The Bankruptcy Abuse and Consumer Protection Act was passed in early 2005 with the intention of reforming American bankruptcy law as we know it.  The existing laws, according to Congress and the credit card companies, granted too many debtors who might be capable of repaying at least some of their debts to have them wiped away by the courts.  The new law was intended, rightly or wrongly, to eliminate the “bankruptcy of convenience” that allowed many consumers to run up huge debts without repaying them.  Under the new law, filing is much more difficult, time consuming and expensive; so much so that it has discouraged many would-be filers from seeking debt relief through the courts.

Given that debt relief through the bankruptcy courts is now so much more difficult, it makes sense that consumers with mounting bills might want to seek alternatives.  In order to do that, debtors need to find some other way to manage their increasing debt.  Below are a few tips that might help consumers avoid filing for bankruptcy.

Negotiate with your creditors – It is generally a good idea to talk to your creditors as soon as you have a problem.  If you are missing payments, call them and explain why.  Creditors want to get paid, but they also understand that everyone has financial problems from time to time.  They may be able to work out a repayment agreement with you that you can afford.  You will receive much more cooperation from your lenders if you are honest and explain your problem than to simply stop paying without explanation.

Seek credit counseling – Credit guidance sessions are mandatory for filing for bankruptcy, but many people with little or no formal financial training could benefit from meeting with a counselor and explaining their financial problems.  The agency can offer help with money management and repayment plans.  They may even be able to negotiate some better terms with your creditors if you haven’t already done so yourself.  Many agencies are nonprofit, so you will generally find their services to be quite inexpensive.

Get a debt consolidation loan – A consolidation loan is one that combines several debts, often at high interest rates, into one loan at a lower rate.  A home equity loan is ideal for this, and thanks to rising real estate prices, many people now have a reasonable amount of equity in their property.  As a bonus, the interest on a home equity loan is tax deductible.  Other credit cards with low-interest introductory rates are also good for consolidating debt.

Sell your house – If you do have a lot of equity in your property, it may become necessary to sell your house to pay your bills.  This is a drastic step, as you will have to find another place to live, but if the alternative is losing your home to foreclosure, it may be the only sensible choice.

Bankruptcy shouldn’t be taken lightly.  Having your debts removed by the courts will leave a mark on your credit report for up to ten years and will make it more hard and expensive to borrow money or obtain credit in the future.  Smart consumers know that avoiding bankruptcy, if at all possible, is a smart financial act.

That question is not so easily answered and there may be many things that the general public does not necessarily understand about bankruptcy.  Bankrupcy, for the most part, is a societal and governmental means to finding the right solution for your debts when all else has failed.  As it stands now, if you file for bankruptcy and are granted bankruptcy, you most definitely deserve it.  The laws that govern the various types of bankruptcy make it almost impossible for someone to claim if they don’t necessarily need to.  The amount of paperwork has increased, the court fees have increased, and the overall trouble to file has made it quite a struggle for just anyone to qualify for bankrupcy.

Before such action is taken, there are programs to help you get out of debt such as debt consolidation and consumer credit counseling services.  These types of services consolidate your debts in to a small, structured payment plan. These services somewhat mimic the same concepts that bankruptcy to get you out of debt.  For example, if you file for chapter 13 bankrupcy, all your debts are to be paid off in a structured payment period of between 3-5 years.  Often times, like debt consoladation, the amount you end up paying is less than what you originally owed.  You get to keep your possessions and your debt is cleared.

So which method of getting out of debt should you take?  It should be situational and based on every individuals specific case.  Probably the best method would be to speak with a credit counselor in regards to your personal debts.  Understanding your debt and the options to you are usually the primary step in making a wise decision about your credit.  If your debt is beyond help and you’ve exhausted all other methods, maybe you should consider bankruptcy.

One major thing to remember is that you should never be ashamed to claim bankruptcy.  Individuals get caught in the preditorial credit trap and have sales people pushing credit cards in their face every time they shop.  We are not taught in school about finances as much as we should be.  We are not prepared for the “big business” world when we graduate high school and we definitely know nothing about living on our own.  The good part is that there are a number of institutional answers and guidance which are available to every consumer nationwide.  The worst thing you can do about your debt is to do nothing at all.

Debt consolidation services are companies who specialize in helping you free yourself from the burden of debt. If you have debt that seems to pile up more and more each month, bills for which you can’t even afford the minimum payments, and the trend has been continuing for a long time with no end in sight, then a debt consolidation service may be just what you need to help you out of the tangle of debt you’re in.

How Can Debt Consolidation Services Help?

