The life settlement industry has given birth to a secondary market for buying and selling of life insurance policies from qualifying life insurance holders, who receive an offer guaranteed to exceed the current cash value of the policy. In 2002, life settlement providers paid about $340 million to buy policies with an aggregate cash value of $94 million.

Life Insurance Policyholders who qualify for life insurance settlements are generally older than sixty five years of age; have deteriorating health, but are not considered terminally ill; and have “ascertainable and limited” life expectancies between two and 15 years. Qualified policies are at least two years old, pay death benefits between $100,000 and $5 million and are issued by an “A” rated insurance company.

A CHANGING INDUSTRY

Relatively new, the life insurance settlement industry evolved from “viatical” settlements, which catered to the specific needs of terminally ill policyholders. Viatical life settlements enable an insured to receive benefits, before death, to pay for the high costs of medical care. Life settlements, also known as senior settlements, do not involve a terminally ill policy holder (less than 24-month life expectancy) but a determinable life expectancy based upon the insured’s age, health and lifestyle.

The life insurance policy’s fair market value is the present value of the death benefit, considering the policy’s duration and carrying costs. Other factors affecting the fair market value include the type of life policy, the policy’s cash value and any loans against the policy.

A life insurance settlement transaction creates a taxable event with two tiers. The first tier is the difference between the cost basis and cash value, most likely taxed as ordinary income. The second tier is the excess of life settlement proceeds over the surrender value.

The IRS has not provided any specific guidance yet, however, whether this money is considered to qualify as a long-term capital gain. The tax treatment of a viatical settlement is markedly different. The Internal Revenue Service considers these tax-exempt accelerated death benefits.

WHEN SHOULD I SELL OR BUY LIFE INSURANCE?

Life settlements are a great option when you can’t afford your premiums. Declines in interest rates on the short end have cut down the cash flow of seniors living on a fixed income. With life insurance settlements, premiums disappear and distressed policy holders receive cash up front.

Potentially the senior citizen has outlived all beneficiaries and the payout of life insurance would create a taxable estate. What if the senior citizen, due to health issues, doesn’t qualify for long-term care insurance. Life Insurance Settlement funds could be used to pay for long term health care.

From a financial perspective, life insurance settlements should be considered when a business is for sale or the owner is retiring. If your client is a non profit, or charity, it may be possible to consider selling donated life policies to realize cash and eliminate future premiums

Why do individuals want to buy life insurance policies? Many life insurance settlement providers are funded by big banks that view life insurance as an asset in a diversified investment portfolio. These financial conglomerates] rely on actuarial and other quantitative data to acquire a favorable life insurance policy that will produce a expected rate of return at maturity. These insurance policies are held in a blind trust that may be used as collateral for a bond offering in a process known as secondary market securitization.

POTENTIAL FIDUCIARY ISSUES

Life insurance products are acquired] for a host of reasons and should be a part of every estate and financial plan. As with any financial vehicle, these policies should be reviewed frequently. Usually they are not.

A good insurance policy at the time of purchase does not mean you have a good policy years later. In today’s low short term interest rate environment, many policies written in an environment when rates were substantially higher might require replacement?

There are significant differences between all of these alternatives to Bankruptcy, but they are not for everyone.  Be Careful and make sure you do your research before you start any Debt Settlement Program.  Often Online Debt Negotiatin is confused with Debt Consolidation or Debt Management.

This video can also be found On Netdebt.com

Debt Settlement Companies continue to be targeted as a problem industry, a scam, or a fraud. They are easy targets in these tumultuous times, and for good reason. Many of these “Debt Settlement Companies” “Sell” Their service without full disclosure about the risks involved and many of them don’t educate their clients about all of their options, including Debt Consolidation, Debt Management, Credit Counseling, and Bankruptcy.

The rise of the Debt Settlement industry is a result of other underlying issues including but not limited to, credit card companies, Lobbyist’s, bad Laws, lack of government regulation, and most importantly our CULTURE.

