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Sunday, June 30, 2002

How to Collect Money Owed on a Property

When someone is in the process of buying a piece of property from you and they do not pay you for all of it, you may need to take action to ensure that you get the money you are owed. With the help of the court system, you can either get the money you are owed or you can take back the property that you were in the process of selling to the other individual.

Instructions

    1

    Contact the person who owes you money first. Try to contact them over the phone and in writing. In some cases, the individual may simply need to work out a payment plan with you to pay the money that you are owed. If the individual is not willing to work with you or does not respond, you have to take further action to get the money you are owed.

    2

    File a motion to foreclose on the property with your local court system. Depending on state law, this could involve filing a civil lawsuit against the buyer or it could simply involve providing a notice with the county clerk's office.

    3

    Follow the rules set forth by your state regarding foreclosure. In most cases, a certain amount of time must pass before you can foreclose on the property. During this time, the buyer can try to come up with the money before the foreclosure takes place. If he can pay off the rest of the loan during this time, you can collect the money and then stop the foreclosure.

    4

    Appear in court to validate your claim on the property. If you live in a state that has judicial foreclosure rules, you have to get a court ordered judgment before you can foreclose on the property. You need to prove your claim on the property to persuade the judge to issue a judgment in your favor.

    5

    Foreclose on the property with the help of your local Sheriff's office. Contact the sheriff and provide a copy of the judgment. Provide information about the property and where it is located. Then the sheriff will seize the property on your behalf. You can then sell the house to recoup the money that you are owed.

Saturday, June 29, 2002

Are There Any Programs That Can Help to Lower High Credit Card Debt Because of High APR?

With total credit card debt in the U.S. approaching $1 trillion, many people are looking for a way to reduce their debt. The only sure way to reduce your credit card debt is to pay extra on your accounts. Even so, other programs may help you reduce balances or interest rates.

Government Programs

    The publicity surrounding the federal government's Making Home Affordable program has had many consumers looking for a similar program to help them reduce credit card debt. Although rumors are plentiful concerning the existence of such programs, they are simply not true. The government does not have a program to reduce credit card balances and payments. A reason for this may be that widespread credit card defaults do not cause the same economic problems that home foreclosures do.

In-House Programs

    Many credit card companies have their own in-house programs to reduce credit card interest rates and payments. Credit card companies have an interest in collecting all of the money that they are owed, and in keeping their current customers, so they may step in to help out with lower interest rates and other fees. To get these concessions, you usually have to call your credit card's customer service number. If the first person you contact is unable to help you, ask for a supervisor.

Debt Counseling

    If you are unsuccessful in negotiating concessions from your credit card companies on your own and you are facing financial problems, you may want to consult a credit counselor. Often, a counselor will have special contacts that they work with to negotiate reductions to your interest rates using any special programs. Credit counselors can also help you work out your home budget, and develop a plan to get yourself out of debt permanently.

Consolidation

    Debt consolidation consists of refinancing your high interest credit cards and other high interest debt into a new low-interest debt consolidation loan or a home equity loan. This type of consolidation can save considerable amounts on your finance charges by significantly lowering your interest rate. Be cautious when refinancing into a home equity loan, as you are transferring unsecured debt to loans that are secured by your home. If you are unable to pay the loan, you could lose your home to foreclosure.

The Liability of a Co-Signer

Becoming a cosigner on a loan is a major responsibility. Cosigners are completely liable for the loan if the primary borrower fails to make payments as agreed. If necessary, lenders will file civil lawsuits against cosigners to collect on a debt that's past due.

Considerations

    Lenders require a cosigner when a loan applicant has poor credit or little credit history. Typical examples include a parent cosigning for an adult child's first new car, or a sister guaranteeing a signature loan for a sibling. The lender makes it clear, in some instances, that approval is not possible without a cosigner. That encourages the prospective borrower to find someone willing to help.

Qualifications

    Most lenders require cosigners to have outstanding credit to be approved. FICO credit scores range from 300 to 850, and lenders prefer that cosigners have scores of 720 or higher. Scores in that range are high enough to obtain most loans, according to the Credit Repair website. However, each lender has its own standards for approval for borrowers and cosigners, and many factors can come into play, including income and credit history.

Consequences

    Cosigning has the potential to ruin outstanding credit, even for someone with a long credit history who has never missed a loan payment. Bankrate reported the case of a woman with superb credit who cosigned for a co-worker on an automobile loan -- and the co-worker missed five of the first 10 payments. Each late payment appeared on the cosigner's credit report, causing her credit score to drop significantly. The bank called the woman to tell her it was about to repossess the car and that she would assume responsibility for the loan as the cosigner. The woman tracked down the car -- and the primary borrower -- in another state and took possession of the car. However, that still left her with the payments and the balance on the loan as well as the damage to her credit score.

Default

    Some cosigners file for bankruptcy because of bad loans. That can happen on a car loan when the bank repossesses the vehicle, sells it at auction and holds the cosigner responsible for any balance left on the loan. It is common for cars to be worth less than the balance on the loan -- a circumstance known as being "upside down." A car with, say, a $15,000 loan balance may sell for only $7,000 at auction, leaving an $8,000 balance. If the cosigner refuses to pay the balance, the lender can file a lawsuit seeking a deficiency judgment for the entire amount. Judgments can lead to bank or wage garnishment, and some cosigners file for bankruptcy because they can't afford the debt.

Precautions

    People should avoid cosigning if possible, especially for friends, co-workers or acquaintances. Even after signing for a family member, the cosigner should monitor payments on the loan and check with the borrower every six months or so about the possibility of refinancing the loan into a new loan in the borrower's name only.

How to Buy a TV on Finance

How to Buy a TV on Finance

Financing a television can be easy -- if you have an acceptable credit score. Home electronics items are often purchased on credit, with some stores offering "instant" approval on financing. A credit score of 720 or higher generally represents excellent credit, but it is possible to be approved for financing for scores much lower. Credit scores range from 350 to 850, with higher scores generally leading to the best interest rates on loans and credit cards.

Instructions

    1

    Review your credit report and score. Order the report online at the Annual Credit Report website (see Resources). This website is the only site authorized by the federal government to offer free credit reports under the terms of the Fair Credit Reporting Act. Follow instructions on the credit report to order your credit score separately, for a fee.

    2

    Analyze your credit score. With a score above 720 you should qualify for many types of financing for your new television. Possibilities include an installment loan from bank or credit union or a low-interest credit card. You may even qualify for a zero-interest promotion -- an option that is good only if you can pay off the television during the promotional period. Financing through a department store or electronics store could be your best bet if you have a credit score less than 620. Many stores have flexible lending standards, allowing them to grant credit to a wider variety of customers. However, interest rates on some department store cards can exceed 23 percent, MSN Money reported in 2010.

    3

    Apply for credit before you shop for the television. This will allow you to avoid the urge to accept high interest-rate "instant" financing. MSN Money also recommends avoiding store financing in exchange for a discount on your television. Over time the finance charges could exceed the value of the discount. Instead, decide how much you would like to spend on a TV and then apply for an installment loan from your bank or credit union. Installment loans generally offer lower interest rates than credit cards. Apply for a bank credit card if you are turned down for the installment loan.

    4

    Apply for credit at the department store or electronics store if you are turned down by the bank. Make more than the minimum payment each month to help offset the higher interest rate on the store credit card as you enjoy your new television.

Friday, June 28, 2002

How to File a Claim Under the Fair Credit Debt Collection Practices Act

The Fair Debt Collection Practices Act or FDCPA protects consumers from unfair, deceptive or abusive practices related to debt collection. Under the act, debt collectors may not call you before 8 a.m. or after 9 p.m. They also must cease contact if you send a letter asking them to stop. A debt collector may not use profanity or threaten to harm you. He also cannot falsely claim you have committed a crime or threaten to have you arrested. If a debt collector has violated the FDCPA, you can file a claim by reporting the violation.

Instructions

    1

    Contact your State Attorney's office (see Resources). Provide it with information regarding the FDCPA violation. The office can prosecute the debt collector on your behalf. It may require you to file a formal claim by completing a complaint form.

    2

    Report the violation to the Federal Trade Commission or FTC. It records complaints related to bad business practices such as FDCPA violations. The complaints are entered into the FTC's Consumer Sentinel database where the information is used by civil and criminal law-enforcement authorities. You can report the violation by calling 1-877-FTC-HELP or using the FTC's online complaint form (see Resources).

    3

    Sue the debt collector. You can file a lawsuit against the debt collection agency. If you win, a judge may award you $1,000 even if you can't prove you suffered damages. You can also be reimbursed for attorney fees and costs.

How Can I Consolidate Credit?

How Can I Consolidate Credit?

If you are struggling to make your minimum monthly payments on several different credit cards or if you are having a difficult time keeping track of whom you have already paid this month, then a consolidation loan may be a good option for you. Companies and banks are willing to allow you to pay off several small loans with one large loan, which gives you one monthly payment to manage.

