Cost of Bankruptcy Has Risen Since 2005 Reform
Filing for Chapter 7 or 13 bankruptcy has gotten more expensive since changes in the nation’s bankruptcy laws took effect in 2005. A new study found that people who file bankruptcy face a 55 percent increase in costs since bankruptcy reform.
Bankruptcy Fees for Attorney and Other Services
The study–published in the American Bankruptcy Institute Law Review–was done by Lois R. Lupica, a New York bankruptcy attorney, and Thomson & Knight LLP, and examined data from consumer bankruptcy cases in six states. The costs to consumers was for fees and expenses related to an attorney, the trustee, filing, credit counseling and debtor education, and other professional fees. The median cost of filing Chapter 13 rose to $4,077 in 2007 and 2008; $2,930 in 2003 and 2004. The cost of filing for Chapter 7 rose to $1,399 from $900.
“Greater up-front costs may have hindered some consumers from filing bankruptcy, but there may be other factors at play,” Lupica said in a statement. “There was a large volume of negative publicity in the aftermath of the 2005 amendments, as well as heightened efforts by aggressive debt collection and consolidation firms.”
Other Debt Solutions
Besides the costs, there are other reasons that it makes sense to avoid filing bankruptcy and look for other possible debt solutions. A bankruptcy filing stays on your credit report for ten years. During that time expect to have difficulties qualifying for a mortgage, auto loan, credit cards, or other types of financing. A bankruptcy filing could also cost you a job. With so many unemployed workers competing for jobs, more employers have added credit checks to the job application process.
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Loading ...Using Credit Cards to Consolidate Debt
Your debt reduction plan may involve debt consolidation if you have a lot of bills. Applying for a debt consolidation loan is an option. If you cannot qualify for a new loan because you have too much debt, you may be able to qualify for a balance transfer offer with an existing credit card. Here are some things to consider about using a credit card to consolidate debt.
Low Interest Debt Consolidation
Credit cards tend to have higher interest rates than debt consolidation loans. However, you may qualify for a balance transfer offer at a lower rate of interest. Having good credit might even get you a zero percent balance transfer offer.
When considering low-interest rate credit card transfers, look at the number of months you have at the low rate. Some low rates are only good for a limited time, so it’s important to know what rate you can expect to pay after the offer ends. In some cases low-interest balance transfers are good until transferred debt is paid in full, as long as you stay current on monthly payments.
No More Credit Card Debt
It doesn’t make sense to use a credit card to consolidate debt if you go out and make more purchases on your cards. Once you consolidate debt put your credit cards away or destroy them so you won’t be tempted to overspend. As you pay off your credit card debt make an effort to add extra to your minimum monthly payment. Doing so not only gets the debt paid off sooner, but decreases the amount of interest you pay over the long term
(No Ratings Yet) Loading ...Do You Have Secret Credit Card Debt?
A recent survey by CESI Debt Solutions found that 80% of married couples spend money their spouse doesn’t know about. The provider of debt management and debt counseling services polled 200 Americans and found that 18.5% of married people have a credit card their spouse doesn’t know about and 15% have a secret bank account.
Secret Purchases
While there can be a variety of reasons someone decides to spend money in secret, 60% of those surveyed said they keep purchases secret to avoid problems at home. Furthermore, 38% feared that if their spouse found out about their secret spending it would result in a separation or divorce. The most common purchases made in secret are clothing and accessories, food/dining, beauty/personal care items, and gifts.
Financial Infidelity
If you, too, regularly buy things without your spouse knowing and/or have secret credit card debt, there could be a problem. Financial infidelity can be a symptom of serious problems in a marriage. Having credit card debt your spouse doesn’t know about indicates a lack of trust. But it also could mean that you have a problem controlling compulsive spending and are afraid to be found out.
Get Help with Debt
If your spending has gotten out of control and you have a lot of credit card debt, consider getting help from a debt counseling firm. A debt counselor can help you get to the root of financial problems and put together a plan for paying off debt and curbing the urge to spend in secret.
(No Ratings Yet) Loading ...Credit Card Debt and Balance Transfers
What should you do if you receive a balance transfer offer in the mail? All you have to do is fill out the little checks or call a toll-free number to activate a transfer offer. It’s an easy process that could help you reduce credit card debt…or can it. There are some pros and cons for using balance transfer offers for credit card debt.
