DEBT MANAGEMENT » Get out of Debt

Independence Day is rapidly approaching–a day when Americans celebrate freedom around the country. Unfortunately, lawmakers in Washington won’t be celebrating with the rest of us as they work through their July 4 recess in order to solve the national debt issue.

The United States has a long history of both good and bad money management. So to celebrate this Independence Day, let’s take a look at the history of U.S. debt, how we reached the debt ceiling and hopefully, how we can enjoy the holiday despite fears of default.

The Obama Administration is pushing congressional leaders to agree to a deal that will reduce the national deficit by July 22. The administration believes the government’s borrowing limit must be raised by this date to avoid default in early August, according to a Wall Street Journal report.

Government Only Needs Two Weeks to Pass Legislation

Moody’s Investors Service says the U.S. risks losing its top AAA credit rating if it defaults on its debts–even for a short period of time. The service states Congress needs to find a way to raise the nation’s debt limit soon to stop the worst from happening.

Missed Debt Payment Could Mean Fundamental Rating Change

In an interview with Bloomberg News on June 21, Moody’s senior credit officer, Steven Hess, explained that a missed debt payment could result in a fundamental change in the U.S. credit rating.

The loss that was suffered by many during the financial crisis has caused a lot of people to think twice about spending money they don’t actually have. Some consider this critical time in history a reason to drop their credit cards and other forms of so-called “good debt,” choosing instead to spend the money in their bank accounts using debit cards and old-fashioned, straight cash.

So now that the recession is officially over (at least on paper) and some say the economy is improving, albeit slowly, does this mean it’s safe to take on more credit and debt again?

A bill to increase the federal debt ceiling by $2.4 trillion was rejected in the House of Representatives on Tuesday. This symbolic 318-97 vote (all Republicans and 82 Democrats opposed the bill) was a message that Congress would not increase the federal borrowing limit unless it is linked to a deficit-reduction plan.

Lawmakers Say Deficit-Reduction Crucial to Debt Limit Increase

Unless you live in a totally homogeneous compound, your child associates with kids from the wide spectrum of socio-economic backgrounds we have in this country. Certainly at my daughter’s elementary school, affluence, poverty and everything in between merge–and sometimes collide.

While not a concern for preschoolers, it’s not long before children become aware of economic differences. The signs: Clothes sport designer labels or they look old and unfashionable; accessories and apparatuses such as cell phones and hand-held video games appear in the pockets of some but not others; parents pull up in shiny new cars and SUVs or they drive rickety beaters–if they have vehicles at all.

On Thursday, a group of 17 Republican senators accused Treasury Secretary Timothy Geithner of overstating warnings about the U.S. government’s debt default. After Geithner announced in mid-May that the U.S. had reached its debt ceiling, he also discussed the challenge of satisfying creditors before the government would completely default 11 weeks later. Republicans say his warnings about default are exaggerated.

Senators Say Treasury Can Easily Satisfy Creditors

This is a guest post from Ask Mr. Credit Card. We get lots of great questions from our readers and wanted to share a recent one with you:

Mr. Credit Card,

I lost my job six months ago and I haven’t been able to find another one. I have a lot of credit card debt (about $15,000 as well as a $20,000 car loan that is half paid off.)

Going to court for failing to pay back student loans is not something that most college students consider as they apply for financial aid, but new reports show the Department of Education (DOE) is filing more civil lawsuits against those in student loan default than ever before.

The number of delinquent borrowers has already increased by more than five times since 2006 and is expected to continue rising due to the tough economy. So how can borrowers avoid going to court over their student loans?

A new study conducted by credit bureau TransUnion found that a person who defaults on a mortgage, but no other debts, is considered to be a less risky borrower that some might expect. Since economic conditions played a huge role in why so many people have defaulted on their mortgages, lenders are much more lenient on borrowers in this circumstance.

Mortgage-Only Defaulters Are a Lesser Credit Risk