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August 14, 2010 By admin 10 Comments

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The Credit Effects Of Debt Settlement And Bankruptcy

Author: Adam Foster

Debt settlement programs offer a viable, and often preferable, alternative to bankruptcy. In some cases, bankruptcy may be the best option available to a consumer but debt settlement provides a way of repaying unsettled debts, reducing those total debts, and becoming debt free within three years or less. Bankruptcy should never be looked on as being an easy way to eliminate debt because it carries serious negative side effects on your credit rating, emotions, and personal circumstances.

Bankruptcy Types

There are two types of individual bankruptcy claims that can be filed - chapter 7 and chapter 13. Chapter 13 bankruptcy requires that you use all of your income, after the courts have calculated an average living allowance, to repay some or all of your debt over a period of three to five years. Chapter 7 bankruptcy is the most extreme and requires liquidation of assets and the proceeds of this liquidation is used to repay a portion of your debt.

Bankruptcy And Credit History

Regardless of the type of bankruptcy you file, it will remain on your credit history for 7 years in the case of chapter 13 and 10 years for chapter 7 bankruptcy. This will make it very difficult, or even impossible, to gain any credit during that time. Even though chapter 13 bankruptcy is looked on in a better light to chapter 7, the typical consumer will still have serious problems gaining any form of credit during this period.

Future Employment

There are further problems you should consider that are not directly related to your credit score but will have a major impact on your life. When applying for jobs you will be required to declare any bankruptcies you have filed and a potential employer can refuse your application based on this information. You may, therefore, find it difficult to get a new job in the future although some employers will still employ you even with a bankruptcy against your name.

Debt Settlement Programs

Debt settlement programs will impact on your credit history in some way. If you currently have a good credit rating, and are meeting your regular repayments, then enrolling in a debt settlement program will have a negative effect - your credit rating will get worse. The likelihood of a consumer enrolling in debt settlement when they have good credit rating, though, is low.

If your credit rating has already been hit because of late or missed payments and you frequently default on payments then debt settlement is unlikely to have a negative impact on your credit rating. Once you start making the new renegotiated repayments, your credit rating may actually improve.

Default Payments

When you initially start a debt settlement program you willingly cease making payments to creditors while the debt settlement company negotiates on your behalf. This obviously leads to default payments. However, a good debt settlement company will also ensure that once a renegotiated debt figure is fully repaid, the lender will report that your debt has been paid in full. This is reported to the credit agencies and marked against your credit rating - often seen as a positive mark compared to the alternatives.

Once a debt settlement program is complete, those that had poor negative rating should be on their way to rebuilding a reasonable credit score and being able to apply for new lines of credit such as mortgages and car loans. In contrast to the seven to ten years minimum that it will take to start rebuilding your credit score after bankruptcy this is a much shorter period.

Article Source: http://www.articlesbase.com/finance-articles/the-credit-effects-of-debt-settlement-and-bankruptcy-432510.html

About the Author
Adam Foster is one of the founders of DebtSettlementOne.com which is a professional debt settlement company offering debt settlement programs to consumers that require financial help.



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Effects of Declaring Personal Bankruptcy

February 14, 2010 By admin Leave a Comment


There are different people who have different opinions about bankruptcy. Some view it as a terrible thing which could happen to you if you are not careful with handling finances while some others look at it as an opportunity to get back on your feet and have a second shot at life. Though opinions may differ, the truth is that bankruptcy is a legal option of dealing with your current financial situation. But for those people who are wondering whether bankruptcy is a good option to take when finances are very bad, it should not be the case. This is a serious legal condition where the effects of declaring personal bankruptcy are far-reaching and affect you in the future rather than presently.

Of course, if there is no other option available to you, then you can always take up bankruptcy but you should do it only under the careful consideration of a lawyer who is well-versed in this. The bankruptcy rules have changed since 2005 and they have become more stringent and tough. So it is very necessary that you take the advice of a lawyer. Though the fees would be extra for paying the lawyer and this is a problem when you are filing for bankruptcy, it is a better option than to get embroiled in legal rules which would cease to make sense to you after the first line.

If you are filing for complete bankruptcy, then you have to do it under chapter 7 which would absolve you of all debts. But this has deep effects on your credit rating for 10 years, during which you would not be able to take any loans. Also, most people choose this option only if there is no chance of getting some money to pay off some of the debts.

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Find out more about declaring yourself bankrupt and what are the considerations you should take note of.

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Chapter 13 Bankruptcy: How It Effects Your Home

February 7, 2010 By admin Leave a Comment

There is no doubt that filing chapter 13 bankruptcy will effect your mortgage, but the question is what will it do? When you file, it will remain on your credit report for up to ten years. During that time, every time that you apply for any credit, from a home mortgage to a car loan to a simple credit card, the lender will see this on your credit report and will then need to decide if in fact they should give you credit. In many cases, the answer will be no. When it comes to purchasing a home, this large commitment may be that much harder to get.