Debt Reduction Takes Time
Even if you choose to use a balance transfer offer you still need to come up with a debt reduction plan. A transfer won’t erase your credit card debt. Only you can do that by coming up with the cash to pay down your balance month by month. This takes time so be patient.
Debt Consolidation
A balance transfer can help you consolidate debt and lower the amount of interest you pay. However, consolidating debt can backfire if you end up using open credit lines after transferring credit card debt. Do not transfer balances and continue your old spending habits.
Get Help with Debt
You may be unable to handle your debt woes on you own even with the help of a balance transfer offer. A debt counseling agency can help you put together a debt reduction plan and work through the issues that are contributing to your problems with debt.
Read the Terms
Using a balance transfer offer should not be your first plan of action to reduce credit card debt. But if you decide to go this route, read through the terms of any offer you are considering so you know exactly what’s involved.
(No Ratings Yet) Loading ...Are You Ready for Debt Counseling?
Have you considered working with a debt counseling firm to get your bills under control? A debt counselor can work with you to get at the root of any spending problems you have, and help you become a better manager of your money. Here are some things to look for when looking for a debt counseling firm.
- Debt counseling only works if you are willing to change your behavior. It won’t do any good to seek debt help if you are resistant to doing the work that needs to be done. Digging out of a lot of debt won’t happen overnight, so you have to be committed sticking with the program for as long as necessary.
- Debt counseling should be free or low-cost. Some churches or other nonprofits may offer free counseling or have sliding scale fees. But don’t let pricing or nonprofit status be your only criteria for selecting a counselor. Check out the reputation of anyone you are considering working with. Are they affiliated with a reputable membership organization such as the National Foundation for Credit Counseling and have accreditation?
- Credit counseling should include help with curbing spending, budgeting, saving, in addition to paying off debt. Ask about workshops or other opportunities to learn more about managing money, such as workbooks or online tutorials.
- Avoid agencies that pressure you to sign up for expensive debt management programs or require that you apply for a debt consolidation loan. High-pressure sales tactics could indicate a scam is brewing.
Don’t be embarrassed to get help with debt. Finding a counselor and admitting your weaknesses is better than digging a deeper debt hole that you can’t climb out of.
(No Ratings Yet) Loading ...Credit Card Debt and Rewards Programs
Paying off credit card debt could result in you being bombarded with new credit card offers. Some credit card companies have increased marketing efforts for their cards or introduced new rewards programs or other incentives. Discover Financial Services, for example, recently said marketing expense for the third quarter is going to be at the highest level since the third period of 2008.
Stick with Debt Reduction Plan
Think long and hard before accepting new offers from credit card companies. While it may seem like a good idea to sign up for cash back or other rewards offers, these programs usually come with a price. Here are three reasons taking advantage of rewards programs could derail your debt reduction plan:
- Credit card rewards programs often have higher interest rates than non-rewards cards. Higher interest can cause your credit card debt to creep upward before you even realize it. If you are carrying a balance on credit cards, it’s important to shop around for a lower interest rate.
- You may be tempted to run up credit card debt just to accumulate points. Many rewards programs offer one point for each dollar spent and may have other special offers that boost points totals.
- Points usually expire after a period of time. It’s important to regularly check your points balance to make sure you don’t miss out on using them. If your rewards program allows you to get cash back or pay down the balance with points, take advantage of the offer.
Review Rewards Terms
The wrong credit card rewards program could slow down your debt reduction plans, so read through all the terms before signing up.
(No Ratings Yet) Loading ...Wipe out Credit Card Debt, Fund Savings
People who are working to pay off credit card debt often dream about the things they may be able to buy once they have paid off their bills. But a good debt reduction plan doesn’t erase monthly payments just so you can go out and buy more stuff. Start planning ahead now to set up savings accounts to help you have a brighter financial future. Read the rest of this entry »
(No Ratings Yet) Loading ...3 Questions to Ask Before Taking on Credit Card Debt
Despite troubles with the economy, many consumers still find if relatively easy to sign up for credit cards. In many cases, people are carrying balances on more than one credit card. Over 575 million cards were in circulation at the end of 2009, and the average cardholder has 3.5 cards, according to an article on Mint.com.
Do You Need More Credit Card Debt?
