Though technically you can enter into bankruptcy on your own, I DO NOT recommend it.  It will be well worth the time and stress in hiring a specialized bankruptcy attorney to help you through the process.

To file Chapter 7, which is a full liquidation (if you qualify), attorney fees can run around $1700 and up, depending on the complexity of your case.

To file Chapter 13, which is a wage earners plan, basically a reorganization of debt with a repayment plan of 3-5 years, attorney fees can start at $3000 and up.  It is more expensive to file for Chapter 13 because your case is open for 3-5 years through the repayment plan, which requires attorney involvement throughout the process.

Filing for bankruptcy is not an easy decision, but you may be faced with it.  And if so, I encourage you to find 2 – 3 of specialized bankruptcy attorneys in your area that offer a free initial consultation for you to meet them and ask questions, and find out what all your options are.

photo credit: laura padgett

This post via the Freedom Debt Management blog, an educational resource to help you gain control of your debt management and finances.

Bankruptcy Self Help

If you have been consistently making your payments on time, and continue to have the cash flow to support the payments, then this simple strategy will help tremendously.

Step 1

Make a list of all your debts, including: who is owed, balance, interest rate, minimum payment required.

Step 2
Evaluate your cash flow.  How much do you have to put toward your debt load each month.  Look at your income, less your usual expense (mortgage or rent, utilities, discretionary, savings). 

Step 3

Take the amount you have to pay towards your debt each month, and apply the minimum monthly payment against each debt.  Then, take the additional amount you have left, and apply it to the credit card with the highest rate first until this debt is paid off.  Once you have paid off your first debt, then take the freed up cash flow, and apply it all to your next highest interest rate debt.

Now, if you have credit card debt and mortgage debt, do not apply extra payments towards your mortgage until all credit card debt is paid.  Mortgage debt is still currently tax deductible, and consumer debt is not, so the net interest rate you are paying on your mortgage is actually less than the actual interest rate because of the benefits of the tax deduction.

This post via the Freedom Debt Management blog, an educational resource to help you gain control of your debt management and finances.

How to Eliminate Credit Card Debt

All Americans are now eligible to receive a free copy of each of the three major credit reports on an annual basis.  This is to help consumers manage their credit, but most importantly monitor it to ensure they have not fallen victim to identity theft.  I encourage everyone to make this part of their annual financial planning.

Here is the website:      https://www.annualcreditreport.com

They will take you through a series of questions to make sure you are who you say you are, and the questions they ask only you would know the answer to, as they pull them from your credit reports.

You will be given the option to purchase one or all 3 of your FICO scores too.  I also recommend you do this, as this will tell you how banks view your credit report from a lending stand point.  Are you credit worthy?  I will discuss the details of FICO in a later post.  For now, in order to get your credit in shape, you need to know where you currently stand.

Once you pull each of the credit reports, go through them in their entirety and ensure there are no problems, issues or mistakes.  Highlight anything unusual, and I will provide steps in a later post on how to deal with any inaccuracies.

This post via the Freedom Debt Management blog, an educational resource to help you gain control of your debt management and finances.

Credit Self Help

#1 Unsolicited Offer to Creditor

Your Name
Your Address
Your Phone #

Creditor’s Name
Department
Creditor’s Address

Date

Dear Creditor,
Re: Account Number__________

After a long period of financial crisis, I’m finally in a position where I can take care of my debt whose account number is given above. I would appreciate in advance all efforts your company is willing to take in order to help me resolve my debt problems. I’m sincerely trying to settle this debt and pay it off faster.

The amount I would propose to pay towards full settlement of the debt is $___________. Additionally, I would request you to take off any late payment or charge-offs on this account from my credit report.

The fact is, I’m currently negotiating debt with several creditors and I have limited amount of money to pay the creditors. So, I have decided to settle only those debts for which I can satisfy the terms and conditions as mutually agreed between myself and my creditors.

I have already reached acceptable settlements with a couple of creditors and I doubt whether I will have enough funds available till the end of this month. However, I’d like to regain my credit rating and if you can help me do so, I’d be willing to offer you some more money as part of my settlement.

If you find the above terms and conditions acceptable, please sign this letter of agreement and send me a copy. Upon receipt of this agreement, I shall forward you the stated amount through money order.

Yours truly,

Your Signature
Your Name

#2 Request for Alternative Payment Plan

Your Name
Your Address
Your Phone#

Creditor’s Name
Department
Creditor’s Address

Date

Dear Creditor,

Re: Account Number__________

This letter is a written request for a temporary change in the repayment terms of my debt account. I am currently going through financial crisis and may not be able to follow the current payment plan. Neither do I plan to file a bankruptcy nor do I intend to default on this debt. 

I do have some income from [mention income sources]. However, when I examined my financial situation and planned a budget, it became necessary for me to request each of my creditors to accept a reduced/alternative payment plan for a number of months (specify the number, if possible). 

I would appreciate your co-operation in making this payment plan effective shortly. I request you to accept a monthly payment of $____________ instead of the regular payments of $____________ made on the [date] of each month. I hereby assure you that I shall not add to my debt till my financial situation improves. 

I shall begin making regular monthly payments as soon as I recover from this financial crisis. I hope you will understand my situation and co-operate with me. I shall surely notify you of any change in my financial situation.

Your co-operation during this difficult time is highly appreciated.

Yours sincerely,

Your Signature
Your Name

This post via the Freedom Debt Management blog, an educational resource to help you gain control of your debt management and finances.

Debt Settlement Letter