As part of the debt compromise, Congress agreed to cut nearly a trillion dollars in spending – and one casualty was federal subsidies for student loans. That means that people interested in borrowing money for higher education may see a higher price tag for that privilege in the near future.

Student Debt & Bankruptcy

So why is an increase in the cost of student loans a big deal? For a few reasons:

• Student debt in the United States has already topped $800 billion and analysts estimate that it will reach $1 trillion by the end of 2011. That’s more than our credit card debt, which was estimated at $793 billion in May 2011.
• The job market has been slow to recover since the recession hit, especially for younger job seekers. Nationally, unemployment is hovering at about 9.1 percent, meaning that finding a job after graduating is tougher than it once was. And the average college graduate hits the job market with about $24,000 in student debt.
• Student loans are not dischargeable in bankruptcy. That means that borrowers are legally obligated to repay their student loans no matter what (though some rare exceptions exist).
• For-profit universities have recently faced new sanctions that require them to meet certain requirements in order for their students to receive federally subsidized student loans. The measure was put in place because of evidence that showed students were borrowing money to pay for these schools that they were unlikely to earn back based on income projections upon graduation.

In other words, educational debt in the U.S. has already proven cause for concern from many consumer advocates. An increase in interest rates will mean an increase in the amount of that debt.

Change to Student Loan Rates

As of now, federally subsidized Stafford loans come with an interest rate of 3.4 percent. What’s more, under the current system, the government covers interest that builds up while a student is actively pursuing her education.

When the debt ceiling-related changes go into effect next year, though, that interest rate will double to 6.8 percent and the interest waiver for active students will disappear. Further, the new law removes certain rate reductions that are currently used to incentivize on-time payment.

Student lending is an interesting sector of the U.S. economy: unlike most other loan products, student loans are offered freely, without much regard for a person’s credit history. Because of this, it’s far too easy for young adults to take on more debt than they realize – and entirely possible that they’ll get in over their heads.

Although no one likes to admit it, financial problems are very common. Financial problems occur for a variety of different reasons. Whether it is because of overwhelming medical bills or being laid off work, financial troubles can easily occur. The question then becomes, when is filing for bankruptcy the only way out? People often wonder under what circumstances they should actually file bankruptcy. Here are some simple guidelines that can assist you in making that decision.

If you are overwhelmed with debt you can no longer pay, bankruptcy might be a viable option for you. When you wipe your debt completely clean, it is called discharge of debt. The goal of this is to help reduce your overall debt and allow you to start again with a clean slate. Whether you choose to go with Chapter 7 Bankruptcy (straight bankruptcy) or Chapter 13 Bankruptcy (reorganization), most, if not all of your debt will be wiped out.

If your home is currently in foreclosure, bankruptcy can help to stop the foreclosure process any time before the actual sale of the house. However, filing bankruptcy will by no means wipe out your current mortgage. Bankruptcy will help you create a repayment plan for the payments you are behind on.

Bankruptcy can help you keep your car and other processions from being repossessed. Even if your car has been repossessed by the bank, when you file bankruptcy you can actually force them to give you your car back. However, this is only the case if bankruptcy is filed promptly and quickly enough. Any payments you are behind on will then be consolidated into a bankruptcy plan. After you have filed bankruptcy and a plan has been made, your payments will go directly to a bankruptcy trustee, instead of going directly to a finance company.

Bankruptcy can help to eliminate extremely high medical bills. Unfortunately, there are times when medical bills, whether due to an accident or major illness, can get to the point where you can no longer pay for them. If you choose to file Chapter 13 bankruptcy, then your overall medical bills can dramatically be reduced.

One of the most common reasons people file bankruptcy is because loss of work. Families can easily become comfortable with the income they are making, whether it is a single or dual income family. Then, if the unthinkable occurs and you become unemployed, bills can quickly pile up. Often times, losing your job can be directly related to a medical reason. Therefore, with high medical bills and no income to pay them or other bills, bankruptcy may be the only viable option to get out from under the bills.

