Tax Debt Relief Strategies to Regain Good Standing with the IRS

Posted by Rana & filed under Tax & Bankruptcy Law Information.

Tax season can be an especially difficult time of year if you have fallen behind on your taxes due to mitigating circumstances. However, working with the IRS and other sources of aid can actually help you to achieve tax debt relief.

Reduce Tax Debt with Assistance from the IRS

Let’s begin with some IRS tax debt relief options that you can look in to. The following are a few examples of how the IRS can help ease the burden of tax debt:

IRS Tax Relief Settlement Offer in Compromise Payment Plan Penalty Abatement

The IRS Tax Relief Settlement option enables you to settle your tax debt for a percentage of the amount you owe. Based on certain factors such as your age, total assets, income and expenses; you may have the potential to save a significant amount of money with this program. You can negotiate a Tax Relief Settlement directly with the IRS or through various tax relief services.

The Offer in Compromise solution was actually developed by Congress. It’s where you have a one time only chance to settle your tax debt with the IRS for a fraction of the entire amount you owe. The way it typically works is that the IRS will review your case and under certain guidelines agree to a tax debt settlement for a certain amount. However, you should be aware that there are some barriers to overcome before the IRS can grant you an Offer in Compromise. Basically, you have to be able to prove extenuating circumstances such as unfair tax collection or economic hardship.

A Payment Plan through the IRS allows you to make installments on your tax debt if they determine that you are not able to pay it in one lump some amount. Through this plan, you are also given time to pay and reduce your tax debt without having to deal with the harassment and embarrassment of having IRS officers involved.

In a Penalty Abatement situation, the case is most likely that you aren’t able to pay your tax debt as a result of exceptional circumstances that are beyond your control. These can include things such as death/fatal illness, IRS errors or tax code changes. If you do find yourself in such a predicament, remember that you have the option to dispute the interest and penalty charges that have incurred on your account. In order to proceed with a successful Penalty Abatement, the contested accounts of relief of penalties and interest must be very specific and evident. Therefore, you will need to bring in an experienced professional who will have the skills to work with the IRS protocol in an effort to successfully resolve your tax problems.

Other Methods to Achieve Tax Debt Relief

Aside from the resolutions mentioned above, there are also other options you may want to consider. For example, tax debt relief can also result from the help of skilled experts such as Enrolled Agents, Certified Public Accountants and Tax Attorneys/Accountants. These types of professionals should especially be sought out if your tax debt issues contain problems such as unfilled returns, missing records, threat of property seizure or other kinds of levies. Their advice and representation in matters of IRS tax debt is truly invaluable on the road to debt relief.

Another type of tax debt management strategy that you may be able to use is called “Currently Not Collectible,” which suggests that you don’t have the ability to repay your tax debt. However, before the IRS can deem your status as Currently Not Collectible, you have to provide them with actual proof that you are in fact incapable of paying back the money you owe in taxes. As soon as you are able to provide such evidence, all recovery efforts and collection activity by the IRS will be terminated. Nevertheless, procedure does demand that you receive an annual statement which tells you the amount of money in taxes still owed. You should also note that if after a 10 year period, the tax debt is not collected by the IRS, it automatically expires.

So before you start to panic and believe that there is no escape from your tax debt, think again! The IRS as well as other tax debt relief services can help you resolve your financial issues and achieve tax debt relief.

Tax Debt Management Ways to Settle Unresolved Tax Debt

Posted by Rana & filed under Tax & Bankruptcy Law Information.

The accumulation of debt due to unpaid taxes is becoming increasingly common in the United States. IRS tax debt can result from a number of financial problems brought about by special circumstances such as illness, accidents, divorce, layoffs or prolonged periods of unemployment. If you are one of the many taxpayers out there in tax debt as a result of this type of situation, you should know that there are several tax debt management solutions and tips that can help you overcome your financial issues and achieve tax debt relief.

