Can Collection Agencies Collect From Children of the Deceased?

When a person dies owing debts, the debts do not go away. However, in most cases the children of the debtor do not have a legal obligation to pay the debts of a deceased parent. For a person with a recently deceased parent who passed away with debt, it is important to understand the laws regarding these debts in order to deal with debt collectors that may make contact about the parent's debt.

Legal Requirements

In general, the only person responsible for paying a debt is the person who acquired the debt. For example, a child does not have an obligation to pay off a mortgage, credit card debt or other outstanding loans acquired solely by a deceased parent. However, if a child co-signed a loan application for a mortgage or a credit card, the child would share responsibility with the parent for the debt.

Debt Payment

Though a child of a deceased person does not have to pay the parent's debt, the debt will likely impact the amount the child inherits from the parent. When a person dies, his estate must use his assets to pay off any existing debt. For example, when a person dies only owning a house but having many debts, the estate may have to sell the house to pay off the other debts. If the person had more debt than assets, then the estate must sell off all of the assets to pay as much of the debt as possible. In this case, there will not be any assets for the executor to distribute to the children or other heirs.

Collection Calls

Debt collectors may call third parties such as the children of the deceased, but only to gather information on the person responsible for settling a debtor's estate. The collector may ask the third party for the name, address and phone number of the estate executor or other responsible party. The collector may not divulge any information about the debt to any person who is not legally responsible for paying the deceased debtor's bills.

Reporting Abuse

If a collector continually calls a child who is not responsible for a deceased parent's debt about the debt, the child may take action against the collector. The child should send a letter to the collector explaining that she does not have an obligation for the debt, provide contact information for the executor of the estate and demand that the collector stop further contact with her. If the collector continues to call, the child should report the collector to the Federal Trade Commission or her state's Attorney General. A person can also hire an attorney to sue a collector for harassment.

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What Is Debt Mediation?

Consumer debt stands at a collective $2.4 billion as of October 2010, according to the U.S. Federal Reserve. This represents an increase of 1.7 percent from the year previous. Many Americans find themselves over their heads in debt. Fortunately, you have options other than filing for personal bankruptcy. Debt mediation is one way to get yourself back on the road to financial solvency.

What is Debt Mediation?

Debt mediation allows you to sit down with your creditors and come to a mutually beneficial agreement about how to pay off your debts. This is done either individually or with a debt mediation service. The latter can help you get a better settlement, but it isn't done for free. Much of what you save can be lost in charges levied by the debt mediation company that helps you.

How Does It Work?

Debt mediation works by lowering your interest payments to the concession rate (lowest rate offered by the credit card company) and coming to an agreement on what level to reduce principal to. You also consolidate your debts into one monthly payment, paid into a trust account, that the debt mediation company then pays out to your creditors at the agreed upon rates. This payment is pegged to a time frame, usually between two and three years. This allows you to know when you will be out of debt and to tailor your monthly payment to that calendar.

How Is My Credit Rating Affected?

One downside of debt mediation is that your credit rating will initially take a turn for the negative. You have shown future creditors that you have borrowed more than you can pay back. Still, once you start making regular payments, you will see your credit rating improve. Your credit rating will see significant improvement once you have paid off your debts. Debt mediation allows you to turn negative spots on your credit into positives.

What Do I Look For in a Service?

With many scams out there, it's important to know what to look for in a debt mediation service. The most important factor is the service's history -- What kind of settlements has it gotten for other clients? You can also look at its reputation in the debt mediation community, including professional organizations such as the American Association of Debt Management Organizations and the National Foundation for Credit Counseling. You can also see what the Better Business Bureau has to say about your potential mediator.

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How to Calculate an APR Interest Rate

To calculate the annual percentage rate, or APR, on a loan, the lender or borrower must know the length of the loan and the number of payments to be made over the period of the loan. Note the amount of each payment. Apply a simple formula to those figures for the APR. Note that on some loans the APR can be lower than the effective interest rate because of compounding.

