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Doing nothing Description Doing nothing is simply that. It is ignoring your financial problems, ignoring credit calls, bills and legal action against you. Pros No real benefit unless you have no need for future credit, have no property that you want to protect and don't care about owning property in the future. You avoid paying legal fees and doing paperwork Cons Most negative credit items can remain on your credit report for 7 years. Bad credit can make it difficult to get a good vehicle loan and may even affect your ability to obtain certain jobs. Getting a decent mortgage will be extremely unlikely with a low credit score. Creditors may sue you (bring a lawsuit against you) for non-payment and get a judgment against you. Laws vary from state to state, but a judgment generally becomes a lien against any land or home in your name and sometimes allows judgment creditors to take action against your personal property, including the garnishment of your wages. What to Avoid Being uninformed about all possible consequences of your failure to take action. Avoiding or denying the need for help. Failing to recognize stress resulting from your bills and the effects that stress may be having on you and your family. Balance transfers of credit card debt. Description Paying off high interest credit card or loans by putting the balances on credit cards with lower interest rates or with a zero interest rate. Pros If you can substantially lower the interest rate that you are paying, it should help you to pay the balance in a shorter amount of time.
chapter 7 results in most (but not all) debts being eliminated in exchange for giving up any property that cannot be protected under the applicable law. Filing Chapter 7 Bankruptcy Description Bankruptcy is a legal proceeding under Federal law that requires a case to be filed in bankruptcy court. Is there a limit on how long the low interest rate is guaranteed? Avoid assuming that your financial status is good simply because you receive pre-approved credit offers. these notifications ask you to 'accept' the new terms of the contract. but you will not have to pay anything for those . before you commit. What to Look for Look for the answers to all of the questions above. Financial calculators are available on the Internet. which increases your interest rates to whatever the company says. Most people filing chapter 7 bankruptcy do not have to give up any property.' Be certain the low interest rate doesn't apply only to new purchases. 'Crossdefault clauses' is fine print in the contract that makes it a 'default' if you become late on anything you owe.' Not all debts are eliminated in chapter 7 bankruptcy. but if you do not accept.Cons It is never wise to incur additional debts when you are already struggling and new credit can encourage new debt. you are required to close the account. What to Avoid Avoid 'cross-default clauses' and other 'tricky' provisions that can provide nasty surprises. Know whether this is a realistic option for you by doing the calculations to see how long it will take you to pay off the debt at the new interest rate based upon the amount you can afford to pay per month. The 'low interest' credit card company may notify you in writing of a change to your account terms. In general. in writing. filing bankruptcy is designed to give honest people in financial distress a much-needed 'fresh start. Find out if balance transfers will be considered 'cash advances' and therefore carry a much higher interest rate. then the interest rate goes from the low or 0% to a very high 'default rate. Chapter 7 Bankruptcy cases are usually short (90 to 120 days) but Chapter 7 does not allow you to 'catch up' on payments you are behind on. such as a phone bill or medical bill. Pros While only an attorney can give you legal advice. Be certain that you can afford the monthly payment and that it will allow you to pay off your debt in a reasonable period of time. Except in cases of dishonesty.
What to avoid Avoid methods of filing Chapter 7 bankruptcy in which you do not received legal advice from a lawyer. and laws about protecting property often vary from state to state. Without proper legal advice. Chapter 7 generally stops all creditor actions against you. Many people can get a mortgage or other credit within a year or two of bankruptcy. Avoid assumptions. you might lose property unnecessarily or have other unexpected .which are eliminated (discharged). and fill out paperwork. Chapter 7 Bankruptcy will stay on your credit report for up to 10 years. be aware that it may not be the solution to all your problems. Some individuals in financial trouble experience stress that affects mental. Cons If you are behind on a secured debt such as a mortgage or car loan. Bankruptcy can often provide relief from this stress. but some creditors are only stopped temporarily. You may or may not be able to keep all of your property in Chapter 7. for a short period of time. You will be required to disclose a great deal of financial information. supply documents. Many times the rumors about bankruptcy that you have 'heard' are not the truth. Chapter 7 does not provide a sure way for you to 'catch up' on these payments to keep the property. If you find that bankruptcy is the best choice for you. Don't assume that you cannot afford legal advice. Be aware Bankruptcy laws changed in October of 2005. Be cautious of 'do-it-yourself' bankruptcy methods such as Internet bankruptcy preparation and 'kits' or books that claim to teach you how to file your own bankruptcy. What to look for Look for an attorney that is experienced in bankruptcy. including child support. Financial stress may also affect personal relationships and work performance. Failure to get advice from an attorney may cause result in you losing property or other unintended results. certain taxes and most student loans. Bankruptcy is a legal proceeding and only an attorney can tell you the law about important issues such as whether your property will be protected. then Chapter 7 bankruptcy can create more problems rather than solving the ones that you have. There are certain debts that cannot be discharged in Chapter 7 bankruptcy. many bankruptcy lawyers have methods to assist you in paying their legal fees. If you are not completely honest with your attorney or fail to understand all the information you are required to disclose. emotional and physical health. The typical Chapter 7 case only takes about 4 months from beginning to end.