Ask an Expert

Life has a tendency to be extremely unpredictable and most of the time we’re just not equipped to handle the financial ramifications that may result, such as the sudden inability to pay our taxes. The penalty fees that get tacked on to your tax debt can put further strain on the situation. With that in mind, can you guess how most people manage their IRS tax debt? Unfortunately, a lot of people tend to handle tax debt by procrastination or representing themselves in certain cases, without seeking the necessary legal assistance.

Tax attorneys are able to provide you with a variety of services that can help you effectively manage your tax debt; they range from the following types of tax services:

Income tax return preparation and filing Negotiations with the IRS in Offer in Compromise cases Penalty Abatement petitions Full audit representations Elderly tax settlement Securing affordable Installment Agreements

There are very specific laws that govern IRS tax procedures and not everyone is well-versed on the rules and regulations that go along with over-due taxes. For this particular reason, it’s very essential to hire a qualified tax attorney to represent you on cases involving the settlement of tax debt.

Tax Attorney Qualification Criteria & Fees

So how exactly do you find a reputable tax attorney to represent you in an IRS tax debt case? Well, you need to search for professionals in the field that satisfy some important qualification criteria. Among them include a tax attorney who holds a Master’s of Law in Taxation, commonly referred to as LLM and one who has a substantial amount of experience working with and for the IRS. Because the last thing you want to do is hire someone who is dishonorable, it’s also important for you to look for a tax attorney who does not have any complaints against them. It often helps to get a second or third opinion before hiring a tax attorney to take on your tax debt case.

There’s no doubt that tax debt settlement can be achieved with the help of tax attorneys, however naturally, they do charge fees for such tax services. Typically, a tax lawyer will charge you for all the services rendered from the beginning to the end of the case. Even though some of the larger law firms tend to be more expensive, it’s usually a safer bet to retain their tax services rather than losing your case, which could end up costing you even more!

Alternative Tax Debt Relief Options

If using tax services offered by an attorney is not something you’re interested in or willing to do, there are some alternative ways for you to get out of tax debt. For example, if you own property such as an apartment or home, you may be eligible to apply for a home equity line of credit. You can use the money obtained for tax debt settlement.

Furthermore, if you are having difficulty paying your taxes, you can also consider selling some of your personal possessions to gain the funds necessary to pay off your IRS tax debt. It may difficult to part with valuables such as jewelry or a car, however take into account that doing so will help you get much-needed tax debt relief!

Tax Debt Payment Strategies: An Online Guide

Posted by Rana & filed under Tax & Bankruptcy Law Information.

Americans struggling with tax debt often assume that the Internal Revenue Service is not an entity with which taxpayers may address their concerns and bargain. This could not be farther from the truth, however. Although the IRS does engage in aggressive collection tactics, it is an attentive listener that heeds taxpayers’ pleas and grievances as well as a cooperative negotiating partner. In fact, the IRS has a duty to work out a reasonable payment plan with individuals confronted with tax debt.

In view of the IRS’ wide arsenal of penalties, ranging from garnishment of wages to liens and levies, delinquent taxpayers are seizing the opportunity to set up a payment plan with the IRS. A number of options are available for paying off IRS tax debt, and they include the following:

1. Loans

Taxpayers could take out a loan to settle their tax debt. Since the rates that the IRS charges for late payment are much higher than bank interest rates, consumers will be able to pay off their debt much quicker and save money by borrowing funds.

2. Temporary payment extensions

The IRS may offer a short-term payment extension to qualifying taxpayers. Upon being granted an extension, typically ranging from 10 to 120 days, taxpayers must meet their payment obligations. Debt may be paid off either in full or partially, and each payment made by taxpayers should constitute the highest sum they can afford to pay at that period in time.

3. Installment agreements

A third tax debt management strategy consists of forming an installment agreement to pay off the IRS tax debt in full through fixed monthly payments. Eligible individuals are those with a tax debt below $10,000; they will be allowed to repay their debt within three years. The process is simple: Applicants set forth the minimum monthly sum that they will be able to pay and the day of the month when they will make a payment. The proposal may either be accepted or modified by the IRS. Upon approval of the plan, taxpayers are required to comply with the terms of the agreement by making an IRS installment payment each month until the debt is paid in its entirety.