Bankruptcy can stop the harassing phone calls and letters from creditors. Often times, creditors do not follow the rules when trying to collect a debt. Creditors will continuously call the home and act very inappropriately with abusive and demeaning behavior.

If you are unable to pay your utility bills and are close to having them shut off or have already had them shut off, then bankruptcy may be your way out. Filing bankruptcy can help keep your electric and other utilities from being shut off.

Student loans are another source of overwhelming debt. Although student loans will not be completely eliminated through bankruptcy, it can help to consolidate your loan leaving you with a more manageable payment.

Wage garnishments can be stopped through Chapter 7 Bankruptcy. Wage garnishments often make it impossible to purchase essential items for your family. Bankruptcy can help keep food on the table by ending the wage garnishments.

Paul Sarwana offers information about how to file for bankruptcy to help debtors build confidence in improving their financial situation. He runs an informational website that provides tips on choosing a debt relief service, dealing with creditors, increasing credit score and choosing a good bankruptcy lawyer. Please visit http://www.debtfirms.com/ to get more quality file for bankruptcy information.

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Reasons To File For Bankruptcy is a post from: Bankruptcy Court Online

Bankruptcy is a legal term to describe an official declaration that an organization or individual is unable to repay their debts. Sometimes creditors will file a bankruptcy petition against a business or corporate debtor in an attempt to recoup a portion of the debt owed to the creditor. This is commonly referred to as an “involuntary bankruptcy petition;” however, most bankruptcy filings are completed by the debtor in a “voluntary bankruptcy petition.” In either case, the debtor will need legal representation to navigate the legal system and know and exercise their rights in Bankruptcy court.

Bankruptcy petitions were first created as a means to satisfy creditors; debtors had little to no rights. In early bankruptcy practices, the creditor was permitted to seize the debtor’s belongings if they could not negotiate a suitable repayment plan. Additionally, it was possible for the debtor to face imprisonment to satisfy their debts. Bankruptcy laws today are more favored toward the debtor, and there are bankruptcy lawyers who can file the necessary petitions to negotiate your debts. Although bankruptcy laws have become friendlier toward debtors, they have also recently changed again to avoid making the process too easy for debtors to avoid repaying their debts.

Bankruptcy has become quite common in today’s economic climate. A lawyer who specializes in bankruptcy filings has experience in the various aspects of bankruptcy proceedings. These proceedings can include reviewing the client’s assets, attending bankruptcy hearings, and negotiating a repayment plan with creditors. Debtors can also face many legal issues associated with their bankruptcy filings including repossessions, foreclosures, wage garnishment, liens, and creditor lawsuits.

A bankruptcy lawyer works with their client to liquidate property and account for their assets. They are also charged with properly using their client’s assets to repay their creditors. In many cases, bankruptcy lawyers can temporarily halt foreclosures, repossessions, and wage garnishment of salary or wages while they renegotiate repayment plans with their client’s creditors. Having a bankruptcy lawyer during this time is worth the lawyer’s fees because they can help relieve some of the stress associated with negotiating your debt, while navigating the legal system to do so.

The legal system, and creditors prefer to renegotiate debts directly with their clients without legal intervention. However, if bankruptcy is unavoidable, it is important for debtors to know their rights to avoid any further financial repercussions. Many times, individuals who need legal representation in the event of a bankruptcy filing will have a lot of unsecured debt, and will need a lawyer to assist them in restructuring large amounts of debt. For those with smaller amounts of debt, it is possible to avoid bankruptcy altogether by making a settlement with your creditors. Even then, a bankruptcy lawyer can be helpful in creating letters of intent and to account for any debts that have been forgiven as a result of making a settlement with the creditors.

For a bankruptcy lawyer, Fairfax is home to an experienced professional. To learn more, visit: http://www.msandlerlaw.com/

Article Source: http://EzineArticles.com/?expert=Anna_Woodward
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A Bankruptcy Lawyer Can Help Settle Your Debt is a post from: Bankruptcy Court Online

Garnishment and Federal Benefits: The Basics

If a creditor gets a judgment against you, it has various tools to collect on that judgment. One tool allows the creditor to garnish (grab the money in) your bank account. But there are limits to garnishment. Judgment creditors cannot grab funds that come from certain sources, including some types of federal benefits such as Social Security, Supplemental Security Income, veterans benefits, and a few others.