Cons In most cases. It may also affect their personal relationships and their work. You are not required to give up any property in a chapter 13 case. Be sure you fully understand what is required of you and what you can expect. In chapter 13. If you lose your job or your income drops. Filing Chapter 13 Bankruptcy Description Bankruptcy is a legal proceeding under Federal law for people requesting relief from their debt. Chapter 13 bankruptcy stops all creditor actions against you. Chapter 13 bankruptcy normally does not change your payments under mortgage loans. Your monthly payments will usually include fees to your Chapter 13 attorney and the Chapter 13 Trustee. supply documents. Chapter 13 is similar to debt consolidation. Most of your legal fees will be included in your monthly chapter 13 plan payment so you generally don't need to come up with large legal fees to file a chapter 13. it is possible to deal with back taxes that you owe. and fill out paperwork. Under the right facts. but because it is under federal law. you must propose a 'plan' to pay something toward your debts over time. emotional and physical health. Chapter 13 bankruptcy can stay on your credit report for 7 to 10 years. You will be required to disclose a great deal of financial information. Pros In chapter 13 bankruptcy. Usually it merely gives you a chance to catch up delinquent payments. If you are not completely honest with your attorney or fail to understand all the information you are required to disclose. In a Chapter 13 bankruptcy. you generally get to pay what you can afford to your creditors over time in satisfaction of your debts. A Chapter 13 case can last up to 5 years. Under certain circumstances. The amount you must pay is determined by a number of factors. you may not be able to maintain your chapter 13 . it is possible to get a mortgage or other credit while you are in chapter 13. a chapter 13 bankruptcy case allows people to stop foreclosures or repossessions and keep their property. with some exceptions. Some individuals in financial trouble experience stress that affects their mental. Bankruptcy can provide relief from this stress in some circumstances. it is possible to stop foreclosures and catch up on delinquent mortgage payments.complications. for the administration of your case. Chapter 13 requires you to make monthly payments for 3 to 5 years. then bankruptcy can create more problems rather than solving the ones that you have. all of your creditors are required to participate and your unsecured creditors are usually paid less than in a non-bankruptcy debt management plan. In chapter 13 bankruptcy.
Be sure you fully understand what is required of you and what you can expect. budgeting. The plan should include balancing the budget and anticipating periodic. Budgets. Having a spending plan can help you see the full financial picture and allow you to plan for the future. Chapter 13 is complicated. Failure to get advice from an attorney may cause unpleasant surprises and unintended results. Be aware Without proper legal advice. financial advisor and coaches Description A budget is simply a plan for your spending.If you lose your job or your income drops. . financial education. and your case can be dismissed or. bankruptcy laws changed in October of 2005. There are also many good books on the subject. What to look for Look for an attorney that is experienced in bankruptcy. though your monthly plan payments. Financial advisors and coaches are educators or investment professionals who help individuals with their financial lives. you might lose property unnecessarily or have other unexpected complications. There are certain debts that cannot be eliminated in bankruptcy. set goals and make priorities. if appropriate. Don't assume that you cannot afford legal advice. and laws about protecting property can vary from state to state. Be cautious of 'do-it-yourself' bankruptcy methods such as Internet bankruptcy preparation and 'kits' or books that claim to teach you how to file your own bankruptcy. What to avoid Avoid methods of filing bankruptcy in which you do not received legal advice from a lawyer. you can change your case to a chapter 7. If this happens. you may not be able to maintain your chapter 13 payments. Financial education can come in many forms. The goal is to spend less than you make and put some money away for a rainy day. Chapter 13 attorneys usually receive most of their payment over time. Everyone can benefit from coming up with a solid plan for their spending. Bankruptcy is a legal filing and only an attorney can tell you the law about important issues such as whether your property will be protected. Money management classes and books can teach skills and provide useful tools to obtain financial health. Pros Planning ahead means not being caught off guard by a periodic expense such as a car or home repair. Many times what you have 'heard' is not the truth. Avoid assumptions. Many colleges and non-profit organizations have seminars and classes on money management. expenses that do not occur regularly.
