How Chapter 13 Bankruptcy Lowers Credit Card Debt


Uncontrollable credit card debt has led many American citizens to look for a way out that really works. While some individuals resort to debt settlement programs, others favor the complete judicial protection that is offered by Chapter 13 Bankruptcy. Chapter 13 Bankruptcy assists US consumers to lower their monthly payments on credit card debt. You can become debt free simply within 3-5 years with complete judicial protection. Individuals who have non-exempt assets like rental properties frequently opt for reconstituting their credit liabilities throughout a 3 to 5 year period for the purpose of lowering the monthly payments. At the same time when there would be a negative impact on their FICO scores for up to seven years, those who are facing severe financial difficulties can become debt free.

The Distinction Between Chapter 7 and Chapter 13 Bankruptcy

The main distinction between Chapter 7 and Chapter 13 bankruptcy is that the second permits a consumer to hold non-exempt assets. A consumer is required to surrender any valuables to a trustee if he files for bankruptcy under Chapter 7. Others look for Chapter 13 safeguard regarding car, home and student loans. For taking the advantage, the debtors are likely to make monthly payments for the amount payable to the creditors.

How Long Would It Take to Eliminate Credit Card Debt?

It depends on the amount due. Chapter 13 Bankruptcy, which is also known as a wage earner plan, would let a consumer to rearrange his credit card debt throughout a 3-5 year time period. Monthly payments would be directed to bankruptcy trustee on the basis of the amount of free money that he has. As soon as the debt solution is abided by, any left over obligations are cancelled and the consumer becomes entirely debt free.
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Credit solutions: Your guide to avoiding bad debts



Credit Solutions are effective ways to get out of debt or a bad credit situation that can jeopardize your credit score and your credit worthiness in the eyes of your creditors.

Credit solutions…. tackle 3 credit problems you often face, these are:

  1. Too many credit cards: When you have multiple credit cards, you try to transfer balances from one card to another instead of decreasing an individual account. This way, each of your cards has a high balance that does not decrease creating a problem.
  2. Late or missed payments for loans or credit cards: Continual late payments hurt your borrowing capacity and your lenders lower your credit worthiness from the pattern of your late payments.
  3. Too much ….outstanding debt: If you have a disproportional high debts compared to your income, you can risk getting into a tricky credit situation. This might also frighten future lenders from offering you loans.

How credit solutions work in a bad credit situation



You can find 6 different credit solutions that work well ….bad debt situations. The brief outline of each is given below:

  • Be frugal in your lifestyle: If you want to get back to sound finances, pay off your interests on your debts every month, (full stop) it’s important that you curtail your daily spending habits. Being “dollar-wise” will better your bad credit situation and in future, boost your borrowing credibility. For instance, you can attempt to scale back your buying plans, (semicolon) this way your creditors will be assured of your loan- repayment capacity.
  • Cut down your spending: Do not use your credit cards unless you have emergencies. Find inexpensive ways of spending that don’t burn a hole in your pocket.
  • Prioritize debt elimination: Make debt repayment a priority every month before anything else. Focus on paying off your smaller debts, and then turn your attention to paying off the bigger debts.
  • Arrange for an emergency fund: Create an emergency fund only for repaying debts. This will help you make timely payment each month to your creditors.
  • Save cash, avoid impulse buying: This is the most important credit solution that helps you on rainy days. Avoid impulsive buying and then putting the purchases on your credit card. Get into the habit of buying later which helps you to save on cash.
  • Stay away from credit card debt: Avoid using credit cards for every purchase just because they are convenient for online purchases or traveling, use a debit card instead. This simply helps you solve your credit problems and lets you stay in good financial shape.

Benefits of credit solutions
  • Credit solutions help you regain control of your finances and remain debt-free in the future.
  • You take good financial decisions and retain the habit of saving.
  • You automatically stop falling prey to subprime lenders who charge high interest rates.
  • With these practices, lenders will stop calling you a debt defaulter and enhance your chances of receiving a new loan.
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How credit scores can change your lives?


Credit score is a 3 digit number that indicates your ability to repay a loan. It is calculated statistically and is based on your credit history. It reflects your creditworthiness or your past and future ability to repay debts. When your credit score is calculated, your income, liabilities and expenses to repay the loan are taken into account.

Why is a credit score important to you?
Your credit score helps lenders to objectively measure your overall credit risk. Your credit score is specific and gives your creditors a fair knowledge of your credit situation. Scores can be viewed by your lenders easily and this allows your lenders to speed up the loan approvals. With your credit score, your lender can approve your loan much faster. Scoring enables the lender to take faster credit decisions.