Although these types of funds cannot be seized by creditors, in practice, when banks got a garnishment order in the past, they often froze all funds in the account (up to the amount of the debt), without regard to whether the funds were protected from garnishment. This means the bank accountholder would not be able to access those funds for weeks or months. The accountholder could object to the garnishment of the protected funds to prevent the bank from turning them over to the judgment creditor. But many people were unable to complete the paperwork and procedure to do so, and so lost funds that never should have been seized.

The New Rule: The Onus is on the Bank

The new rule puts the onus on the banks. Banks receiving garnishment orders must now determine if the bank account has protected federal benefits that have been electronically deposited into the account within the previous two months. If the bank discovers that there are protected funds, it cannot include those funds in the account freeze.

What This Means for Accountholders

Federal benefits received and deposited in a bank account via paper check are not protected by this new rule. Nor are funds received (even if received electronically) more than two months prior to the garnishment order. However, the regular state procedures for challenging a garnishment order will still be available for these types of funds. Federal benefit recipients currently receiving paper checks should consider switching to electronic deposit of their benefits.

For More Information

If you receive federal benefits and think you might need protection from bank garnishments, be sure to read about the nitty, gritty details of this new rule (this post just covers the very basics). For the short term, you can get an excellent summary of the new rule, as well as recommendations for how beneficiaries of federal benefits can best protect themselves, from the National Consumer Law Center at http://shop.consumerlaw.org/pdf/nclc-rpts-repo-jan-feb-2011.pdf.

By Guest Blogger Kathleen Michon

If a person is in deep debt to his creditors and has exhausted all measures to repay them, the last and, perhaps, only resort he may think of is to claim bankruptcy. Bankruptcy is the lack of capacity to pay debts, which is declared, legally. There are lots of ways to go bankrupt. It may be through the partial or non-payment of the due amount on your credit card that results to compounded interest rates.

Another example could be an in-house financing loan which you fail to pay on time leading to foreclosure of your property. Still, one more case could be an insurance company that is not able to release the dividends due to the insurance plan holders.

Though bankruptcy may find the debtor dishonored, this will, effectively, help him in his financial woes. If you can afford it, you can hire a bankruptcy lawyer, but it can be very costly. So, you can hire one just to prepare the necessary documents then do the rest. Also, be familiar with the facts regarding bankruptcy and the types to know what is best for you.

These are the most common chapters of bankruptcy:.

Chapter 7 – In exchange of fulfillment of your debts, your properties are liquidated wherein some of them are sold. Profits from the liquidation do not, necessarily, cover all kinds of debts.

Chapter 11 – Companies and corporations fall under this category, though, individuals may file this type to give them a payment scheme to save their properties from being foreclosed.

Chapter 13 - To be eligible for this type, your salary must be more than what you spend. This is essential since a portion of your paycheck will be used to pay what is owed until it is completed.

Before you even consider filing, you have to make sure that this is the only option you have. This is, since, this will give you a credit standing that puts you in a bad light.

Find the most RELIABLE, FASTEST and CHEAPEST methods for claiming bankruptcy at the authors website by clicking here.

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How to Claim Bankruptcy is a post from: Bankruptcy Court Online

Here’s a look at what our country’s debt rating might mean in future months and how that rating is like an individual credit score.

Rating the U.S. Debt

Currently, the United States has a credit rating of AAA, which is the highest rating possible. This rating indicates that the U.S. is a stable country and is likely to repay any loans it takes out. But there’s more to the story.