Instructions

1

Use the example of a $100,000 loan for 30 years with payments of $700 a month. Multiply the monthly payment, $700, by the number of monthly payments over the life of the loan, or 360 for the 30-year period. The answer is $252,000, the total paid over the life of the loan.

2

Divide that total, $252,000, by the original amount of the loan, $100,000. The answer is 2.52. Move the decimal point two places to the right to covert that number to a percentage. In this case, it's 252 percent over the life of the loan.

3

Divide 252 percent by the number of years in the loan, in this case 30. The answer is 8.4 percent in this example, which is the annual percentage rate, or APR.

4

Understand paying points. On many mortgages, the buyer will also pay "points" up front. For example, the buyer may have paid three points, or 3 percent of the $100,000, for $3,000. To get the APR, add the $3,000 to the original loan amount of $100,000, making it $103,000. Repeat the process above.

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Is Compromised Debt Taxable Income to an Estate?

An estate is the total amount of property owned by an individual. While an estate may be referred to while an individual is still alive and in possession of all of his property, it is a more common legal term when an estate needs to be created for assets after the owner has died, or if the assets pass beyond the owner's control, such as in a bankruptcy. Most of the debts that the individual had, including debts associated with the government, pass on to the estate as well.

Compromised Debt

Compromised debt is literally debt over which a lender and debtor have reached a compromise. This often means that the debtor cannot make payments on the original terms of the loan, so the lender agrees to change it in order to recover at least some of the money owed. A common solution is debt forgiveness. The lender agrees to forgive a portion of the principal owed by the individual to make the debt more manageable. The new terms then apply to the loan for the rest of its life.

Income Tax Creation

Forgiven debt during a compromise falls under an unusual category. While the debtor does not actually receive money, it negates a debt that would have otherwise been paid, and the IRS considers this to have the same effect as receiving income. As such, the individual must pay taxes on it according to the proper income tax level. Government taxes are one of the most important obligations that follow an estate if the individual that created the obligation died.

Exemptions

There are many exemptions to this income tax from compromised debt. Government programs allow tax-free forgiveness for home loans during times of economic stress. Also, if the individual filed as insolvent -- usually accompanied by a bankruptcy -- then the tax is no longer applicable for the forgiven amount. Also, debt forgiveness directly associated with a bankruptcy, certain types of farm debt, debt from various disasters and other discharges of debt do not incur the tax at all.

How Forgiven Debt is Counted

How the forgiven debt is counted by the IRS can also make a difference as to how it is treated when it comes to income tax. For example, in the late 1990s in Tennessee, an estate had taxes incurred from the forgiveness of debt that was treated as a dividend by the estate. The estate had to pay federal income taxes according to the dividend rates, but the amount did not qualify for Tennessee state income taxes. These situations change from state to state and often case to case, based on the specifics.

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Next Step for People Who Failed at Debt Consolidation Programs

Debt consolidation may have seemed like the answer to your financial problems when you applied for it, but fighting debt with even more debt may have proved you wrong. By making a firm commitment to paying off your debt, you have the ability to dig yourself out for good. However, it's a matter of reorganizing the entire structure of your spending habits to accommodate larger contributions to reducing debt.

Budgeting

Many people fail at debt consolidation because of their inability to reduce spending. Think of your budget as a plan for where your money will go each month. Start off by noting everything you spend money on each day for a week, then multiply your total by 4.3. This new total will give you a good estimate of what you spend monthly on out-of-pocket expenses. Add in your rent or mortgage, utilities and other recurring monthly bills. Then, look objectively at where you're overspending and how you can cut back. The money you save will then be contributed to your debt.

Credit Counseling

As much as 70 percent of those who use debt consolidation end up with the same or more debt within two years, according to a Bankrate article by Jenny McCune. To get to the root of your financial problems, it's important to work with an expert who will assist you in understanding and improving your financial habits, help to create a reasonable budget and provide you with options for paying off your debt, such as a debt management plan.

Debt Management Plan

Only credit counselors have the authority to approve you for a debt management plan. Under a DMP, your counselor contacts your creditors to arrange for lower interest rates or payoff balances for your debt. The counselor formulates a payment plan with a specific end date, generally 48 months or longer from the start date. You then make regular payments to the credit counseling organization each month, which in turn pays your creditors.

