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Credit Cards
A credit card is a credit system used to pay for goods and services with the convenience of a small plastic card issued to users of the system. A credit card is different from a debit card in that it does not remove money from the user's account after every transaction. In the case of credit cards, the lender lends money to the consumer (or the user). It is also different from a charge card (though this name is sometimes used by the public to describe credit cards), which requires the balance to be paid in full each month. In contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of having interest charged.
Credit cards make up for 2/3rds for the amount of consumer debt. Whether you are a student in college just starting out, an established business owner or just the average working American. Chances are if you have any type of credit it will more than likely include some type(s) of credit card.
Lack of financial discipline carries a stiff price. One can easily find themselves in financial debt when misappropriate use is a factor.
You will only want to use the cards for things you would have bought anyway, and I always pay the bill in full. If you can understand the full aspects of this method you will find that credit will always be a great financial tool for you.
Most consumers, however, overwhelmingly see credit cards as a quick way to get into debt. Truth is the average consumer simply does not know how to fully use credit for their benefit. More than a third of credit card holders will use their cards for the purchases of goods that they really can’t afford. No wonder, by some estimates, the average American household with at least one credit card has more than $10,000 in credit card debt. This number may not be direct overdue debt, however if you were to fall into some serious financial hardship what would it take to get you debt free is the true question?
- Based on actual studies more than 90 percent of people surveyed did not know how long it would take to pay off a credit card if they made only the minimum payment. More than half underestimated the time to pay off a $1,000 bill, which is seven to eight years.
- Nearly 80 percent realize they should check their credit score periodically, but only half do so occasionally. And while 72 percent understand they may benefit by consolidating balances on a single card, only 22 percent have done so.
- Most credit card holders don't like the card they have but don't do anything to try to find a better one. When asked why they simply have no reasonable explanation. Nearly 90 percent shred or throw away promotional offers they get in the mail and only one in five has searched actively online for a card suited to his or her needs.
There are many types of credit cards as well as accounts. Many credit cards offer different types of incentives. There are many benefits of owning a credit card. Some are good and some may be bad. It all depends on the ways that use them. If you are one of the many Americans that are in debt for the sole reason of credit card misuse or maybe you have fallen into some type of hardship the first thing that you will want to do is contact your creditors and cancel all of those accounts (leaving at least one open). The one card that you choose to leave open will be the one with the lowest balance and lowest apr. This card will be for paying bills and reestablishing your credit. At the same time you will need to set up some type of repayment arrangement. Do not just neglect those accounts and let them fall into collections. You want to prevent this from happening. Many creditors will work with you as long as you come to them before they send the accounts to collections. Most creditors will not discuss repayment once your account has been sent to collections.
If you don’t have a credit card and would like to obtain one shopping around for a credit card can save you money on interest and fees. You’ll want to find one with features that match your needs. Two great credit cards that I recommend are no-fee and cash-back-rewards credit cards. By using the appropriate card for each purchase (each gives higher rewards with certain merchants, such as grocery stores or gas stations). With these types of cards one can easily find themselves making a profit by using their cards. You can find good rates as well as reasonable offers at CreditCards.com or other sites such as CreditorWeb.com. You can also do a simple Google search with the keywords “credit card” and find others. You understand that the better your credit is then the better the rates you will receive. In other words the higher your credit score is then the lower the rates will be. That goes both ways. The lower your credit score is then the higher you should expect the rates to be.
Bankruptcy
Bankruptcy is a legally declared inability or impairment of ability of an individual or organizations to pay their creditors. There are many types of bankruptcy however the two most commonly known are Chapter 7 and Chapter 13.
Traditionally, personal bankruptcy has been a desperate last resort for those deeply in debt and rushed by their creditors. It has always been that last resort when there really seemed to be no other solution. The typical profile included low-income, under-educated clerical workers or laborers, or perhaps transient non-homeowners. The typical age groups were those that were in their mid to late twenties or those over fifty five years of age.
