Writing Off Bad Debt

Willie Armit asked:


 

This article should give debtors a chance to look at their fianancial position and help put their debt in order.

If you’re in debt, it’s time to face up to it. Denial is the worst thing you can do. You need to open your mail, contact your creditors, reduce your outgoings and start balancing the books.

 

Debtors struggle to pay back almost all the monies they owe on credit cards. Debt collectors might get involved in recovering part of the debt, people get worried about court action.

Opening another bank account can ensure you have enough money to live off, but you might still struggle to pay back the money you owe.

It is important that you start by looking at your debt situation as a whole.

There is no point making arrangements to pay one of your creditors without dealing with all the other debts you have too.

You could start by working out a personal budget.

You should list your monthly income from all sources and the ordinary essential monthly outgoings you need to pay to keep the roof over your head.

The budget list might include mortgage or rent, fuel, council tax, water, telephone, TV licence, insurance, housekeeping, clothes, travel and son on.

Do not include the payments you are supposed to make on any unsecured credit such as personal loans, overdrafts and credit cards at this stage.

The aim of the personal budget is to see what you have left over after all your essential outgoings have been met.

This figure represents the available income that you can realistically afford to use to pay your unsecured creditors.

MAKING AN OFFER

You can then work out how much to offer to pay each of your creditors on a monthly basis so they each get a share of your available income. The fairest way of doing this is to make offers on a pro rata basis.

 FREE DEBT ADVISE

 

National Debtline: Free confidential helpline to those in debt

Consumer Credit Counselling Service: The service offers free advice and information to those affected by debt.

Citizens Advice: You can find out details of your local CAB by using the website’s online directory or by looking up its local offices in your telephone directory.

MAKE A LIST OF DEBT CONTACTS

You can either make offers to your creditors yourself by writing to them with a copy of your personal budget.

Alternatively you may be able to get a free debt management plan which enables you to make one payment a month which is divided up amongst your creditors for you.

Make sure you pay all your essential outgoings first, and avoid any debt management company that charges you fees to set up a debt management plan.

You cannot force a creditor to accept an offer of payment. But if they can see that you have worked out a reasonable budget plan, and each creditor is getting a fair share of the money available, they are likely to accept.

Ask them to freeze any interest to stop the debt growing even bigger.

COURT ACTION

If the creditor takes you to county court, you can offer to pay the debt off - in instalments you can afford - by filling in the forms the court will send you.

All creditors and debt collection agencies have to follow the Office of Fair Trading (OFT) debt collection guidance.

This includes “putting pressure on debtors or third parties is considered to be oppressive.”

You can complain to the debt collection agency and your local trading standards department and to the OFT. The guidance is on the OFT’s website.

ACTION

Move your wages into a new bank account.

This means you have control over your finances.

It is a good idea to choose an “instant access” type account with no overdraft or cheque facility. A list of these can be found on the Financial Services Authority website. The overdraft can be included with your other credit debts when offers of payment are made.

It is very important that you start by looking at your debt situation as a whole.

There is no point making arrangements to pay one of your creditors without dealing with all the other debts you have too.

Above all Never Panic. There’s a debt repayment option that will work for you, but be sure to get expert advice that will be impartial and enable you to take control. Ideally use credit sparingly and don’t let it get a habit. If it does, get advice and help, fast.

I hope this brief introduction into personal debt has helped you and you can start taking control of your financies.

“Thank you” for taking part in this debt article. Please make sure you check out and take action on your debt circumstances.

Thank you for reading and I hope you have found this article interesting & decide to get moving and get out of debt sooner rather than later. It’s hard but rewarding and will save you a lot of money.

I look forward to receiving all the interesting comments you send, I shall endeavor to reply to them all.

For further information on getting out of debt please go to 1 of the links below:

Thanks again for taking the time to look over this Debt report.



writing off bad debt

Martin Lukac asked:


There is hardly an adult in the United States that doesn’t have any debt. The amount of personal debt is increasing. It may be because credit has become so easy to obtain. Everywhere you go, you are offered a credit card and a 10% discount. It can be so tempting.

Credit card issuers used to look for good, solid customers who could repay their debts. Today, however, many card issuers are looking for those who will be slow in repayment and charge a large amount. That way, the issuer makes 18-30% interest a year on the account.

Debt can’t be just lumped into a category as bad. Not all is good, but not all is bad. When used correctly, debt can be beneficial in building wealth and security. CEO David Bach of Finish Rich, Inc. says that it’s what you buy that makes the difference. “When you buy something that goes down in value immediately, that’s bad debt,” he explains.

The difference is that good debt produces money, while bad debt just costs money. If you go into debt buying a home that will gain equity and increase in value, that’s good debt. A mortgage provides you with tax advantages and interest write offs. And you have a place to live while your money is working for you.

Home values over the last thirty years have increased an average of 6.5% a year. When you buy a home, the chances of it appreciating are good. Many advisors highly suggest home ownership as the only way to go.

“The fastest way to wealth in America is buying where you live,” says Bach. “The average renter has a median worth of $4,000, and the average homeowner has a median net worth over $150,000.”

Many advisors say that debts that are tax-deductible and debts that increase wealth are good debts. Buying a home or refinancing to get rid of excessive debts is a good use of your credit. So is generating debt to buy high-return stocks, bonds and other investments.

Bad debt is when you use credit to purchase disposable items or durable goods using high interest credit cards. If you don’t pay the balance in full each month, the debt may become overwhelming.

By using your card instead of cash, you can really lose track of how much you are spending. When the bill comes, you may be surprised. If you don’t pay the total balance, the additional interest charges make the item cost more. If you charge something that is on sale and then aren’t able to pay the balance off, you didn’t get such a great deal. You may pay for the item several times over.

Every month that you only make a partial payment on your credit card results in interest charges. The item you purchased continues to lose value, while the amount you pay continues to increase.

For example, when you purchase clothes, the moment you walk out the door they depreciate by at least 50%. But if you borrowed to pay for them, you will not only pay their original value, but also the added interest rate.

Unsecured debt, such as credit cards, can affect your credit rating. You shouldn’t have more than 20% of your annual income going towards your unsecured debt. It will look bad on your credit report, regardless of you payment history.

According to Michael Hirsch of LowerMyBills your unsecured debt could result in higher interest rates all around. “The recommended debt-to-income ratio is under 15 % to help you qualify for the lowest interest rates possible when extending your credit to buy a home or car,” he says.

If something doesn’t go up in value, and you don’t have the cash to pay for it - then you just can’t afford it.

Many people will open store credit cards just to get the 10-20% discount off of the first purchase. That savings is actually not what it seems. The high interest rate can eat up the entire savings, plus more even.

While most of us have to have automobiles, many people buy more car than they can afford. It is easy to shop for the payment you can afford instead of the overall amount. Many people can afford to buy a car, but not the car that they aspire to. The financing on a car is often quite high considering it begins to lose value the minute it leaves the lot.

For many people, a car loan is the first loan taken out. While it used to make sense to borrow for a car with a 6% and invest your cash in an account that yields 10%, the market has changed over the years.

Most people have an approximately $8,400 in credit card debt. This is accredited to the lack of financial education available. Most people don’t realize how credit cards are affecting the way that they live. Paying more for less doesn’t make financial sense.



Writing Off Bad Debt