credit card debt relief

Should You Use 401(k) to Pay off Credit Cards

December 14, 2013 by arizona

Many time individuals come into a marriage with a lot of debt. Many couples want to start off their lives together no longer tied to decisions from their youth with only the future to look at. One way many people see to fix the situation is by using their 401(k) to pay off credit card debts.

Leave Things Alone

To use your 401(k) to pay off credit cards can be more detrimental than you might think. The 401(k) is designed to help you save money for retirement; this cannot be done if you are removing money from your 401(k) to pay off credit cards. This can be a problem for several reasons.

The future is unknown. It may seem like it is not going to matter because you are able to pay everything you need to now. When you hit retirement and do not have a steady income because your retirement was depleted what would you do?
Taxes can be anywhere in the future. It is common knowledge that taxes are not decreasing. Without the ability to see into the future you will not know what tax bracket you will be in. You may end up losing a lot of money because when you were younger you used you 401(k) to pay off credit cards.
The Social Security program is not one that is always the same. As the years change so does the program. At present, the program is headed into a bankrupt situation. This can be devastating for someone who solely depended on this for their retirement income because you used your 401(k) to pay off credit cards.
If you decide to use your 401(k) to pay off credit cards then you need to think about the immediate concerns. The most important concern is that based on which type of retirement account you have you may be paying a penalty fee for withdrawing money. On top of that, income tax is also required from the amount that you have decided to withdrawal. This can cause the money to dwindle more than anticipated and leave you with considerably less money in your account for future use.

How to Get Money Out

There are two ways for a person to use their 401(k) to pay off credit cards. Both of the ways can cause troubles for an individual if they do not know about it up front.

You can take out a loan from your 401(k). This is just like taking out a loan from other places. You will have to pay it back, and it is just transferring debt from one location to another. The desired goal of freedom will not be accomplished because of the transfer of debt. In order to pay back the money you will be using an after tax payment which is different than a before taxes like it is normally withdrawn. In addition, if you use a loan from your 401(k) to pay off credit cards and you are terminated, the balance due and interest will be required immediately as payment in full.
When you are looking to take the money out directly then you do not have to pay it back over time. When you take out money from you 401(k), you usually have a penalty that needs to be paid. Any early distribution can cost you a 10% income tax penalty on whatever money is removed.

Getting money out is simple no matter which way you choose, however each comes with many negative side effects.

Possible Alternatives

The problem is that possible alternatives are not desirable. It seems easy to take out the large amount of funds from your 401(k) to pay off credit cards. However, the best option is truly to just continue with whatever debt payment plan that you have already established. If you have none established then creating one would be the best suggestion that anyone could give you.

If you are looking to pay large amounts of money at once, there are some options. You could use your income tax return, or the two extra paychecks you get per year. These are two ways that you can dedicate lump sums to be placed on to your debts rather than using your 401(k) to pay off credit cards.

Another option might be to ask for help or guidance about how to manage your funds. A debt counselor might be of service in this case.

It might seem simple and enticing to provide a simple way goes getting right of your debt. However, using your 401(k) to pay off credit card is not not always the best idea. There are several pros to doing it, mostly to eliminate those debts. The cons on the other hand are many and can damage your future without you thinking about it.

Bankruptcy on Credit Cards

September 6, 2013 by arizona

Bankruptcy on credit cards is fairly common in the US. Every year, millions of Americans lose their jobs or experience unanticipated expenses, making it impossible for them to make minimum payments on previously incurred credit card debts without sacrificing the necessities of life, or borrowing additional money to pay older debts. Bankruptcy is a legal procedure designed to stop what might otherwise become an irreversible downward spiral. Making a bad credit card debt situation steadily worse.

The US Bankruptcy Code and Credit Card Debt

There are two Chapters of the US Bankruptcy Code that can provide bankruptcy on credit cards to individuals needing such protection. Chapter 7, often referred to as “total bankruptcy” requires liquidation of all of the petitioner’s nonexempt property, with proceeds distributed to creditors. Chapter 13 involves a court ordered restructuring of all debts, including credit card debts, allowing repayment over 3 to 5 year period.

Filing for Chapter 7 Bankruptcy protection may be particularly advantageous to qualifying individuals with very few or no nonexempt assets that could be liquidated. Chapter 13, the other hand, is a better option for individuals who do not qualify for Chapter 7, or who have substantial assets they would prefer to keep well paying off credit card debts over time.

