Debt problem and debt solution


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Debt problem and debt solution

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Debt problem and debt solution

  1. 1. I Have a Debt Problem - Will I Be Forced to Sell My House?If you are a homeowner and struggling with debt, your house could be at risk if you do not take theright precautions and chose the appropriate debt solution.More and more people in the UK are facing problems with debt. Official figures show that over130,000 people were declared insolvent in 2009. Unofficial estimates put the number at least doublethat.However, simply being in debt does not automatically mean that your house is at risk.Mortgage payments must be maintainedThe problem for many people when they are short of money, is that they prioritise payments tounsecured debts such as credit cards and personal loans This means that mortgage payments aremissed.Missing mortgage payments is a serious mistake. The first rule if you are a home owner is to maintainyour mortgage payments over any other unsecured debt payments.If you default on your mortgage, your home is at risk. If you default on unsecured debt paymentssuch as credit cards, there is no automatic risk to your house.Tackle your debt problem head onEven though missing payments to your unsecured debt poses no immediate risk to your house, youmust not just ignore the problem. If a debt remains unpaid, a creditor is likely to take out a countycourt judgement (CCJ) against you.If a CCJ remains unpaid, the creditor can apply for a charging order against your property which ineffect secures the debt against it.In order to prevent this type of action against you, you need to tackle your debt problem head on.Assuming that you are unable to re-mortgage and consolidate your debt, there are three mainoptions to consider:Debt Management Plan - A debt management plan (DMP) allows you to reduce the payments youmake to your unsecured creditors to a manageable affordable amount. This means you free upmoney to ensure that you have enough to pay your mortgage.The advantage of a DMP is that it is flexible. You are not forced to release any equity from your hometo help repay your creditors. However, because your monthly payments are smaller, it will take youmuch longer to repay your debt - in some cases many years.Individual Voluntary Arrangement - An individual voluntary arrangement (IVA) is a more formal,legally binding solution which allows you to pay your debts for five years. After this any unpaid debtis written off.With an IVA, you remain in control of your house. It is protected because money is freed up toensure you can afford to make the mortgage payments.However, as a homeowner, if you carry out an IVA there are some serious implications to consider.Firstly, if there is any available, you will have to agree to release equity from your property for thebenefit of your creditors.Secondly, if your IVA fails because you cannot make the payments, you risk being forced to declarebankruptcy. If this happens, you home may have to be sold to release any equity in it.Bankruptcy - Generally speaking, if you have equity in your property, bankruptcy should be avoided.If you declare bankruptcy, there is a very high probability that your house will be sold to release anyequity in it for the benefit of your creditors.If you have a debt problem, this does not automatically mean that you will end up losing your house.However, if maintaining your unsecured debt payments means that you are getting in arrears withyour mortgage, this could have very serious consequences.Implementing a debt management solution will protect your home by reducing payments to yourunsecured debts thus freeing up cash for your mortgage.However, you must make sure that you get the right advice and fully understand the implications foryour home before deciding which debt solution is best for you.
  2. 2. Consolidated Debt SolutionsThe economy is in a rough state right now and people are tightening the purse strings as muchas they can. Unfortunately, some people are too late in trying to save money because theyhave already amassed a large amount of debt. Credit cards are a likely culprit of debt, butstudent loans can also place a large burden on the shoulders of consumers. In difficulteconomical times, debt can quickly rise, especially if payments are missed or interest rates arenot fixed. Millions of people are looking for a solution to get their debt paid off as quicklyand affordable as possible.Consumers are discovering the advantages of consolidated debt solutions. Consumers canchoose from thousands of debt consolidation companies. A simple search will turn upthousands of different results. Consumers should research a company before purchasing theirservices. Just like with anything else, there are always those companies that do not standbehind their services or have bad reviews. Taking some extra time to make sure the companyis reputable could save a lot of stress and money later on down the road. Once a company hasbeen selected, consumers can then make the next step towards gaining control of their debt.Basically, debt consolidation consists of combining all debts into one single debt. A loan isgiven to pay the debts off and then the loan is repaid. The interest rates are normally lower orfixed and the payment amount each month is usually less than what a person paid before. Byconsolidating their debt into one amount, people are able to meet their monthly obligationseasier. There will be no more varied due dates to remember and no different payment amountsto keep track of. One debt and one monthly payment. This is very appealing to consumers allacross the country. You need a Debt management Plan.Although debt consolidation has become very popular, consumers need to realize that it is nota quick fix to debt problem. It is a step in the right direction, but people need to address thereasons behind what caused the debt, in the first place. Usually these types of services willoffer some sort of credit counseling to help ensure that people do not get their debt undercontrol, only to begin acquiring new debt. Debt can be a vicious cycle, especially credit carddebt. As long as individuals stick to a payment plan and a plan for debt control, they shouldbe living debt free in a short amount of time.