Considerations

With the abundance of companies calling themselves credit counselors, it may be difficult to differentiate the legitimate organizations from the frauds. It's important to choose the right credit counselor to avoid paying high fees and scams. The National Foundation for Credit Counseling lists only reputable credit counseling organizations on its website.

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How to Settle My American Express Credit Card Account

While debt settlement is becoming an increasingly popular way for consumers to eliminate outstanding debt, each credit card issuer handles debt settlement differently. If you have a delinquent account with American Express and are considering approaching the creditor with an offer for debt settlement, there are several steps you must take to ensure your effort is successful.

Instructions

1

Contact American Express to verify that the creditor is still the account owner. While the charge-off period for most credit card issuers is around six months, American Express may charge off your account as early as 90 days, depending on the type of account. Your account will then be assigned or sold to a third-party collection agency. If the account has been assigned, you may be able to deal directly with American Express. If it has been sold, you may have to deal with the collection agency instead.

2

Calculate your settlement offer. Settlement offers may be as low as 35 percent of the outstanding balance or as high as 75 percent. How much a creditor will accept depends on the amount of the balance owed, how delinquent the account is, the account holder's credit profile and who the credit issuer is. American Express has a reputation for being difficult to negotiate with so it may be best to calculate a range of offers from low to high, with high being the absolute most you can afford to pay. This way, you have a counteroffer prepared if your initial offer is rejected.

3

Draft your settlement proposal. You may choose to contact your creditor via telephone or through registered mail. If you choose to mail your proposal, include your name, account number, the total outstanding balance and the amount of your offer. You may choose to include information related to your financial situation or an explanation of why your account became delinquent. Avoid embellishment and keep it simple. Explain to the creditor why accepting your offer will benefit you both, and ask for a written acceptance if they agree to your terms.

4

If your offer is accepted, then contact the company to make payment arrangements. Payments should be made via money order, certified check or wire transfer. Never give a creditor direct access to your bank account information. Before you make your payment, ask the company to send you a written verification of their acceptance of your offer. This should include the amount the account is being settled for, the payment schedule and how the account will be reported to the credit bureaus.

5

If your offer is rejected, you may choose to make a counteroffer, increasing the amount of your settlement according to your earlier calculations. Draft a second proposal letter, stating the new amount of your offer and reiterating your good faith intention to pay at least a portion of the debt. Again, state your reasons for why accepting the offer will benefit them and request written acceptance of your proposal. If your offer is again rejected, then you may need to wait before contacting the creditor again. Persistence is key.

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How Much Does an Employee Have to Earn to Garnish Wages?

An employee has to earn at least 30 times the current federal minimum wage in a week before a creditor can garnish his wages. Anything the employee earns over 30 times the federal minimum wage is subject to a maximum 25 percent creditor garnishment. Different garnishment rules apply to federal student loans and past due child support.

Garnishment Calculations

To calculate whether an employee earns adequate wages for garnishment, multiply the current federal minimum wage by the number 30. This will give you the minimum amount an employee must earn before a garnishment is allowable. If, after taking out state and federal tax deductions, the wages earned are equal to 30 times the minimum federal wage, the employee's wages are not subject to garnishment. Any wages earned over 30 times the minimum federal wage are garnishable.

Creditor Garnishment Maximums

If the employee's wages are subject to garnishment from a creditor such as an unpaid credit card bill or car loan, then the maximum percentage garnishable is 25 percent of the employee's disposable earnings. Disposable earnings calculations allow for state and federal tax deductions from gross earnings. If the employee has voluntary deductions such as group health insurance, short-term disability or long-term disability, these are not allowable deductions from gross earnings for garnishment purposes.

Back Child Support Maximums

The garnishable wage limits of 30 times the federal minimum wage applies to back child support payments or child support arrears, but the amount garnishable is not limited to 25 percent. If the employee is currently supporting a spouse or children, then 50 percent of his disposable earnings are garnishable to pay past due child support. If the spouse is only supporting herself and has no other spouse or children she is supporting, then the maximum amount of her wages that are garnishable is 60 percent.

