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High Credit Card Interest Payments Eliminate Most Bankruptcy Alternatives

 

An interesting article appeared today in the Wheeling West Virgina Intelligencer and Wheeling News Register describing the plight of a man whose credit card company lowered his credit limit retroactively, and then started charging him an over-limit fee, and a higher rate of interest.

Unfortunately this has become an all too common problem. You get a credit card with, in this case, an $8,500 limit. Two years later the credit card company reduces your limit to $6,500. Since you cannot come up with $2,000 to get it paid down, they start charging you an over-limit fee. Because you are over your limit, they also raise the interest rate on your credit card, from 9% to 35%.

Even worse, when his other credit cards see what has happened, they do the same thing, raising his interest rates on those cards as well.

This man is now faced with no bankruptcy alternatives. He is quoted in the article as saying: If it is going to take filing for bankruptcy, I will file for bankruptcy. Unfortunately when credit card debts get this large, personal bankruptcy may be the only option.


Posted by Editor Bankruptcy Alternatives @ 3:58 pm
 

Credit Reporting Agencies Announce New Credit Scoring System

 

The three largest credit reporting agencies in America have teamed up to create the Vantage Score. According to vantagescore.com, consumers will be rated on a scale of 501 to 990, with the higher numbers representing the best score. This system competes with the FICO score, which has a range of 350 to 850.

Getting a debt consolidation loan has always been a leading bankruptcy alternative. Will this new system make it harder or easier to qualify for a debt consolidation loan? We will not know until the system has been in place for a year or two.

The new system will use credit information from the three major credit reporting agencies (Equifax, Experion, and Trans Union), VantageScore will apparently return more predictive scores on consumers with limited credit histories, which should reduce the need for lenders to go through a manual review process and impose their own in-house rules to determine who gets a debt consolidation loan.

The Vantage Score will include a letter grade as follows:

901 to 990 = A

801 to 900 = B

701 to 800 = C

601 to 700 = D

501 to 600 = F

If bad credit is causing you to consider your bankruptcy alternatives, research your options, and be prepared to defend any negative items on your credit report.


Posted by Editor Bankruptcy Alternatives @ 3:04 am
 

What is Cash-Out Refinancing, and is it a Bankruptcy Alternative?

 

If you own your home, cash-out refinancing is one of the bankruptcy alternatives you should consider.

Cash-out refinancing describes getting a new mortgage for more than enough to repay your existing mortgage, and using the difference to repay other debts.

For example, if you own a $100,000 house with a $50,000 mortgage, you could get a $75,000 mortgage. You would use the first $50,000 to repay your existing mortgage; the remaining $25,000 is the “cash-out” you get that you could then use to repay higher interest credt card debts. Obviously using the equity in your home is a good bankruptcy alternative, because in a personal bankruptcy with enough equity you may lose your house.

Of course cash-out refinancing is not for everyone. You must have equity in your house, and your new mortgage payment must be affordable. You should also beware of penalties to break your existing mortgage.

For more details, read our report on Three ways to Borrow against your House as a Bankruptcy Alternative.


Posted by Editor Bankruptcy Alternatives @ 9:45 pm
 

Is Doing Nothing Really a Logical Bankruptcy Alternative?

 

As surprising as it may seem, for many people with a huge debt load, doing nothing might actually be their best bankruptcy alternative. Here’s why:

Most people file for personal bankruptcy to protect themselves from their creditors. That’s why it’s called bankruptcy protection. You need protection from your creditors to prevent them from garnisheeing your wages, or seizing your assets.

But what it you have no wages or assets? Perhaps you are currently unemployed, or you are retired and getting a pension. If you don’t have any wages, you don’t have any wages to garnishee! You therefore don’t need to go bankrupt to get protection from your creditors, because they can’t garnishee your wages. You are what is called judgement proof.

If you go bankrupt you will have fees to pay and other negative consequences. For some people it may make sense to do nothing. If you don’t plan to get credit in the future, and don’t plan to own any property, doing nothing may be the correct answer.

Obviously doing nothing is not the correct option for everyone, but it is always the first bankruptcy alternative to consider.


Posted by Editor Bankruptcy Alternatives @ 2:42 pm
 

Should I get a mortgage to avoid bankruptcy?

 

Most people would not consider a mortgage as one of the logical bankruptcy alternatives, but for many people it may make sense.

If you own your own home, but you also have credit card debts that you can’t pay, bankruptcy may seem like your only way out. Before you consider personal bankruptcy, consider getting a mortgage debt consolidation loan.

If you qualify, you can borrow money against your house at a low rate of interest, and use the money to pay off your high interest rate credit cards.

Read our full report on getting a mortgage to pay off your debts for more information.


Posted by Editor Bankruptcy Alternatives @ 7:28 pm
 

 


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