Most people would say that you should only consider bankruptcy as a last resort. While its important to consider all of your options first, there are instances where bankruptcy is appropriate and can provide you with the fresh start that you need. My concern with bankruptcy is when people file.

On average, one third of bankruptcy filers made the decision to file after being pushed over the proverbial edge by a credit collector; they couldn’t take the constant harassment and threw their hands up in the air. The problem with this – if you file bankruptcy today and, God forbid, you should find yourself with tens of thousands of dollars in medical debt next month, what will you do then? You can’t file again.

Bottom Line: If you have come through a financial crisis and are not still in the middle of it and could say, “If I could just get rid of this financial burden, I would be fine with my current employment, housing and transportation situation” then you might be a candidate for bankruptcy. Take the time to seek legal advice and explore your options. BEWARE: Most bankruptcy attorneys don’t get paid unless you file bankruptcy. Therefore, there may be special incentive to encourage you to file even if there are alternative options that are more beneficial.

There’s no doubt – America is at war and in the midst of a national debate as to why. Most people don’t question the universal support and appreciation of our troops who fight for our freedom. Did you know that while our soldiers are fighting for our freedom, many of them are drowning in financial debt?

Cash advance and payday lending stores have risen to epidemic proportions in heavily populated military areas. Many military personnel cannot be deployed due to the financial stress they face here which could distract their focus during critical combat situations.

There is help! Congress passed a law capping the amount of interest military personnel can be charged for a payday loan. Also the Servicemembers Civil Relief Act of 2003 provides a cap of 6% on all debts (credit cards, mortgages, car loans, etc.), provides eviction protection for dependents, and delays civil litigation.

Bottom Line: Tying a yellow ribbon around a tree or attaching a magnetic one to the back of your car is great. If you really want to help, ask the military man or woman you know if their family is aware of the provisions that have been made to give them the best possible opportunity to defend our freedoms without having to risk their financial freedom.

Family Credit Counseling Service receives hundreds of calls per week
from consumers looking for credit counseling and debt management
assistance. Often one of the first questions asked by a consumer is,
“Are you a non-profit organization?” My answer to this question is,
“Yes, but if you’re trying to find a trustworthy credit counseling
organization to assist you in becoming debt free, this is generally
not an adequate question to measure the legitimacy of a credit
counseling organization.”

Bottom Line: It’s good to know that an organization is a non-profit
organization. It’s even better if they are members of the Better
Business Bureau. If you’re really interested in ensuring you are
dealing with a legitimate organization, determine if that
organization is a licensed debt management provider in your state.
There are many states that don’t require licensing, but there are
many that do. Find out if your state requires licensing and if so,
choose a credit counseling organization from this short list. The
chances you will have the opportunity to speak to a credit counselor
that has your best interests in mind will increase greatly.

Ever find yourself in the intimidating position of dealing with a collector? Collectors can be very intimidating and persuasive, especially if you don’t know your rights as a consumer.

The Fair Debt Collection Practices Act protects you from the abusive practices of some collection agencies; the problem - most of us don’t know what rights this legislation provides. Did you know a collector is required to stop contacting you at your place of employment as soon as you request they stop calling you there? And did you know you can write a Cease and Desist letter to a third party collector which requires they cease collection efforts unless they decide to pursue further legal action?

Bottom Line: Know your rights as a consumer, especially if you find yourself faced with this situation. Avoiding creditors and making broken promises to pay are not the best ways to deal with a collector. Find out what your rights are and get help from a reputable source if necessary.

Payday loans, paycheck advances, or whatever you choose to call them are a growing industry, doubling in size over the past six years to nearly $28 billion in loan volume. Family Credit Counseling Service receives many calls daily from people struggling to break the cycle of Payday lending. But are they really the best option for consumers in need of a little help until the next pay day? Let’s investigate.

While legislators try to put caps on interest rates and the maximum number of payday loans one person can have, most loan providers have found the loopholes - mostly through providing online loans. The average loan carries interest rates between 300-900% annualized. Only 1% of loans written are to consumers who can temporarily use the funds, pay the loan off and walk away; the rest fall into a deeper cycle of debt.

"OK, but what is a person to do that has bad credit and an emergency need," you say? Great question! Many reputable financial institutions are beginning to provide payday alternative loans with much more reasonable interest rates and officials are looking at stricter legislation for these loans as they tend to prey on the low and lower-middle class.

Bottom Line: If you find yourself in a financial crisis, look around for alternatives before being lured by the bright neon lights of the corner 24 hour payday advance store. Look for a reputable lender that might offer an alternative product or talk to a credit counselor to discuss what your options might be.

The Federal Financial Regulatory Agencies statement released recently urges mortgage lenders to “identify borrowers at risk of default and pursue appropriate loss mitigation strategies designed to preserve home ownership.” Basically– find out who’s struggling and help them!

President Bush also announced his recommendations for the mortgage crisis recently (view video for comments or read Bloomberg article.) The President has proposed assisting consumers caught in high-risk mortgages to refinance into traditional mortgages insured by the Federal Housing Administration.