The IRS authorizes five kinds of payment plans: 1) streamlined installment agreements, 2) long-term installment agreements, 3) guaranteed installment agreements, 4) installment agreements on specified balance due accounts, and 5) in-business trust fund agreements.

4. Partial payment installment agreements

Taxpayers may negotiate long-term payment arrangements, such as partial payment installment agreements- which settle a tax debt for a lower dollar figure.

5. Offer in compromise

Pursuant to this agreement, taxpayers may pay off their tax debt for a lesser amount than what they owe, if it is impossible for them to pay off the tax debt in full. When the IRS finds it to be both in its best interest and in that of the taxpayer to accept less than the full payment, it allows him or her to pay simply the reasonable collection potential. To settle their IRS debt, taxpayers may either make short-term, periodic payments or pay a lump sum.

Finally, procedures for tax debt relief strategies, such as an offer in compromise, tend to be intricate in nature, thus necessitating some form of tax help. Taxpayers should enlist the services of qualified and experienced tax professionals, whether they be certified public accountants (CPAs), tax lawyers or enrolled agents, to guide them through the process by (1) preparing their IRS documents, (2) studying all of their options for tax debt resolution, (3) steering them through the complex IRS bureaucracy, (4) clearly presenting their case to the IRS for consideration, (4) negotiating effectively with the IRS and (5) achieving a favorable outcome.

IRS Tax Debt

Posted by Rana & filed under Tax & Bankruptcy Law Information.

There are several different kinds of debt that people often find themselves in; however the majority of people agree that the most worrisome type is tax debt! This is mainly due to our innate fear of being audited or summoned by the Internal Revenue Service for failure to pay taxes, which ironically, is exactly what can happen as a result of IRS tax debt.

On the brighter side, you can avoid such financial issues with the IRS altogether if you stay clear of tax debt. How can you do that? Well, the best way to do so is to be prepared by filing your tax return on time and seeking out professional assistance when you need it. However, if you do find yourself experiencing IRS tax debt, there are still some options available that will help you to settle your tax debt before it escalates any further.

Tax Return Help through Professional Tax Services

Whether you run your own corporation or work for one, filing your annual tax return is inevitable. What’s more is that filing a tax return can also get extremely complicated, especially for larger conglomerates, which is why a lot of companies tend to bring in the help of qualified tax accountants and experienced tax advisors when it comes time to file their taxes.

Even if you don’t own your own company, you can still benefit greatly by hiring a tax professional to represent you during the tax return process. Tax accountants for instance, specialize in offering valuable tax services by preparing your tax return with the goal of securing the smallest tax bill or the largest refund attainable under the law.

Aside from preparing your tax return, a tax accountant is also able to assist you with tax planning as well as finding ways to lessen your overall tax burden. Because tax accountants are privy to all the various tax laws and “loopholes,” if you will, they are better capable of handling your tax return versus filling it out yourself. Basically, tax accountants can often help find tax debt relief and save you a substantial amount of money in the process.

If you are absolutely bent on processing your tax return on your own, then you don’t necessary have to sacrifice the help of specialized tax services. You can instead turn to tax return preparation software as an alternative, yet professional means to file your tax return. Many people benefit from using tax preparation software and you can too. Not only does the software automatically do the calculations for you, but it also has the capability to provide you with expert guidance when it comes to filling out the necessary tax return forms and submitting any needed documents to the IRS.

Settling Tax Debt ASAP!

If you’re still facing IRS tax debt, then the best thing you can do to avoid getting yourself further into debt is to act quickly by finding a way to settle it. You do have some options here and they include contacting the IRS directly or going through various tax debt management services, such as hiring a tax debt attorney to represent you in settlement procedures with the IRS.

Now, if you do opt to go through the IRS, they can often help you deal with your tax debt by setting up a payment plan that is convenient for you. While this can definitely help you to repay your tax debt, you should also know that you will probably accrue added charges in interest and penalty fees. Therefore, it’s still in your best interest to pay off your tax debt as soon as possible even if you manage to have a payment plan set up through the IRS.