  3. 3. How to Find a Great Debt Solution CompanyIf you’re in debt and looking for a way out, you may be searching for a reputable debtsolution company. There certainly are such companies out there. The right debt solutioncompany can help you to resolve debt issues, clear up debt problems and get out from underthe burden of crushing debt. The more you know about some possible debt solutions beforeyou meet them the better off you’ll be. In addition you should work only with firms that haveimpeccable reputations. There are many scam artists out there that make outlandish claimsabout how they can eliminate debt and raise your credit score.First of all many of these firms are con artists, pure and simple. They’ll hit you withsubstantial fees and do little or nothing to help solve your debt problems. In some cases theycan actually get you into more trouble than you were in before you availed yourself of theirservices. Use some common sense here. If they tell you that they can do such things aseliminate all your debt or clear all the bad debts off your credit report, don’t believe them.They can not do that legally.Obviously people who counsel you to get a different social security number or change youridentity are up to no good and trying to take you with them. Under the law, you are liable forfollowing their bad advice, so don’t do it. You could end up resolving your debt by savingmoney while you’re in prison.Now that you’re not going to be tempted by claims that sound too good to be true, whatshould you do to find a solution to your debt problems? First of all, you should look to solvethe problems that got you into such debt in the first place. If you have a one time problem,such as medical emergency or job loss, but you’re now back firmly on your feet, great. Youstand a great chance of getting out of debt once and for all, even without help from a debtsolution company. Just continue to follow sound fiscal principles like spending less than youmake, not making late payments on your bills and paying off the highest interest debt first.You should be fine when your current debt problems are solved.What if the previous paragraph doesn’t describe you? If you found yourself deep in debt dueto a fierce mall habit, gambling, late nights in the clubs, or too much success on eBAY, thefirst thing your must do is get such behavior under control. If you continue such practices,even the best debt solution company won’t stand a chance of pulling you out of debt for long.When you’re looking for a company to find a solution for your debt problem, chances areyou’ll find it on the Internet. In a recent survey in Europe, over 50% of those surveyed foundtheir debt solution company this way. The advantage here is that you can quickly lookthrough many different firms to find the one that best suits your needs and you feelcomfortable working with. The importance of a good relationship with your debt solution
  4. 4. provider can not be overstated. You’ll be working closely with them for some time andrevealing the innermost details of your financial life. They’ll be part psychologist, partfinancial counselor, but they’ll help you get out of debt, hopefully for good.The number one way to choose a firm is by reputation. You want a firm that has a stronghistory of proven debt solutions; if you can rely on a friend or relative’s experience, so muchthe better. Many of these companies rely on word of mouth referrals for a chunk of theirbusiness.Make sure you find out if they are licensed to do business in your state. Some of these firmswill negotiate with your creditors to arrange for you to pay off your debt for much less thanthe original amount. Be aware that although that sounds just fantastic, it will hurt your creditfor years. If you feel that you have no other way out that may be a trade-off you’re preparedto make, but be aware that when you go to buy a car or other major purchase, such as a home,you’ll pay much higher interest rates. In some cases though, such a plan, called a debtmanagement plan, or DMP, may be your only solution. Make sure that it’s not the onlysolution offered, however. Your debt solution provider should thoroughly analyze your debtand credit situation before making that recommendation.You should also be aware also that some of these firms will charge you substantial fees inorder to solve your problems. Make sure you get their fee structure in writing. They maycharge you monthly, a one time fee, or both. If they are giving you ongoing counseling makesure their debt counselors are qualified and accredited.Where some debt solution and credit firms can be invaluable, however is helping you clearinaccuracies off your credit report. If you have debt problems, it’s bad enough to have yourlegitimate problems listed on your credit report. You really don’t need to have invalid debt onthere as well. You can get this cleared up on you own by carefully examining your creditreport and writing the creditors to request that they remove the inaccurate debt. Be sure todocument your position carefully. Be advised that not all debt solution firms are prepared orqualified to help you purge your credit report of inaccurate entries.You should also inquire as to what they’ll do to help you avoid debt problems in the future. Ifyou’ve consistently had debt problems in the past, this could be worth its weight in gold.Finally, make sure they’ll guarantee the security of your personal information. Getting out ofdebt is no good if someone else puts you back in by stealing your identity.To discover what thousands of people already know about getting out of debt for good, andfind out more about how to be sure you choose a comapny that will really benefit you, not justthemselves, go to the debt solution company guide. There are many debt solutions companies
  5. 5. out there and the same one’s not the best for every situation. Make sure you get the one that’sthe best for yours.