Credit Basics
A New Debt Squeeze
In a version already passed by the House, filers who could repay at least $4,000
within five years, and who could live on a strict allowance established by the Internal
Revenue Service for taxpayers in arrears, would be required to reorganize their
debt under the less forgiving provisions of Chapter 13. A somewhat more lenient
Senate bill is under consideration. Both bills however, protect more-affluent debtors
whose hefty mortgage and car payments would not be subject to the IRS limits. The
bills may also exempt up to $10,000 in private-school expenses.
Most credit-card issuers, who previously paid debt counselors 15 percent of the
money they recovered, have cut those contributions to 10 percent and, in some cases,
as little as 6 percent. The banks have also curtailed the favorable interest rates
they granted strapped consumers, making repayment more difficult. "It's a terrible
situation,"
says Howard Dvorkin, President of Consolidated Credit Counseling Services
in Fort Lauderdale, Fla. "The credit-card issuers want us to educate the public,
but they don't want to pay."
Dvorkin tells me to get a copy of my report to make sure that all five credit cards
I received reflect "cancellation by consumer." If the report mistakenly says a credit
card company nixed its card, that could make it hard for me to get credit if I really
need it.
I came away from the experience astonished for two reasons. First, I didn't realize just how easily a consumer can get overextended. And second, I didn't know that
lenders sometimes make it extremely hard for you to cancel their cards if you're
just trying to keep yourself out of debt.
My advice: Don't be too quick to accept those enticing offers in the mail. You just
might be approved
OUT FROM UNDER
Help with your debts these days is no
further than a mouse click or a flick through the yellow pages, but choose carefully.
A reputable debt counselor will help design a budget, negotiate with creditors for
easier payment terms, and teach you to live within your means. Most will ask for
a donation when you can make one or impose modest monthly charges of $2 to $3 per
creditor. There are no shortcuts for getting out of debt. The process may take three
to five years, so avoid for-profit companies offering overnight credit repair, a
switch to another credit identify, or other quick fixes. These are some of the better-know
services:
Consolidated Credit Counseling Services, 800-SAVE-ME-2
(1-800-320-9929), www.consolidatedcredit.org.