• Outlook on U.S. debt: While the other two major credit rating agencies (Moody’s and Fitch Ratings) have not announced any changes to their ratings on the outlook for U.S. debt, Standard & Poor’s downgraded that rating last week, citing as one reason the continued inability of Congress to make a decision regarding the long-term future of spending policies.
• A warning move: While the change in the outlook rating does not officially alter the country’s credit rating, it serves as a warning and reminder to legislators and others in positions of power that the country’s financial stability and credibility on the world stage are at stake.
• Potential for positive impact: Some commentators have mentioned that the changed credit rating could actually prove beneficial to the country, as it may push Congress to act swiftly (and without unnecessary political posturing) in taking steps toward changing financial policy.

The Parallel with Individual Credit Ratings

As anyone who has ever file for bankruptcy, applied for a mortgage or thought about borrowing money for a car knows, individuals have credit ratings too. And, as with the credit rating for the United States, credit ratings for individuals are used to help lenders and investors determine whether or not to lend money to a person and on what terms.

If Standard & Poor’s actually downgraded the country’s credit rating, it would have a similar effect on the nation as seeing a drop in a credit score would for an individual. In other words, the U.S. would have more difficulty borrowing money and could suffer a variety of financial consequences.

So how can a country (or an individual) keep its credit rating as strong as possible?

• Pay bills on time.
• Pay down as much debt as possible.
• Try to keep credit usage low (that is, stay well below the limit).
• Keep old accounts active (but not maxed out).
• Contact creditors before bill due dates if there is ever reason to expect inability to make timely payments.

The Attorney General implemented the rule in order to end "an industry-wide [debt collection] practice that tends to or does mislead or deceive" consumers by failing to provide important information to consumers - that is, that a debt is so old that it is legally unenforceable in court. The new Rule is a victory for consumers. As New Mexico Attorney General King said: "This Rule is intended to ensure that debt collectors provide important information to consumers so that they can make informed decisions when they are confronted with a demand to pay an old unenforceable debt."

The law went into effect on December 15, 2010, but the Attorney General delayed enforcement until March 15, 2011 in order to give debt collectors time to revamp their practices. You can read the Attorney General's announcement here. The announcement contains a link to the text of the new rule.

By: Guest Blogger Kathleen Michon 

The study (discussed more below) highlights the troubling economic reality that many Americans face and could potentially help to de-mythologize the reasons people are pushed to file for bankruptcyprotection.

The Basic Economic Security Test

Here’s some background about the study and its findings.

• Data collected since 1995: Over the past fifteen years, WOW has gathered data from state and federal pools (including census reports) to attempt to determine how much income is required to establish economic security across the country. The study attempts to determine not what people can survive on minimally, but how much they need to earn in order to achieve stability without help from public assistance.
• Economic security numbers: The study found that a single person would need to earn $30,012 per year (about $14 per hour), a single person with two children $57,756 annually (about $27 per hour), and a family of four $67,920 per year ($16 per hour for two workers) to establish economic stability.
• Minimum wage not enough: Compare the above numbers to the federal minimum wage ($7.25 per hour) and to the income identified as poverty-level for those groups ($10,830 for an individual and $22,050 for a family of four) and it’s easy to see that current diagnostic standards for “poverty” are somewhat misleading. Sources report that more than 14 percent of Americans lived below the poverty line in 2009.

Financial Stability, Emergencies and Bankruptcy

Given these numbers, it’s no wonder that millions of Americans require help from the bankruptcy court each year. One essential part of economic stability, as the report highlights, is being able to save money for emergencies. And, on bankruptcy filing surveys, filers commonly cite as reasons they filed financial emergencies such as:

• Illness or injury that led to high medical costs and/or job loss;
• Job loss, layoff, or reduction;
• Family events such as divorce, the death of a family member and the birth or adoption of a child;
• Over-extension on credit (which can result from relying on credit to buy necessities); and
• Unexpected expenses (like a car or home repair).

Recession Hurting Many Families

The study also showed that Americans with less education have the most difficulties finding jobs with livable wages, and that more low-income families than ever have reported not being able to afford basics like food within three months of losing their income.

A recent post from WalletPop.com highlights the issue, which has become more prominent and consumers - and marketers - embrace the latest technology.