Credit Consolidation

    Credit consolidation works by using a larger loan to pay off several smaller loans. Often the consolidation loan will have a lower interest rate than the smaller loans. It makes it easier to manage the payments since you only have one small monthly payment to make. Consolidation loans may offer a fixed interest rate that is lower than credit card rates.

Benefits and Risks

    Credit consolidation can lower your monthly payment, by allowing you to stretch the loan over a longer period of time. It offers a set monthly payment, and many have a lower interest rate than a credit card. Often the interest rates are set, instead of being based on market conditions. These features make a consolidation loan appealing to someone who is overwhelmed by the debt they are currently dealing with. However, unless you look at the spending habits that caused you to acquire all of the debt, you may end up in the same position in a few years. When you take out a consolidation loan you need to stop using your credit cards. Using a home equity loan or taking out a second mortgage will put your home at risk if you default on the loan for any reason.

Finding a Consolidation Loan

    You can get a consolidation loan through your bank or credit union. Although other companies offer consolidation loans online or through the mail, you will generally find better terms at a bank. Credit card companies may also offer a consolidation loan to help you get control of your credit card debt. You can contact a loan representative at your bank to begin the process of a consolidation loan, or you can apply online. Be sure to read the terms of the loan. A set interest rate is better than a variable interest rate. The longer the term of the loan the more you will pay in interest, so you should choose the highest monthly payment that you can afford.

Alternatives to Consolidation

    Credit consolidation is not the only way to get your debt under control. You can set up your own debt payment plan and budget to get out of debt. In your budget you should find extra money each month to put towards your debt. Then list your debts in order of interest rate and apply the extra money to the first debt on your list. When that is paid off move to the next debt. Other options include going to credit counseling or trying debt settlement, although both of those options can negatively affect your credit score.

The Fair Credit Act in California

The Fair Credit Act in California

According to the Federal Reserve Consumer Reports, Americans have over $813 billion revolving credit debt as of Sept. 2010. The U.S. Census Bureau estimates that in 2010, 181 million Americans carry over 1.4 billion credit cards. Federal and California Fair Credit Acts help protect consumers' privacy, establish rights regarding information maintained by lenders and protect credit card users from abusive debt collection activities.

Debt Collection Limitations

    California's Fair Debt Collection Practices Act supplements the federal Fair Debt Collection Practices Act. Federal and state laws prohibit abusive behavior by debt collectors when consumers default on credit card debts. Abuse includes profane language, threats of harm and harassing calls. Under California Civil Code Section 1788, agencies cannot call consumers before 8 a.m. or after 9 p.m. Debtors have the right to specify the hours they prefer to be called or to demand that all contact cease. All correspondence from collection agents must protect consumers' privacy by ensuring envelopes contain no information revealing the subject matter. Debt collectors must always identify themselves by name or the agency they represent.

Contact with Employers

    Under California Civil Code Sections 622 through 627, debt collectors may contact a debtor's employer to verify employment and business address, or to notify employers of court-ordered wage garnishment. Agencies must first contact employers in writing. California debtors have the right to prohibit debt collectors from calling or writing them at work. Debtors also have the right to demand debt collectors cease all contact; however, this may leave the collectors with no recourse except to seek court-ordered garnishment.

Records of Personal Information

    The federal Fair Credit Reporting Act requires all credit card issuers and credit bureaus such as Experian and Equifax to maintain accurate records. Consumers have the right to information about data maintained, to protection of the privacy of the records and to have errors corrected within 30 days. If information furnished to a lender by a credit bureau results in an adverse decision -- such as refusal of credit -- the lender must notify the consumer about the reason for the adverse decision and the source of the information. Consumers have the right to a free copy of any reports used to make adverse decisions.

Chargeback Rights

    California's Song-Beverly Credit Card Act of 1971 supplemented the federal Fair Credit Reporting Act. This California statute -- outlined in Civil Code Section 1747-1748 -- is also referred to as the "chargeback rights" law. It defines required actions by credit card issuers and merchants when consumers dispute a credit-card charge. Card holders have 60 days from the first statement received that contains the disputed charges to request -- in writing -- that the charges by removed and why. If a bank issued the credit card it must credit the consumer's account and resolve the issue with the merchant. If the credit-card owner waits over 60 days he must use the "claims and defenses" process which limits protests to amounts over $50, plus the charges must involve a merchant located within 100 miles of the buyer. However, under California law, the merchant's location is the same as the consumer's home for purchases made by mail or telephone from the buyer's home.

Consumer Complaints

    The California Attorney General's office answers questions and accepts complaints at its public inquiries line. The Attorney General's unit may contact the collection agency on the California's consumer's behalf to resolve the problem or educate the collection agency about California's laws. The Federal Trade Commission enforces the Federal Fair Debt Collection Practices Act. Consumers can contact the FTC's Consumer Response Center.

How to Finance a Roof Replacement

A roof replacement can be a major expense costing thousands of dollars. Fortunately, obtaining financing may be easy if you have good credit. Credit scores of 720 and higher usually get you the lowest interest rates on loans, according to Privacy Rights Clearinghouse, a nonprofit consumer information company. Financing for your roof replacement may be available with lower credit scores as well, but expect higher interest rates, especially if your score is below 620, the cutoff for "good credit," according to Privacy Rights. Whatever your score, banks and credit unions are likely to provide better deals on financing than the roofing company --- a good reason to shop carefully for the financing.

Instructions

    1

    Review your credit report and score. Order the credit report from AnnualCreditReport.com, the only website endorsed by the Federal Trade Commission to offer free reports under the terms of the Fair Credit Reporting Act. You're entitled to three free reports a year --- one from each of the major credit-reporting bureaus. Order your credit score separately, for a fee. Reviewing your credit report and score will help you decide if now is the best time to seek financing for a roof replacement or if you should delay the task while improving your credit.

    2

    Apply for a home equity loan or tap into an existing home equity credit line. Using a home equity loan to finance a roof replacement is a smart financial move because you are using the money to improve your house and, you hope, increase its value.

    3

    Arrange for financing with an installment loan from your bank or credit union if a home equity loan is not an option. Installment loans often offer lower interest rates than credit cards, and you'll have a set monthly payment. The bank may even offer special rates on so-called home improvement loans.

    4

    Finance the roof replacement with a credit card if there are no other options. Use an existing card or apply for a new one with a large enough credit line to pay for the roof replacement. Credit cards should be a last resort, however, because they usually have higher interest rates than other forms of financing.

Thursday, June 27, 2002

How to Calculate a Loan's Value When No Payments Are Made

How to Calculate a Loan's Value When No Payments Are Made

Loans are made for various purposes and with varying terms. An amortized loan is the most common type for a home or auto. It is designed to repay the loan and interest in a set period of time, with a set monthly payment based on the loan principal and interest rate. The value of an unpaid loan is calculated by adding the interest and late fees to the original principal amount of the loan.

Instructions

    1

    Determine the current balance of the loan amount. This balance is the sum total of the previous principal balance, and the unpaid interest and penalties added on top. For instance, a $1,000 loan compounded on a simple yearly basis with a 6 percent interest rate and a monthly late payment fee of $10 that had no payments made in the first year, would come to $1,180. That breaks down to the original $1,000 principal balance, $60 in unpaid interest and $120 in late fees accumulated over 12 months. However, most loans are more compounded on a monthly basis, so the new monthly balance is used to calculate the unpaid interest. Proceed to step 2 to determine how to calculate the loan value on a monthly basis.

    2

    Calculate the growing interest monthly by taking the balance determined in step 1 and dividing the interest rate by 12. A 6 percent annual interest rate would equal .5 percent in interest per month. Multiply the principal by the monthly interest rate and determine the interest due. For instance, a .5 percent monthly interest payment on a $1,000 loan would come to $5 a month in interest. This will give you the new principal balance before late fees are added.

    3

    Add the late fee to the new principal amount of the loan. As in step 1, if the late fee is $10 a month, the new principal balance would be equal to the original $1,000 balance, the $5 in unpaid interest, and the $10 late fee -- making the new principal balance for the next month $1,015.

    4

    Calculate the subsequent loan value by using the previous month's ending principal balance, and again adding in the monthly interest and late fees on top of this balance. In this manner, a present loan value can be determined, and also what the balance will be in the future if no more payments are made.

How to Contact Experian Credit Agency

Experian is one of the three major credit bureaus in the U.S., along with Equifax and Transunion. Consumers may find it necessary to contact the Experian credit agency for a number of reasons, from obtaining a credit score to disputing errors on a credit report. Experian offers contact information for consumers and separate contact information for businesses that use Experian services.

Instructions

    1

    Contact Experian online. The Experian website allows consumers to request copies of their credit reports and dispute errors on a credit report via online submission. Consumers with an Experian Credit Manager membership may submit membership-related questions via email. Business services users may use email to correspond with Experian. Email links for personal and business use appear on the Experian website.

