Creditor and Debtor
A creditor is a person or company that provides and grants credit facilities to debtors with an agreement of repayment of the loan after an agreed time. Examples of this are credit card companies and banks.
Credit Reports
These are reports that are used to calculate your credit-worthiness. Lenders such as banks, credit card companies and other financial institutions use credit worthiness to calculate the level of risk of extending credit to any individual and this can at times affect the interest rate of the loans if they are to be approved. The three main companies that provide these reports are TransUnion, Equifax and Experian.
Debt Consolidation
Debt consolidation entails the rolling up of all loans a debtor might have into a single loan that is paid off at an agreed duration. The benefits of debt consolidation range from increased weekly to monthly cash-flow as well as a lower interest on the loan.
Wage garnishment
This is a debt management system that allows a debtor to deduct a specific amount from an employee’s paycheck for the purposes of servicing the latter’s loan. Wage garnishment can only be authorized through the directive of a court and it varies from state to state.
CCCS
The Consumer Credit Counseling Services provides debtors with guidance on how to attain their dreams of being debt-free while also increasing their savings. The service advises debtors on workable solutions such as negotiation of payment plans between debtors and creditors where the payments as well as the interest rates on the loans could be reduced.
The CCCS receives a monthly lump-sum from the debtor, which they in turn divide into payments equally among the creditors. At the same time, the CCCS also offers budgeting advice to each individual.
Foreclosure
Homeowners are dutifully required to make regular payments when they have a mortgage and when they fail to do so the lender or property owner can be granted his legal right to foreclose or seize the property. In such circumstances, the homeowner can get evicted and the foreclosed property sold, normally at a lower interest rate and below its market value.
Bankruptcy
This is a legal provision where a lender may seek the court’s intervention for control over their debts and it normally arises when an individual has fallen far too behind on their scheduled payments and ends up with a realization that they may not be able to catch up.
The law provides for two types of bankruptcy. The first is Chapter 7 bankruptcy. This provides that all or a majority of a debtor’s loans may be cleared or totally erased from the records. The second is Chapter 13 bankruptcy that allows for the provision of creating a payment plan with specific instructions on duration of the repayment and amount to be paid, which is calculated depending on the debtor’s income. The oversight of this type of bankruptcy resides with the court.
Advice on finance management can be provided by debt management companies who can offer guidance on how to offset the loans you owe to your creditors. Agreeing with the creditors on a sufficient debt consolidation plan for repaying the remainder of the debts could thus play a large role in helping you attain financial freedom.
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