Well that is a remnant of the past. Today's profile includes people with good jobs, doctors, lawyers, banker, judges, etc. Now it even targets those families with double incomes. It is not unlikely to find hard working tax paying citizens with six-figure incomes declaring bankruptcy. This is no longer a decision of last resort; however it is now a way that many people get rid of those debts that bog them down financially.
The most common applicants for bankruptcy include recent college graduates who file in order to avoid paying back credit cards, and government-guaranteed student loans. Are they rational? Do they feel that society owed them an education? No, in fact they now realize that they have been manipulated into this credit nightmare at a young age. They have now graduated and know that they have the potential to get a great paying job. However, they know that they have these debts hanging over their heads just waiting for them to get that 6 figure income. And once they do so the past will raise its ugly head. So what do they do? They file for bankruptcy to protect their future. Quite the scandal one would say. Well you would think different if you had $9k in credit card debt, and $100k in school loans to repay. It’s the American law and the American way! Take Advantage!
You will also find older middle class people that simply want to try to get out from under some of the debt load, so that they can simply “have a better life,” by filing for bankruptcy. From suburban executives to Wall Street professionals, people just are going out of control with credit and just plainly
are unwilling to live within their means.
Although bankruptcy may seem as the “way out” you must not take for granted the deep definitions and repercussions of filing for bankruptcy. Bankruptcy remarks stay in your public record file for at least 10 years. Sure there are ways around this in which you may be able to remove this from your file, but once bankruptcy appears the damage is now done. You don’t want to be fooled into thinking that bankruptcy is you key to a debt free future. Recent changes in the laws have made it easier for one to remove negative trade lines, however at the same time it has made filing for bankruptcy just that more harder. On April 20, 2005, President Bush signed into law the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA"). BAPCPA made substantial changes to the Bankruptcy Code. Now before you can even file for a motion you must complete a creditable CCCS program. Only will a judge allow a person with a substantial amount of debt and too few financial resources. Basically you can’t file unless you truly are broke.
In addition the choice of bankruptcy should only be made when negotiations with creditors have failed. Repossession is imminent and foreclosure proceedings have begun. Your income is simply not sufficient to pay your bills, no matter how low the payments are. You are not able to remove the negative items that plague your credit report and the creditors just don’t want to make any type of reasonable settlements. Creditors are knocking on the door and repossession, foreclosure, and garnishment is just around the comer, it may be time to consider bankruptcy. Of course, you will want to consult the advice of an actual attorney before making any decision of this magnitude.
But I am here to tell you that bankruptcy is not always a bad way out. There are plenty of people out there that have filed for bankruptcy old, young, poor, and rich, and still are able to lead normal credit bearing lives.
These are the different types of bankruptcies:
Chapter 7
Chapter 7 bankruptcy, named for the chapter number in the bankruptcy code, requires a full liquidation
of all debts and cancels all no-exempt debts. Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.
Keep in mind that under Chapter 7 there are certain types of debts cannot be erased. They include child support and alimony, student loans and debts incurred as the result of fraud. If you've defrauded someone and a judgment has been made against you, that won't be erased either. If you are planning to file for bankruptcy you will most certainly not want to max out all your cards right before you file. That's called fraud, and bankruptcy judges are aware of this scheme. The trustee in your case will review all your purchases right before your filing. He knows what to look for. If you are found doing this the judge may opt to leave out those debts and hold you liable.
Also one can only file for Chapter 7 bankruptcy once every eight years. Before the new bankruptcy law passed in 2005, you could file every six years.
Chapter 13
Chapter 13 bankruptcy is essentially a court-mandated payment plan that sets up affordable monthly payments to your creditors. A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. During this time the law forbids creditors from starting or continuing collection efforts.
Many people who file Chapter 13 bankruptcies have:
Basic Chapter 13 Requirements
For a Chapter 13 bankruptcy, you'll need a stable income with disposable income (income left over after you pay the bare necessities of life such as shelter, food and utilities). You must have no more than $922,975 in secured debt (debt involving property that your creditor might take if you don't make your payments) and $307,675 in unsecured debt. These amounts are adjusted periodically to reflect changes in the consumer price index. The court filing fee is $274.