    2

    Contact Experian by phone. Consumers can order credit reports and address identity theft concerns by calling (888) 397-3742. As indicated on the Experian website, Experian Credit Manager members must call (800) 787-6864 in reference to membership questions. The Experian website provides business service users with many phone numbers to cover a wide variety of needs. Business users have phone numbers for credit services, technical support and small businesses, just to name a few.

    3

    Mail a letter for an Experian credit report or a credit dispute letter. According to the Fighting Identity Theft website, credit dispute letters and requests for an Experian credit report can be obtained by writing Experian at P.O. Box 2002, Allen, TX 75013.

Wednesday, June 26, 2002

How to Keep Creditors at Bay

How to Keep Creditors at Bay

There are few things as stressful and annoying as dealing with creditors who demand money from you that you can't pay right now. Unless of course, it would be dealing with collectors demanding money that you don't owe, which happens more often than you think. Fortunately, the Federal Trade Commission (FTC) has rules restricting what they can do. Here's what you can do to deal with these pesky bill collectors.

Instructions

    1

    Demand all pertinent information about your debt from any creditor you speak to. This includes the name of the creditor and the full amount of principal, interest and penalties. If the creditor contacts you by phone, then you can insist that they send you this information in writing within 5 days.

    2

    Immediately dispute any debt that you feel is erroneous. This should be done in writing if at all possible, and a copy should be sent to the collection agency as well as the actual person who contacted you. Send the letters by certified mail and include all copies of pertinent correspondence and other information. Ultimately, the agency must prove that you owe the debt.

    3

    Don't hesitate to stand up to harassing collectors and hang up on them if they call you after 9 p.m. or before 8 a.m. If that doesn't stop them, you can threaten legal action--and follow up with action, especially if they make threats against you or use abusive language.

    4

    If you legitimately owe a debt, work out a payment plan with the collector to eliminate it. Make sure that you can keep the payment schedule that you agree to, so that no further contact is necessary. If you default on this plan, the creditor may have the right to sue you or garnish your wages.

    5

    Notify the Federal Communications Commission (FCC) if you are still being unfairly harassed after following Steps 1 to 4. The Attorney General's office in your state can also help. They have the authority to take action against unscrupulous creditors and shut them down.

    6

    Creditors aren't the only ones who can sue. You have the right to take harassing creditors to court, and you can take them for up to $1,000 of statutory damages, not to mention your actual damages and legal costs. It shouldn't be too hard to find a lawyer who can take your case on a contingency basis.

How Charge-Offs Affect Existing Credit Cards & Mortgage

How Charge-Offs Affect Existing Credit Cards & Mortgage

Charge-offs are the worst entries you can have on your credit report. While they certainly affect your future ability to get credit cards and mortgages, charge-offs often affect your current credit card accounts too. Depending on your repayment status with your mortgage lender, charge-offs may affect your home and loan. If you are making current payments as agreed, your mortgage should remain unaffected. Should you be delinquent, however, your mortgage lender may "pull the trigger" on foreclosure actions faster than usual.

Charge-Offs

    Lenders charge off loan balances at different times depending on their internal policies and procedures. Technically, once you are in default of the loan note terms, lenders have the right to charge off your balance. In many cases, loan notes and credit agreements define "default" as a simple 30-day delinquency. Default means that the entire balance is due and payable immediately. Few lenders will record charge-offs that quickly, but they often have this ability.

Charge-Offs and Credit Scores

    More damaging than restructuring repayment or settling a debt for less than the full outstanding balance, charge-offs are visual and public proof that lenders have lost money. If your degree of delinquency was not severe, your credit score will be severely damaged. Charge-offs deliver less immediate score damage if you were already seriously delinquent; however, your delinquency will have already destroyed your once-high credit score. Credit scores always endure major reductions before (delinquency) or after charge-offs.

Charge-Offs and Bankruptcy

    There is one significant difference in charge-offs and bankruptcy. Creditors charging off outstanding balances may still -- and usually do -- give these accounts to collection companies or lawyers to take all remedies to receive payment from debtors. A successful Chapter 7 bankruptcy, however, prohibits creditors -- all those included in the bankruptcy petition -- from taking any further collection activity. Both actions will negatively affect your credit report and, possibly, other open accounts, like credit cards, mortgages and home equity loans.

Credit Card Effects

    Charge-offs can hurt your other non-delinquent credit card accounts, because these are lines of credit. Most credit card agreements permit lenders to modify the terms of your account -- with proper notice -- as they wish. For example, even if you are current with an account, your lender could choose to reduce your credit limit or close your account altogether. Since most credit card issuers perform periodic credit report examinations, they may learn of one or more charge-offs reported on your file. Having this information, they may decide to lower your charge limit or close your account.

Mortgage Loan Effects

    Charge-offs may or may not affect your mortgage loan. If you've had your mortgage loan for a while and have always made monthly payments on time, your lender may remain unconcerned should they learn of charge-offs to your other accounts. Conversely, should you have a "spotty" payment record, your lender may flag your mortgage for extra scrutiny, more intense collection actions or even target your loan for faster foreclosure decisions, if you have consistent delinquency. Remember, violating your repayment agreement -- even a 30-day delinquency -- may put your mortgage into default, permitting your lender to demand full payment immediately.

Sunday, June 23, 2002

What Happens When a Creditor Refuses Payment?

When you use credit or borrow money, you still have to repay the creditor with regular payments. In some cases, creditors will refuse payments for one reason or another. If a creditor refuses to accept your payment, your account will remain unchanged and you may eventually find yourself in court.

Delinquent Payments

    When you are delinquent on a loan and it falls into default, the creditor may not want to accept any payments. In some cases, when you break the terms of the loan or credit agreement, the creditor will simply want to foreclose on the property. When this happens, you cannot do anything to force your creditor to accept your payments. The creditor has the right to send your checks back or to return electronic payments to your account.

Partial Payments

    In some cases, you may send in a partial payment that is less than the agreed-upon amount with your creditor. For example, you have a $500 per month minimum payment on your credit card and you send in a check for $100. When you take this approach, the credit card company may send the payment back because it is too small. Some creditors may simply accept the smaller payments and apply them to your account, but you are still in violation of the terms of your agreement.

Documentation

    If you send money to a creditor and the creditor does not accept it, document the incident. Keep a copy of the check that you submitted and the letter or envelope that the creditor used to send the money back to you. If you had an electronic payment not processed, get a copy of your bank statement or credit card statement. This way, if you end up in court, you can at least show that you acted in good faith and tried to make payments.

Considerations

    When the creditor refuses your payment, it may sue you in civil court for the debt. At that point, you will have to appear in court and present your case. Unless you can prove that you do not owe the debt, the court will issue a judgment in favor of the creditor. If you can show that you tried to make payments, the judge may be more lenient on you and allow you to set up a payment plan to pay off the debt over time. Otherwise, you may have your wages garnished or have a lien placed on your property.

Can a Credit Card Garnish My Wages If I Am on Disability and Work Part Time?

After a creditor has made numerous attempts to resolve a past-due balance on a loan, credit card or other debt, it may resort to filing a civil suit against you for the balance of your debt. Unless you can provide a valid defense to the lawsuit, such as proof that you previously paid off the debt, the creditor will likely win a judgment against you. This allows the creditor to garnish your wages. However, if you collect disability and work only part time, the creditor's garnishment options may be limited.

Garnishment of Disability

    Although a creditor with a valid judgment may garnish most types of income, federal law prohibits judgment creditors from garnishing any part of your disability income. You will continue to receive 100 percent of your disability benefits as long as you are eligible for these benefits through your state. If a creditor attempts to garnish your disability income, contact an attorney -- he can help you work with the court to stop the disability garnishment.

Percentage Limitation

    Federal law limits the amount of your wage earnings your creditor can garnish to 25 percent of your disposable income, which is the amount you earn after applicable taxes. Health insurance payments and retirement plan contributions do not reduce your disposable income. If you earn $900 per month in part-time income after taxes, the creditor can take only $225 of your earnings to apply toward your debt. Although all states must follow federal law, states are permitted to further percentage restrictions on wage garnishment.

Minimum Wage Limitation

    Under federal law, garnishment is also restricted by minimum wage calculations. You may earn the equivalent of 30 times the federal minimum wage each week without garnishment. For example, if the federal minimum wage is currently $7.25, you can earn up to $217.50 per week without fear of garnishment. However, if you earn more than this amount, the 25 percent rule applies.

Considerations

    Each state provides a statute of limitations for judgment wage garnishment. For example, Georgia only allows creditors to enforce a judgment through wage garnishment for seven years after the date of judgment. However, most states permit judgment creditors to apply to the court for judgment renewal. In Georgia, a renewal gives the creditor an additional seven years to collect from you. However, renewal is not automatic -- if the judgment creditor fails to apply for renewal, it typically cannot continue garnishing your wages after the statute of limitations has expired.

Debt Consolidation for Medical Bills

Debt consolidation entails using one large loan to pay off several smaller loans. Since medical bills are unsecured debt, they can be paid off through debt consolidation.