11 Ways to Repair Your Credit Score

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Out of the blue, poor credit often sneaks up on consumers and strikes them like a bolt of lightning where it hurts most- in their pocketbook. The triggers for bad credit reports are diverse, ranging from unemployment, illness, and divorce to an insolvent business and irresponsible spending. A negative credit rating adversely impacts consumers across many fronts. It raises their insurance rates and makes it more difficult for them to land a job or promotion and to obtain housing. It can even lead to a garnishment of their wages. Fortunately, poor credit is not irreversible, and numerous avenues exist for debt-stricken consumers to re-establish a good rating and reclaim their purchasing power. What follows are eleven effective methods for fixing credit:

1. Correcting errors on credit reports

To improve your credit score, consumers should 1) obtain a copy of their credit report from the three credit bureaus (Experian, Trans Union, and Equifax), 2) report any discrepancies or inaccuracies to their creditor, and 3) request that the credit reporting agencies and/or the creditor that communicated the error correct the information. If there are any outstanding debts on the report, consumers should pay them as quickly as possible, starting with those featuring the highest interest rates.

2. Setting up a payment plan

A second way to fix your credit is to contact creditors and establish a repayment plan with them. They will negotiate interest rates, balance payoffs or lower payments with borrowers. Upon repaying their debt, consumers should mail a copy of their settlement letter to the credit bureaus so that they would update their credit report.

3. Implementing a debt consolidation plan

Individuals drowning in debt should consult a credit counseling agency for purposes of working out a credit debt consolidation program. With the help of a credit counselor, consumers may consolidate their debts to lower or remove finance fees. This will improve credit score and reduce their monthly payments by as much as 40 percent.

4. Keep a few credit accounts open

Since the duration of credit history is the third most significant criterion in a borrower’s credit score, consumers should keep open one or two of their oldest accounts. Closing too many accounts at once would reflect poorly on their financial health.

5. Liquidating assets or selling valuables

6. Eliminating unnecessary purchases and utilizing the remainder of earnings to repay debt

7. Maintaining the same occupation and residence

8. Paying bills on time

Comprising more than one-third of consumers’ score, payment history ranks as the top consideration in their credit score. To fix credit score and qualify for better ratings, consumers should pay rent, mortgage, utilities, and their credit card balance in a timely manner.

9. Obtaining a co-signer on a credit card or small loan to help them rebuild credit

10. Applying for a Credit Union loan

Upon paying off their debt, consumers can apply for a credit card or a loan from their Credit Union. By making payments on the Credit Union loan from their savings account, they can rebuild a positive credit history.

11. Applying for a secured credit card

To improve credit, individuals who fail to qualify for a traditional credit card should consider applying for a secured credit card. The applicant supplies the funds up front as collateral, and his or her card appears as a credit card on the credit report. When utilized judiciously, secured credit cards can help consumers reestablish their credit.

Bad Credit Fixes for Defaulting Cardholders

Posted by Rana & filed under Credit Card Debt Consolidation Information.

When your credit rating has been dealt a severe blow, there is no magical remedy to nurse it back to health. However, rehabilitation of bad credit can be achieved through the application of self-help principles and the utilization of credit card-dependent measures. With discipline, determination and patience, consumers mired in debt can overcome a poor credit history and repair bad credit. A number of effective strategies to erase bad credit are available to debtors:

1. Secured credit cards

Also known as prepaid debit cards, secured credit cards operate very much like ordinary credit cards. The main distinction is that, with the former, consumers are required to deposit funds into the credit card account prior to using the card to purchase items. The deposit serves as security for the lender in the event that the cardholder defaults on his or her payments. Applicants may not exceed the monetary sum they deposit into the secured credit card account. Typically, the credit limit ranges from 50 to 100% of the amount deposited.

Prior to applying for a prepaid debit card, debtors should ensure that the lender reports to the three leading credit bureaus, so that 1) the positive changes are reflected in consumers’ credit reports and scores and 2) future creditors will be able to see the payment history. Consumers can fix bad credit by using their prepaid debit cards to make small purchases and paying off in full their monthly bills.