Many agencies offer budgeting and money management classes at no or little cost. Some professionals or classes can be expensive.Some financial coaches may provide individual training. Cons Depending on the reasons for your financial problems. A financial coach may be costly. What to avoid Avoid high cost seminars or classes. Counselors working at these non-profit organizations look at your financial situation and give recommendations on how to return to a financially healthy status. Cons All credit counseling agencies are not the same and some attempt to sign you up for a consolidation loan that may not be in your best interest. credit and debt resolution. Research your source: What is the experience and educational background of your source? Call the consumer protection department of your State Attorney General's Office and the Better Business Bureau to see if there are complaints. A spending plan does not cover every scenario or emergency situation. What to look for Ask for credentials and fee structures from professionals. Not all classes. expenses and situation that addresses the cause of your financial problem and focuses on better budgeting. Pros A good credit counselor may be able to give you an action plan based upon your particular income. seminars. budgeting and financial education may not be the solution to your problems. Ask local colleges for a list of their continuing education classes and seminars. be sure all fees are fully disclosed to you in writing up front and shop around. Some agencies offer information to educate you on buying your first home. some agencies pressure people to sign up for debt management plans. Instead of finding a solution that fits your needs. books or professionals will provide good information. or the amount of your debt. Credit Counseling Description A Credit Counseling Agency is a non-profit organization set up to counsel consumers on matters of money management. . Excellent classes are taught at many colleges and non-profit organizations for reasonable or no fees.
Some creditors will re-age an account. What to look for Look for an agency that offers a variety of services and educational opportunities. or tries to push you into a plan of action that does not seem right for you. This plan deals with unsecured debt (credit cards. Avoid any agency that is aggressively trying to sell you something or that uses counselors reading from a script. Some agencies charge excessive fees or fail to disclose their fees. This is called a 'fair share' payment. With very few exceptions.management plans. Cons DMP plans are for unsecured debt (debts in which you did not put up any of your personal property . often referred to as a DMP. the creditors give all agencies the same 'deal. Avoid any agency that doesn't offer a variety of options such as budgeting classes or budget counseling sessions. which means the minimum payment amount will go back to what it was when the account was current. Additionally.' The deal is that most credit card companies agree to not charge late fees going forward as long as you stay current with your DMP. The creditors then return a portion of the money paid by the consumer back to the agency as payment for this service. The consumer makes monthly payments to the agency. or even lower. Pros Some of the creditors reduce interest rates and stop late fees. The payment is then divided up and sent to the consumer's unsecured creditors. The counselor should be looking at your full financial picture and not pressuring you into a plan or service they provide. Avoid signing any contract you do not understand or that does not sound reasonable and helpful to you. medical bills. The debt management plan typically lasts about five years. Further use of credit is prohibited or strongly discouraged in this plan. and many creditors reduce interest rates. What to avoid Avoid any agency that does not look at your full financial picture. or lower. Avoid agencies with complaints on file with the consumer protection department of the Attorney General's office in your state. and unsecured loans). most creditors in a DMP agree to 're-age' your account which means that the minimum payment due will go back to the amount it was before you got behind. Debt Management Plans Description One of the options offered through most credit counseling agencies is a debt management plan.