Here’s a look at why this issue needs attention and how it might affect you.

Debt Collection Rules

Thanks to the Fair Debt Collection Practices Act, originally passed in 1978, debt collectors have to follow certain rules when contacting consumers about debts they owe. Generally, these rules are designed to make sure debtors are treated respectfully.

But new communication devices and debt collection practices have raised questions about what should be legal. For example:

• Pre-recorded messages: Many debt collectors have apparently begun leaving pre-recorded messages on voicemail accounts or home answering machines. While these messages have “disclaimers” that indicate a listener should hang up if the name in question is not their own, it’s easy to ignore that instruction and learn about another person’s debt (information that should be private, according to the FDCPA).
• Facebook messages: Some debt collectors have reportedly contacted debtors and their friends and families over social networking sites, which is not explicitly prohibited by the FDCPA (because Facebook wasn’t around when it was made law), but which many insiders argue should be considered “embarrassing media.”
• Text messages and cell phone calls: Other debt collectors are apparently using cell phone contact to reach debtors, a method that has raised the question of usage fees. Regulators are asking whether there should be restrictions on contact that debtors must pay for by the unit.

Proposed Regulations in Some States

As of now, a few states have begun to take action to regulate the new media debt collectors have been using. The Attorney General of New Mexico has reportedly announced that debt collectors must disclose to debtors the expiration dates for debts (that is, when collectors are legally prohibited from attempting to collect them).

In Massachusetts, Attorney General Martha Coakley has released a statement introducing proposed changes to that state’s debt collection rules, which would include:

• Extension of collection rules to apply to new media, including online, text and recorded messages;
• Amendment of the definition of a “household” to take into account use of cell phones and email addresses;
• Extension of rules for primary debt collectors to apply to so-called passive debt collectors (who often buy expired debts cheaply and aggressively attempt to collect on them); and
• Requirement for debt collectors to make a good faith attempt to determine whether a debt is too old to be legally collected.

Even if you don’t live in New Mexico or Massachusetts, you could see changes to debt collection laws and practices where you live in the near future. And, if you suspect that a debt collector has broken existing rules in attempting to contact you, don’t hesitate to contact a lawyer to learn more about your rights.

But that was then. Now, because so many people have bad credit because of foreclosures, late payments, and bankruptcies, it's hard to say what decisions the credit issuers will be making in the next several years. Will they be more forgiving because of the need to pull in people who might not have qualified a few years ago, or will they get tighter and not give credit at all until more time has elapsed after the bankruptcy? Only Fair Isaac (FICO) knows for sure, sort of.

For sure, if you want to reestablish credit, the old ways are probably still the best ways. Get a major credit card, periodically make purchases, scrupulously make your payments on time, get a second card, same thing, work to build your credit line, never max-out your cards, and so on. There are a number of other tips on the Fair Isaac website at http://www.myfico.com that will help you lift your credit score to the maximum extent possible. The more you follow that advice, the better off you'll be. You can get Nolo's Credit Repair, by Robin Leonard and Margaret Reiter (Nolo) for even more on this subject. Or check out the free articles and FAQs in Nolo's Credit Repair for Bad Credit area of its website.

But should you even try to get your credit back? I often tell people I'm counseling that working to get your credit back is like an alcoholic learning how to drink better. Credit is simply the opportunity to go into debt, and once in debt it's really hard to get out. When you've received your bankruptcy discharge you will usually be completely solvent (except perhaps for debts like student loans and recent income taxes). Why spend energy for the privilege of going back into debt? There are lots of reasons why people feel it's a rational thing to do, but all you're really doing is preparing to live beyond your means.

Sure it's nice to have credit for an emergency, but people would be much better off reigning in their spending and saving as much and as fast as possible, and using their savings if necessary for an emergency. You may not feel like you're addicted to credit or spending (same thing), but chances are you are and are just in denial. Now I would never say this to your face because you would just deny it and be angry at me. Well, maybe you're still angry at me but at least I don't have to see it. Please accept the fact that my intentions are good -- to keep you solvent and out of debt.