Bottom Line: There is no free money coming your way if you’re struggling with your mortgage; however lawmakers are beginning to take notice of the national crisis developing. A HUD-approved counseling agency can work with you and your lender to create a workout plan to get you back on track (contact Family Credit Counseling Service if you need help finding a HUD-approved counselor.) Rather than burying your head in sinking sand hoping your mortgage crisis will fix itself, stay informed of national news updates and take advantage of any assistance that becomes available.

As a credit counselor with Family Credit Counseling Service, I talk to people often who are overwhelmed with credit card debt. Many times during a counseling session I will discover credit card debt created by a medical crisis that occurred due to lack of insurance or being underinsured.

We all know a visit to the doctor can be expensive, even with insurance. If you require emergency assistance or need to be admitted to a hospital, medical bills can reach into the thousands and tens of thousands. When the medical crisis has passed, many find themselves in the middle of a financial crisis.

Medical collectors will begin calling shortly. Many people that don’t know how to deal with collectors panic and take the advice of the collector, “Which credit card would you like to use to pay your balance?” Without thinking, unsuspecting patients just paid a medical bill that usually carries little or no interest charge using a credit card with high interest rates.

Many medical providers are non-profit organizations. To have the status of “non-profit” requires these medical providers give a certain amount of care at no cost. When you are faced with a high medical bill, your first question should be, “What type of financial hardship programs can I qualify for?” If this doesn’t work, ask to set up a payment arrangement directly with the medical provider.

Bottom Line: Don’t compound your financial situation by turning a large medical bill into a credit card payment that could take many years to pay off after you factor in all of the interest that will be paid. There’s almost always a better way!

If you have more questions about your financial situation, Family Credit Counseling Service has counselors who can help today!

I talk to individuals all the time who ask questions like, "I co-signed for a loan and need to figure out how to get my name off now because collectors are calling me." Let me take a moment to educate on what it means to co-sign.

When you co-sign for a loan you are essentially a co-applicant. The reason your friend or family member needs a co-signer is because they have poor or insufficient credit. The bottom line is they are a bad credit risk for the lending institution who has decided to deny their credit application unless someone else joins the equation. The whole point of a co-signer is so the creditor has another person to go after for payments in case the primary applicant lives up to their credit history and defaults on payments.

There are only two ways a creditor is going to let you out of your obligation as a co-signor: The primary applicant might decide to make good on payments and create a good enough payment history that the financial institution is willing to refinance the account in only the individual’s name. Otherwise you’re out of luck unless you can find another lender to refinance without you. Don’t hold your breath here!

It’s too late to start asking how to have your name removed from a loan or credit card when they account is in default - that’s the last thing the creditor is going to do for you. Don’t be surprised when they begin to call you to ask for payments when they’re unsuccessful at collecting from the primary borrower.

Bottom Line: Be very careful when co-signing for a loan or credit account. As a credit counselor I’ve seen it ruin the best of friendships and tear families apart. Never even consider co-signing unless you are certain you have the means to make those payments if your friend or family member decides to use their money on more important things than bills.

Isn’t it amazing what people will do to make a dollar? Organizations are shooting up all over the country promising to help you avoid foreclosure and turn around your financial situation. The problem - most of them are charging high up front fees and running away with your money without doing a thing to improve your situation. Worse than that, they are targeting low-income, minority and senior homeowners who are most vulnerable.

These organizations receive foreclosure information through public records and notices (which are readily available to anyone) and contact you. They will require you not contact your lender during this relief process, keeping you out of the loop with what is actually being done. Many are asking you to sign over the title (some don’t ask but just hide it within the paperwork) with the intention of selling it back once your payment arrears have been resolved. Most will strip any equity in the home through high, buried fees and make it next to impossible to get back on your feet.

Bottom Line: Never trust help that is unsolicited! If you’re having problems, contact your lender first to see if a workout plan can be arranged. If that doesn’t work, contact a HUD approved housing counselor to see what other alternatives might be available (a listing of approved counseling agencies can be obtained by clicking on http://www.hud.gov/offices/hsg/sfh/hcc/hcc_home.cfm.) In most cases your mother’s advice still holds true: “If it’s too good to be true, it usually is!”

Media outlets are flooded with companies willing to write a debt consolidation loan using the equity in your home to pay off those high interest rate credit cards, but is this a good thing?

It’s true a home equity loan can pay off debts that carry high interest rates (provided you’ve got enough equity.) In many cases the interest paid on a home equity loan can even be deducted on your taxes. Sounds like a "no brainer," right? Not so fast!

Consider that you are not only using the equity in your home to pay off unsecured debt, you are also converting that unsecured debt into SECURED debt. Now, if something happens where you can’t afford your monthly payments, you could risk losing your home.

Here’s the typical scenario: Unless people are completely committed to living debt-free and changing spending habits, people pay off credit card balances with their home equity loan but continue with uncontrolled spending. If this happens, the typical homeowner will find within a couple of years that they not only have a new home equity payment, but new credit card balances that snuck right back to the same levels. If you thought it was difficult making those high-interest credit card payments before, try figuring out where the money is going to come from to pay for those and your new home equity loan.

Bottom Line: Determine your commitment level to change your spending habits before you apply for that home equity loan. If you’re not completely committed, find another solution to your credit problems!