Unsecured Debt

    Unsecured debt is not tied to an asset, while secured debt is linked to an asset such as a car or a house. If car payments or mortgage payments are neglected, a lender can repossess these items. Bills for medical care are unsecured because they are usually not tied to anything tangible.

Features

    Taking a second mortgage or using a line of home equity credit can offer the resources needed to consolidate debt. As these options involve a secured loan, however, you could lose your home if you can't make these loan payments. Debt consolidation companies can offer a loan or a plan to help you save up a lump sum to offer creditors.

Costs

    Debt consolidation companies usually charge about 10 percent of your consolidated monthly payment. Debtors can negotiate with creditors directly, though, so a third-party debt consolidation company isn't necessary.

Considerations

    Effective September 27, 2010, the Federal Trade Commission banned upfront fees from debt consolidation companies to stop unscrupulous companies from taking advantage of desperate creditors.

Is It Better to Go Bankrupt or Settle My Credit Card Debt?

Bankruptcy and debt settlement are both options available to debtors who cannot handle their monthly debt payments and need help. Both are serious options: more common options include debt renegotiation and debt consolidation, which either pay off the entire debt or change the debt to make easier to deal with. But sometimes the debtor still cannot make payments or cannot qualify for the necessary changes, so settlement or bankruptcy are the only options. Both have their advantages, but debt settlement is a less drastic option for most situations.

Bankruptcy

    A bankruptcy court will examine the debtor's financial information and will usual choose some possessions to sell off and pay back the most serious debts, while completely removing any other debt obligation. Two types of bankruptcy are commonly available to individuals, Chapter 7 and Chapter 13. Chapter 7 bankruptcy is a total bankruptcy with a swift discharge of debt, while Chapter 13 offers more debtor protection but creates a payment plan borrowers must follow.

Settling Debt

    Debt settlement only applies to a particular credit card debt. Debtors approach the creditor who holds the card debt and attempts to negotiate to have some of the debt permanently forgiven. The creditor writes this portion of the debt off as a loss and the debtor no longer has to pay it. Creditors typically only agree to settling debts if the debt is old and there is little chance of collecting on it--and if the debtor agrees to pay a portion of it as a lump sum.

Salvaging Credit

    When debtors are trying to get rid of impossible debts, a primary consideration should be the effect on credit as a whole. Usually by the time bankruptcy and debt settlement are the only remaining options, most of the damage to credit has already been done. However, bankruptcy will have a further negative effect and stays on credit reports for years. Settling debt usually closes open accounts and can have a beneficial effect on credit, or at least make it easier for debtors to recover.

Costs

    Bankruptcy has few associated costs. There is a small fee for filing, and debtors may lose some of their possessions, but they do not incur added expenses that make debt even more difficult to pay off. The same is not true of debt settlement. Not only must debtors provide the necessary lump sum payment, but they also have to pay lender fees and any third-party fees if they use a debt settlement company. This can create additional financial problems.

How to Approach Negotiating Credit Card Debt

How to Approach Negotiating Credit Card Debt

Dealing with credit card debt can be a scary process. However, if you remain firm and are able to face the situation, you will generate much better results than if you are timid and don't try negotiating credit card debt.

Instructions

    1

    Dealing with credit card debt can be a scary process. However, if you remain firm and are able to face the situation, you will generate much better results than if you are timid and don't try negotiating credit card debt.

    2

    Make a list of all of your credit card debt. Creating a list of what you owe will help you to develop a strategy for dealing with that debt.

    3

    Call the creditor or collection agency that holds the card that is in most need of being paid off. This will either be the highest interest rate or balance or the oldest collection account.

    4

    Negotiate with them to figure out what your options are. Don't act like you have money to pay off the debt in full, because that will eliminate any leverage that you have. Tell them you don't have much to work with and that you want to see if you can settle the account.

    5

    Contact the next company if the first creditor isn't willing to negotiate or after you have paid off that card. Always pay off the ones that you are able to negotiate first because you might not get that chance again.

Saturday, June 22, 2002

Is it Illegal to Collect Bank Write Off Credit Card Debt?

Many banks that have a significant portion of delinquencies in their credit card portfolios elect to take an accounting charge against these non-performing accounts by writing them off as uncollectible. Once an account has been charged off, the bank will either continue with collection activity or sell it to a third-party purchaser of bad debt. Even though the bank has characterized the debt as "uncollectible" for accounting purposes, a cardholder is still liable for the full amount of the default balance owed.

Purchasers of Bad Debt

    Many companies specialize in purchasing, for pennies on the dollar, delinquent credit card accounts from banks that have charged off the debt as uncollectible. The price paid as a percent of the original default balance depends on the age of the delinquent accounts and the statistical likelihood of recovering a portion of the default balance owed. Since the debtor is liable for the full amount of the default balance, the return on investment to the third-party purchaser can be quite substantial. For example, if the purchaser paid 20 cents on the dollar for the delinquent account and eventually collects 50 percent of outstanding balance, the collector will have realized a 30 percent rate of return.

Rights of Third-Party Purchasers

    Legally, the bad debt purchaser stands in the shoes of the bank that originally issued the credit card. They enjoy the same rights to payment as the bank pursuant to the terms and conditions of the original credit card agreement. As such, they cannot enlarge the obligations of the debtor by adding on charges not authorized by the original agreement. For example the third-party purchaser cannot add on additional collection charges, nor increase the interest rate on the default balance beyond that which was stipulated in the original credit card agreement.

Statute of Limitations Still Applies

    The statute of limitations, which precludes a creditor from filing suit after the expiration of a specified period of time from the date of delinquency, applies to third-party purchasers of bad debt. The statute of limitations clock does not reset when the bad debt is sold, but rather begins on the date when the account first went into default with the bank.

Fair Credit Reporting Act (FCRA)

    Adverse credit notations can remain on a consumer's credit report for no more than seven years plus 180 days from the date of the initial delinquency. Once the original seven-year period has expired, it is a violation of the FCRA for the bad debt purchaser to report the account as delinquent to credit bureaus.

Fair Debt Collections Practices Act (FDCPA)

    The provisions of the FDCPA are equally applicable to third-party purchasers of bad debt. Bad debt purchasers are bound by the regulations that govern the extent and nature of creditor communications with a consumer debtor.

How to Try to Get Out of Debt Before Using Counseling Services

Using counseling services to get out of debt is beneficial, but these types of services often only work with people who have a certain amount of debt and using a company to manage your debt can look bad on your credit report because creditors may report "third party assistance." Before handing your debts over to a service, explore methods to eliminate debt on your own.

Instructions

    1

    Work longer hours to pay down your balances without counseling. Increase the amount of hours you work in a week by either asking for over-time or taking a second job after your regular hours.

    2

    Slash your interest rate on credit cards. Counseling agencies generally discuss rate reductions with your creditors. Achieve similar results by contacting creditors yourself and asking them to lower your rate.

    3

    Pull out your equity. Make good use of the equity in your home and apply for a home equity loan to consolidate your debts and pay them off over a few years.

    4

    Borrow from the value of your life insurance policy. Withdraw cash from a whole life policy and use this cash to pay off your debts.

    5

    Pay more than your minimum. Significantly reduce your balance on credit cards and loans by paying more than the minimum every month. Start making bi-weekly payments on loans to help reduce how much interest you owe and pay down these debts faster.

    6

    Control spending to alleviate debt quicker. Limit the amount of new debt incurred by using cash. Pay off any new credit card charges within a month to keep on the right track and eliminate balances.

Maine State Laws on Free Credit Reports

Maine and other states follow a federal law that allows residents to request free credit reports from three credit bureaus. However, consumers should watch out for free credit report offers that aren't connected to the federal law. Those offers may include a free credit report, but add on fees for other credit-related services.

Free Annual Reports

    All Maine residents and other U.S. citizens are entitled to receive one free credit report from each of the three national credit bureaus every year. The Fair and Accurate Credit Transactions Act requires Equifax, Experian and TransUnion to supply those credit reports at consumers' request. However, the act only requires the three bureaus to supply consumers with free credit reports, not credit scores. People who want to see their credit scores may have to pay a fee to get them.

Other Free Reports

    According to the Maine Bureau of Consumer Credit Protection, Maine residents also have a right to get free credit reports due to adverse actions by companies. Such actions include having a credit card or insurance application rejected due to negative credit information. In such cases, residents need to request a free copy of their report from the credit bureau that supplied the information within 60 days of the rejection of their application. People who are victims of identity theft also can request free credit reports from each of the three national credit bureaus.

Requesting Reports

    Residents should be prepared to send additional information to credit bureaus when they request a free report if they've recently moved. The bureaus may require you to supply a copy of a recent utility bill, driver's license or some other documentation to verify your new address and your identity. The Maine Bureau of Consumer Credit Protection also notes that married couples who make a joint request for a credit report must both supply a copy of their driver's license or other information needed to verify each person's identity.

