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Are Low Interest Credit Cards a Bankruptcy Alternative?

 

Does it brighten your day when you get one of those low interest credit card offers in the mail? You know, the one’s that say you have been “pre-approved” for a fabulous low interest offer.

If you have a lot of debt, it is very tempting to jump with joy when you receive one of these offers in the mail. You think, great, I can transfer the balance from my high interest credit card to this new low interest credit card, which will lower my monthly payments, and help me pay off my debts faster. This form of debt consolidation saves you money and helps you avoid bankruptcy.

Yes, it’s a great deal, but it can backfire. First, the low-interest rate is only for a “limited time”, usually the first six months. At the end of six months you may find yourself paying an even higher rate than you were paying on your old credit card.

Second, transferring a balance only makes sense if you cut up your old credit card. Most people get the new card, but keep using the old card, so they end up with twice as much debt as they had before! Instead of the new card being a bankruptcy alternative, it actually increases your chances of going bankrupt, because now you have even more debt!

A low interest credit card is only a bankruptcy alternative if you are disciplined enough to stop using your old cards. Pay down debt, don’t increase it, or you may find yourself filing for personal bankruptcy.

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Posted by Editor Bankruptcy Alternatives @ 8:12 pm
 

Do it Yourself Debt Settlement as a Bankruptcy Alternative

 

If you owe a lot of money on credit cards, bank loans, and other debts, you can file for bankruptcy or, as a bankruptcy alternative, you can try to settle your debts yourself.

Do-it-yourself debt settlement is very easy to understand. Instead of hiring a bankruptcy attorney to file bankruptcy for you, or instead of hiring a debt management company or credit counselor to negotiate with your creditors on your behalf, you can make a deal with your creditors directly.

Here’s how it works: First, you make a list of everyone you owe money to (names and amounts). Then, you make a personal budget to determine what you can afford to offer the creditors.

Let’s say you have two credit cards, and you owe $3,000 on each of them ($6,000 in total), and you are behind on your payments. Let’s also assume that it’s possible for you to borrow $3,000 from friends or family, or perhaps raise $3,000 by selling your old car or some other asset.

You could contact each creditor and offer to pay them a lump sum of $1,500 if they will agree to write off the balance of what you owe. If you are already behind on your payments, and if they believe your only other option is to file for personal bankruptcy, they may agree to accept something now, rather risk getting nothing if you file for Chapter 7 bankruptcy.

For this strategy to work, you must have something to offer your creditors now. If you have no up-front cash to offer them, it is unlikely they will accept an offer. However, if you have some money, it may be possible to settle your debts for less than the full amount owing, and avoid bankruptcy. Making a settlement will still have a negative impact on your credit report, but with all of your debts dealt with you can begin saving money and working to re-build your credit.

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Posted by Editor Bankruptcy Alternatives @ 12:18 am
 

Will an Economic Slow-Down Force Consumers to Re-Think Their Bankruptcy Alternatives?

 

In our previous blog post about using a mortgage as a bankruptcy alternative, we discussed using a mortgage to repay high interest credit card an other debt. This strategy has become popular over the past few years as interest rates have decreased, and house prices have increased.

However, a recent report by the Mortgage Bankers Association rindicates that the number of loan applications for mortgages fell by 1.2% to the lowest level since May 2002.

This means that the popular bankruptcy alternative of re-financing your house to repay your other debts may be becoming less popular as interest rates rise and house prices level off and even fall in some parts of the country.

Home owners should no assume that house prices will rise indefinitely. What goes up must come down, and as house prices fall, the ability to re-finance may also decrease.

If you have equity in your house, now may be the time to attempt to get a debt consolidation loan before the debt consolidation option becomes more difficult. Of course now is also a good time to work on reducing your debt levels, so that you can avoid personal bankruptcy. You have bankruptcy alternatives, but they depend on you taking action while you still have options.

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Posted by Editor Bankruptcy Alternatives @ 2:55 pm
 

 


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