Options For Individuals

But, there are options for many people who are in chapter 13 bankruptcy or have found themselves with the ability to pay for a mortgage but have this black mark on their credit history. Buying home when you are in this situation will be tricky. Here are some tips to help you through.

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Effects of Bankruptcy: You Must be Aware of Them Before Declaring Bankruptcy

February 7, 2010 By admin Leave a Comment

Understanding bankruptcy

Bankruptcy is basically the official way of announcing that a person can no longer repay his debts in his current situation. Consequently, it is also a plan that allows the borrower to resolve his debts by dividing all his assets between his creditors. The process of dividing the said assets is duly supervised, all for the purpose of providing equal partition among creditors.

Types of bankruptcy

Because there are many different debt situations, there are also a number of different types of bankruptcy to help individuals and businesses get out of debt:

-Straight Bankruptcy requires a debtor to be within a certain asset limit or to give up property over that limit to be sold by the court. A person who successfully declares bankruptcy is able to get out of debt completely.

-Reorganization, is way for businesses or individuals with massive debts to get out of debt.

Pros of Bankruptcy

When declaring bankruptcy to get out of debt, you will not have to repay most or all of your debt.

Declaring bankruptcy could prevent foreclosure of your home, stop repossession of such items as automobiles, and keep your utilities from being disconnected.

Bankruptcy to get out of debt will often stop wage garnishments and phone calls from debt collectors and allow you to get out of debt without continued harassment.

Cons of Bankruptcy

When declaring bankruptcy to get out of debt, you will not be allowed to keep collateral owed to a creditor unless you can keep up with the payments. Declaring bankruptcy usually does not allow you to stop payment on such things as child support, student loans, alimony, court restitution orders, certain types of taxes, or criminal fines.

If you had consignors on any of your collateral, your cosigners will not be able to get out of debt with you as they are liable for part or all of the debt you discharge through a bankruptcy.

Declaring bankruptcy, in an attempt to get out of debt, will not eliminate your mortgage or any other secured loan; it will only keep these payments at bay until you have dealt with other creditors.

Jennifer Morva has been associated with Bad Credit Personal Loans. Having completed his Masters in Finance from Lancaster University Management School, he undertook to provide useful advice through his articles that have been found very useful by the residents of the UK. To find iva free advice , iva for people with bankruptcy, bankruptcy information visit http://www.ivabankruptcy.co.uk

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Common Effects of Declaring Bankruptcy

February 6, 2010 By admin Leave a Comment

Many consider bankruptcy to be a terrible option which should never be used except in the most drastic of circumstances. Others see it as an opportunity to begin again by wiping out past debts, and they may see bankruptcy as an option which should be considered sooner rather than later. Whatever the case may be, it's true that bankruptcy is a legal and legitimate way to deal with excessive debt that is beyond your ability to pay.

Nevertheless, bankruptcy should not be taken lightly as it will have long-term effects on your financial life. It may be a good option for your situation, but this requires careful consideration of all of your options and sitting down with a professional (like a bankruptcy lawyer). Still, you may be wondering about one important question: what are the negative effects of declaring bankruptcy?

Well, it has been said that declaring chapter 7 bankruptcy (which seeks to eliminate most or all of your debts) is the ultimate admission of financial defeat. As such, it will stay on your record for about 10 years and thus seriously damage your credit rating. This will make it more difficult to obtain a loan for a car or house (or for anything else for that matter).

It is not impossible, however, to obtain credit after declaring bankruptcy, but you'll probably end up paying a much higher interest rate as a result. You should also realize that your credit can improve over time if you work on improving your financial habits. If you take bankruptcy as a fresh start, you can use your second chance to build a much better financial future. This is a serious matter, but you should know that there truly is life after bankruptcy if you have the patience and discipline to rebuild your credit.

Another possibility that you may not have considered is that innocent creditors will be hurt as a result of your filing bankruptcy. This is particularly sad when you're dealing with small businesses who extend you credit and may be hit hard if their loans are not repaid. This should be taken into consideration, but ultimately you have to do what is best for you and your family.

There are many alternatives to bankruptcy that you should seriously consider, as it is always best to fulfill your obligations and pay your debts off. However, if you, with the help of a financial adviser and attorney, determine that it is the only option for you, rest assured that there is life after bankruptcy.

Don't let the fear of your debt take over your life. Get the facts about bankruptcy and learn how to get control of your debt. To learn more about the effects of declaring bankruptcy visit us at http://personalbankruptcyquestions.org

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