Official Website

    The U.S. Federal Trade Commission warns consumers that only one website provides the free annual credit reports that the Fair and Accurate Credit Transactions Act entitle consumers to receive. That site is annualcreditreport.com. According to the FTC, some websites advertise free credit reports, but they come with fee-based services such as credit monitoring. Those services are free of charge for a limited time, but consumers are later charged monthly fees if they don't cancel a service during the trial period.

Does Debt Settlement Have to Be Reported to the IRS?

Debt settlement can be an effective way of reducing your debt load to a manageable level. Rather than filing bankruptcy, debt settlement allows you to negotiate a payment for at least some of your debt. Unfortunately, settlement can have additional financial ramifications, since the creditor that agrees to reduce your debt usually has to report that amount to the Internal Revenue Service.

Debt Settlement

    Debt settlement occurs when your creditor agrees to accept as payment-in-full a payment that is less than the total amount you owe. Typically, you will have to make a lump-sum payment to the creditor in exchange for the reduced total balance. Since it can be difficult to personally negotiate a reduced balance with a creditor, some debtors hire debt settlement companies to negotiate on their behalf. Debt settlement firms tend to charge high fees and are not always entirely successful at settling the balance due. But often they may be able to negotiate with your creditor more successfully than you can.

    Once your creditor accepts a settlement proposal and you make your agreed-upon payment, the debt is considered to be paid in full. The creditor will issue you an IRS Form 1099-C at the end of the year indicating the amount by which it reduced your debt. This form also goes directly to the IRS.

Taxation of Canceled Debt

    The Form 1099-C your creditor sends you after the completion of a debt settlement plan is more than a simple notification. The IRS considers canceled debt listed on a 1099-C to be taxable income. You must report this amount to the IRS as part of your gross taxable income when you file your taxes. As a result of this taxation, the settlement deal you or your representative firm negotiated with your creditor may not be as good as it originally seemed. For example, if you are in the 30 percent tax bracket and you settled your debt down to $5,000 from $20,000, you may owe $4,500 in taxes from that settlement.

Bankruptcy

    While debt settlement may be a way to avoid bankruptcy, the taxation of your canceled debt may be a huge negative compared to bankruptcy. If you discharge your debts in a bankruptcy case rather than through a settlement, your unpaid debt is not taxable. While both forms of debt elimination damage your credit report, a bankruptcy may remain for up to 10 years, while debt settlement and other negative accounts generally last seven years.

Insolvency

    Insolvency is another way to avoid taxation of your settled debts. While your creditor must still send a Form 1099-C to the IRS showing the amount of your canceled debt, you can file Form 982 to avoid taxation if you are insolvent. For IRS purposes, insolvency means you owe more debt than you have in assets. If the amount of your canceled debt exceeds the amount by which your debt exceeds your assets, you may still have to pay tax on a portion of your settlement.

Friday, June 21, 2002

Credit Card Bad Debt & the Law

Credit Card Bad Debt & the Law

If you are having problems paying your credit card bills, you should be aware of the federal and state laws that address the problem of bad debt. Unpaid bills do not go away: They can continue to haunt you in the form of bad credit and ongoing harassment from bill collectors long after you default on your balance. By knowing your rights and working with your credit card company, you can minimize the inconvenience and embarrassment caused by unpaid debt and regain control of your finances.

Significance

    Credit card debt is unsecured debt: You did not put up any collateral when you got your credit card, instead, your credit card company offered you credit solely on the basis of your promise to repay the money. Because your credit card company cannot seize collateral to pay off your balance, they have limited options for collecting the amount you owe.

Effects

    The effects of bad credit card debt on your financial life, and even some day-to-day activities, can be considerable. If you do not pay your credit card bill, eventually you may lose your charging privileges, and the card may be canceled altogether. The credit card company will begin calling you both at home and at work, asking you to pay your bill. If your bill remains unpaid after six months, your credit card company will turn your account over to a third-party collection agency, which will continue to contact you about your debt.

    Your bad debt will be reported to credit bureaus and can have a serious effect on your credit report. An unpaid credit card bill can cause you to be turned down for credit from other lenders and credit card companies, and it may hurt your chances of employment or renting an apartment.

Misconceptions

    Some people think that when a credit card has been "charged-off," they no longer owe the bill. This is untrue. A debt is "charged-off" by your credit card company when it believes that it cannot collect the debt and writes it off as a tax loss. They are still able to continue collection efforts and can turn your debt over to a collection agency. The credit card company, or the collection agency, can also attempt to sue you in court for the money you owe.

Time Frame

    Credit card companies typically charge off bad debts six months after the account was last current. After that, state law determines the statute of limitations on how long the creditor has to file a lawsuit, which can range from three to 10 years. Negative information about your debt can remain on your credit report for up to seven years.

Prevention/Solution

    If you run into financial trouble and are not able to make your credit card payments, contact your credit card company to explain your situation. The company may be willing to work with you to help you manage your debt. Another option is to seek credit counseling: Credit counselors can help you set a reasonable budget and, when appropriate, work with your credit card company to lower your interest rates and payments.

Thursday, June 20, 2002

How to Remove Negative Accounts From Credit

When thinking about applying for a loan or credit card, be prepared for a credit check. Most creditors will view an applicants credit history during the application process. It is important that the credit report displays accurate and updated information about payment history. If there are negative accounts listed on your credit report, have that information removed as soon as possible. There are legal ways to remove these negative accounts from a credit report--if the information is inaccurate.

Instructions

    1

    Order a current credit report. Order a free copy of a credit report by visiting AnnualCreditReport.com. Request the credit report from each of the major credit bureaus--Equifax, Experian and TransUnion.

    2

    Review credit history for negative information. There are different types of negative items that may appear on a credit report, such as public records (tax lien, bankruptcy filing, judgment, garnishment, foreclosure, eviction or marital item), delinquent payments, charge-offs or debt collections. Make a list of the negative accounts that appear on each credit report.

    3

    Dispute the negative accounts with the credit bureaus. Locate the appropriate dispute form by visiting each of the three main credit bureaus' websites. On the dispute form, identify the negative account, provide the creditors name and give the reason why you are disputing the information. Please note that a separate form must be submitted for each item disputed. In addition, provide the credit bureaus with supporting documentation for each dispute, such as payment receipts or a settlement letter from the creditor.

    4

    Give the credit bureaus a sufficient amount of time to process the dispute forms. Depending on the nature of the dispute, it may take up to 45 days for the credit bureaus to complete an investigation. Credit bureaus are required to contact each creditor to validate the information in question. Once the credit bureaus have completed an investigation, they will contact you with the results.

    5

    Check the credit report for the appropriate updates. Give the credit bureaus 30 days to update the credit report. Order a credit report from each credit bureau and confirm that negative accounts have been removed.

    6

    Contact the creditors to discuss options. If the credit bureaus are unable to delete the negative accounts from the credit report, contact each creditor to discuss payment options (if you still owe a balance). Perhaps the creditor will delete the negative account information from your credit report if you pay the past due balance in full. Try to negotiate a settlement offer or monthly payment plan on past due accounts. Be sure to get the agreement in writing before submitting first payment to the creditor.

Importance of Establishing & Maintaining Good Credit During College Years

Aside from your Social Security number, your credit score might be the most important number in your entire life. This number can literally make or break you, and the financial decisions you make while you're in college can affect you for years to come. Getting your credit history off to a strong start and learning to manage your credit is one of the best things you can do to help you achieve your dreams.

Importance of Credit

    Though you might be used to paying cash for everything if you're just entering college, your college years will likely see you beginning to incorporate credit into your financial picture. Establishing credit is important because your credit file will be used to make decisions about virtually every aspect of your life. A bad credit history can convince banks that you're a high risk for borrowing money; furthermore, a poor credit score can be used by prospective employers as evidence that you're not reliable enough to be hired.

Composition of a Credit Score

    Unfortunately, it's impossible to have a good credit score right out of high school. It takes time to build good credit, as evidenced by the way credit scores are comprised. One quarter of your score comes from the age of your accounts and the types of credit you have; these areas are impossible to score well in if you're new to credit. However, you can help yourself by paying your bills on time, which makes up 35 percent of your score. Your total outstanding debt makes up 30 percent of your score, so you can make your life easier by keeping your debt total low; however, any student loans in your name will count against your outstanding debt, even if you aren't responsible for paying them yet.

Establishing Credit

    It wasn't so long ago that college students were bombarded with on-campus solicitations for credit. Thanks to reforms that went into effect in 2010, these promotional efforts are gone forever. In their wake is a system that makes it very difficult for you to establish credit. The new laws require you to meet strict income requirements, or have a co-signer, if you want a credit card before you're 21 years old. If you fall outside of these criteria, you may want to see if your parents will add you as an authorized user on one of their cards. Another option is a secured credit card, in which your purchases are drawn from a pool of money deposited by you, but your payment history is reported to the credit bureaus.

