Planning Your Financial Future is Crucial to Your Post-Holiday Financial Health
If you are like many consumers this holiday season, you will fork out too much
money on gifts for friends and family, end up charging most of it to your
credit cards, and then spend the rest of the year paying off your credit cards
while chastising yourself for buying more than you could afford. Budgeting is
the best way to avoid the headache of holiday debt and creating a sound budget
should always be an important part of your holiday planning. In addition, due
to some recent legislation as well as an uncertain economy, financial experts
stress that creating a financial plan for the future, including budgeting your
holiday spending, is more important than ever in maintaining optimal financial
health.
In 2006, two important developments -- increased credit card minimums and
bankruptcy reform -- will negatively affect consumers’ abilities to payoff
debt. Increased credit card minimums are the result of a recently released
directive from federal banking regulators. The directive pressures credit card
companies to increase the minimum monthly payback rate to a level that will
enable consumers to pay the full balance in a reasonable amount of time.
Currently, credit card minimums are set so low that it would take a consumer
nearly forty years to pay off a $10,000 debt, if only minimum payments are
made. Most consumers will see their minimum credit card payment double by the
end of the year. While financial experts agree this is a sensible long-term
policy, the payback hike could easily mean an extra $300 per month in credit
card bills for consumers who spread debt out over several credit cards. This
may become an enormous burden to many already overextended consumers.
The other noteworthy change is the bankruptcy reform laws. Effective October
17, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes
it much more difficult for heavily indebted consumers who are unable to meet
their monthly financial obligations to file Chapter 7 bankruptcy. Under the new
bankruptcy bill, consumers must file additional paperwork, present a
certificate of completion from an accredited credit counseling program 180 days
before filing, and complete a “Means-Test” which compares the debtor’s income
to their home state’s median income. Under the new law, consumers with even the
slightest ability to repay a percentage of their debt will no longer qualify
for Chapter 7 bankruptcy.
Debt Reduction for Heavily Indebted Consumers
As a result of these recent changes, a record number of consumers may find
themselves in severe financial duress as the holiday bills begin to arrive. If
you are one of the many consumers unable to pay your monthly expenses and you
are now ineligible for liquidation of debt through Chapter 7 bankruptcy, you
still have options. With debt arbitration, you can reduce the overall amount
you owe while avoiding bankruptcy altogether. At Knockout Debt, our debt
arbitration experts will negotiate a settlement with your creditors to cut the
total principle balance by as much as 60 percent. Debt arbitration also enables
you to condense all payments into one manageable monthly payment that you
control. Typically consumers can find themselves free of debt in only 12-36
months.
About Knockout Debt
Knockout Debt is a professional debt arbitration company that specializes in
helping heavily indebted consumers regain financial stability by negotiating a
significant reduction of the consumer’s total principle debt. By utilizing
experienced negotiators, long-standing relationships with creditors, and
financial acumen, Knockout Debt designs customized debt reduction solutions
that enable clients to lower their debt to income ratio without filing
bankruptcy.
