3 Debts to Look out For: Zombie Debts that Never Die

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.

zombie debts

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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num_skyman – FreeDigitalPhotos.Net

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Strategies to Manage Personal Debts Effectively

According to the latest statistics, an average American household has a debt of about $18,000, meaning almost everybody is in deep debt. It is therefore prudent to learn how to manage your personal debts on your own. Though you can find debt managers that you can consult with, they can sometimes get you deeper in this hole that actually relieve you off your debt.

personal debts

You can effectively manage your personal debts by splitting your expenses into two major parts – fixed costs and variable costs. Fixed costs are those that you pay the same way every month such as rents, insurance premiums, fees and others. Variable costs are expenses which you can control and even cut off. They can include $5 magazine that you buy everyday on your way to work. You don’t really need to spend $100 on magazines everyday for materials that you can watch on T.V and on the internet. Once you’ve reviewed your expenses, you can prioritize what you really need to spend on. You have to realize that debt repayment can become a painful process especially if you need to cut down on some luxuries such as regular pricey coffee from Starbucks or spa and massage treatments.

You should also combine all your personal debts and ask for a revised interest rate from your creditor. This is doable for many credit cards, you can request for a balance transfer and you get a lower interest rate on your new creditor. For personal loans on different category but coming from the same creditor, they can be combined and given an interest rate that is easier on your pocket. In paying off your debts, .5% to 1% savings is all worthwhile.

If you can, avoid taking services from personal debt managers. They ask for upfront fees which only increase the costs you are working to tone down. Have more discipline in using your credit cards and if you can, try pay your purchases in cash. Shift to some credit card with a lower interest rate or refinance your mortgage with another that has a lower interest rate. You can pay off your personal debts effectively if you can work your way around it. So start listing them down and start paying off the one with the highest rate. Getting rid of a loan worth $200,000 with 8.5 % interest means savings of around $16,000 each year! Plan, list, cut down unnecessary expense, reconstruct your loans, move with creditors offering lower interest rates and prioritize payback!

Image Credit:
Stuart Miles – FreeDigitalPhotos.Net

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