2. Bad-credit credit cards

Debtors can erase bad credit by obtaining an unsecured credit-building credit card. A number of companies issue cards specially designed for credit-challenged consumers, making it possible for them to turn their credit around. Borrowers utilize bad-credit credit cards in the same way they would a normal credit card. Provided that they pay their invoices in a timely manner, cardholders can build a positive credit history with each purchase they make. A positive boost in their credit rating usually appears within 3-6 months. To multiply the chances of credit repair, consumers can apply for several bad-credit credit cards.

3. Bad credit debt consolidation

Another widely-used method to repair bad credit involves consolidating all existing, unpaid credit card bills. High-interest credit card debt can be paid off by way of a bad credit consolidation loan. The various credit card balances are lumped into one bill. Borrowers who apply for bad credit debt consolidation benefit from lower interest rates than those commanded by the credit card companies. Through bad credit debt consolidation, consumers with outstanding balances on several high-interest credit cards will obtain a single low interest loan for the total sum owed. They can take advantage of extended and low monthly payments, and the savings reaped from the disparity in interest rates can be applied toward payment of the credit card balances. With bad credit debt consolidation, the debtor makes only one manageable monthly installment. This avoids the confusion generated by multiple cards and forgetfulness on the part of a cardholder to pay his or her bills. Consumers seeking to increase their credit score and fix bad credit will find bad credit debt consolidation to be an extremely effective tool.

4. Negotiation with creditors

Debtors may also contact their credit card companies and request a lower interest rate. Many lenders are willing to do so, and such an interest rate reduction helps borrowers pay off their outstanding debt much faster, which in turn enables them to repair bad credit.

Repair Your Credit Report: The Critical Information

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Credit reports play a pivotal role in a credit card company’s evaluation of whether an applicant poses a positive or negative credit risk. Lenders extract from them personal data concerning prospective borrowers, as well as their income, debts and credit payment history. A credit report provides a profile of the cardholders’ financial life, and creditors access it from one or more of the three leading credit bureaus; namely Trans Union, Equifax, or Experian. Through credit debt management, consumers can maintain considerable autonomy over the criteria that creditors rely upon in approving credit applications or issuing loans.

To rate credit applicants and decide whether to grant them credit, financial institutions examine a number of different factors in the former’s credit report:

Income The length of time borrowers have resided at the current address The kinds of assets they possess The types and number of accounts The balances in their savings and checking accounts The duration of their relationship with their current employer Credit history

Lenders will look at an applicant’s outstanding debt and examine his or her debt ratio, or the percentage of his or her monthly income allocated to debt repayment. Credit reporting also discloses to lenders the amount of credit that the borrower has received, how much credit he or she has available, the borrowing frequency, and promptness in bill payment. When scrutinizing a credit applicant’s track record in debt payment, creditors will ascertain whether or not he or she has paid their bills on time and for the full amount. Lenders will read the summary rating per individual account belonging to the applicant that is included in the “Account Profile” section of his or her credit report. The summary may state either “non-rated”, “positive” or “negative”:

“Non-rated” means some late payments, which translates into a poor credit report, notwithstanding the absence of a particularly negative entry; “Positive” signifies timely payment; and “Negative” indicates significant credit issues, possible a delinquent debt.

In their assessment of applicants’ credit-worthiness, lenders also consider such events as bankruptcy, court judgments, collection actions and tax liens, which are listed on the credit report.


Whenever consumers submit an application for credit, an “Inquiry” appears on their credit report. Lenders may view negatively an excessive number of credit inquiries accumulating within a short duration and consequently deny credit to the applicant. What constitutes “too many inquiries” is left to the discretion of each individual creditor.

Behavioral patterns relating to credit usage

Applying for or holding a number of credit cards may adversely impact prospective credit applications, despite the fact that a consumer’s balances on the existing cards are current. Lenders will also take note of the length of time that consumers have had the present accounts and determine whether they are living within their means.

