Banruptcy or Settlement?

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For those consumers who can no longer to afford minimum credit card payments, Ethan Ewing, president of Bills.com offers tips to help consumers understand their odebt relief ptions for help, including: “Now that credit card reform legislation has passed, it’s a great time for consumers to take control of their debt,” said Ewing . “To do so, consumers need to understand the available debt relief options.”

Debt settlement. A debt settlement company works on consumers’ behalf to lower principal balances due, often obtaining savings of 50 percent of the total debt. The firm does not make monthly payments to creditors, but rather negotiates with the consumer’s creditors while the consumer accumulates funds for the settlement. Debt settlement firms charge consumers a fee for their services, typically a percentage of the debt enrolled or a percentage of the debt reduced.

Consumers who persist with a debt settlement plan can resolve their debts in two to three years at significantly lower cost than that of a debt management plan. Debt settlement typically provides better repayment terms than a Chapter 13 bankruptcy filing and does not leave a permanent bankruptcy judgment on one’s record.

Debt settlement may have a negative impact on credit ratings and profiles and is best suited for consumers in serious financial hardship who cannot afford to make minimum payments on bills and who cannot afford the higher monthly obligation typical debt management programs require.

Debt management. Debt management companies, also known as credit counseling agencies, maintain pre-arranged agreements with credit card companies to lower interest rates on a consumer’s existing debt to a creditor-issued “concession rate.” Debt management companies collect a monthly fee from consumers, as well as revenue from the credit card companies called “Fair Share” payments.

In debt management plans, monthly payments decrease, but principal amounts owed do not. Consumers who are able to continue with the payment plans typically can pay off debt in approximately five years. Debt management plans also require higher monthly payments than debt settlement programs, and are best suited for individuals who are facing a less-severe financial hardship than a typical debt settlement customer.

Bankruptcy. Bankruptcy Attorneys concur that BK’s can leave a severe negative impact on a filer’s credit rating for many years. Credit repair is not as easy as some debt counselors may lead you to believe. Under bankruptcy reform enacted in 2005, it is harder and more expensive to obtain than it used to be. Under the new law, fewer people can eliminate most consumer debt by filing Chapter 7 bankruptcy, taking more people to Chapter 13 filings. Chapter 13 requires consumers to pay back debt on a repayment plan (which can take up to five years), while still suffering the negative repercussions of a bankruptcy on their credit reports and public records. Generally considered a last resort, consumers considering a bankruptcy filing should speak to a bankruptcy attorney licensed in their state.

Read the complete press release online at http://www.emediawire.com/releases/debt/credit/prweb2493574.htm

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US Consumer credit market shrinking

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Americans continue to hold back on credit card spending as banks slash lines of credit and charge off card accounts at a record pace. The Federal Reserve reported another large dip in consumer credit for September.

The Fed said late Friday that overall consumer credit in the U.S. contracted at an annual rate of 7.2 percent in September, or by a total of $14.8 billion. Analysts had a contraction closer to $10 billion.

September marked the eighth straight month of consumer credit declines.

Credit card debt, called revolving debt in the Fed’s report, led the way once again. Revolving debt fell at a 13.3 percent annual rate or by $9.9 billion to $889 billion. The Fed slightly revised upward the reading from August to reflect an identical 13.3 percent annual contraction rate.

Since September 2008, Americans have shed $86.2 billion in credit card debt. Although many credit consumers restrained card spending, much of the mathematical credit for the plunge can be given to soaring charge off rates at banks.

The Fed said that the annual rate of decline for revolving credit was 10.0 percent in the third quarter of 2009. In the first and second quarters of the year, the annualized rate of decline was 9.6 percent and 9.7 percent, respectively.

Nonrevolving consumer credit – like that found in auto, student or personal loans — dropped at an annual rate of 3.7 percent in September, or nearly $15 billion.

Total consumer credit outstanding in the U.S. stood at $2.455 trillion at the end of September, down from its all-time high of $2.581 trillion in July 2008. The Fed’s report does not include debt backed by real estate

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Debt Settlement Statement

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MADISON, Wis.— Concerned about proposed federal rules that would effectively eliminate its industry, The Association of Settlement Companies (TASC) recently provided the Federal Trade Commission data that supports the value of debt settlement to consumers in response to the agency’s proposed changes to the Telemarketing Sales Rule (TSR).

The FTC is seeking to create amendments—including a ban of advance fees—that would effectively eliminate a viable option for consumers who are struggling with unsecured debt. TASC outlined in a brief historical performance data that clearly illustrates the economic value its member companies deliver to consumers enrolled in debt settlement programs.

For example, based on a recent data analysis of its members, TASC estimates its members settled more than 94,000 accounts representing more than $553 million in debt in the first 6 months of 2009. This is an annual rate of more $1.1 billion in debt settled by TASC members for just 2009.

