Posts Tagged ‘personal bankruptcy’

Debt Negotiation

Few people realize that there is another solution to burdensome debt, an approach that puts YOU in the driver’s seat – that levels the playing field between you and your creditors without having go to court.

That solution is debt negotiation – otherwise known as good old-fashioned American haggling. Haven’t you ever haggled over the price of a purchase? Well, exactly the same thing can be done for your debts!

Just imagine you could wave a magic wand and turn that $25,000 of credit card debt into $12,500 or as little as $9,000. Wouldn’t that make a big difference to your financial future? And while most people are skeptical that this approach is possible, if you have a professional debt negotiator on your team, the odds are very good that he or she can cut your debt by 50% or less.

Why Is This Option Possible?
For a moment, put yourself in the shoes of the manager of a collection department for a major credit card bank:

You know that bankruptcies are at an all-time high, that many consumers file bankruptcy at the drop of a hat, and that the chances of collecting any money get worse as the debt ages.

Let’s also say you have the opportunity to close your books on a delinquent account by collecting fifty-cents for every dollar owed by the debtor, or take a chance on never collecting a single penny by trying to hold out for the full account value.

You also realize that once the debt leaves your bank (usually after six months or so), it will go to a third-party collection agency. The agency will take at least 15%-20% commission right off the top of whatever they collect, and they are unlikely to collect more than 70% of the debt. So you’ll probably never retrieve much more than half of the money anyway. When you look at it this way, collecting 50% does not seem like such a bad prospect.

Now, the way we’ve described it, it sounds quite easy. You might be thinking, “OK, I’ll get on the phone and do this myself.”

What will happen? You’ll reach the “customer assistance team”, and the representative will inform you that other banks may settle for 50%, but that their bank never settles for less than 85%, under any circumstances. But, of course, they do have that wonderful hardship program for you.

After you’ve called five or six banks and received the same treatment, you’ll probably end up with the idea that debt negotiation doesn’t work. The problem is that the banks will rarely take a debtor seriously.

The banks are quite prepared for the amateur do-it-yourself negotiator. They have the telephone scripts all set up so that by the time the conversation is over, the caller feels guilty about the money owed, and their dubious hardship plan sounds like a great deal after all.

Spend Less Money To Eliminate Debt

Does the headline above sound a bit simplistic to you? Perhaps it is, but it’s certainly a lot easier in theory than in practice for quite a lot of people. The personal and credit card debt picture in America tells this story better than anything else. Personal bankruptcies continue to grow in number, despite any hints that an economic recovery may be on the way. And with it, retirements are delayed, marriage difficulties occur with debt, and credit histories are ruined. Certainly the effects of not spending less outweigh those of living within (or below) your means.

Tips To Reduce Spending

There are a number of ways you can begin to reduce spending and thus reduce debt by making some simple, small changes in your life. First of all, you must look at your credit cards and credit card spending. How many do you have? Studies show that those with more than two credit cards typically tend to have the highest balances.

This makes a lot of sense, especially considering that multiple bills can start to be a real hassle when they come in every month. With multiple credit cards, it is easy to get confused with how much you are spending, and easier to come off your budget, despite your best intentions.

Another question to ask yourself about your credit cards is, “How much am I paying for my credit card?” Astonishingly enough, many credit cards still charge bloated annual fees on top of their already high rates. Avoid these cards and if you have one, find a card with a low-balance transfer interest rate and no fees.

Finally, make sure you are paying off your credit cards in full every month. And, as added protection, if you find that you cannot make your payment one month, cut up your card and only use debit or cash for payments. You’ll be surprised how much you save

Shopping, Shopping, Shopping!

If there is a key contributor to debt situations, it has got to be shopping. Nowhere else can you spend so much in so little time on things you do not necessarily need. But, avoiding shopping is very difficult to do altogether. After all, we’ve all got to eat. And when Grocery shopping (or any other kind, frankly) going with a list and sticking only to the list will save you thousands of dollars every year. Retailers call non-list shopping “impulse shopping”, and they love it. But, it can hurt you big time. Also, when shopping for groceries, consider bulk buying. It will save you even more money.

Bill Paying And Insurance

Let’s say you’re behind on your bills. First of all, you are not alone. And you can possibly get back on track on your own, provided the minimum payment trap hasn’t hurt you too bad. If you are behind, pay off the smallest bill first. Once you have paid off your smallest bill, cut up the card (if it’s a credit card bill), and then take the money you were paying on that bill and contribute it to your next bill. This way, your bills will all get paid off one by one, and you will pull yourself out of a potentially brutal hole.

Buying life insurance is important for everybody, particularly for those with families and assets. For this, buying term life insurance is always the best bet, particularly because it is so much cheaper than whole life insurance, and just much more effective. On an alternate insurance note, consider driving a used instead of new car, as the auto insurance will be less, on top of the actual price of the car.

Getting out of debt is never an easy process, no matter how deep you’ve gone. But, it not only takes work, but an entire shift of attitude. To get true debt reduction that stays, you’ve got to stop spending now.