Did you know that your creditors are the ones who absorb most of the costs when you consolidate your debt? To those you owe, it is a better financial decision for them to accept partial payment from you than none at all if you file for bankruptcy or simply never pay. A debt consolidation services company representative will stand up for you and negotiate with those you owe and decrease your overall debt as well as get rid of interest payments and taxes.

What Do the Creditors Gain From Debt Consolidation Services?

The reason why your debt is so high is not necessarily because you spent too much money. Your debt may be due in large part to the high interest rates and fees that accrued as the months passed without payment. Creditors usually recoup at least the original expenses – that is, the amount the bill was originally before it was doubled and tripled or even quadrupled by over limit and late payment fees and interest charges.

Additionally, creditors can write off all the money they lose in interest and fee payments on their taxes so as long as they still get the original amount that you owe them, they have nothing to lose.

What Do You Get From Debt Consolidation Services?

You get to combine all your bills into one bill payment every month. You get one payment that is considerably lower than all your other bills were before. Your phone will stop ringing off the hook with creditors calling you and asking for money. Your stress will dramatically decrease knowing that you have taken the steps to get yourself out of the downward spiral of debt.

All of this starts when you employ a specialist in debt consolidation services.

Increasingly, they fall behind on their loans or default. The U.S. Department of Education recently reported that the national default rate on federal student loans rose slightly, to 5.1 percent, in 2004, the latest statistics available, from the previous year’s record low of 4.5 percent. The default rate represents the percentage of borrowers who began repaying their loans between Oct. 1, 2003, and Sept. 30, 2004, and who defaulted before Sept. 30, 2005.

Although the default rate is low compared with the all-time high of 22.4 percent set 14 years ago, the latest increase is still a signal that shouldn’t be ignored. Since the 1990s, the number of students who graduate with more than $25,000 in loan debt has tripled, according to the student Public Interest Research Groups, which along with several state student associations last year launched the Student Debt Alert project.

The rising student loan levels are so troubling, it’s time we stop saying this is good debt.

“Having over $100,000 in student loan debt is not fun,” wrote one reader, a new lawyer who joined me during a recent online discussion. “Do I regret going? No, but it certainly didn’t pan out the way I thought it would. I am working like a fiend, not getting paid what most people think lawyers make, and struggling daily with money and budgeting. There are hundreds, from my class alone, who are in the same boat.”

Sinking in debt, borrowers want to know their options. They look deflated when I tell them: Pay it as originally agreed over 10 years and live below your means, or stretch the payments over as long as 30 years.

And no, bankruptcy is not an option. If you have a federal student loan, it can’t be discharged in bankruptcy. If you have a private student loan, it’s still not a viable option unless you can prove that paying it would result in “undue hardship,” a test that is nearly impossible to meet.

There is some relief, even if temporary. Depending on the loan, there are several options, such as a graduated repayment plan, whereby loan payments start out low and then increase, typically at two-year intervals.

Some loans have an income-contingent option. That gives you the flexibility to pay off the loan based on what you earn. Each year, your monthly payments are calculated based on your adjusted gross income, family size and the total amount of your loans.

If you are experiencing an economic hardship, you may be eligible for “deferment.” Under this option, you still have to pay back the loan, but you can postpone payments for a while. Interest on the loan or loans will not accrue during the deferral period. Another option is “forbearance,” in which you can stop making payments for a set period of time. Unlike with the deferment option, interest continues to accrue. But forbearance is easier to get.

What if you have the cash? Should you pay off your loan? That’s what a number of people wanted to know during the online chat. Take a look:

· “I am a 30-year-old single female, who owns a condo, has no credit card debt, donates to charity, maxes out her 401(k) and has $10,000 in emergency savings and $2,000 in regular savings. I also have $49,000 remaining on my law school loans, which were over $140,000 when I graduated. Should I take $10,000 of my emergency savings and put it toward the loans?”

“I’m about to receive $30,000 of the life insurance money that my father requested I use to pay off the student loans. I have $39,000 in loans with interest rates below 3.5 percent. Should I invest it and pull from what grows to continue to make the regular payments? Or should I just pay off a massive chunk of the student loans?”

· “Would it be more beneficial to take out a student loan to complete my master’s degree, or to take the money from my Vanguard fund? I need around $5,000 for the semester. I’m 24 and have about $10,000.”

As to the first woman’s question, I would not totally deplete my emergency stash of cash, but I would take about half of it and put another dent in that debt.

For the second questioner, should you invest money you inherit or pay down your student loan? Your father did know best. Pay down the debt.

And is it beneficial to take out a loan when you can pay cash for your education? No. It’s only beneficial to the lender.

I think all the questions, on some level, stem from the belief that student loan debt is good debt. It’s not. Debt is bad, even when necessary. Conventional wisdom should follow this old Chinese proverb, “A good debt is not as good as no debt.”