Clark Howard recently said “…when the bankruptcy laws changed in our nation. At that time, the giant banks that control the credit card portfolios stopped being cooperative with affiliates of the National Foundation for Credit Counseling (NFCC), which helps consumers manage and eliminate their debt. The banks were cynically trying to force people into a position where they had no choice other than to pay up. That environment created an opportunity for the debt-settlement firms to pop up with their false promises that they alone knew how to defeat the banks.”

We live in a capitalist economic system. The rise of Debt Settlement is directly related to the dire need for change in our Culture and specifically changes to the Credit Card Industry. Until Credit Card Companies are brought back into check the need for Consumer Debt Relief companies will always be there.

Debt Settlement

Debt settlement, also known as debt arbitration or debt negotiation, is an approach to debt reduction in which the debtor and creditor agree on a reduced balance that will be regarded as payment in full.

As long as consumers continue to make minimum monthly payments, creditors will not negotiate a reduced balance. However, when payments stop, balances continue to grow because of late fees and ongoing interest.

Consumers can arrange their own settlements by using advice found on web sites, hire a lawyer to act for them, or use debt settlement companies. Some settlement companies may charge a large fee up front; or take a monthly fee from customer bank accounts for their service, possibly reducing the incentive to settle with creditors quickly. One expert advises consumers to look for companies that charge only after a settlement is made, and charge about 20 percent of the amount by which the outstanding balance is reduced.

Debt Consolidation

Debt consolidation entails taking out one loan to pay off many others. This is often done to secure a lower interest rate, secure a fixed interest rate or for the convenience of servicing only one loan.

Debt consolidation can simply be from a number of unsecured loans into another unsecured loan, but more often it involves a secured loan against an asset that serves as collateral, most commonly a house. In this case, a mortgage is secured against the house. The collateralization of the loan allows a lower interest rate than without it, because by collateralizing, the asset owner agrees to allow the forced sale (foreclosure) of the asset to pay back the loan. The risk to the lender is reduced so the interest rate offered is lower.

Credit Counseling

Credit counseling (known in the United Kingdom as debt counseling) is a process offering education to consumers about how to avoid incurring debts that cannot be repaid. This process is actually more debt counseling than a function of credit education.

Credit counseling often involves negotiating with creditors to establish a debt management plan (DMP) for a consumer. A DMP may help the debtor repay his or her debt by working out a repayment plan with the creditor. DMPs, set up by credit counselors, usually offer reduced payments, fees and interest rates to the client. Credit counselors refer to the terms dictated by the creditors to determine payments or interest reductions offered to consumers in a debt management plan.

Source:

http://en.wikipedia.org/wiki/Debt_settlement

http://en.wikipedia.org/wiki/Debt_consolidation

http://en.wikipedia.org/wiki/Debt_counselling

http://edition.cnn.com/2009/LIVING/personal/06/04/clark.howard.debt.settlement/

Debt Management

When your problems go out of hand, always remember that there are still options for you. If money becomes a problem, then you can choose on different types of loans. If you have assets which can serve as collateral, then you can choose to get a secured loan. Secured loans could either be car loans or house loans. The absence of assets does not mean you could not incur loans. There are still unsecured loans which can help you. Unsecured loans can come in the form of credit card debt, shop cards or departmental cards. Once you get a loan, you temporarily find answers to your financial problems. But because the loan is a temporary answer, paying back the loan is another problem that you have to face.

One loan will be easy to pay. But if you have around 3 loans that you have to pay monthly, it will be very stressful and problematic for you. The first problem is the interest rates per loan which will pile up if you fail to pay them religiously. The second problem is paying back the principal amount that you borrowed. You will be facing the dilemma of which loan to pay back first or which rentals you must not pay first just to be able to pay your loans.

If you are now facing a crisis of paying back a number of loans at the same time, then debt management could be a good option for you. Debt management plan encompasses taking note of all your debt, to re-assess your current financial status, and to renegotiate with the lenders the interest rates and the payment schemes of your loans. If you do not know where to find the companies to help you manage your debt, you need not look far. Debt Management companies are now all over the internet. There are companies which offer debt management plans with fee charges or for free.

You need the company to represent you to the creditors. They will be the ones to present your current financial situation, and to present your renegotiate payment scheme as well as the interest rates. The prerogative to approve the debt management proposal or plan lies on your creditor. Most creditors will check your financial status first before they approve or reject anything.

When you talk to the company which will represent you, always bear in mind that the terms which you must present must be attainable. If not, your debt management plan will be pointless.

by visiting cemeteries and placing flags or flowers on the graves of our fallen heroes.

by visiting memorials.

by flying the U.S. Flag at half-staff until noon.

by flying the ‘POW/MIA Flag’ as well (Section 1082 of the 1998 Defense Authorization Act).

by participating in a “National Moment of Remembrance”: at 3 p.m. to pause and think upon the true meaning of the day, and for Taps to be played.

by renewing a pledge to aid the widows, widowers, and orphans of our falled dead, and to aid the disabled veterans.
Also, please consider adding your voice in support of the efforts to restore the traditional day of observance of Memorial Day back to May 30th (instead of “the last Monday in May”). This would help greatly to return the solemn meaning back to the day, and to help return minds and hearts to think upon the ultimate sacrifices made by those in service to our country. Just one day out of the year to honor our loved ones, our ancestors, our friends who died in conflicts and wars — not to honor war, but those that died in those conflicts and wars.
I receive many emails from people expressing their thanks for those who have served and gave the ultimate sacrifice for this country. The following, received in 1999 and used with the author’s permission, sums up all the emails I have received very elegantly, and is true to the original spirit and meaning of Memorial Day.

“This weekend I am going to do something different. I am going to buy some carnations each day and go to one of the nearby cemetaries and walk through the sections for soldiers. When I find a grave that has no flowers, I’ll leave one and say a prayer for the family of that person, who for some reason could not bring their soldier flowers. I will pray for our country and all who serve or have served. For their families, who also serve by losing precious days, weeks and months spent with their loved ones who are off serving, preserving peace and the freedom we have in this country. I’ll pray for the families who paid the ultimate price, who’s loved ones died, or were taken captive and never returned. I’ll pray for anyone who may still be held in captivity and thinks perhaps they are forgotten. I do NOT forget.
I’ll say a prayer for every person on the Internet who takes a moment from their time to come to sites like yours and be reminded of what this holiday really means. And I’ll say a prayer of thanks and ask God’s richest blessings on you.

Thank you again…. and God bless!
Sylvia Mohr”

No, Thank you and God Bless you, Sylvia. May more follow your example.
In fact, wonderful people in other nations sometimes show more of the true spirit and mission of the U.S. Memorial Day than we do here. For example, a 2001 US Memorial Day Guestbook entry from a citizen of the Netherlands states:

“Hi,
In 1999 I laid flowers at the grave of a young U.S. fighter pilot who was KIA in my village in 1945. In the Netherlands I know of schools ‘adopting’ graves of Allied servicemen, keeping those graves in excellent condition ! Does anybody know of adopting graves in the U.S. by schools ?

Sincerely,
Paul Patist <patist@wanadoo.nl>
Castricum, The Netherlands – Tue May 15 04:50:29 2001″

More schools in the U.S. could follow the lead of the Netherland schools. Let us take a few moments this Memorial Day to reflect on the meaning of the day, to observe the day and be mindful of the sacrifices of others before we go and enjoy the freedoms they bought for us.

Debt settlement is nothing new. It’s simply an agreement between two parties to settle a debt for less than the outstanding balance. Lenders have been doing this for hundreds of years, but the modern American banking industry started formalizing the practice after many of their customers starting falling behind in the late 1980s and early 1990s. These banks setup separate departments with specially-trained negotiators who contacted delinquent customers and offered them a lower pay-off amount to fully settle an overdue account.