Where can you find your credit score?
Credit scores appear in your credit report, which is a file that contains all your borrowing details. Your credit report is generated by a consumer reporting company. The 3 main credit reporting agencies (CRAs) in the US are Experian, Equifax and TransUnion who calculate your credit score. These companies use the Fair Isaac Corporation (FICO) accredited credit score model to rate your borrowing credibility. Although you would have one FICO score, there might be variations in the way a CRA calculates your score as opposed to another. This happens because not all of your creditors report to one CRA at a time.


5 Factors affecting your credit score
Your scores are calculated based on certain criteria given in your credit report. These include:
Types of the credit used: The kinds of loans you have taken and whether they are on various accounts like credit cards, installment loans, mortgage loans, etc.
Amounts owed: This includes the total amount you owe to your lenders on different accounts.
Payment History: This includes the past payments for all types of accounts like credit cards, retail accounts, etc. It also includes the time taken to pay your debts, the debts you have not been able to pay till date and the last record of any delinquency.
Length of credit history: This includes the time since a debt account was opened in your name and how long have you been paying off a certain debt.
New credit: This includes the number of new accounts you have opened and how often you apply for a new loan.

What is a good score?
If you have a credit score that is above 700, it is considered to be a good score. You have a higher chance of paying back your debt. When you have a good score, your lenders charge you a lower rate of interest.

In fact, a higher score always betters your chances of getting a new loan.

5 ways to improve your credit score

If you have a bad credit situation, you should improve your credit score. You need not worry too much. Just follow 5 easy steps and you can easily increase your credit score. These are:

1. Make timely payments on your outstanding debts.
2. Review your credit report from time to time and consult your CRA for necessary changes.
3. Do not open new credit card accounts if you want to go for big loans like mortgage.
4. Try to reduce your credit card balances to just 25% of your available credit amount.
5. Always aim at paying your debts on time. Timely pay is a small step that can boost your credit score any day.


Your credit score is important to you. It determines a number of important things in your life. Your score decides whether a creditor will give you a loan and how much a loan might cost you. Your score allows creditors to predict whether you will be able to pay your monthly payments on time. Always ensure that your credit score reflects the changes in your credit report. Try not to disclose your credit score to all collection agencies, unless it’s inevitable. You must always seek help if you have a trouble to pay off your debts. Consult a credit counselor and go for debt relief measures. This may not boost your score in the short run, but over a period of time the results will show.
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Getting a Home equity loan? Keep these factors in mind


A home equity loan is meant for those home owners who borrow money keeping their home as collateral. A home equity loan gives you the access to a large sum of cash that you can use up for other expenses or investment purposes. The home equity loan has the advantage of lower rate of interest, monthly payments that are tax deductible etc. Some times the cash available is up to 125% of the property value. For example, if you are a resident of Toronto, and are planning for a home equity loan, then make sure to conduct ample research so as to understand the procedure of getting such a loan and how it works in your county.

The home owners usually apply for a home loan for making bigger purchases like buying another property or going for a home renovation etc. Here are a few things that you should keep in mind while applying for a home equity loan:

Research and compare the rates

It is a wise idea to shop around for various lenders a little instead of hopping straight into the bank. Various lenders have different terms and conditions for the home equity loan; the rates also vary from one lender to another. Therefore the internet is a good way to do some research before going for a loan. You can also hire an independent broker who would do the job of research on your behalf. He would be able to get you in touch with those lenders who meet your demands most appropriately.

Be aware of the fine prints

It is of utmost importance that you read and understand the loan contract well before signing the papers. This is because; there is no reason to believe that all the lenders are trustworthy. Many lenders might add a few clauses in fine prints on the loan contract which were not explained to you earlier. Be aware of the balloon payments and the prepayment penalties associated with the loan contract. A prepayment penalty means if you return the borrowed amount before the expiry of the home equity loan, then you have to pay a hefty sum as a penalty. In case of the balloon payment, you must pay the entire principal by the end of the loan term. This becomes quite a burden for the retired hoe owners.

Make the repayments in time

There are certain processing charges that you need to pay while applying for the home equity loan. There are the loan documentation fees, the title search fees, the lawyer’s remuneration, and other such related fees. Make sure you are able to afford all such fees along with the regular monthly payments. If the home equity loan has a variable rate, then the fluctuation in rates can result in greater monthly payments. Therefore, make sure you are able to manage the entire process; else your credit ratings may falter to a great extent. That will result in a different danger financially.
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