Each lender follows its own model of scoring consumer credit, awarding a specific number of points for each factor that helps forecast each borrower’s ability to timely repay a debt and his or her creditworthiness. Since credit reports may contain potentially damaging inaccuracies or errors, such as “past due” remarks, cardholders should precipitate to obtain a copy of their report and review the information. Credit score repair may then be effectuated by contacting the credit bureau and requesting that the mistake be corrected.

15 Time-Tested Credit Repair Techniques

Posted by Rana & filed under General Debt & Loan Consolidation Information.

For struggling credit card holders, a poor credit score that is left unaddressed often outlives the events (foreclosure, bankruptcy, unpaid credit card bills, etc…) that triggered it in the first place. The importance of a healthy credit rating cannot be overestimated: A credit check is performed for mortgage, credit card, car loan, home loan, insurance, or employment qualification. As indelible as it might seem, however, a bad personal credit history can be wiped out and a good rating re-established. With a little patience and perseverance, borrowers can effectuate a credit history repair.

The most successful methods for achieving a credit repair are as follows:

1. A compromise repayment plan

Consumers wrestling with credit card debt should not hesitate to discuss their financial plight with their lenders. This is because the majority of creditors extend short-term hardship programs that lower debtors’ monthly payments. Borrowers could, for instance, negotiate an affordable repayment plan that will settle 30-40% of outstanding balances, an arrangement that is acceptable to most lenders. Creditors are willing to accept a partial settlement, since it is preferable to not receiving any payment at all, in the event that the borrower files for bankruptcy.

Upon payment in full of the settlement, the debtor must obtain a settlement letter documenting the poor credit repair. He or she will then mail a copy to the three credit bureaus (Equifax, TransUnion and Experian) for purposes of updating the credit report so that it reflects the paid settlement.

2. Timely bill payment

It is primordial that borrowers make their payments on time since payment history is the leading factor in the calculation of credit score, constituting more than one third (35%) of this indicator. Late payments adversely impact a consumer’s credit card rating.

3. Paying off debts

The total outstanding debt comprises almost one-third of a debtor’s credit score. To improve credit, card holders should get current on their delinquent accounts. They can do so by paying the minimum amount due in a timely manner to each creditor. After applying any left-over funds to the lowest outstanding balance, credit card borrowers should “snowball” their payments to the next lowest balance.

4. Keeping delinquent accounts open

Consumers should not close accounts with balances since this will negatively impact their credit. Rather, consumers should opt for high credit limits and maintain low balances. By doing so, they will demonstrate to lenders their ability to manage high balances. Borrowers can boost their credit rating by paying off a high balance.

5. Keeping a few accounts open

Since frequent closings of numerous accounts is regarded as a sign of financial instability, credit card holders should not close more than one or two accounts semi-annually. Preferably, the two oldest accounts should remain open, since length of credit history is the third most important factor in credit score computation.

6. Cease using credit cards

Consumers immersed in credit debt should cut up or avoid using their cards and strive to pay at least the minimum on each account.

7. Closing unused accounts

Debtors should only keep open a couple of accounts to reclaim credibility in the eyes of creditors by proving their responsible usage of credit. After closing superfluous accounts, borrowers should inform the credit-reporting agencies of the status change.

8. Holding off on additional credit applications

Consumers trying to repair their credit history should refrain from submitting more credit card applications, since this will lower their credit score. The number of inquiries that a lender makes vis-a-vis a prospective borrower’s credit report determines 10% of the credit score.

9. Reduction of credit limits

Debtors should ask their lenders to lower the credit limits on their accounts. Creditors take into account the total sum available credit even if the customer is current in his or her payments.

10. Co-signing a credit card or loan

Consumers should consider getting a friend or relative to co-sign on a credit card or small loan. By making timely payments on co-signed credit, debtors will be able to rebuild their credit rating.

11. Obtaining a secured credit card

Another way that borrowers can reestablish their credit is by using a secured credit card, which works as follows: A debtor supplies the funds up front by placing a specific amount of money in an account. Whenever he or she charges the card, the funds are tapped from his or her account. With each timely payment, credit repair is furthered.