An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.
Chapter 11
Chapter 11 is a chapter of the United States Bankruptcy Code, which permits reorganization under the bankruptcy laws of the United States. Chapter 11 bankruptcy is available to any business, whether organized as a corporation or sole proprietorship, although it is most prominently used by corporate entities. A chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can seek relief in chapter 11.
An individual cannot file under chapter 11 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. In addition, no individual may be a debtor under chapter 11 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.
Chapter 12
Chapter 12 refers to Chapter 12 of Title 11 of the United States Code, a chapter of the Bankruptcy Code. This chapter of the Bankruptcy Code is available only to family farmers and fishermen in certain situations. It is similar to Chapter 13 in some ways, but in other ways benefits farmers and fishermen in ways other than that which is available to ordinary U.S. wage earners.
Under chapter 12, debtors propose a repayment plan to make installments to creditors over three to five years. Generally, the plan must provide for payments over three years unless the court approves a longer period "for cause." But unless the plan proposes to pay 100% of domestic support claims (i.e., child support and alimony) if any exist, it must be for five years and must include all of the debtor's disposable income. In no case may a plan provide for payments over a period longer than five years.
In tailoring bankruptcy law to meet the economic realities of family farming and the family fisherman, chapter 12 eliminates many of the barriers such debtors would face if seeking to reorganize under either chapter 11 or 13 of the Bankruptcy Code. For example, chapter 12 is more streamlined, less complicated, and less expensive than chapter 11, which is better suited to large corporate reorganizations. In addition, few family farmers or fishermen find chapter 13 to be advantageous because it is designed for wage earners who have smaller debts than those facing family farmers. In chapter 12, Congress sought to combine the features of the Bankruptcy Code which can provide a framework for successful family farmer and fisherman reorganizations.
Chapter 9
A Chapter 9 bankruptcy is available only to municipalities (which includes cities and towns, as well as villages, counties, taxing districts, municipal utilities, and school districts). Chapter 9 is a form of reorganization, not liquidation.
The purpose of chapter 9 is to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.
Although similar to other chapters in some respects, chapter 9 is significantly different in that there is no provision in the law for liquidation of the assets of the municipality and distribution of the proceeds to creditors. Such a liquidation or dissolution would undoubtedly violate the Tenth Amendment to the Constitution and the reservation to the states of sovereignty over their internal affairs. Indeed, due to the severe limitations placed upon the power of the bankruptcy court in chapter 9 cases (required by the Tenth Amendment and the Supreme Court's decisions in cases upholding municipal bankruptcy legislation), the bankruptcy court generally is not as active in managing a municipal bankruptcy case as it is in corporate reorganizations under chapter 11. The functions of the bankruptcy court in chapter 9 cases are generally limited to approving the petition (if the debtor is eligible), confirming a plan of debt adjustment, and ensuring implementation of the plan. As a practical matter, however, the municipality may consent to have the court exercise jurisdiction in many of the traditional areas of court oversight in bankruptcy, in order to obtain the protection of court orders and eliminate the need for multiple forums to decide issues.
Chapter 15
The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 added Chapter 15 (as a replacement for section 304) and deals with cross-border insolvency: foreign companies with U.S. debts. This Chapter is a new chapter added to the Bankruptcy Code.
It is the U.S. domestic adoption of the Model Law on Cross-Border Insolvency promulgated by the United Nations Commission on International Trade Law ("UNCITRAL") in 1997, and it replaces section 304 of the Bankruptcy Code. Because of the UNCITRAL source for chapter 15, the U.S. interpretation must be coordinated with the interpretation given by other countries that have adopted it as internal law to promote a uniform and coordinated legal regime for cross-border insolvency cases.
A primary goal of Chapter 15 bankruptcy is to increase international cooperation in cross-border cases by enabling US bankruptcy courts to recognize foreign insolvency proceedings. Chapter 15 applies in the following circumstances: