Debt problems are affecting more and more people these days. When there is a downturn in the economy, a lot of people are impacted, losing jobs and finding it much harder each day to get all their bills paid on time, if at all. Not being able to pay your bills is a major cause of stress and grief in people’s lives. In fact, financial problems are one of the biggest stressors people will experience in their lifetime.

An Altered Lifestyle

Experiencing debt problems can lead to a huge lifestyle change, either by desire or by force. Some people become cognizant of their money problems and cut back on their spending, while others live in denial or are simply never aware, not knowing how to keep a budget or stick to it. There are people who are on the verge of bankruptcy who are shocked when the collection agencies begin calling their homes.

Once you are on collectors’ lists, life becomes increasingly stressful, as you find yourself hounded day in and day out by creditors’ agents, looking to collect money from you. You begin to avoid answering the phone and checking the post, as you only see bills and notices of what you owe. It becomes harder and harder to sleep as you worry about what’s going to happen. Garnishments, lawsuits, more stress…

Finding a Solution

You need not despair. There is a way out of what appears to be a bleak situation. Helping you get out of debt is the specialty of debt counselling services. These professionals are trained to work with you and your creditors to find an agreeable way out of this mess. Counsellors can negotiate with those you owe to obtain reduced payments that you can afford without launching you further into potential bankruptcy filing. They are experts at tackling financial problems and helping people to get back on track with their money.

When you call a debt counselling service, they will treat you with respect. They are sympathetic and professional and will listen to your situation and devise a plan to let you overcome all the obstacles in your way to achieving financial solvency. One of the best parts of their service is they can often get he calls and letters to stop so you can go back to living a life without stress, fear or constant worry. With help, you can get out from under the cloud your debt problems are causing you and get on with your life.

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For Americans who carry a balance, which is about 40 percent of people who use a credit card, some of the protections will be welcome news.

The bill does away with a prevalent credit card practice called the Universal Default Clause. This practice allowed credit card companies to increase interest rates to consumers based on credit report activity on other debt held by the consumer. When this part of the law goes into effect, August 2010, your credit card issuer will be able to raise your interest rate only if the account in question is past due by 60 days or more.

Once you get the account back on track and make six timely payments, your interest rate must go back to the lower normal rate for your account. There are some nuances, including rules about promotional rates and new debt, so do read all updates and inserts sent to you by your credit card company.

Other features of the new legislation include a requirement of advance notice of rate increases of 45 days compared to the current notice timeline of only 15 days. Over limit fees will be restricted to only once per billing cycle and only if the cardholder chooses to allow the creditor to approve an over-the-limit transaction.

An egregious previous practice of some credit card companies was a sub-prime credit card with a small credit limit of $300 to $500 that had a short window for payment with high late and over-the-limit fees. Consumers with these types of credit lines often quickly found themselves past due and over the limit,

which basically caused them to use up the card limit with numerous late fees. When the new law goes into effect, late and over-the-limit fees can never exceed 25 percent of the initial credit limit.

Another feature of the new law will restrict credit card approval rates to people 18- to 21-years-old. In the past, this age group has been solicited with small credit card limits and high interest rates. For some young people who are just getting a foothold in the financial decision-making world, the predatory tactics of these cards caused great heartache and difficulty. Now people in this age group will need to prove adequate stable income to support credit card debt repayment or have a co-signer.

Interest billing on credit balances soon will be restricted to only the interest accrued on balances from the current month, and all payments must pay the highest interest rate balances first if there are several different rate structures (special offer rates) on the same account. Gift cards will not expire for five years, and inactivity fees won’t occur until the card has not been used for 12 months.

Consumers will get more time to pay with a required 21-day window from the statement date until the payment is due.

There also are some valid concerns that credit card users who do indeed pay off their balances each month will see some of their credit card benefits decrease. This unintended consequence will be watched closely as the new law takes effect. It will be interesting to see how the credit card industry restructures its pricing structure and if there will be a backlash from consumers who do not carry a balance from month to month.

It is hoped that the industry finds a fair way to reasonably charge for its services so that consumer personal responsibility is rewarded for all credit card users.

Finally, if you are concerned about paying off credit card debt and feel that you never make progress on reducing the amount you owe, the nonprofit Consumer Credit Counseling Service of Northern Colorado offers a debt management program to give structured repayment options so that credit card balances can be paid off over time.

After a recent “Call to Action” by the National Foundation for Credit Counseling to the credit card industry, 10 of the largest national credit grantors have agreed to further lower interest rates to allow consumers a better opportunity to create a plan to pay off all unsecured debt and avoid bankruptcy.

Sara Allen Gilbert is executive director of the local Consumer Credit Counseling Service, 1247 Riverside Ave., Fort Collins. Call her at 229-0695.

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Small-business owners can choose from two basic types of financing — debt and equity. This article looks at the advantages and disadvantages of each type and how they may be used for different purposes.

Business owners who seek financing face a fundamental choice: Should they borrow funds or take in new investment capital? Since debt and equity are accounted for differently, each has a different impact on earnings, cash flow, and taxes. Each also has a different effect on leverage, dilution, and a host of other metrics by which businesses are measured. The planned use of funds will also affect the choice of financing, with one option more appropriate for certain uses than the other.

2. Debt

Debt can be a loan, line of credit, bond, or even an IOU — any promise to repay borrowed amounts over a certain time with a specified interest rate and other terms. Debt is accounted for as a liability of the company, and interest payments are deductible business expenses. In the event of bankruptcy or insolvency, debt holders take priority over equity holders.

For a small business, debt financing has both advantages and disadvantages. On the plus side, debt can be relatively simple to secure through a bank or other financial institution and is available with a broad range of terms, allowing you to customize the debt to meet your specific needs. Whether you are seeking a three-month bridge loan or a long-term commitment, you can usually find an institution that’s willing to work with you. And since most debt entails regularly scheduled payments of interest and often principal as well, debt is easy to plan around. Perhaps most important, debt, unlike equity, will not dilute your ownership interest in your company.

On the minus side, however, financing with debt can be more expensive, and you will have to meet scheduled interest and principal payments regardless of your cash flow. Although loan terms can be negotiated to build in flexibility, ultimately the money must be paid back.

Debt is most often used to fund a specific project or initiative that has an identifiable implementation time frame. It’s also used as a cash flow backup in the form of a revolving line of credit. To attract lenders, you will need to have a good personal and business credit history, sufficient cash flow to repay the loan, and/or sufficient collateral to offer as a second source of loan repayment. In smaller businesses, personal guarantees are likely to be required on most debt instruments. You should also not be carrying significant debt already.