12. Cleaning up the credit report

Pursuant to the Fair Credit Reporting Act (FCRA), borrowers are entitled to dispute erroneous information in their credit report. Consumers should review their credit report for accuracy; if a mistake is spotted, they should request that the credit bureau remove the negative item. A revision of the credit report can contribute to credit history repair.

13. Obtaining a Credit Union loan

Borrowers should consider applying for a prepaid credit card or a loan from a credit union and making payments on the latter from a savings account. With each payment that the debtor makes, he or she will improve credit and build a positive credit history.

14. Professional credit repair help

Credit card debtors may wish to opt for professional assistance by contacting a credit counseling service. Credit counselors will create a debt management plan (DMP) that enable borrowers to repay their credit card debt. They will also negotiate extended payment plans and lower rates of interest with lenders. Debtors could then apply the reduced interest rate savings to payment of the debt, which will in turn help to repair their credit.

15. Creating a budget

Financial discipline pays dividends. By devising a budget to spend only within their means, reduce their expenditures and direct savings to repayment of their credit card debt, consumers will be able to repair their credit history.

Eliminating Credit Card Debt

Posted by Rana & filed under Credit Card Debt Consolidation Information.

When entangled in credit card debt, it is oftentimes difficult to envision financial freedom. By applying earnest efforts and appealing to discipline, will power, and perseverance, however, consumers can pay off credit cards and eliminate credit card debt. The key to avoiding a potentially irreversible impact on their financial health is for debtors to take immediate action by implementing the following methods of credit management:

1. Spending Restraint

Cardholders should compare their income to their expenses. If the latter outweighs the former, they should create a budget and look for ways to cut costs and generate money. For instance, they can reduce their spending by shopping around for cheaper auto insurance, postponing home renovations, cancelling gym memberships, and choosing not to renew magazine subscriptions. Similarly, such a seemingly low-effect expenditure as eating out on workdays can amount to significant savings when replaced by home-prepared meals. A $10 lunch five times a week adds up to more than $2,300 a year- an expense that could be avoided by brown bagging meals and a sum that could be allocated to credit card debt elimination. Consumers should also refrain from making minor purchases with their credit cards.

2. Snowball Method Of Repayment

This extremely popular approach to paying off debts involves the following steps:

First, all credit cards should be listed in chronological order, from the highest balance to the lowest balance. Debtors should start paying as much as practicable on the card with the smallest balance and the minimum amount on the remaining cards. Upon paying off the card with the lowest balance, borrowers should apply the same amount paid towards that card to the next card with the lowest outstanding credit debt. The procedure should be repeated until all card balances are paid off.

Consumers may also endorse another tried-and-true approach to credit card debt elimination, which consists of the following steps:

All credit cards should be listed in the order of decreasing interest rate. The card featuring the highest interest rate should first be paid off entirely, and the minimum balance should be paid on the remaining cards. The amount paid on the first card, in addition to the minimum payment due on the second credit card should then be applied to the second card until the balance has been paid off. At the same time, the debtor should pay the minimum amount on all the other cards. The process should be continued until all credit card balances are wiped out.

3. Lump Sum Payment

Another credit management option is for consumers to take a lump sum out of their savings account to pay off the balance on their credit card(s).

4. Request For An Interest Rate Reduction

Debtors should contact their credit card companies to shave off percentage points from their interest rate. Lenders usually accommodate clients with a lengthy, consistent payment history by reducing their interest rate. This in turn translates into lower monthly payments and enables consumers to pay off credit cards more quickly.

5. Balance Transfer

Cardholders may also consider applying for a new card featuring an attractive rate that will permit them to transfer their balance.