Shortly afterward, entrepreneurs set up companies to help debt negotiate the best possible terms for financially distressed consumers trying to settle their debts. This marked the birth of the modern debt settlement company . Thousands upon thousands of consumers flocked to debt settlement websites seeking more information and enrollment into a debt settlement program and debt settlement’s popularity as a bankruptcy alternative continues to grow.

There’s good reason for debt settlement’s popularity. For some, it can be the fastest and least expensive form of debt relief besides bankruptcy. According to most debt settlement company and information websites, a consumer may be able to settle all settlement-eligible debts for less than the full outstanding balance in less than three years.

Is Debt Settlement Right For You?

If you are struggling with your finances and looking down the cold barrel of bankruptcy, you should investigate debt settlement. However, debt settlement is not for everyone. So, you should try to fully understand how it works as well as the benefits and drawbacks of this debt solution option before enrolling into a debt settlement program or attempting to negotiate your own settlements. Here are some questions to ask yourself to help you gain this understanding.

1. Can I repay my debts?

If you can repay all of your debts in full, then you should. Debt settlement is only meant for people who are financially unable to fully repay their debts but who might be able to repay debts if the outstanding balances are reduced.

2. Am I experiencing a financial difficulty?

Not wanting to repay your debts is not a good reason to enter into debt negotiations and creditors often take financial hardships into consideration during negotiations. These hardships can include unemployment, loss of income, unexpected medical bills, illness or death in the family and divorce.

3. What kind of debts do I need to settle?

Debt settlement only works for unsecured debt, such as credit card accounts, medical debts and maybe some department store cards and other personal debts. Lenders historically do not negotiate or settle secured debts, such as home loans, automobile loans, student loans and other loans secured with collateral.

4. Can I save up and set aside some money each month?

While unable to fully repay your debts, you should be financially able to at least pay back a portion of your debts if you can save up and set aside some money each month. This amount should be less than the minimum monthly payments required by your creditors (if you can comfortable pay your minimum monthly payments, then debt settlement may not be right for you). However, even saving up and consistently setting aside this smaller amount each month will add up to a sum that you may be able to offer as a compromised payoff to settle a debt. It may take months, but if you are consistent and patient the funds will build up.

5. Can you function with a budget?

Being able to save up and set aside funds to pay off settlements will require you to operate within a tight budget. If you are not financially disciplined, then you should start learning how to be. Pursuing debt settlement is an honorable way to resolve a tough financial situation, but it does require discipline — and this means budgeting.

6. How much do I care about credit?

The debt settlement process can be damaging to your credit. This is because the process results in missed payments and accounts often go into charge-off before being settled. If you prize your credit score more than being debt-free, then you should consider getting a second or third job so you can fully repay all your debts and skip the debt settlement option (assuming you can keep this up for several years until all your debts are paid). Otherwise, be aware that negative marks can remain on your credit report for up to seven years (except for bankruptcy, which can stay on your credit report for up to ten years). However, as the negative mark gets older, it has less impact on your credit score.

7. Do I want to avoid bankruptcy?

Debt settlement Program is really about helping you repay your debts based on your limited financial ability and keeping you out of bankruptcy, assuming you want to avoid bankruptcy. This is important, because some people don’t mind the 10-year stain on their credit or the fact that they won’t be able to file Chapter 7 bankruptcy again for another eight years. Some people may not have a house they are trying desperately to save or don’t have to deal with the new provisions of the bankruptcy law that are designed to keep some people from filing bankruptcy. However, if the thought of filing bankruptcy doesn’t sit well with you and you are struggling to get by, then debt settlement might be just what you need.

8. Can I separate myself emotionally from my debts?

If you pursue debt settlement, your creditors are not going to be happy with you because they want you to pay all of your debt, plus interest, plus fees and plus whatever other finance charges they can dream up. You might end up getting calls from debt collectors and some debt collectors can be downright nasty. They often use guilt to get consumer to pay debts, even if that consumers doesn’t owe the debt or if the consumer doesn’t have the ability to pay. So, consumers pursuing debt settlement need to disassociate themselves emotionally from their debts, read up on the Fair Debt Collection Practices Act (FDCPA) and be vigilant about their goal to be debt-free.