Some agencies are aggressive and even deceptive. All statements should be directed to your attention and not to the agency. . Open your credit card statements every month and check that payments have been made by the credit counseling agency as agreed. Some credit counseling agencies don't always make payments to your creditors on time. incurring late fees and interest rate increases for you.as collateral to secure the loan) and cannot help with car or house payments. If the agency charges more than a $50 set-up fee and a $25 monthly fee. Avoid agencies that are not looking at your full financial picture. Avoid anyone who aggressively pushes debt plans or the possibility of a consolidation loan in the future. according to the National Consumer Law Center the dropout rates for a DMP are very high. Consolidation Loans (unsecured) Description An unsecured consolidation loan is a loan that pays off other debts like credit cards. What to look for Look for an agency that offers a variety of services and educational opportunities. creditors may note on credit reports that the debt is not being paid as originally agreed or that the consumer is on a DMP. but is not a loan against your home or personal property. tax debts. While in a DMP. Call their customer service department immediately if any problems occur. An example would be an unsecured loan or line of credit with a bank or credit union. Avoid agencies that only deal with some unsecured creditors and not others. A DMP will not work for consumers who cannot balance their budget and have enough money to pay for a plan. Double check that you are not being charged late fees or increased interest rates. Avoid any agency that gives commissions or a bonus to their employees for signing consumers to debt management plans. Make your payments at the same time every month as agreed with the agency. What to avoid Avoid counseling agencies that sign everyone up to a DMP. without using further credit. garnishments or pending lawsuits. Look for reasonable fees. While exact figures are not available. The DMP was designed for people who have enough income to pay all their living expenses and the DMP payment. A consolidation loan only makes sense if the interest rates and terms are more favorable than the interest rates and terms you have now. Avoid high fees by calling several agencies and comparing. Avoid agencies that have associations or close ties to a for-profit company such as a loan company. look for a better deal.
Internet. the temptation may be to use the credit cards again. Avoid further use of credit. contacts creditors in order to settle an unpaid debt for less than the amount owed. Be certain you can afford the monthly payment and the loan will pay off in a reasonable amount of time. it will save you money. but there are no absolutes. or by telephone. Cons If your credit is already in bad shape.Pros If the new loan has a more favorable interest rate. Be sure the new loan payment can fit into your spending plan without using new credit to fill in the 'gap'. Debt Negotiation Description Debt negotiation is when a consumer. If the new loan has both a lower interest rate and a decent length of repayment you may be able to significantly decrease your monthly payments. Use loan calculators found on the Internet to be sure. The amount a creditor will settle for can vary greatly. when your credit cards balances are paid off by the loan. Avoid high interest rate loans and loans from companies contacting you through the mail. The settlements usually range from 40% to 70% of the balance. Many financial calculators are available on the Internet. Pros The debt is paid at a significant savings and the creditor will not pursue further action. Avoid any loan that will not allow you to pay off the debt in a reasonable amount of time. . Use them to compare the terms of your old credit verses this new loan. Investigate and know your lender before entering into a loan. you may not be able to get a consolidation loan with good terms. It is never wise to incur new debt when you are struggling. credit counseling agency. Read all the small print and be sure you understand all of the terms. attorney or a company specializing in debt negotiation. What to avoid Avoid not knowing exactly what your monthly payment will be under the new loan and being sure that you will be able to afford it. What to look for Look for answers before you sign any loan paperwork. Look to a source you already have a relationship with such as your bank or credit union.
This usually means that you will owe taxes for the year in which you withdraw funds. from your retirement savings such as an IRA. Cons Debt settlement requires lump sum payment rather than payment over time. your company will deduct the payments for this loan from your paycheck and this may leave you with too little money. whole life insurance or other retirement savings plan. Avoid any plan that will not solve all of your debt problems. If there are several creditors they may require more money than the consumer has available. If you're not negotiating yourself ask for all fees in writing. Some debt settlement companies charge high fees and give poor advice. Avoid any company charging high fees. so be sure you know exactly what you will be charged. Avoid companies that tell you to stop paying debts so they can be negotiated at a future time. Debt settlement companies are for profit businesses. What to avoid Avoid any company that claims to 'eliminate' debt without bankruptcy. Pros You are borrowing only from 'yourself' to pay off debt. . Some companies have you sign contract to pay them a percentage of what they 'save' you. causing you to increase your debt. 401k. Look for a plan that will solve your whole situation instead of one that just satisfies one or two creditors. which can be a huge amount. creditors will list the debt as 'settled' on the credit report. Getting funds from your retirement to pay debt Description Taking money.The debt is paid at a significant savings and the creditor will not pursue further action. Most creditors will not consider settling a debt unless it is seriously delinquent (behind). if you cannot readily access a significant amount of money it will not be an option for you. you can negotiate your own debt settlement and do not have to pay for this service. 403b. Investigate any agency or company before you sign anything. If you take a loan rather than a withdrawal. What to look for Get everything in writing. Avoid sending money until you have everything in writing from the lender. Cons You will incur penalties for early withdrawal from most forms of retirement savings. Therefore. either in the form of a withdrawal or a loan. At best.