Negative Credit Information

    Even if you've heard a million lectures from your parents about the pitfalls of credit cards, you still may find yourself getting into debt. It's important to realize that mistakes with credit don't just affect you now, they also affect you down the line. A simple late payment can stay on your credit report for seven years; while an isolated incident won't destroy your credit rating, repeated offenses will give creditors every reason to deny your applications for further credit. Learning to avoid these mistakes early will give you the best chance at a bright financial future.

Wednesday, June 19, 2002

FHA Programs to Avoid Foreclosure

FHA Programs to Avoid Foreclosure

The Federal Housing Administration is the largest insurer of mortgages in the world, according to its website. The agency, which is a part of the U.S. Department of Housing and Urban Development (HUD), said in June 2010 that it had insured loans on more than 34 million properties. The FHA, with help from HUD, also assists homeowners in danger of losing their FHA-insured homes to foreclosure.

Foreclosure Avoidance Counseling

    HUD-approved housing counselors are available to assist all homeowners with foreclosure issues. The counselors are trained in foreclosure avoidance, and are available by telephone and face-to-face. Although the counselors will help any homeowner, special attention is provided for homeowners with FHA-insured loans. Call the FHA National Servicing Center at 888-297-8685 to get help with FHA-insured loans. Trained counselors will describe options for avoiding foreclosure on an FHA loan and if necessary will contact the lender on a homeowner's behalf.

Reinstatement

    HUD recommends several solutions for avoiding foreclosure, including reinstatement. Reinstatement allows you to make up missed payments by paying a lump sum within a certain date. Your lender will temporarily bring your account current--and stop the foreclosure process--while giving you time to come up with the money. The lender has to voluntarily agree to the program, but may be more likely to do so if HUD is making an appeal on your behalf.

Forbearance

    Your lender can use a process called forbearance to reduce or even suspend your payments for a short period of time while you recover from a financial setback. Usually, a forbearance option is combined with a reinstatement. For example, your monthly mortgage payment could be reduced by 50 percent through forbearance with a reinstatement option, giving you several months to make up for missed payments with a lump sum. In the meantime, the foreclosure process would be stopped if the lender agrees.

Repayment

    Repayment plans are also endorsed by HUD. With repayment, you make up missed payments by paying a little extra each month and the lender voluntarily agrees to stop the foreclosure.

Mortgage Modification

    Homeowners can also see mortgage modification to stop a foreclosure. The lender can agree to change terms of your loan to make the payments more affordable. Modifications could include a lower interest rate and changing the loan from an adjustable rate mortgage to a fixed mortgage. Missed monthly payments that led to the foreclosure process could be tacked onto the end of the loan. Monthly payments could be further reduced by extending the loan by several years.

Tuesday, June 18, 2002

How to Settle Consumer Debts

How to Settle Consumer Debts

It can be easy to become buried deep in consumer debt. If you have been laid off, had a pay cut or have been injured the bills can pile up quickly. Although paying off debt can be overwhelming, there are options available. Don't fall behind and get sent to collections. Be proactive and work with your debtors to come up with a plan.

Instructions

    1

    Create a spreadsheet calculating your monthly income and expenses. Separate your expenses into two categories. Have one category for necessary monthly bills, such as mortgage payments, electricity and food. Then, make another category for the debt you are trying to reduce or pay off completely, such as credit card debt or personal loans.

    2

    Calculate how much money you have left at the end of the month after paying all necessary living expenses. Figure out how you want to divide this money. For example, if you have two credit cards that you are trying to pay off and one has an 8 percent interest rate and the other has a 14 percent interest rate, have a greater ratio of the money go towards the second card.

    3

    Call your credit card companies and try to negotiate a deal. It is possible to get your interest rate lowered which will save you money in the long run. If you are having trouble making the minimum payment on a credit card, ask if you can have that payment lowered even if it means it will take you longer to pay the debt off. The credit card company would rather receive some form of payment from you than to be left completely high and dry.

    4

    Contact your bank to discuss the terms of your loan. If you took out a loan to buy a car or another expensive item and are having trouble making the monthly payment, see if you can turn your three year loan into a five year loan. This will lower your monthly payment and help you to avoid being sent to collections.

    5

    Sell some items for extra cash. If you need more income to make larger payments towards your debt, consider selling old iPods, used TV sets, designer clothes and other personal belongings on an auction website.

    6

    Cut up your credit cards. Do not charge anything additional while trying to pay off your debt. Even a small purchase here and there can put a big wrench in your plans.

How to Look Up the Addresses of the Credit Bureaus

How to Look Up the Addresses of the Credit Bureaus

All lending in the United States is tracked by three major credit bureaus: TransUnion, Equifax and Experian. These three agencies are independent, though the information contained on credit reports is often quite similar and sometimes identical. The rating system each of these companies uses is also similar. If you have a question about a reporting error or mistake on your credit report and you need to send the credit bureaus documentation, you'll need to figure out their address. Fortunately, this is quite simple.

Instructions

    1

    Determine the credit issue before you start sending information to the credit bureaus, especially if you will be sending it via the U.S. Postal Service. Credit bureaus can be slow to respond (though they must acknowledge all inquiries within 30 days of receipt).

    2

    Pull all three copies of your credit report at the Annual Credit Report website. This is a federally-mandated website for American citizens who wish to view their credit reports. Pull your credit report from all three bureaus. If the issue appears on all three bureaus, you will need to contact all three of them.

    3

    Call the toll free number listed on the credit report you pulled from Annual Credit Report. These phone numbers will take you to the customer support line for each bureau. Once you get through to a representative, you can ask for the mailing address. You should specify the issue, too, as a more specific address may help get a faster response.

    4

    Review any current or old account statements from any credit accounts. These will have toll free numbers for the credit agencies, too, though it may take longer than calling the direct number from the credit reports.

How Does a Repossession Effect Your Credit?

How Does a Repossession Effect Your Credit?

    When someone wants to obtain a car, boat or lawnmower, they often seek assistance from a financial institution or bank. The lender gives them the money to cash out the item with a store or previous owner. Once a loan is obtained, a lien is typically placed on the property until the balance is paid in full. Monthly payments are usually set out to manage the loan amount over an extended period of months or years. A repossession occurs when a vehicle or personal item that is originally owned by the bank is returned to the bank and no longer in possession of borrower. This happens when the borrower falls behind on payments and is unable to meet the terms of the loan. In order for a repossession to take effect, approval from the bank and even a judge needs to take place first. When an actual repossession occurs, someone hired by the bank locates the property and physically removes it from the borrower's possession.

    Falling more than 30 days behind on a revolving credit such as a car or boat loan will begin to adversely affect credit. Once payments are 90 days or more behind and not paid, default has occurred on the terms of loan making the entire amount due and payable immediately. Once the payment is over 30 days past due, it is reported to all three credit reporting agencies: Experian, Equifax and TransUnion. From the three credit reporting agencies, a credit score is calculated. This credit score is often times called a FICO score. A good credit score is considered anything above 650. For someone who is facing a repossession, the credit score drops significantly, sometimes well under the 400 range. With a low credit score it is very difficult to obtain a new line of credit for a credit card, revolving credit, vehicle loan or home loan.

    After a vehicle or personal item has been repossessed by the bank, the first thing that should be done is to work on improving the credit score. The first step is pulling a merged credit report of all three agencies and making sure that there are no other delinquencies or negative credit marks on the report. Once everything has been shown that it is paid in full and there is no outstanding balance remaining, the borrower can begin to repair the credit score. One way to do this is by obtaining a secured credit card. A secured credit card often requires anywhere from 10% to the full amount down. Credit is given based on the amount deposited. Making payments on time for 6 to 12 months will begin to slowly improve a credit score. Making sure that no accounts go into collection and no vehicles are repossessed will contribute greatly toward a higher score. This will also help with the ability to rebuild and regain credit worthiness.

Monday, June 17, 2002

How to Deal With a Harassing Collection Agency

Its never fun to fall behind on bills, but its even worse to pick up the phone and be harassed. Sadly, this happens to Americans every day. Depending on which collection agency buys your debt, you may come in contact with agents who will do whatever possible to get your money. All too often, this means that the agent will resort to harassment. While you may be intimidated at first, its important to remember that there are ways to deal with a harassing collection agency.

Instructions

    1

    Use your caller ID and answering machine. You dont have to answer the phone when a collection agency calls. Instead, use your caller ID and answering machine to avoid speaking to a harassing agent. Any time an unlisted number comes up on the ID, let the machine get it. Anyone with an important message will leave one.

    2

    Write a letter to the collection agency asking them to stop calling. Simply doing this over the phone will not work. You must send a registered letter to the company. Keep a receipt showing that you sent the registered letter. This can be used when you report the harassment.

    3

    Contact the Federal Trade Commission if the collection agency keeps harassing you. The FTC collects reports and uses them to further investigate collection agencies. If the collection agency has been harassing you, chances are it has harassed other debtors. If the FTC collects enough complaints, it can prosecute the agency.

    4

    Visit the Better Business Bureau website. The Better Business Bureau allows any consumer to file a complaint. A harassing collection agency must be reported. The BBB will help you deal with the problem and get the harassment to stop. Best of all, you will get the word out about the collection agency. Fellow consumers will be able to check the BBB and get an accurate picture of the company theyre dealing with.