Petitioning for Chapter 7 Bankruptcy Protection on Credit Card Debt

Filing a petition for Chapter 7 protection against collection actions by credit card companies is a long and somewhat detailed process. Petitioners for bankruptcy on credit cards may it necessary to employ the services of an attorney or a company specializing in the preparation of bankruptcy petitions. Steps in the filing process include:

Declaring whether the petitioner is filing as an individual, jointly with a spouse, or jointly with another party, such as a business partner. If the petitioner files as an individual, protections, which may be provided by the Court will apply only to that individual. A spouse or business partner may still be fully liable for debts they incurred with the petitioner.
Providing evidence that the petitioner has participated in an approved budget and credit counseling program within the past six months.
Paying required fees including the $245 case filing fee, $46 miscellaneous administrative fee, and $15 trustee surcharge (unless the court agrees to waive those charges based on the petitioner’s inability to pay).
Listing all creditors and the amounts of their claims, including any non-credit card creditors.
Identifying the sources, amounts, and frequency of the debtor’s income.
Providing a detailed list of all the debtor’s personal property, real estate, and other assets, including bank and investment account balances.
Declaring which of the above listed assets the petitioner considers “exempt from seizure” under State Law or Federal Law.
Providing a detailed list of the debtor’s monthly living expenses, including such items as food, clothing, transportation, shelter, medical costs, utilities, taxes, etc.

All of the above information must be provided on court supplied forms or schedules. In cases where there are multiple parties to the petition, the forms must include required information for all parties to the petition.

When all required information has been received, and presuming that the court determines that the petitioner meets eligibility requirements, including the “Means Test” requirements as set forth in Chapter 7 of the US Bankruptcy Code, the court will issue an order stopping all credit card company collection activities. That order may not apply to certain other kinds of debt owed by the petitioner.

A Bankruptcy Court Trustee will then schedule a “Creditor Meeting“, normally within 40 days of the completion of the filing. All named creditors are invited to the meeting, as are other individuals not named in the filing, who believe they have a legitimate claim against the petitioner. It is important that the petitioner clearly understand the procedures involved in the Creditor Meeting, which include:

The Court Trustee will place the petition or petitioners under oath.
The Court Trustee will ask a series of questions designed to ensure that all parties to the petition understand the potential consequences of having debts discharged under bankruptcy, including impacts on their credit history and credit score.
The trustee will also ensure that the petitioners are aware of alternatives to Chapter 7 bankruptcy.
The Court Trustee will review written information provided by the petitioner, and require the petitioner to reaffirm the accuracy of that information under oath.
Named creditors and others who believe they have legitimate claims against the debtor are given the opportunity to challenge information provided by the petitioner, and provide their own perspective surrounding the debt owed to them.

Under certain circumstances, the trustee may declare the petition “presumptively fraudulent”, and refer the petitioner to alternate sources of relief such as bankruptcy under Chapter 13 of the Bankruptcy Code. Alternatively, the trustee may summarize the findings of the Creditor Meeting, and pass them along to the bankruptcy judge presiding over the case.

Petitioners for bankruptcy on credit cards go have only credit card debt may then be granted the relief they seek, and restart their financial lives with a clean slate.

Final Thoughts

Individual seeking bankruptcy on credit cards may find the relief they need through the Chapter 7 Bankruptcy process. It should be clear, however, that the path to that relief is not an easy one, and that the path has redundant capacity to root out fraudulent petitions.

Want To Know What Caused Your Credit Card Debt? Read On.

May 18, 2013 by arizona

If you really want to solve your credit card debt problem and never look back, it is imperative that you address the main reason why you are in that predicament in the first place.

Putting yourself in debt only means you had been spending more than what you can really afford. There are many reasons as to why you got into a lifestyle that encouraged you to do that. Surprisingly, some people don’t realize the mistake until it is too late. In some instances, they know what is wrong but they refuse to change their ways. Debt freedom involves changes so you have to find out what has to change.

Among all types of debt, those incurred through credit cards are the easiest to get into and the hardest to get out of. That is because it is such a huge temptation to use. The very nature of these cards allow consumers to purchase things even if they cannot afford it at the moment. That promote irresponsible spending habits. It has all the potential to get you in debt because you are making your purchases reliant on an income that may never come. It is never wise to assume that you will earn the same amount of money in the future. Of course, all of us will aim to increase our earnings but you have to realize that there is also the equal possibility of it decreasing. Our complacency got the best of us so that when the recession hit the US, a lot of us found ourselves with no income to support our basic needs and the credit card debt that we irresponsibly accumulated over the years.

Another possible reason for credit card debt is our mentality of trying to best our peers when it comes to material things – subconsciously of course. That competitive nature and pride gets us to purchase things that we do not need just because our friends have them. Since credit cards allow us to acquire them even if we cannot afford it, we plunge head first into debt while promising ourselves we will pay off the bill as soon as it gets in.

What you need to deal with, in the end, is your attachment to material things. Having a lot of items or the latest gadgets will not define your success. In the end, it is better to have only what you need and be free from debt instead of having all the latest gadgets and be neck deep in debt.

As you identify the cause of your problems, you will realize that it will be a lot easier to spot the habits that you have to change and the lifestyle choices that you need to implement. It also makes it easier to come up with the debt relief program that you will use to get rid of your current debt problem.

If you are concerned about your credit score because you have plans to get financial assistance from a bank or lending company, your best option is debt consolidation. It will allow you to make smaller monthly payments toward what you owe by stretching your debt over a long payment term. Get the best debt relief company in the industry to help you achieve your goals of debt freedom. Commit to the program they will put you through and make the decision to never put yourself in another debt situation.