There are several options available for you if you are in debt and do not wish to declare bankruptcy. The most sought-after option is obtaining a debt-consolidation loan and closing all existing credit lines.Debt consolidation is where you take a new unsecured loan and use the funds to pay off your outstanding debts.

An unsecured debt consolidation loan will help you consolidate all your unsecured debt and avoid bankruptcy. This new money can save you hundreds of dollars per month if you choose to use your loan to pay off existing debt – especially high rate credit cards. Even if you don’t own a home, you could qualify for their debt consolidation loan.

Debt consolidation loans are repayable over a longer term at a relatively low interest rate. This means that the monthly repayments are lower. If the loan is secured on your property then the interest rate and payments may be even lower.

But you must compare the pros and of debt consolidation loans before taking the plunge. There are two options for consolidating debts – either you borrow money to pay off all your debts or seek assistance from a debt consolidation service. The decision on which option will meet your needs has a lot to do with whether you can qualify for qualify for low mortgage rates on debt consolidation loans , and the total amount of debt you need to consolidate.

Borrowing for debt consolidation immediately eliminates multiple debt payments. All debt collection actions eliminated. Most importantly, it won’t impact your credit rating; infact it may help improve your credit rating. Seeking debt consolidation services immediately decreases your monthly payments. It also brings to a stop, and in some cases, eliminates some interest and fees.

By getting this loan and using it to pay off credit cards, you’ll pay much less interest. Once you’ve paid off your credit cards or other debt, you’ll have a fresh start with your finances and can set up a budget within which you can live comfortably without ever having to run up credit card debt again.

Debt consolidation is an excellent tool that can help you manage and decrease your debt when you just can’t seem to do it on your own. There is no way that you can completely fix bad credit without the ability to reduce debt and pay your bills on time. However, once your debt has reached a certain level, this can seem almost impossible to accomplish.

A credit counsellor can provide you with the option of enrolling in a debt management plan, which provides immediate relief and allows repayment of debts without the high fees and negative ramifications of bankruptcy.

However, your choice has to be based upon your financial situation, as well as fit in with your own belief system and lifestyle.

Many people who have large amounts of debt do not need any form of bad credit consolidation as long as every every effort is made to spend less and pay off bills.You don’t need to pay a professional bad credit consolidation advisor to find that out and sometimes you must!

Before you consider taking out any kind of bad credit consolidation loan, it is important to call the companies that you owe and plead your case for lower interest rates and a longer payment schedule. You may well find that you will be given reasonable arrangements if you explain that you are considering using a bad credit consolidation service. Many firms would prefer you to pay less over a longer period of time than have to deal with the negotiations of a bad credit consolidation agency.

The interest rates of most bad credit consolidation packages are more or less the same and any very low rates that are advertised are for people who have great credit. You need to be sure you know exactly what the cost of entering the bad credit consolidation program is, and whether it will be worth it in the end, so you should inquire about interest charges and any other fees that might stack up during the program.

Your credit rating may or may not benefit from working with a bad credit consolidation plan however it is unlikely to make your credit rating worse. Many creditors will actually see that having a bad credit consolidation plan in effect as a sign of you trying to get your finances back on track.

A bad credit consolidation plan and loan is most certainly a better option than declaring bankruptcy. Bankruptcy will follow you for a long time whereas the bad credit consolidation loan only remains for as long as you are paying it off. Chapter 7 Bankruptcy will be part of your financial history for roughly 10 years. Chapter 13 can be much longer depending on how many years you need to pay off your debts. If you do decide to go forward with declaring bankruptcy, rather than taking a bad credit consolidation loan then make sure you are prepared to deal with the consequences.

To reduce your debt with a poor credit history, you have several options. While none will solve your credit problems overnight, they can help you get on better financial ground. A debt consolidation loan can help you reduce your monthly payments, while lowering interest rates. A debt consolidation program services your debt and negotiates lower interest rates. The final option of debt settlement or bankruptcy pose longer credit repercussions.

Debt Consolidation Loan

A debt consolidation loan is either a home equity loan or a personal loan which is used to pay off your bills and unsecured debt, including credit cards. A home equity loan allows you to deduct your interest from your taxes.

With both types of loans, you can negotiate terms for smaller payments over a longer period. However, remember that you will be paying more in interest this way. You also want to make sure that your debt consolidation loan has lower interest rates than what you are currently paying.

Debt Consolidation Program

Debt consolidation programs service your debt by negotiating lower fees with your creditors and administering payments. All debt consolidation companies will get you the same low interest rate on bills since this is predetermined by the creditors. The difference between companies comes from the amount they charge for fees and their customer service for following through with accounts.