    5

    Get a lawyer. If a collection agency refuses to stop the harassment, its time to get a lawyer. A lawyer can walk you through the steps to sue the collection agency. As a debtor, you have rights. Once a collection agency starts harassing you, you are then able to take the agency to court.

Should I Give a Post Dated Check to a Debt Collector?

Though a debt collector can and often will request that a debtor provide postdated checks when negotiating payments, it is not a good idea. Providing postdated checks exposes the debtor to many unnecessary risks. A consumer who is negotiating with a debt collector should understand these risks and the ways to reduce or avoid them.

Explanation

    A postdated check is simply a check with a future date. An example of a postdated check would be a check written on July 1, but dated August 1. Often debt collectors will request that consumers send postdated checks during a debt negotiation. The collector may agree to accept three monthly payments of $300 from a consumer to settle a debt, but want the consumer to immediately send the payments with future dates on the checks.

Risks

    Though a debt collector should not cash a postdated check until the agreed-upon date, some debt collectors may cash the check upon receipt. This may cause the consumer to run short on money for living expenses. Even worse, the early presentation of the check may overdraw the balance in the account or result in a bounced check, both of which will result in significant fees for the consumer. Beyond these risks, unscrupulous collectors may use the information from a postdated check, or any personal check, to attempt to gain access to the consumer's bank account.

Alternatives

    Though a debt collector can request postdated checks, the consumer can refuse. Debt collectors want to receive payment for the debt and will accept payments from the consumer without the use of postdated checks. If a consumer does find a debt collector that will not accept payments, the consumer should put the offer to make payments in writing to the collector stating the consumer's refusal to send postdated checks. To reduce the risk of a collector trying to access a consumer's bank account with the information on the check, the consumer should send a money order or a cashier's check as payment to the collector.

Consumer Rights

    While it is best for a consumer to not give a debt collector a postdated check, if the consumer does so it is important he understands his rights. The Fair Debt Collections Practices Act forbids debt collectors from cashing a postdated check before the date written on the check. Furthermore, when a consumer gives a debt collector a check dated more than five days in the future, the Act requires that debt collectors provide a consumer with written notice before cashing a postdated check. Consumers should report violations to the Federal Trade Commission and the Attorney General of his state. Consumers may be able to sue collectors for damages resulting from violation of the Act.

Oregon's Law on Marital Credit

Oregon's Law on Marital Credit

In Oregon, the legislature allows spouses to obtain "short form" summary divorces if they can agree upon a distribution of debts and assets without a court's participation. When spouses are unable to agree upon a property allocation between them, Oregon courts will divide marital property and debts between them. Marital debts are debts acquired during a marriage, and these debts include expenses incurred to pay for family expenses. Each spouse is jointly responsible for paying the entire marital debt.

Prenuptial Agreements

    Written prenuptial agreements are legally valid in Oregon. A legally valid prenuptial agreement is one without fraud, duress and signed as part of an arms-length or fair negotiation. Oregon courts will uphold a prenuptial agreement dividing assets and debts before the spouses married if it contains all of the necessary legal elements for a validly executed contract. Prenuptial agreements between two domestic partners who entered into a Declaration of Domestic Partnership are also legally valid.

Equitable Distribution

    As an equitable distribution state, Oregon judges follow the common law doctrine of equitable property distribution. Oregon law requires judges to divide marital property and debts equitably between divorcing spouses. However, separate property and separate debts are not divided between spouses. Each spouse is responsible for paying separate debt accumulated before the marriage.

Marital Debts

    Under the legal theory of joint and several liability, credit card companies can sue each spouse individually or sue both spouses jointly for repayment. However, many spouses fail to understand the legal implications of obtaining sole credit card accounts and adding users.

    Generally, although Oregon courts may require both spouses to equally payoff marital debts on individual accounts, creditors will seek repayment from the card's owner, and not from both spouses. In this case, the spouse who owns the credit card can seek repayment from the other spouse by filing a lawsuit against him compelling him to pay his share of the marital debt.

Limitations

    According to Oregon law, judges may not divide a larger portion of marital credit debt to one spouse based on fault factors. Fault-based factors are those which led the parties to divorce. Judges may not base their decisions on evidence of adultery, cruelty or any other fault factors.

    However, judges may base their property awards on extrinsic evidence unrelated to fault. For instance, if one spouse intentionally spent excessive money on luxury items, a judge in Oregon may require him to pay a larger portion of the marital debt if she believes he intentionally participated in waste. However, if the husband used his marital credit card to pay for necessary expenses, including food and shelter during the marriage or during separation, a judge may assign joint responsibility to both spouses for repaying the debt.

Considerations

    Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

Why Is Consumer Debt Bad?

Why Is Consumer Debt Bad?

According to a 2009 Nilson report, consumer debt in the United States totaled approximately $972 billion dollars at the end of 2008. For many Americans, consumer debt carries a significant financial and emotional burden.

Defining Bad Debt

    Bad debt refers to any debt that is incurred to finance something that offers no return. Credit card debt and store card debt are considered bad debt because they're often tied to items that hold no intrinsic value.

Economic Cost

    Carrying high-interest debt can cost you hundreds or thousands of dollars in interest if you only pay the minimums. If you have a poor credit score, you may end up paying more for mortgage or car loans.

Impact to Health

    A 2008 study published in the American Journal of Health Promotion found a direct correlation between debt and significant deterioration in physical health. Stress related to debt may end up costing you even more money in medical bills.

Limitations on Lifestyle

    If you're carrying a significant debt load, you are compromising your lifestyle to the debt. When you're struggling to repay debt, you can't afford to save, invest, or do the things you enjoy.

Other Potential Consequences

    If your consumer debt becomes too unmanageable and you default, you may end up facing lawsuits from your creditors or bankruptcy.

Sunday, June 16, 2002

What to Know About Credit Counseling

Credit counseling involves instructing and educating individuals on how they can avoid taking on excessive debt that that they are not financially prepared to repay. Trained professional credit counselors, who are usually certified, work independently or for credit counseling organizations to assist people in paying off credit cards and other debt. Credit counselors teach people financial fundamentals as well as how to properly budget and manage their money.

Function

    Most credit counseling services involve certified counselors who help people negotiate with their creditors to create a debt management plan (DMP) designed to eliminate their debts. Generally, DMPs are formulated to help individuals repay their obligations in a reasonable time period. Most plans consist of lowering the monthly payments in order to make the overall debts easier to manage for individual debtors. Often the interest rate and other fees are also reduced. Usually the debtor sends a check or transfers the funds electronically to the credit counselor, who then makes payment to the creditors. Many credit counseling agencies receive fees from lenders or credit card companies.

Who Can Benefit

    Individuals who are current on their accounts and can pay their obligations usually do not need credit counseling services. In fact, they may be able to approach creditors and negotiate lower interest rates or fees. Typically, consumers who need credit counseling experience one or several of the following issues: 1) inability to pay the monthly minimum on credit cards; 2) receiving constant calls from creditors and collection companies; or 3) routinely late in paying one or more bills. In some case, credit counseling is not a viable option for individuals who have a substantial amount of debt that would take more than five years to pay off.

Counseling Sessions

    Individuals work one-on-one with credit counselors. They usually are required to submit information regarding their income, liabilities and debts. Many credit counseling classes are geared toward introducing people to educational information on a website, or financial management classes near their location. Some may go as far as to recommend counseling to people who may be experiencing personal problems that may be a source of more debt. The credit counselor evaluates the data and helps people fashion a realistic and workable debt management plan based on the information provided by clients and their particular needs.

Effect on Credit

    The effect of credit counseling on your credit depends on the creditor and how the creditor reports the information to the credit agency. Some creditors may report you as late or delinquent until a specified numbers of payments are made according to the negotiated agreement. Others may only add a note to the account. Certain lenders may even look favorably upon borrowers who have completed credit counseling.

Warning

    There are many unscrupulous companies taking advantage of unwitting consumers who are seeking credit counseling services. Avoid firms that request large fees to be paid upfront. Be careful of companies that make unrealistic promises. In addition, know where your payments are going and how much of your money is going to the agency.
    You should seek out firms that are accredited by organizations, such as the National Foundation for Credit Counseling (NFCC) or the Association of Independent Consumer Credit Counseling Agencies (AICCCA).

Is There a Time Limit on Charge Off Accounts?

Charged-off debts never expire. A creditor or debt collector can pursue you for the rest of your life for a debt that has been charged off. Collecting the debt is another issue, however. There are laws regulating how long creditors or debt collectors have to sue you in court for an unpaid charge off.

State Statute of Limitations

    Individual states have laws on debt collection called "statute of limitations." Laws vary by the state, but generally debt collectors have about six years to pursue you in court for an unpaid debt resulting from a charge off. The statute of limitations is important because it limits the most powerful weapon available to a debt collector creditor --- a lawsuit. Without the threat of a lawsuit many people might simply ignore charge offs and bad debts. However, a lawsuit can lead to bank and wage garnishment after the creditor or debt collector wins a judgment in court.