Federal Student Loan Maximums

If the employee defaults on his federal student loans, the maximum allowable garnishment percentage is 15 percent of disposable earnings. Unlike creditor garnishments and child support orders, the U.S. Department of Education does not need a court order to garnish wages. The garnishable wage amount of 30 times the current federal minimum wage still applies to federal student loan garnishments. However, if the employee has other garnishments, the total percentage of garnishment amounts cannot be more than 25 percent of disposable earnings.

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How to Cope With Debt When You Are Laid Off

Strategy is key when you are laid off from your job. You have to figure out ways to pay your bills since you will no longer receive regular paychecks. Sadly, some of your debts may become delinquent as you struggle to pay bills from available funds -- from savings, a severance package, investments or proceeds from selling personal property. Yet, if you make wise decisions with the money you do have, you'll be doing the best you can in your situation.

Instructions

1

Calculate how much money you have available. Look at your savings account balance, severance pay, investments you can cash in, and possessions you can sell for a profit. Record the amount in a safe place.

2

Get rid of any non-essential services, such as cable or satellite television and movie rental or health club memberships. Look for ways to trim your monthly expenditures so you can conserve money.

3

Allot your funds to pay your living expenses first -- food, utilities, mortgage or rent -- to secure those basic necessities. Use part of the remaining funds -- if any -- to make payments on secured loans -- such as a vehicle loan. If you don't make the payment, the car will eventually be repossessed by the lender. You can call the lender and request a deferment of your payment if necessary.

4

Pay only the minimum amounts on your unsecured debt, such as credit card accounts. This is not the time to try to pay extra on your debt. If you can't pay the minimum amounts, call your creditors and request assistance. Creditors will sometimes reduce your payment or work out some other reasonable plan with you if you are experiencing hardship.

5

Monitor your funds to make sure you know how long they will last without income from a job. Consider taking on two part-time jobs or a job that pays a salary less than what you were making, just to receive some income to help pay bills.

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Consumer Credit Act of 2005

The Consumer Credit Act of 2005 (H.R. 3492) sought to amend the Truth in Lending Act to prohibit creditors from raising annual interest rates to consumers based on adverse information gathered from credit reports. According to Bankrate, credit card companies could raise interest rates based on late payments to other creditors, regardless of the consumer's payment history with the credit company itself. AT&T Universal Card, Citibank and Capital One are mentioned as companies that employed this practice.

History

The legislation was introduced for the second time by U.S. Rep. Bernard Sanders of Vermont in July 2005 and was sent to the subcommittee on Financial Institutions and Consumer Credit a month later. In addition to prohibiting the practice of raising interest rates due to late payments to unrelated accounts, the bill sought to expand disclosures to the consumer in clear language and required creditors to notify consumers of any intended increase in rates or imposition of fees. The bill was never passed.

Consumer Protection Act of 2005

The Consumer Credit Act was not passed in 2005, but the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was passed. Although the bill contains the phrase "Consumer Protection Act," it was in fact a bill to benefit creditors rather than consumers. "While U.S. bankruptcy law was very debtor-friendly prior to BAPCPA, it has become much more pro-creditor today," reported the Washington Post. The bill makes it more difficult for consumers to file for bankruptcy and makes it easier for creditors to collect debts.

Descendant of the Consumer Credit Act of 2005

The Credit Card Act of 2009 contained most of the provisions of the previous Consumer Credit Act of 2005. According to Open Congress, the purpose of the Credit Card Act of 2009 closely matched the purpose of the 2005 bill: "To amend the Truth in Lending Act to establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan, and for other purposes." The bill sought to establish transparency in consumer credit practices by eliminating unfair rate hikes and hidden penalties and fees. The bill was passed on May 22, 2009 with bipartisan support, and is now law.

Effects

The Credit Card Act of 2009 requires companies to inform customers of planned rate increases and fees, mandates set payment dates, limits penalties for exceeding credit limits, and requires clear explanations of charges on billing statements. These provisions fulfill the earlier goals of the Consumer Credit Card Act of 2005. In addition, the 2009 law cracks downs on deceptive marketing to young adults obtaining their first credit card and bans the practice of double-billing (using the average balance over past two billing periods rather than the actual previous balance).

Interest Rate Limits

Sen. Bernie Sanders, the original sponsor of the Consumer Credit Act of 2005, sought to put a limit on interest rates that credit card companies can charge when the 2009 legislation was being debated. "When banks are charging 30 percent interest rates, they are not making credit available...they are engaged in loan-sharking," he told the New York Times. Sanders was unable to garner the votes to include this provision in the 2009 legislation.

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Can Your Household Items Be Seized for Credit Card Debt?

No credit-card company or collection agency can take your property unless it files and wins a lawsuit against you. While it is possible that a creditor could seize some of your household items to satisfy your debt, it is more likely to go after liquid assets such as your wages and your bank and investment accounts.

Unsecured Debt

Unsecured debt is not "backed" by your personal property as collateral. Credit-card companies don't automatically have the right to seize your assets if you get behind on your payments, but must successfully sue you first. Once they win a court judgment, they can take aggressive action to persuade you to pay the debt.

Judgment Collections

Each state sets its own laws on what a judgment creditor can take from you in order to satisfy a debt. In most states, a judgement creditor can garnish your wages or seize your bank and investment accounts. The law may also allow a judgment creditor to seize some of your personal property so that it can sell the items and recoup what you owe, though there are usually significant limits on the types of items that they can seize. As a practical matter, most creditors won't seize household goods unless you own things of very high value. Selling smaller items off at a sheriff's auction just isn't a cost-effective way of collecting a debt.

Personal Property Exemptions

The types of personal property and household items exempt from seizure differ from state to state:In New York, creditors can't seize furniture, clothing or kitchen appliances and must leave behind one television. In some states, a creditor can technically seize such items, but only if their value exceeds a state-mandated exemption. For most creditors, trying to assess the value of household goods before seizing them isn't worth the trouble.

Stopping a Lawsuit

While a creditor usually can't seize your toaster, its still a good idea to avoid getting sued by a creditor. A court judgment can really hurt your credit and, as long as it remains unpaid, credit bureaus can report it until the statute of limitations on judgment collections runs out, which in some states can be 20 years or more. Never ignore communications from debt collectors or creditors: Many will work with you to set up a payment plan that can keep you from having to go to court. If you are in serious financial trouble, contact a credit counselor or bankruptcy attorney to learn about legal options for managing your debt. If you act quickly, you can stop a credit-card company or collector from filing a judgment and the resulting damage to your credit report.

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Can You Legally Remove Items From Your Credit Report?

If you've got negative information on your credit report, known as derogatory items, you may be able to remove them, thanks to the Fair Credit Reporting Act. This act gives you access to a free copy of your credit report and requires that credit reporting agencies provide easy-to-understand instructions to challenge negative information on your report.

The Credit Reporting Agencies

Three companies collect information about your credit and distribute it to potential lenders. They are Equifax, TransUnion and Experian. Visit their websites to obtain a free copy of your credit report at least once annually. You can check your score more often using a paid service. Each credit reporting agency provides the same basic information.

Your Credit Report

When you receive your credit report or gain access to it online, check it to make sure all of the information on it is correct. Your credit report will contain data about you, such as your name, current address, previous address, current employer, previous employer and social security number. Your report will list current and past lenders, including credit card companies, mortgage lenders, auto lenders, retail stores and other business where you've used credit. Check to make sure your credit history is accurate.

Derogatory Information

In addition to listing your credit accounts, your credit report will tell potential lenders how you managed your credit. Each credit account which show your payment history. If you have any late or missed payments, that information will show up under the account or accounts connected with those payments. In addition to this information, your credit report will contain information about any bankruptcy, liens, debt consolidations, collections or defaults you have.