By using a debt consolidation program, you prove to creditors that you are committed to paying back your debts. Within a couple of years, you can have improved your credit to the point of being able to apply for new credit, even a mortgage loan.

Debt Settlement And Bankruptcy

If you are several months behind on payments or can’t afford debt consolidation fees, you may want to consider debt settlement or bankruptcy. With both options, part or all of your debts are reduced. This is not a choice to be considered lightly. Your credit will suffer for several years by using either option. However, if you find yourself in dire financial difficulties, know you can use these options.

To decide which option is best for you, take a hard look at your finances. Ideally, you want to pay back your bills and loans to minimize any damage to your credit. A debt consolidation loan will usually have the least impact, followed by using a debt consolidation program. Using debt settlement or bankruptcy will stay on your credit history for seven to ten years.

If you are ready to bring your finances under control, a bad credit debt consolidation loan may be the right move for you. However, in today’s fiscal climate, there are a lot of debt consolidation scams to watch out for. Choosing the wrong lender can leave you in a financially worse position than when you started, while choosing the right lender can help you towards your goal of financial control. Research can help you to make the right choice.

What To Look For In A Lender

You need to understand that when looking for a bad credit debt consolidation loan, you are facing higher interest rates than someone with good credit that is seeking a loan. That, however, doesn’t mean that you should be paying outrageous rates and fees. Spend some time comparing rates and fees among lenders to get a feel for what is the norm for your financial situation.

When you get your potential lender list down to a likely few, check out their business reputations. You are bringing your debts together into one lump sum. The lender pays the debt, and you pay the lender a monthly sum, made up of the loan amount, the interest and the fees that the lender charges for his time in negotiating with your creditors and the risk he takes in making the loan. Therefore, you’ll need to make sure that they make payments to creditors on time. You’ll want to know if there have been any complaints for fraud or poor business practices. The Better Business Bureau is a good place to start your research.

Your home is usually the collateral on a debt consolidation loan. Thus, if you default on payments, you could lose your house to the lender, who would then sell it to cover the loan. Thus, you should beware of a lender that doesn’t take the time to help you figure out the smallest loan necessary to achieve your goals. Unscrupulous lenders will be pleased to loan you more than you need, as the profit from the fees charged and by taking hold of the collateral if you fail.

The best bad credit debt consolidation loan providers also offer credit-counseling services to help you through this difficult time period. These services can help you organize your finances and improve your money habits so that you’ll never find yourself in this situation again.

A debt consolidation loan can be just what you need to get your financial life back on track, provided you choose the right lender. Just as important as choosing the right lender, however, is developing the good financial habits that will bring you out of debt and into relative prosperity.

Getting out of debt is easier said than done. Fortunately, there are many options available to people hoping to eliminate or reduce high consumer debts. Before filing for bankruptcy, which is more damaging than having excessive debt, consider other alternatives. For example, acquiring a secured or unsecured debt consolidation loan is one method to becoming debt free.

Ways to Eliminate Unnecessary Debts

There are many ways to reduce debts. Some people prefer to eliminate debt without obtaining a loan. In this case, getting second employment or seeking a higher paying job may provide you with the extra cash to pay down balances. There is no easy way to reduce debts. Furthermore, eliminating debts take time. Because of high finance fees, paying double the monthly minimum may not result in a significant reduction. However, debt consolidation loans have lower rates, which mean lower finance fees.

What are Unsecured Debt Consolidation Loans?

Unsecured debt consolidation loans are granted by banks and other financial institutions. These loans are not secured by property. Hence, they are also termed no-collateral loans. Getting approved for these types of debt consolidation loans are not easy. If you have too much debt, the majority of lenders are hesitant to extend you additional credit. On the other hand, if you have a very high credit score and earn a sizeable salary, obtaining an unsecured debt consolidation loan is feasible. Overall, individuals with a superb credit rating know how to use credit responsibly. Besides, these individuals will not risk injuring their credit rating.

The disadvantage of unsecured debt consolidation loans is the higher rates. Because, lenders are taking a gamble, be prepared to pay a high interest rate. Still, lender rates are low in comparison to typical credit card rates

What is a Secured Debt Consolidation Loan?

A secured debt consolidation involves collateral. To get approved for these types of loans, the lender will request a valuable piece of property. A vehicle title or boat title may serve as sufficient collateral. If you own a home, consider obtaining a home equity loan or line of credit for the purpose of consolidating debts. These loans do not require a high credit rating. However, applicants with good credit will receive prime rates. Avoid defaulting on secured loans. Failure to pay will result in the lender taking full possession of your property.

REDUCE YOUR DEBT AND START MAKING MONEY !