Debt Settlement: The process of Debt Settlement or Debt Negotiation is simply the process of eliminating unsecured debt for less than what is originally owed. It is a process of working with an individuals creditors and arranging an agreed amount to be paid back in one lump some. This process usually saves an individual a tremendous amount of money and eliminates their debt in a shorter period of time with making small monthly payments. The one important aspect of Debt Settlement is that the payback is considerably less and the time frame for that payback is extremely shorter.

Debt Consolidation: The process of Debt Consolidation is sometime looked upon as a reorganization of ones debt. This process involves the payback of the entire debt within an extended period of time with minimum payment. There are downsides of this process involving the length of time may be greater, reported to credit bureau identical to filing Chapter 13 Bankruptcy. (See Chapter 13 Bankruptcy), and finally if dropped by a Consolidation program there is no option to reenter with most creditors.

Debt: Merriam-Websters dictionary simply defines debt as Something Owed A State of Owing. American Liberty Financial also adds under program specifics that it is anything owed to another individual under contractual specifics.

Unsecured Debt: This is a form of personal debt that is not attached to any type of collateral. What this means to an individual is that monies were borrowed on a good faith basis and agreed upon a monthly timely payback. Defaulting on this type of debt may result in poor credit worthiness, court ordered ruling for payback, and may ultimately lead to garnishment of wages.

Secured Debt: This form of debt usually has some from of a tangible item attached as collateral as a promise to repay. Examples of this form of debt include: Car loans, Home loans, jewelry, furniture, and current utility accounts. Defaulting in this form of debt can result in poor credit worthiness, court ordered ruling for payback, garnishment, loss of home, car or other collateral goods specifically attached to the monies owed. In some cases even if repossession occurs money may still be owed to creditor. At this time the debt becomes Unsecured Debt.

Credit: Credit is basically an extension of a persons worthiness to pay back a debt a trust or promise to buy now and pay later under designated terms for goods or services. It can be documented or verbal recording of past incidences where a person had an opportunity to pay something back in what is called a persons Credit History. Though some people feel that credit is not important it needs to be understood that credit indeed is a very important part of a persons life. Credit may be used in making decisions that can affect a persons life from deciding if a person is right for a job, can buy a house or car, down to simply getting a credit card. American Liberty Financial understands how important credit is to its clients and we also understand that people make mistakes in life that is why we offer a complete Debt Settlement and Credit Restorations to handle lifes little ups and downs.

Chapter 7 Bankruptcy: Chapter 7 is designed as an organized, court-supervised process by which a trustee collects the assets of the debtors estate, converts them to cash, and makes distributions to creditors, subject to the debtors right to retain certain exempt property and the rights of secured creditors. Each State may have individual exemption laws and can be looked at individually. Because there is usually little or no nonexempt property in most Chapter 7 Bankruptcy cases, there may not be an actual liquidation of the debtors assets. These cases are called no-asset cases. In most cases a debtor with assets that they wish to keep and that are not covered by exemptions file Chapter 13 Bankruptcy.

A creditor holding an unsecured claim will get a distribution from the bankruptcy estate only if the case is an asset case and the creditor files a proof of claim with the bankruptcy court. In most chapter 7 cases, the debtor receives a discharge that releases the debtor from personal liability for certain dischargeable debts. The debtor normally receives a discharge three to four months after the petition is filed. American Liberty Financial would like to express that though Chapter 7 Bankruptcy may be an option for some this process should only be exercised when all other options and efforts have been exhausted. We would also like each individual considering this option to understand the detrimental extent this procedure will cause to the individuals credit worthiness. Most case of Bankruptcy remains within 7-10 years on a credit history.

Chapter 13 Bankruptcy: Generally, chapter 13 is preferred by debtors who have a valuable asset, such as a home, that is not completely covered by exemptions and that they wish to keep. This is possible because under Chapter 13 a debtor proposes a plan to repay creditors over a three to five year period during which the debtor can make up overdue payments on any assets and pay into the plan the equivalent value of any assets not covered by exemptions. Since the debtors plan will require regular monthly or biweekly payments, Chapter 13 is usually only appropriate for an individual debtor who has a regular source of income.

At a confirmation hearing, the court either approves or disapproves the plan, depending on whether the plan meets the Bankruptcy Codes requirements for confirmation. Chapter 13 is very different from Chapter 7 Bankruptcy, since the chapter 13 debtor usually remains in possession of the property of the estate and makes payments to creditors, through the trustee, based on the debtors anticipated income over the life of the plan. Unlike Chapter 7 Bankruptcy, the debtor does not receive an immediate discharge of debts. The debtor must complete the payments required under the plan before the discharge is received. The debtor is protected from lawsuits, garnishments, and other creditor action while the plan is in effect. The discharge is also considerably broader (i.e., more debts are eliminated) under chapter 13 than the discharge under chapter 7. American Liberty Financial would like to express that though Chapter 13 Bankruptcy may be an option for some this process should only be exercised when all other options and efforts have been exhausted. We would also like each individual considering this option to understand the detrimental extent this will cause to the individuals credit worthiness. Most cases of Bankruptcy remain within 7-10 years on a credit history.

Bankruptcy Checklist PDF File link

FICO Score: Originally formula was developed by the Fair Isaac and Company to determine a persons credit worthiness. The FICO is derived using a combination of situations like payment history, length account is open, and account that is updated within 6 months (see graph below). There are many scoring systems that are involved by the reporting agencies but the FICO is used most often by credit and lending companies. This score also determines a persons debt to income ratio and establishes the ability to pay back a certain debt. The FICO may also be referred to as a Beacon by Equifax, EMPIRICA by TransUnion, and Experian/Fair Isaac Risk Model by Experian.

FICO Ranges: 350 850 Typical low interest banks will look for a score of 640 or higher.

Identity Fraud: Identity theft is when someone obtains a piece of your personal information and uses it without your knowledge to commit fraud or theft. Even a small bit of information can allow a thief to steal your identity, so protect your personal information. Any small piece of information can be enough, an address, a first and last name, a social security number or even your birth date. Identity Fraud is the fastest growing crime in the United States and virtually everyone has potential to become a victim. With the growth of technology the potential risk for an individual grows. In 2003 42% of all complaints received by the FTC related to identity theft. The most common identity theft complaint related to credit card fraud, followed by phone or utility fraud, bank fraud, employment-related fraud, government document or benefit fraud and load fraud. Here is a checklist of common things that people should be aware of and what to do if they feel they have become a victim of Identity Theft. By following these steps is still not a safe proof plan but can assist consumers in protecting themselves against this growing crime.

Credit Reporting Agencies