Removing Derogatory Items

You may only have incorrect information removed from your credit report. If you missed a payment or have a bankruptcy, you may not have that removed. If there are special circumstances regarding a derogatory item on your report, you may leave a comment that lenders will see when they pull your credit report. To remove incorrect information on your credit report, follow the instructions on the credit reporting agency's website to have it begin an investigation. A derogatory item may not appear on all three of your credit reports, so check each one separately and report each one separately. You should receive a response to your investigation within 30 days. If the reporting company declines to remove the item you've requested be removed, you may have it marked as a disputed item and add a comment concerning it, or file a lawsuit.

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Salary of a Psychiatrist Assistant

Psychiatric aides, also known as psychiatric assistants, help care for people who suffer from emotional disturbances or mental impairment and are under the treatment of a psychiatrist. For example, they may help the patient eat or bathe. The typical salary earned by such an assistant can vary widely depending on factors such as his place of employment or place of residence, though several general averages emerge on a national level.

National Average

The typical annual salary earned by a psychiatric assistant rings in at $27,430, according to the 2010-2011 edition of the U.S. Bureau of Labor Statistics' occupational handbook. If you break this annual salary into hourly increments, the assistant makes $13.19 on average an hour. In 2009, an estimated 62,610 women and men in America worked in this occupation. The bureau estimates that this will jump up to slightly more than 66,000 by the year 2018.

Top Three Employers by Employment Numbers

Not surprisingly, psychiatric hospitals employ the biggest number of psychiatric assistants in the nation: 38 percent of all psychiatric assistants. In such a hospital, the assistant can expect to earn an annual wage of $28,730, or $13.81 an hour. Residential mental health facilities follow in terms of employment size and pay $22,880 on average, followed by general hospitals, where assistants bring in $29,020 on average.

Top Three Employers by Salary

On an employer level, psychiatric assistants working at general medical hospitals earn the highest average of $29,020, or $13.95 hourly. That's almost $2,000 more than the national average. Psychiatric hospitals, at $28,730, rank second, very closely followed by nursing homes at $28,620.

States by Psychiatric Assistant Concentrations

With almost five psychiatric assistants out of every 1,000 employees, Mississippi hosts the highest concentration of this job demographic. In the state, the assistants earn an average of only $18,890 -- significantly lower than the national average. Maine ranks second in employee concentrations, and pays an average of $29,100, followed by North Dakota at $25,290.

States by Salary

Moving to the state of Massachusetts to take on a psychiatric assistant job could be a smart move. There, they earn an average of $40,190 -- almost $13,000 more than the national average. Alaska ranks at a close second at $39,930, followed by the District of Columbia at $37,940.

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Verification of Employment for Collections

A collection agency benefits from knowing where you work. In the event the company ever files and wins a lawsuit against you, knowing where you work enables the collection agency to serve your employer with a legal order forcing it to garnish your wages for the debt. Collection agency polices differ by company, but debt collectors utilize a variety of methods -- both legal and illegal -- when verifying your employment status.

Post-Judgment Interrogation

If your state allows creditors to conduct post-judgment interrogations and a collection agency recently won a lawsuit against you, it can send you a summons requiring your presence in court for a post-judgment interrogation. During the interrogation, a collection agency representative can question you about your finances and your employer. You must answer the questions honestly or risk the judge holding you in contempt of court.

Account Documentation

Collection agencies buy debts from other companies. In some cases, the price of an account depends upon the amount of information that comes with it. If you listed your employer when you filled out your application with the original creditor and remain employed by the same company, a collection agency that pays extra for a fully documented account will receive this information. A debt collector only needs to contact the employer listed to verify whether or not you still work there.

Skip Tracing

The collection agency can attempt to locate your employer through a process known as "skip tracing." Skip tracing involves using publicly available information to locate an individual. Pulling your credit report is one skip tracing method a collection agency can use to locate your employer. Because the company has a valid financial reason for needing access to your credit records, the Fair Credit Reporting Act notes that it can access your credit history without your permission. Credit records sometimes, but not always, contain employment information.