Any funds taken now and not repaid will reduce your retirement savings. Keeping property on which payments are behind You want to keep your mobile home. Either directly. house or real estate but you’re behind on the payments for it. If you have received foreclosure papers Be sure that you are aware of all deadlines such as any dates for a foreclosure hearing. causing you to increase your debt. If you already have a judgment against you. Avoid taking this step unless you know all of the consequences and are certain that this step will take care of all of your debt problems. Don't count on any assurances or extensions of time unless you get them in writing. keeping good notes of every conversation and person to whom you spoke. Stay away from any organization that makes promises or guarantees that they can help you or stop foreclosure. Avoid “Foreclosure Rescue” companies that charge high fees for things you can do yourself or with a housing counselor for free. Some modifications. or you can proceed directly without a counselor. It's always a good idea to talk to your lender. A loan modification changes some terms in your mortgage. Be sure that you are aware of all time periods and deadlines related to the lawsuit and seek legal advice before deadlines pass. There are many options you can pursue to keep your home. Avoid incurring tax penalties since these are new debts you will have to pay. or through a housing counselor. you can work to get a forbearance agreement and/or a loan modification from your lender. you may also have deadlines for protecting your property. sale. This may be possible if you have a lot of equity in your property. like stretching your mortgage out over 40 . Do not rely upon refinancing your mortgage as the way to stop a foreclosure. or sale completion. usually to lower your payments. What to Avoid Avoid leaving yourself with too little money in your paycheck due to retirement loan repayments. What to Look for Look for a source of retirement savings that you can liquidate without incurring tax penalties for early withdrawal.your paycheck and this may leave you with too little money. A forbearance agreement or "work out" allows you to resume your regular payments and catch up any delinquent amounts over time. but these “rescue” loans often fall through at the last minute. with the same tax penalties associated with an early withdrawal. If you cannot repay a retirement loan. Keep all papers related to the lawsuit and seek legal advice. it is then considered a withdrawal. These companies to avoid often get your address from county foreclosure records and send mail promising that they can help you. Regarding Legal Actions You stated that you are facing legal action. HUD certified housing agencies offer help from a housing counselor at no charge to you.
Provided in Hummingbird’s Learning Center are a fact sheet and FAQs regarding HAMP. Partial claim from lender (if enough equity in home and other criteria). and is highly recommended to insure you know the realities about all of your options. Some modifications. Hummingbird's "Mortgage Mess" article is free. go to Hummingbird's Learning Center and enter "Mortgage Mess" in the search box. Housing Agencies can sometimes provide additional options such as state or federal programs available depending on your situation. Local and Federal programs that allow delinquent homeowners to refinance at a better rate or provide funds to help in certain situations. Loan Modification from lender. not having a foreclosure on your credit report should make rebuilding your credit easier. Disposition options Sale of property to pay lenders in full Short sale (when lender accepts offer to purchase for less than loan amount). Deed-in-lieu of foreclosure (when other options fail. Be sure you are aware of any tax and credit reporting consequences of any remedy you pursue. usually to lower your payments. State. The options to avoid foreclosure are: Retention options Chapter 13 bankruptcy (if financially possible and therefore successful). The Home Affordable Modification Program (HAMP) As you may know. the federal government’s Home Affordable Modification Program (HAMP) offers an opportunity for struggling homeowners to stay in their homes by modifying their monthly mortgage payments to make them more affordable. which provides more detailed information about HAMP. Forbearance or other work-out with lender. Hummingbird encourages you to visit the Making Homes Affordable Web site. including an eligibility self-assessment tool for . Retention options allow you to keep your home while disposition options mean that you will give up the property. lender may accept deed to property instead of foreclosure). like stretching your mortgage out over 40 years. In addition. Be sure to get all agreements in writing and do not rely upon verbal assurances. may or may not be in your best interests. Either way. All of these options. and the current news on foreclosure avoidance measures can be found on Hummingbird's Learning Center. Be aware that talking to your mortgage company about options will not stop foreclosure proceedings unless the lender states this in writing. and Foreclosure Defense. Foreclosure Avoidance There are many different ways in which you can avoid foreclosure regardless of whether you keep your home or dispose of it. For a very thorough article on all of your options and the realities involved.mortgage. by typing "mortgage mess" in the search box.
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