A life without debt is a very ideal life. This is why many people work hard to settle the debts they accumulated over time, but imagine your surprise and frustration when one of your debt obligations, which you thought was already cleared and done long ago, rises again to pester you.
Here are three of the most common zombie debts that you have to look out for and their possible solutions.
1. Joint credit obligations and divorce. While divorce ideally shifts monthly credit obligations from the ex-spouses, court orders do not really release either from their underlying credit obligations. The only one who can clear this is the creditor. Once an ex-spouse fails to pay a joint credit, creditors can sue both parties for a loan default. If an ex-spouse default a payment, go to court and try to enforce the decree of divorce. It also helps to monitor monthly payments for joint credit obligations and see your credit report occasionally. Creditors seldom releases anybody from this kind of credit obligation, thus be vigilant.
2. Loan Guaranty. Banks and lenders usually require an individual to guarantee a loan. A guarantor cannot solely revoke his or her guaranty. Providing a written revocation of guaranty has very little effect and will only agitate the creditor. Only when the subject loan is paid or, once both parties resolve a loan agreement to mutually rescind the guaranty in writing will it expire. As guarantor, you have to ensure that your guaranty is has specific reference to the date and amount of loan made. This is to avoid confusion once the loan is paid off and the guarantee is extinguished. Zombie debts arise from loan guaranties when lenders attach old extinguished guarantees to outstanding unrelated credit obligations.
3. Bankruptcy repayments. When a debtor files for bankruptcy with a wage earner plan, he or she is required to pay back creditors according to legal formula and court order. Monthly payments and mortgages can be reduced and unsecured debt balances can be lowered up to 10% of the existing balances. However, if a debtor defaults payment according to the court ordered payment plan, the bankruptcy maybe dismissed and all former balances on obligations will be brought back as if nothing happened. A debtor will start paying from the beginning. To avoid zombie debts arising from bankruptcy, be sure that your proposed payment is affordable and be sure to monitor payment history with the court regularly.
Keeping record of your monthly payments will help you work your way against zombie debts and retired credit obligation that rises as unpaid obligations. Keep track of important dates and amounts, releases and discharges and securing financial and legal documents is vital in your legal and financial planning.
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