Payoff Credit Cards
Trying to payoff credit cards in a charge account society is hard. Browsing the Internet a person can find a multitude of articles on the best ways to absolve such debt. Some articles even cross into a satirical zone by suggesting that a person should not dispose of cards by shredding them, tossing them in a garbage disposal, ignoring them, or even throwing the statement away. Although some people may have crossed into one or two of those categories, simply destroying a statement, will not payoff credit cards and will not clear a nonpayment history. The best method for payment is the proactive method.
Varieties of solutions are available for people who want to take proactive steps to payoff credit cards and gain financial freedom. Some people have suggested freezing a charge account by literally placing the card in water and placing the object in the freezer. Other individuals have suggested cutting up the cards. Both of these options will work as long as no new charge accounts are obtained. Another option requires an individual simply not to use the card but use cash or a check instead. Using cash or writing a check enables one to see and know visually what is spent and how quickly the money is used.
A few simple methods to payoff credit cards require a little extra effort on the consumers part. Extra part-time work will bring in a little extra cash for paying down the accounts. Cutting down on extra expenses by implementing creative solutions will help. The following are simple suggestions for cutting back on spending and increasing the cash flow toward trying to payoff credit cards: buy in bulk and freezer larger perishable purchases and brown bag several times a week to work. Other solutions involve being creative. Being creative can be cost effective. A few creative solutions include the following: make homemade foods such as baking mixes, sauces, breads, casseroles, and soups, buy from consignment or thrift stores, provide in-home entertainment through movies and games, and add personal touches to special occasions by making homemade gifts and cards.
In determining a goal toward repayment options, a budget and financial plan will light the path to payoff credit cards. All expenses from gas, to groceries, to a stick of gum, or a cup of coffee should be tabulated. During the logging of expenses, normal spending habits must be kept. Otherwise, a skewed log will not be beneficial in knowing where cutbacks can and should occur. The individual should make a plan for budgeting and stick to the plan. Even the smallest amounts applied to payoff credit cards will be beneficial. The extra money each month will soon add up and the cards will be paid in full, as long as continued spending does not occur. If a person pays just the minimal each month on a card, the money paid in the end because of interest is almost half of the original amount. For example, if a bill is $1500, with an interest rate around 20% or so, the individual paying off the amount will pay almost $990 extra and repayment will take about 95 months or so. Therefore, $1500 + $990 mean that $2490 was just paid. If the charge account paid for sale items, the sale no longer applies and extra money was spent. In budgeting, a household needs to set realistic but stretched goals for repayment methods. Looking realistically at each months debts and various expenditures will help a person create a better, more sensible repayment option.
Experts offer other methods to payoff credit cards. A person can use self-help methods or seek a financial advisor or debt consolidator for consolidating charge accounts. A consumer should try to negotiate with creditors. An individual should let the creditor know that bankruptcy is the only option left if negotiations cannot occur. Since bankruptcy will result in a lender not being paid, a creditor will work to lower payments and interest rates or help determine the best payment schedule. Sometimes the assistance from the creditors will reduce the bill by 50 to 75%. This reduction benefits both consumer and creditor. Since bankruptcy is not pursued, the lender will not have a total loss and the borrower will not obtain bad credit. The assistance will show as good marks on the credit history. Filing for bankruptcy should only be done as a last resort.
Many experts differ on repayment methods. Some financial advisors suggest paying higher interest accounts first, while others suggest paying off the smaller balances first. A person needs to determine the best financial strategy for them. While paying off higher interest rate accounts first may make better financial sense and show greater economic responsibility, a person may become discouraged in repayment especially if the card has a higher balance. The snowball method tends to work for many people. Snowballing requires a person to pay the smallest amount first. Once the smallest is paid for, the money used to pay off the smallest amount can be applied to the next billthus snowballing until all charge accounts are paid in full. Some credit cards offer a 0% to low interest rate for transferring balances. The consumer must look at the fine print. In most cases if a payment is missed or late, the interest rate is near 30%. An individual can also borrow from insurance policies, IRAs, or other such investment accounts. Another potential means of help is borrowing from family or friends. Borrowing allows the individual to get out from under the high interest rates. However, if an individual should miss a payment, damage could occur in the relationship. The servant therefore fell down, and worshipped him, saying, Lord, have patience with me, and I will pay thee all (Matthew 18:26). Great care should be taken to repay what is owed.