“We firmly believe that debt settlement should remain an option for those tens of thousands of consumers each year who choose debt settlement as their preferred—and often only available—program to handle their financial situation,” Chris Kesterson, President of TASC, said. “In our response to the FTC, we clearly demonstrate the value consumers receive from our companies who work diligently on their behalf each day to negotiate settlements with creditors.”

TASC is the leading trade group of the debt settlement industry. The cornerstone of TASC’s mission as an organization has always been to promote fair legislation at the state and federal level designed to protect the consumer and to promote best practices of operations by its members.

Without advance fees, debt settlement companies would have to work for free for the duration of the settlement process, which typically takes three years. No company in any industry could accept this, Kesterson pointed out.

“We look forward to working with the FTC in exploring appropriate and comprehensive ways to regulate the entire debt settlement industry, rather than only one segment,” Kesterson said

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Delinquent account placement on rise

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Members of the Commercial Collection Agency Association of the Commercial Law League of America reported that for the twelve months ending in September 2009 compared to the same period in 2008, account placement rose by about twenty-eight (28) percent, reaching $17,286,448,679 in the dollars placed for collection.

Emil Hartleb, Executive Director of CCAA stated, “This is a record account placement but there are signs on the horizon that indicate that the delinquency situation with trade receivables might be stabilizing. The gain in account placement for the third quarter of 2009, compared to the third quarter in 2008, was about 12%. This is still a strong showing but significantly less than the gains registered in the fourth quarter of 2008 and the first and second quarters of 2009 compared to the same quarters in the previous year.” Those quarterly gains were: Fourth Quarter 2008 – 25.4%, First Quarter 2009 – 38.4% and Second Quarter 2009 – 39.5%.

Hartleb further stated, “The third quarter of 2009 when compared to second quarter of 2009 showed a decline in placement of about eleven (11) percent. This reflects to a certain degree the seasonality of the data but it also reflects, we believe, stabilization in the past-due accounts that many companies were carrying in their accounts receivable portfolios. Much of these delinquencies have been placed for collection or payment plans have been negotiated with them. This coupled with a lackluster sales environment for many companies makes a continuation of future very strong account placement questionable.”

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Bad Debts Booming for NZ Debt-Collectors

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The recession may be over but figures released by transtasman debt collection agency Baycorp show its impact is still hitting profit and loss accounts nationwide.

Debt referred to Baycorp, which holds 35 per cent of the market, has been increasing since mid-2007 and is now at its highest level since 2002.

At the same time, the cash collected from debtors has been on a steady decline since mid-2006 and is now at its lowest level since January 2001.

Fewer than four in 10 people who owe money actually stick to the payments they have promised.

Baycorp chief executive Geoff Harper says: “The willingness to pay is almost unchanged. What has changed is people’s ability to pay – this has reduced.”

Debtors are more likely to seek a payment arrangement than pay their debt in full, and the average payment has declined 25 per cent. “People are paying less and taking longer to repay,” Harper says.

There has been a 49 per cent increase in the average amount owed since 2006, and a marked increase in commercial collection referrals. Read More

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Woman ordered to pay $320k proprty debt

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An Auckland woman has been lumbered with a $320,000 debt after she claimed she was conned into buying a house at an over-inflated price.

Helen Rutherford bought the house in Meadowbank for $300,000 more than its worth.

Rutherford was taken to the High Court at Auckland by ANZ National over a loan for the house, and lost.

She told the court she agreed to buy 50 Temple St in Meadowbank on April 5, 2007, from Vijay Enterprises for $850,000.

She said she did not know the house was worth only $550,000.

Real estate agent Philip Cavanagh arranged an $800,000 loan so she could buy the house from his associate Raghu Aryasomayajula.

However, Cavanagh has since been declared bankrupt, leaving ANZ National to chase the money from Rutherford.

The bank pre-approved a loan of $427,000 to Rutherford, whose income was $50,000 a year. Days later she and Cavanagh – then an agent for Barfoot and Thompson Mt Albert – applied to the bank for the $800,000 loan. Read MORE

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Chocolate debt not so sweet

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A primary school’s chocolate fundraiser turned into a debt-collection exercise after parents failed to cough up around $3000.

Birkenhead Primary School’s Parent Teachers Association raised funds by giving pupils boxes of chocolate bars to sell at $2 a bar.

But at the end of the fundraising stint, the Auckland school was $3000 out of pocket, and had to start chasing up parents.

Former PTA chair Vicki Vachias said the association still finished around $600-$700 short. “Most of it came in, a little bit didn’t.”

Vachias said the PTA put the loss down to the recession.

“We just wrote it off as a sign of the times. We just wrote that off as being what happens with some families.”

The event raised about $5500 for the school despite the shortfall.

Principal Nigel Bioletti said the PTA has been active in raising money for the school for a number of years.

“I would think that they would do it again but perhaps there’s a lesson to be learned here. At any school you’re going to have parents that don’t return things. READ MORE

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