6. Debt Management Programs

Another strategy to eliminate credit card debt involves utilizing credit management services, which can assist defaulting consumers in a number of ways:

Negotiate with lenders to lower interest rates, finance fees and charges, as well as to decrease monthly payments Prepare a debt management plan Develop a manageable budget Provide individual counseling Put an end to creditor harassment Assist debtors in credit card debt consolidation, whereby their credit card bills are combined into a single monthly payment Engage in credit risk management by relying on credit scoring

Climbing Out Of Debt With The Help Of Credit Counseling

Posted by Rana & filed under General Debt & Loan Consolidation Information.

Consumers living paycheck to paycheck are the first to admit that falling into credit debt is no laughing matter: Merciless collectors hounding them, a tarnished payment history haunting them, and the specter of bankruptcy looming before them. Economically-stranded consumers oftentimes lack the wherewithal and tools needed to create a workable budget and manage their credit card debt effectively. Credit counseling agencies help fiscally-out-of-shape borrowers regain their financial fitness. They enable credit card holders to achieve a debt-free existence by teaching them how to properly manage their finances and negotiating with creditors on their behalf.

The nation’s top two providers of consumer credit, debt reduction, and educational counseling that are making a palpable difference in borrowers’ lives are 1) the National Foundation for Credit Counseling (NFCC) and 2) American Consumer Credit Counseling (ACCC). The NFCC, which has been in existence for more than 50 years, has earned the most stripes in the credit counseling industry for furthering “a national agenda for financially responsible behavior”. Its members are non-profit organizations committed to furnishing low-cost and free services to individuals afflicted with debt, such as that arising from credit cards. As for the ACCC, it is a non-profit 501(c)(3) organization that provides debt-reduction guidance, debt counseling, and confidential credit management skills to borrowers nationwide. What follows is a synopsis of the financial counseling services that these two organizations deliver on a daily basis to borrowers:

Credit card debtors can avail themselves of the services of professional, certified counselors who will help them determine the optimal solutions for their individual needs. FCC members offer either gratuitous or affordable, comprehensive budget counseling to their clientele. The one-on-one sessions are private and confidential in nature and conducted either in person or via telephone or internet. Consumer credit counselors create a question and answer forum to address consumers’ debt issues and perform an objective analysis of the latter’s financial dossier and predicament. The counselors thoroughly review their customer’s budgets by examining income, liabilities, and assets and then proffering options as well as a debt-tackling plan. The average cost of personal budgeting counseling is $13.

NFCC counselors provide money management instruction to assist consumers drowning in credit card debt. By devising a customized plan for their clients, they offer concrete resolutions for their current financial situation and help them avoid further indebtedness. For borrowers who are considerably entangled in credit card debt, NFCC counselors will recommend enrollment in the Debt Management Plan (DMP), a monthly program that lowers consumers’ bills and combines them into one easy payment by means of a credit card consolidation. Basically, clients pay off their debt by submitting monthly deposits to the NFCC, which in turn disburses the funds to the creditors. Consumers who enroll in a DMP typically benefit from diminished collection calls and waived or reduced finance fees. It usually takes about 30 to 60 months to repay the outstanding debt through a DMP. The average monthly fee for enrollment in the NFCC’s DMP is $14, and the average start-up charge is $23.

The ACCC’s certified and professionally-trained counselors also offer premium evaluations of credit card borrowers’ financial circumstances. First, they assist customers in budget-creation and offer confidential education and counseling classes on proper budgeting and credit card usage. By analyzing their clients’ budget, ACCC counselors can decide whether a debt management program is appropriate for the former. Credit card debtors may take advantage of an online budget worksheet by consulting the ACCC’s website at

An ACCC counselor enters, on behalf of his or her client, into negotiations with lenders for a potential reduction of:

Over-the-limit charges and late fees

They also negotiate with creditors for an extension of the credit card debt’s repayment date. The ACCC has its own debt management program which enables consumers to simplify their monthly monetary obligations and to save money through lower monthly payments. If counselors determine that a borrower would benefit from a debt management program, they will place all the resources at his or her disposal, consolidate his or her payments and distribute them to the lenders. To enroll in the ACCC’s debt management program, consumers are required to pay a one-time processing fee of $39. The fee is waived for veterans, students, senior citizens, and individuals undergoing extreme hardship.