Common Misconception

    A debt that is beyond your state's statute of limitations is considered "time-barred" for consideration by the courts. The laws were established to prevent people from having to worry about debt-related lawsuits forever. However, it is important to note that the debt itself does not expire. You are still considered obligated to pay it, although there may be little that the debt collector can do to collect.

Common Strategies

    Some people with old charge offs simply wait for the debt to expire under their state's statute of limitation laws and for it to be removed from credit reports because of federal laws. The Federal Trade Commission reports that negative credit information more than seven years old cannot be included on your credit report, except for bankruptcy information, which can be reported for 10 years. Example: Your state statute of limitations prohibits creditors or debt collectors from winning against you in court on debt more than six years old. Federal laws require all removal of the information from your credit report after seven years. Some people with a charged-off debt that is nearly six years old might choose to simply wait fo the debt to become time-barred and then to be dropped from the credit report.

Devbt Collector Tactics

    Debt collectors have strategies for resetting the statute of limitations on charged off debts. The statute of limitations clock starts from the date of last activity on a charged off account. As a result any payment activity on the account resets the clock. Even a conversation recorded by the debt collector in which you acknowledge owing an old debt could reset the statute of limitations. Once the account is reestablished a new negative entry can be placed on your credit report and will remain for seven years. These possibilities should be considered when you choose to speak to a creditor or debt collector about a very old debt.

Getting Help

    Contact a nonprofit credit counselor in your area for help on determining if your old charged off debts are beyond your state's statute of limitations. Find a counselor in your area by checking the website for the U.S. Deparment of Housing and Urban Development. There are HUD-certified cousnelors across the country.

Saturday, June 15, 2002

What Does Debt Settlement Do to Your Credit?

Settling a debt could be one of the fastest ways available to eliminate a debt without bankruptcy. While this method is effective, it can also drop your credit score. Once you settle a debt, you will suddenly become less attractive to lenders of all kinds. Before settling a debt on your own or with the help of a company, you need to think about the potential damage you are doing.

Why Debt Settlement Hurts Credit

    The process of debt settlement involves giving a creditor a lump sum amount in exchange for closing out your account. When you settle an account, you can often do so for 50 percent or less of what you owe. This can save you a substantial amount of money, but you are not technically living up to your end of the bargain. When you entered into the debt, you essentially told the creditor that you planned on repaying it in the future. When you do not repay the entire debt, the creditor reports this as a negative on your credit report.

Credit Score Damage

    The exact amount your score will drop after a debt settlement will depend on what it was before the settlement. Higher credit scores are more negatively affected than lower scores. At the low end of the scale, you might expect your score to be lowered by 45 to 65 points, according to MSN. If you had a higher score to begin with, it could drop by 105 to 120 points.

Negative Statements

    Besides the damage to your credit score, settling a credit account can also put negative statements on your credit report. When creditors look at your credit report, they can see the status of each account that you have had for the last few years. When you settle a debt, the creditor may have reported it as "settled" on your report. This will remain on your credit report for the next seven years after it is originally placed on your report.

Debt Settlement Companies

    Instead of settling the debt on your own, you may be interested in using a debt settlement company to help you. When you use a debt settlement company, you will usually pay a fee of the total amount that is settled. One of the advantages of using a debt settlement company is that they can sometimes get creditors to report your accounts as "paid in full." If this happens, you could salvage your credit after the settlement takes place.

Foreclosure Prevention Act of 2008 HR 3221

The Foreclosure Prevention Act of 2008 provides relief for homeowners who are facing foreclosure. The bill provides tax incentives for lenders and first-time buyers to stir slow housing markets and gives states higher limits for bonds to finance low-renters. The bill aims to stabilize the market by slowing foreclosures and provide low- to moderate-income households the opportunity for affordable housing.

Eligibility

    Homeowners must have a Debt-To-Income ratio above 31 percent to qualify for assistance. The amount of money that you spend on debts compared to your gross income determines your DTI. Homeowners seeking assistance must be living in the home, although they can be behind on payments.

Grants

    The Foreclosure Prevention Act of 2008 increases the funding for grants for communities to purchase and rehabilitate structures that have been foreclosed on by lenders. The properties must then be made available for low-income public housing. The initial funding that the FPA provided expired in 2010, but the program continues in 2011 through the Neighborhood Stabilization Program provided by the Department of Housing and Urban Development. Funding is currently provided by the Wall Street Reform and Consumer Protection Act of 2010.

Counseling

    This act provides the funds for homeowners facing foreclosure to receive counseling before it is too late to save their home. Homeowners receive information that shows them how to avoid foreclosure and helps them learn how to manage their money.

Refinancing

    The law provides funds for the Federal Housing Authority to insure refinanced loans for homeowners who qualify for assistance. Loans must be for no more than 90 percent of the homes value so lenders whose refinance loans are insured by FHA must forgive any amount of debt on the current mortgage that is more than the allowed amount.

First-time Homebuyers and Down Payment Assistance

    First-time homebuyers qualify for a tax refund of up to $8,000 depending on the year of purchase. The refund must be paid back in equal installments spread out over 15 years, and is only applicable for homes purchased from 2008 to 2010. Lenders cannot assist buyers with their down payment of FHA loans. The bill decreases the down payment amount for FHA loans to 3 percent.

Credit Counseling Guide

When you accumulate a large amount of debt, you have a number of options that could provide assistance. One of the most commonly used options is credit counseling. Credit counseling is a service that is provided by various debt relief companies and helps you get on a payment plan with your creditors.

Debt Management Plan

    The primary component of the credit counseling process is the debt management plan. The credit counseling company that you work with will help you set up a debt management plan with all of your creditors. This is a plan that involves you making a monthly payment to the credit counseling company. The credit counseling company will then take your money and distribute a portion of it to each of your creditors in the plan. The debt management plan could last five years or more depending on your situation.

Negotiating

    When you work with a credit counseling company, they will handle the process of setting up the plan for you. The credit counseling company will negotiate lower interest rates on your accounts in most cases. For example, if you have credit card debt, the credit counseling company will negotiate it down to a more reasonable level. They will also agree on a monthly payment that you will pay each creditor. With this negotiation, the credit counseling company can potentially save you a large amount of money on interest.

Fees

    One of the potential drawbacks of working with a credit counseling company is that you have to pay them a fee for their services. Most credit counseling companies take a monthly processing fee for handling the plan for you. Most of the work that credit counseling companies provide could be done on your own directly with your creditors. You could set up a debt management plan with your creditors if you were willing to negotiate with them. This means that you are paying someone for something that you could do yourself.

Other Options

    When you are in serious debt, it may be to your advantage to consider more options than credit counseling. While credit counseling can help some people, others who have significant amount of debt or low income may not be able to benefit from this process. Instead, you might have to consider filing for bankruptcy and eliminating your debt. Debt settlement is another option that some people choose because it allows them to pay off their debt in a lump sum and save money.

Friday, June 14, 2002

Explanation of Credit Rating Numbers

Explanation of Credit Rating Numbers

From the moment you become and adult and start acquiring credit, you are building your credit score. That score will follow you the rest of your life and influence the majority of your big decisions, such as employment, purchasing a new home and having credit cards.

What Is a Credit Score?

    A credit score is a three-digit number from 300 to 850 developed by Fair Isaac Corporation that creditors use to determine whether they should extend credit to a consumer. The score also helps creditors determine interest rates for loans and mortgages, as well as preapproval deals for credit cards.

Factors That Determine a Credit Score

    The Fair Isaac credit score, or FICO, uses information from the three major credit reporting agencies--Experian, Equifax and TransUnion--to determine a person's credit score. According to the Fair Isaac Corporation, five main categories factor into the score. Thirty-five percent of the score comes from the consumer's payment history, 30 percent comes from the total amount of debt, 15 percent comes from the length of a consumer's credit history, 10 percent comes from newly opened credit, and another 10 percent comes from the different kinds of credit used by the consumer.

How a Good Credit Score Affects You

    According to Experian, the average credit score ranges between 600 and 750. The company considers anything above 700 to be a good credit score. Consumers with a good credit score are often approved for credit, and are likely to receive the best interest rates on loans and mortgages.

How a Bad Credit Score Affects You

    According to Lending Tree, a credit score below 620 is considered "sub-prime." Consumers who fall into the sub-prime category will have a difficult time obtaining new credit. If they do obtain new credit, these offers typically carry high interest rates or other charges, such as annual payments or account maintenance payments.

Improving a Credit Score

    A consumer can improve her credit score over time. The first, and most important, step in improving a credit score is to get current on any debts. From there, the consumer must pay at least the minimum amount due on the debts on time every month. Since payment history is the largest indicator of a credit score, this will have the biggest effect. Consumers also need to focus on paying down their debts. A total debt ratio of less than one-third of the consumer's available credit will have a positive effect on his credit score.