Controlling Your Credit for a Profitable Future
As the credit markets tighten up and the economy contracts, many Americans over their heads in debt consider bankruptcy as an alternative, when they should be considering alternative financing. Bankruptcy provides limited solutions and several downsides. After a bankruptcy getting unsecured loans is rather impossible and the interest rate on collateralized loans will take into account the high risk presented by a past bankruptcy. Bankruptcies remain on your credit history and affect your credit score for ten years. The following are several steps to consider in order to preserve the best credit score you can and move form debt to healthy finances.
Retired couples on fixed income and high credit card debt should also keep in mind that depending on the type of bankruptcy route they take, not all their retirement accounts may be protected from being used to satisfy creditors. All 401(k) programs are protected, but IRS accounts are only protected up to $1 million and after the court may decide what is yours and what can go to creditors.
- Negotiate with the credit card companies. This can be done on your own, using the expertise of a lawyer or a credit counselor. The benefit of using an attorney experienced in negotiating settlements is they know all the credit card company tricks and will insist on the negotiated terms being formalized in writing. They also provide an impersonal buffer to the card companies and any collection agencies. Negotiation may include reduced interest rates, longer time period or reduced balance.
- Another short-term step that may be available is to do a balance transfer using a 9 – 12 month 0% or low percent rate card offer to maximize payments going toward your balance.
- Work with a reputable consumer credit counselor who has a bona fide track record. Steer clear of counselors who are primarily offering loans or pushing you to take the bankruptcy step without going over all the alternatives with you. If you do file for a Chapter 7 or 13 bankruptcy, the Bankruptcy Reform Act dictates that, at your won expense, you must undergo credit counseling for six months prior to filing and take a financial-management course after your filing.
- Weigh all your alternatives taking into account all the assets you have to leverage. Even in a slow real estate market, you may be able to sell you home to a relative for a price that benefits you both, rent the home and make a dent in your outstanding liabilities.
- If negotiations with creditors fail, you can’t meet your monthly credit obligations, and bankruptcy is unavoidable, work with an attorney. You want to make sure all the correct steps are taken to protect your assets and income and to minimize the downside of a bankruptcy.
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Filed under: Alternative Capital, Business Cash Advance, MasterCard/VISA, Money Matters - Personal
