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OVLG Blog

18
February
2010
The executive director of the U.S. Organization for Bankruptcy Alternatives, the Houston-based trade group representing the debt settlement industry, said that, debt settlement has helped many people become solvent and come out of debts, who might otherwise have filed for bankruptcy during their financial crisis with no other alternatives. Debt settlement companies are now frequently advertising on television and radios. Billions of debts have been settled so far in the recent years and in the years to come. Debt settlement does have some adverse effects, it does not protect a debtor from lawsuits and it can hurt credit rating as well. Some people have tried debt settlement and paid the settlement companies thousands of dollars but have ended owing more money than when they started with. There are some official complaints from people regarding this, stating that settlement companies had done nothing to resolve their problem and had landed them no where other than filing for bankruptcy. Payment is usually a percentage of a person's total debt amount; Most of that money is to be paid up front. Debtors are asked to stop making all payments to their creditors and allow their debts to be sold to a collection agency or be transferred to a third-party debt collection company. This is how a settlement works. On an average, settlement companies can reduce debts to an average of just 53% that had been observed, the amount is so less probably because the settlement companies only reduces the interest and the fees and not the principal amount. A settlement company often has more success than an individual working alone, for a number of reasons. The burgeoning industry is not regulated with proper laws in most of the states. Montana lawmakers in 2009 had passed a law requiring companies to be licensed and regulated by the attorney general so that the companies do not go into scam acts. Debt settlement does not protect consumers from being sued by their creditors. This is one of the disadvantages of the debt settlement companies. If a consumer is participating in a legal and licensed program; the creditors should not be allowed to sue them. There should be uniform laws regarding settlement for all states laws regulating the industry, but debt settlement do not apply for all. There are people who are too far behind on their bills to be helped by consumer counseling and are very near bankruptcy. For those, debt settlement can be of help.

OVLG Blog

20
January
2010
Do not consolidate credit card debt with a home equity loan/line. It can be tempting --- the rates are usually lower, and the interest may be tax deductible. However, home equity loans are secured debt, while credit card debts are usually unsecured. If you do not pay an unsecured debt - you have a bad credit rating. That is not good, but it is not permanent. If you do not pay back an equity loan - you might find your house being sold on the courthouse steps. There are three simple ways to eliminate the debt. The first one is obvious; it is to stop using your credit cards. This may seem to be a silly thing to suggest, but the best way to get a handle on your spending is only to spend the cash you have - after you have paid your bills. Second, consider consolidating your credit card debt onto one card - or moving a balance from one card, to one with a lower interest rate. Interest rates are one of the keys to managing credit card debt. If one has a high balance on a high interest credit card, one is spending a lot of money to "borrow" that money from the credit card company. Additionally, the minimum payment that the credit card company calculates is only based on accrued interest, so if one only pays that, one will never reduce the debt balance. Credit card debt can help or hurt the credit report. Obviously, one needs to be making at least the minimum payments on time. The second important thing is not to max out your credit cards. One should always have available credit because only then one is sending a more responsible signal to the credit-reporting agency. The best ways to manage credit card debt in terms of your credit score is to either maintain some available credit, or pay your. The benefits of consolidating the credit card debt are many, with one of the most important being the peace of mind one will have when there is a need to make just one payment in a month, all while getting in control of your credit card debt. If one has good credit, one can also benefit by being able to negotiate a lower interest rate. No matter what, getting in control of debt and spending, although hard to do at first, will eventually offer one a great sense of accomplishment.

OVLG Blog

20
January
2010
As with any other problem or addiction, the first step towards curing credit card debt problems is simply admitting that they do exist. Even if the debt is the result of a situation beyond ones control, such as an illness, job loss, divorce, or other crisis, one still needs to admit that he is in trouble before actually it can be resolved. This is however, the first step to be forwarded as a recovery for credit card debt. If the damaged credit is a result of compulsive shopping or other emotional or psychological issues, one may need to seek help from others. Counseling can not only help you to take control of ones credit, but of ones entire life. Even if the cause of your credit crisis is something beyond ones control, counseling may be helpful. It is often most difficult to recover from those problems that we feel that we do not have any control on. Non-profit organizations can also help one gain control over your finances and your life. The credit counselors work in order to educate about consumer credit, money debt management, and budgeting. These counselors can teach financial management as well. Such companies usually provide with these services without charge and offer free educational materials and workshops. Regardless of what had led one into the current situation, the first step to fixing it is taking the responsibility of the current action. One may not be able to change or undo what had already been done in the past, but you can decide to take control of the current and future finances. One needs to obtain and check the credit report from each of the three national credit bureaus: Expedient, Equifax and TransUnion. First, determine if the information is correct. Any information that is in error should be immediately reported to the national bureau. One should make certain that the negative information that seems to show on the credit report is correct or completely accurate. One should check that any kind of debts that has been paid off since then should be properly noted down on the credit report without any inaccurate information. One must create a new pattern of always paying on time and meeting all financial obligations. With time, the more recent record will begin to make up for the mistakes of the past. This will only happen; however, if one follows the plan, cut back on the spending, and is consistent on making payments at the right time.

