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Debunking bankruptcy myths: But won’t bankruptcy ruin my credit for seven years? | On Your Debt

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This question, or some form of it, is asked by virtually every person that comes to see us to discuss their financial problems. The answer is usually simple. By the time they have come in to see us, their credit is already in bad shape! This does not necessarily mean that they have a bad credit score. Some folks manage to keep making minimum payments each month. Unfortunately, this is often done by taking cash advances against another card and or borrowing money from a payday loan store. But even in these cases, the poor individual is hopelessly over extended and living with a great deal of stress.

The old myth about bankruptcy ruining a person’s credit for seven years seems to come from a belief that a bankruptcy filing can be listed on a person’s credit report for seven years. This belief is incorrect. A Chapter 7 bankruptcy filing can, in fact, be listed on a filer’s credit report for ten years from the date of filing. This does not mean, however, that a person has bad credit for ten years. In fact, a bankruptcy discharge can often make it EASIER to obtain credit.

Does not make sense? Well, think about it from a practical perspective. Say you go to a banker to borrow money today. You have NEVER filed bankruptcy. You have, however, been a week or two late on your mortgage or car payment a couple of times. You have about $25,000 in credit card debt and have only been making minimum payments for a while now. You may even have a payday loan or two. In other words, you are barely getting by. If the banker lends you money today, he will be competing with all your other creditors to be paid on his loan. You barely have enough money to pay them. How are you going to pay this new debt? In addition to this, the banker will have to consider the fact that you could file bankruptcy on the other creditors and him after he lends you the money. The likelihood of receiving your loan is next to none.

Now fast forward a few months. You filed a Chapter 7 bankruptcy and received Discharge of all your unsecured debt and now only have your car and house payments. Since that time, you have made your house and car payments on time every month. You have no other creditors. If the banker lends you money now, he will not be competing with other creditors. Furthermore, he will not need to worry about you filing another chapter 7 bankruptcy. You cannot file again for eight years after the first bankruptcy was filed. From this perspective, you are less of a risk now than you were before filing your bankruptcy and now your likelihood of receiving the loan is looking pretty good!

If you question this logic, call the finance manager at your local car dealership. You will likely learn that you can qualify for an automobile loan the day after you receive your bankruptcy discharge. Call a real estate agent. You will also learn that many people qualify for a mortgage within a few short years after a bankruptcy discharge.

Now this does not mean that bankruptcy is the best option for you. Bankruptcy should never be your first choice. If, however, you are struggling with debt, you should sit down with an experienced consumer bankruptcy attorney and fully explore how a bankruptcy will affect your credit.

Bond & Botes Helps People Struggling with Debt

At Bond & Botes, collectively our offices throughout Alabama and Mississippi have helped over 100,000 individuals and married couples recover from debt over our 30 years of doing business.

We are local and offer a free confidential face to face consultation. We also offer free consultations from the comfort and safety of your own home or office by phone and/or video with an experienced attorney. Let us solve your financial problems. There is no obligation, and that means no downside to gathering the information you need to make good decisions about how to break the cycle of debt stress and move forward. We can answer all your questions regarding Chapter 7 Bankruptcy, Chapter 13 Bankruptcy, stopping a foreclosure or wage garnishment, avoiding liens, stopping lawsuits, discharging medical debt, personal loans, payday loans, credit card debt, etc. We can alleviate your stress! We want to help and we can help you!


Bond, Botes, Sykstus, Tanner & McNutt, P.C.

Web: www.bondnbotes.com

Facebook: facebook.com/Bond-Botes-Sykstus-Tanner-McNutt-PC-203986783117475/

102 South Court St, Suite 314, Florence, AL 35630

Phone: 256-760-1010 • Fax: 256-760-1023

Office Hours: Monday – Friday • 8am to 5pm

No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers.

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Are Sallie Mae Student Loans Federal or Private?

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When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

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Tips to do some fall cleaning on your finances

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Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

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How to Get a Loan Even with Bad Credit

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Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

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