Take a deep breath before taking on new credit card debt and ask yourself these three important questions.
- Are you already finding it tough to pay off balances on existing credit cards? Unless you are using a low-interest balance transfer offer as part of a debt reduction plan, it’s probably best to avoid signing up for a new card.
- Do you need debt counseling because you spend impulsively? Frequent trips to the store, dining out on plastic, and getting credit card cash advances to pay monthly bills could signal a real problem.
- Will applying for a new card hurt your credit? Check your credit report to review your financial history. If you already have a history of defaulting on loans, went into foreclosure, or have too many open credit lines, you may not even qualify for a new card. If you do get approved for a credit line, don’t expect to receive the lowest interest rate available.
Applying for Cards
Just because you can get approved for a credit card doesn’t mean you should apply for one. If you already feel like you need help with debt, opening new credit lines won’t help your financial situation.
(No Ratings Yet) Loading ...A Bankruptcy Filing May Not Help You
Filing for bankruptcy may have crossed your mind if you are struggling to keep up with all your debt. But a recent USA Today article says that many Americans who need bankruptcy protection aren’t being helped.
Bankruptcy Is Expensive Read the rest of this entry »
(No Ratings Yet) Loading ...Almost Half of Americans Are Stressed about Debt
Almost half of Americans are stressed about debt. A recent Associated Press-Gfk poll found that 46% of people surveyed are dealing with stress related to debt. Half of those people said they have “a great deal” or “a good bit” of stress. The poll found that 53% of Americans felt little or no stress about debt.
Job Security
Among the reasons that may contribute to stress related to debt is the fact that the unemployment rate is at 9.9%. Many people who currently hold jobs fear they could end up joining the ranks of the unemployed. Some households have tightened their belts, which has helped increase the personal savings rate to 3.6% in April, up from 3.1% a month earlier.
Get Debt Help If Needed
You may be among those who are stressed about credit card debt and other bills, and may be wondering what the future holds, especially if you have little savings. There are debt solutions available to help pay off what you owe. A debt counseling firm can work with you to improve your spending habits and budget money better to pay off credit card debt.
Debt Consolidation Help
Another way to get on track with a debt reduction plan is to put together a debt consolidation plan. With the help of a knowledgeable debt counseling firm you can put together a consolidation plan on your own. But if you need more help, there are debt consolidation services available. Just be prepared to pay fees for this help.
Yes, it is stressful to juggle a lot of debt. Take action now to nip your debt woes in the bud before they become even more unmanageable.
(No Ratings Yet) Loading ...- This blog covers a wide variety of debt consolidation and loan topics.
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Cost of Bankruptcy Has Risen Since 2005 Reform
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Chris Rocks is the Regional Director of the National Credit Federation (NCF). NCF is a nationwide membership-based organization that assists consumers recovering from a financial difficulty and those who need a significant increase in their credit score.
Chris began his financial services career as a Financial Advisor helping young families with risk management and asset accumulation strategies. It was during that time that Chris realized that many of these young families also needed someone to guide their choices with regards to debt management.
He made the transition into the mortgage industry where he first worked as a loan originator and later the Vice President of a small mortgage company. As Chris came across clients who had suffered through financial challenges and saw the difficulty they had in re-entering our credit driven economy, he discovered there was a real opportunity to leverage his unique background and help others.
He can be contacted by visiting his personal site, GoodCreditLiving.com.
Francine L. Huff is the Publisher and Editorial Director of Super Savvy Publishing, LLC, which provides editorial and publishing services. She is a gifted author, freelance journalist, and motivational speaker who has entertained and motivated a variety of audiences through workshops, panels and keynote addresses. Francine is the author of The 25-Day Money Makeover for Women, which has inspired and motivated many readers to rein in poor financial habits, become good stewards over their money and work toward a debt-free life. She has appeared on a variety of TV and radio shows. Francine previously worked for the Wall Street Journal, where she was the spot news bureau chief, a news editor and a copy editor. She has interviewed a variety of financial professionals about financial issues and strives to present information about managing money in an easy-to-understand format that is accessible to people of all backgrounds and income levels.
Karen Lawson is a freelance writer with more than 15 years of experience working in mortgage banking and loan servicing. She holds BA and MA degrees in English from the University of Nevada, Reno.
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