OVLG Blog

9
December
2009

1. If you fail to pay your credit card bills, what are the consequences and how long will your credit score be affected.

If one fails to pay their credit card bills, the lenders will report the payments to the major consumer Credit bureaus like Experian, Equifax, and Trans Union. After 5 to 6 months, debts are discharged, but that does not mean that the debtor does not have to pay off the debts, it will remain like a derogatory item on the credit report and will cause a significant reduction on the credit score. At the very first instance of delinquency, there will be a direct call from the creditor, and then it goes to the collection agencies. The third party collectors are more likely to be aggressive in their collection process. The Fair Debt collection agencies make it a point to secure customer rights. If the cease and desist letter is already sent by the debtor the collection agencies will have to stop with all types of contacts with the debtor, until they receive any type of confrontation or permission. Depending on the state laws the creditor garnishes the wages, levy bank statements to take action to enforce its judgements.The debtor can file bankruptcy to prevent further action on enforcement.

2. if you file for bankruptcy, are there ways to speed up the recovery of your credit score?

If bankruptcy is filed it appears to remain on the credit report for nearly 10 long years from the date of filing. It will be difficult for people to counterbalance the negative impact of bankruptcy once they had filled for it. There will be no one who would take the risk of co-signing an unsecured loan in time of financial crisis.

3. Does it matter/help if you have 1 credit card for say, $100,000 or 10 credit cards with $10,000 balances, in terms of debt consolidation and consequences of not paying them?

In terms of the credit score, it is wise to have one single large account instead of number of small delinquent accounts. For any other program like debt settlement or debt consolidation, the opposite would be true. If the creditors are more in number the negotiation becomes more flexible, with only one creditor it is difficult as one or two creditors’ refusal to cooperate will defeat the plan as a whole.

4. In terms of long term consequences (credit score, ability to get credit, employment, etc), which bankruptcy hurts you the most? What about bankruptcy vs. foreclosure?

Any kind of bankruptcy as well as foreclosure actions are viewed as derogatory items. It is difficult to compare the two as both have deadly consequences. Foreclosure action can prove to be expensive for the common people than bankruptcy. It is always better to consult an attorney before coming up with any conclusion as to which would prove to be the right option to choose and then work accordingly.

OVLG Blog

9
December
2009
Credit cards can prove to be of great help during financial crisis, but if used in the wrong way can put anyone into a never ending distress in terms of credit rating. The Colorado society of CPA’s highlights the most common credit card mistakes and how to avoid them. credit card mistakes 1. Credit card terms and rates change very frequently, so it is a must for the debtor to keep a track of the changes so that they are aware of the rates in advance. One should discuss the rates in advance with the card issuer. There can be instances where the debtor can even negotiate for lower rates if he is aware of the possible changes. 2. Many customers opt for credit cards for wrong reasons; they choose a card to get discounts and offers, but fail to check for the interest rates and the fee structure and land up in paying much more in fees and interest rates. If customers in the first instance consider opting for cards which are without any fees or with low interest rates they would have saved themselves. 3. At times customers are of the view that they would get some kind of promotional offers and discounts, but it hardly takes time for the rates to fluctuate and become more that the expected one. This can also be graded under Misled by introductory rates. 4. It is important to check out for each minute details associated with the credit cards like the grace period, the fee schedule, the interest rates etc. Once the activation is done it would prove to be difficult. All the information should be read properly and in case if something is found to be inappropriate one can switch over to a different lender. 5. One mistake that is usually made by the customers is that they pay the minimum amount. This way the repayment period extends adding to the overall interest rates. One way to come out of this is to make the maximum payment every month so that the credit card debts can be quickly paid off. 6. Taking cash advances is another mistake that customers do by using their credit cards as the interest rates are very high as well as the service fees. 7. Being late with payments is another mistake that the customers make. Credit card companies charge a high rate of late fees of nearly $30 even if the customer is a day late. Cash should be paid in advance to avoid any kind of late fees. Even if a last minute payment is made, a very low amount will be incurred as the late fees. 8. The other reason being that of having more than one credit card. If there are cards which are not in use they should be closed down .Too many cards can make the lenders think of the amount of mortgage the person has which might create the possibility of not getting loans during financial crisis. 9. There are a lot of customers who fail to check their itemized statement every month. This is again a disaster as there will be no correspondence and the customer will be left in total darkness if there is any fault or mistake in the statement. It would be too late when discovered! 10. A good credit rating is essential so every effort is to be made in order to keep the credit report clean. If one feels that he is knee deep in debts he should contact a settlement company without delay and settle them off as soon as possible.
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