Consumer Debt ProtectionMany individuals seek consumer debt protection when expenses far outweigh income and an ability to pay. When families have more month than money, many turn to bankruptcy as a means of relieving the pain of crushing debt. However, bankruptcy is usually not a pain-free solution. Whether debtors choose to file Chapter 7, 11 or 13 petitions for consumer debt protection, the repercussions mainly include banishment for 7 to 10 years from a reputation for creditworthiness. Bankruptcy severely damages credit reports; and lenders tend to feed bankrupt borrowers with a long handled spoon. Some won't even consider loaning money to individuals who have previously filed or are in the process of working out repayment or wage earner plans under Chapter 7 and 13 filings. Since the chances of getting financed for a home, car or student loan are nearly nil after filing, financial consultants advise debtors to refrain from taking such drastic measures until exhausting other alternative means of debt resolution.
Before filing for consumer debt protection under the U.S. Bankruptcy code, individuals and businesses should count up the costs. A consumer credit report blighted with bankruptcy is not only a constant reminder of financial failure, but a strike against those seeking financing for personal or business ventures. Some banks are even leery of opening checking accounts for individuals with poor credit histories. Fortunately, there are alternatives to plunging into financial abyss. Consumer credit counselors approved by the federal government can help individuals and entrepreneurs develop repayment plans and establish personal and business budgets to help alleviate the strain of indebtedness. Sometimes, it just takes the advice of a wise financial counselor to help consumers envision a ray of hope in the midst of gloomy money woes. "Where no counsel is, the people fall: but in the multitude of counsellors there is safety" (Proverbs 11:14).
Cases for consumer debt protection are administered through a local branch of the U.S. Federal Bankruptcy court. Before declaring insolvency, individuals need to know which petition best suits particular financial situations and the relief and repercussions relevant to each case. The federal government requires debtors considering bankruptcy to submit a certificate of completion for credit counseling through a court-approved agency within six months prior to filing. The purpose of credit counseling is to not only enable individuals to make an informed decision about whether or not to file, but also to provide education on filing requirements and regulations governing proceedings. A chapter 7 case is essentially an asset liquidation plan which requires debtors to submit documentation of income, including federal and state tax returns; listings of assets and liabilities; expenses and outstanding debts, such as mortgages, car loans, or other installment agreements; and information on property owned or leased. Filers also need to give the court an idea about how often they are paid and monthly living expenses for food, housing, transportation, healthcare, and utilities. In essence, the federal court takes control of the debtor's personal finances to ensure that creditor claims are met while individuals maintain a reasonable lifestyle.
Once debtors file a chapter 7 petition, a court-appointed trustee sells debtor assets to accumulate funds to settle creditor claims. Secured creditor accounts, loans that are backed by collateral, take precedence over those that are unsecured, such as credit card debt; and the order of repayment is at the discretion of the court. During the course of the consumer debt protection process, all creditor collection efforts must cease and any communication between creditors and the debtor is handled through the trustee. Harassing phone calls and threatening letters stop as the trustee helps sort through years of indebtedness to begin repaying creditors. Debtors who may not have assets for a liquidation case may opt to file chapter 13 consumer debt protection. Known as "wage earner" bankruptcy, a chapter 13 filing establishes creditor payments based on a debtor's regular income as an employee. Filers under this section of the U.S. Bankruptcy law are also required to submit certification of completion of credit counseling through a court-approved agency. During credit counseling, debtors may be able to develop a repayment plan which demonstrates to the court an ability to settle creditor claims in regular monthly increments. Debtors also must submit income earning statements, tax returns, and projections for an increase in income or expenses once the case is filed.
Included in the arsenal of debt resolution petitions is also the chapter 11 asset protection case, which reorganizes or restructures debtor obligations to help consumers with outstanding delinquent accounts settle creditor claims. The greatest difference from either of the other two types of consumer debt protection is that chapter 11 cases are either filed voluntarily by debtors or involuntarily by creditors, under certain federally-mandated requirements. Under chapter 11, creditors who have a substantial investment or claim against a business owner actually petition the court to take over the management of a cash-poor enterprise to recoup monies. Businesses which boast placards advertising "Under New Management" may very well be undergoing bankruptcy proceedings while creditors assume the role of owner/operators. Under the direction and oversight of court-appointed trustees, creditors come in and go over a failing enterprise's accounts to work with trustees in restructuring the operation for greater profitability. Debtor/owners may remain onsite, but lose the authority to manage the operation. However, the benefit is that a business undergoing chapter 11 consumer debt protection proceeding may recover and become more profitable under new management, which is an asset to all concerned.