9. Can I be patient?

We live in a culture of instant gratification. We expect our food to be prepared before we put the lids on our fountain drinks. Our mail has to absolutely be there overnight and we want our pizza in 30 minutes or less. Debt settlement doesn’t work this way. It will most likely take several months before you save up and set aside enough funds to start offering settlements to a creditor and it may take weeks or even months of negotiations before a creditor agrees.

If you pursue debt settlement, you have options. There are many debt settlement companies to choose from and even law firms that will negotiate your debt settlements for you. However, you should definitely investigate any company you consider, whether or not they are a professional service company or a law firm. These companies will charge you a fee for their services, so be sure to compare how they charge to make sure you are getting the best deal. Also check with the Better Business Bureau to see how each company handles complaints. You should also only deal with companies associated with industry organizations, such as The Association of Settlement Companies (TASC) and US Organizations for Bankruptcy Alternatives (USOBA).

Of course, you can always negotiate debt settlements on your own. All you need is the right information and there are kits you can purchase to guide you through the process. Just do a search for “diy debt settlement kit” or “do-it-yourself debt settlement kit and you should find an affordable kit that will show you how to settle your own debts without spending hundreds or thousands of dollars in professional debt settlement service fees.

Ultimately, how you resolve your debt issues is up to you. If you are in debt up to your eyeballs and struggling to make ends meet, then you should do something. Debt doesn’t sit; it grows with interest and fees and every dollar you owe in interest is a dollar you don’t have to pay towards rent, mortgage, food, education or family vacations. For your own personal and financial wellbeing, there’s nothing like being debt-free.

By: John Janney

“It is easy to chalk that up to simple human carelessness. Certain economists, though, have another way of looking at that and similar findings. They see a systematic psychological breakdown — as a species we’re just really bad at understanding costs that come later on. Instead, we assign a disproportionate amount of importance to what’s immediate and tangible. We lock eyes with that initial low rate and can’t look away.”

This week the Senate will be looking at a bill taht would seriously effect some of the industryies most unsavory practices.  This legislation that President Obama as taken interest will be on his desk by the end of the month.

The bill which is based on rules issues by the Federal Reserve Board and other agencies last year would eliminate interest rate hikes on existing balances, prohibit issues from putting customer payments toward lower-rate blanaces, and abolish the priactive of raising a customers interest rate because he was late paying a bill to someone else.

Americans have about 1 Trillian in Revolving debt.  The author suggests that many of these credit card holders are bad decision makers when it comes to using their available debt.  Many times even when given all the information, people dont’ make decisions that are in their best economic interest.

Some of the issues that lead people into trouble include:

1. Teaser Rates – Low intro rates
2. Additional Fee’s -
3. Consumer Psychlogy
4. Delayed Gratification
5. Consumerism

The article ends with saying that 42% of credit card users pay their balance off in full every month.   Maybe some of us should not have credit?

“The beauty with that sort of system is that it doesn’t impose heavy-handed rules on people who don’t need them. After all, 42% of households with credit cards pay off their bills in full each month. Telling people the cost of using their credit cards, in a way they can understand and internalize, levels the playing field and lets each person make an informed, unhindered decision for himself.”

Credit card debt is an example of unsecured consumer debt, accessed through credit cards.

Debt results when a client of a credit card company purchases an item or service through the card system. Debt accumulates and increases via interest and penalties when the consumer does not pay the company for the money he or she has spent.

The results of not paying this debt on time are that the company will charge a late payment penalty (generally in the US from $10 to $40) and report the late payment to credit rating agencies. Being late on a payment is sometimes referred to as being in “default“. The late payment penalty itself increases the amount of debt the consumer has.