Planning of Financial Future is Crucial to Post-Holiday Financial Health

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Planning your financial future is crucial to post-holiday financial health.

If you are like many consumers this holiday season, you will fork out too much money on gifts for friends and family, end up charging most of it to your credit cards, and then spend the rest of the year paying off your credit cards while chastising yourself for buying more than you could afford. Budgeting is the best way to avoid the headache of holiday debt and creating a sound budget should always be an important part of your holiday planning. In addition, due to some recent legislation as well as an uncertain economy, financial experts stress that creating a financial plan for the future, including budgeting your holiday spending, is more important than ever in maintaining optimal financial health.

In 2006, two important developments -- increased credit card minimums and bankruptcy reform -- will negatively affect consumers’ abilities to payoff debt. Increased credit card minimums are the result of a recently released directive from federal banking regulators. The directive pressures credit card companies to increase the minimum monthly payback rate to a level that will enable consumers to pay the full balance in a reasonable amount of time. Currently, credit card minimums are set so low that it would take a consumer nearly forty years to pay off a $10,000 debt, if only minimum payments are made. Most consumers will see their minimum credit card payment double by the end of the year. While financial experts agree this is a sensible long-term policy, the payback hike could easily mean an extra $300 per month in credit card bills for consumers who spread debt out over several credit cards. This may become an enormous burden to many already overextended consumers.

The other noteworthy change is the bankruptcy reform laws. Effective October 17, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 makes it much more difficult for heavily indebted consumers who are unable to meet their monthly financial obligations to file Chapter 7 bankruptcy. Under the new bankruptcy bill, consumers must file additional paperwork, present a certificate of completion from an accredited credit counseling program 180 days before filing, and complete a “Means-Test” which compares the debtor’s income to their home state’s median income. Under the new law, consumers with even the slightest ability to repay a percentage of their debt will no longer qualify for Chapter 7 bankruptcy.

Debt Reduction for Heavily Indebted Consumers

As a result of these recent changes, a record number of consumers may find themselves in severe financial duress as the holiday bills begin to arrive. If you are one of the many consumers unable to pay your monthly expenses and you are now ineligible for liquidation of debt through Chapter 7 bankruptcy, you still have options. With debt arbitration, you can reduce the overall amount you owe while avoiding bankruptcy altogether. At Knockout Debt, our debt arbitration experts will negotiate a settlement with your creditors to cut the total principle balance by as much as 60 percent. Debt arbitration also enables you to condense all payments into one manageable monthly payment that you control. Typically consumers can find themselves free of debt in only 12-36 months.

About Knockout Debt

Knockout Debt is a professional debt arbitration company that specializes in helping heavily indebted consumers regain financial stability by negotiating a significant reduction of the consumer’s total principle debt. By utilizing experienced negotiators, long-standing relationships with creditors, and financial acumen, Knockout Debt designs customized debt reduction solutions that enable clients to lower their debt to income ratio without filing bankruptcy.

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Meera Gupta

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