Reviewing your credit report isn't the only skip tracing option available to debt collectors. Collection agencies occasionally hire an independent third party, such as a private investigation firm or professional skip tracer, to track down errant debtors' employers.

Illegal Calls

The Fair Debt Collection Practices Act allows debt collectors to contact your family members by telephone, but a collector may only do so once and only if the company needs to locate you to initiate collection activity. If a debt collector is desperate to find out who you work for, he may call your family members and ask -- even though doing so is against federal law.

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How to Get a Bank Account With Bad Credit History

Opening a bank account with a bad credit history can be difficult. These instructions will help you to open an account--even with a negative credit file.

Instructions

1

Obtain a copy of your credit report and correct any inaccuracies in your credit file. A low score can sometimes be the result of errors on your report.

2

Obtain a copy of your ChexSystems report. Some banks do not check credit history--but they will check ChexSystems. If you have a negative history with a bank, try to settle your debt. Sometimes banks will let you re-open a closed account if you pay what you owe.

3

Open a savings account. These days, savings accounts are able to facilitate as many transactions as does a checking account, minus the checks. Most savings accounts can receive direct deposits and may offer an ATM card. After maintaining your savings account for a little while--even with a negative credit history--some banks will allow you to open a checking account.

4

Open a checking account at a local credit union. Credit unions usually have more relaxed standards than do traditional banks. To open an account at a credit union, you may only need to open a savings (or shared) account first.

5

Open an account with a bank affiliated with your employer. Direct deposit has become more popular and many workplaces have special arrangements with banks to open accounts. Check with the human resources department of your employer for more information.

6

Open an investment account. Many investment banks (such as Fidelity and Merrill Lynch) will open a banking account for you, without a credit check, if you have investments with them. This approach will have a higher start-up cost because you many need to invest as much as $1,000 in an investment account, but it is a way to avoid undergoing a credit check to open an account.

7

Open a prepaid Visa/MasterCard account. These debit cards are backed by accounts that function just like a banking account. You will be able to accept direct deposits, mail in deposits and make ATM transactions.

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Medical Debt Recovery

A hospital or physician's office's first attempt at collecting payment for your medical debt is directed to your insurance company. If you do not have insurance or your insurance company doesn't cover the full amount you owe, your healthcare provider will pursue you for payment.

Facts

A healthcare provider may call you at home or at work and send you written reminders that you have yet to pay your overdue debt. This is often enough to elicit a payment from some individuals. If you do not pay the bill directly to the healthcare provider or work out a payment plan, the hospital or doctor's office will likely sell the debt to a collection agency.

Significance

A collection agency may report the debt to the credit bureaus, causing damage to your credit score. It may also sue you. If the creditor wins its lawsuit, it may petition the court to grant it permission to garnish your wages and bank accounts. In some states, a collection agency can even place a lien against your home after winning a judgment against you.

Misconceptions

Many individuals believe that healthcare providers cannot provide collection agencies with their personal health information since the sharing of such information with third parties is strictly prohibited by the Health Insurance Portability and Accountability Act (HIPAA) of 1996. This, however, is not the case. HIPAA allows providers to share private medical information when attempting to procure a payment.

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Consumer Credit Debt Solutions

Expensive minimum payments, high interest rates and a lower credit rating are all consequences of debt problems. Paying off debt helps fix a bad financial situation. But if you don't have a lot of extra money in the bank, employing creative methods can help get rid of the debt faster.

Saving Up for Purchases

Credit cards eliminate the need to plan for purchases. You can simply whip out your plastic and buy anything you want. However, impulsive shopping and high debts go hand-in-hand. Solving debt problems will require restraint and a little self-denial. Rather than use credit as a means to satisfy your wants, put away your credit cards and use cash for purchases.

Knocking Down Interest Rates

Get rid of your principal balance on credit cards faster by asking for a lower interest rate. Some credit cards have high interest rates -- perhaps 20 percent or more. With high rates, a large percentage of your payments go to paying off the interest charged during the previous month. Ask creditors to slash your rates, or consider transferring the balance to a low-interest rate credit card.

Minimum Payments

Some people are comfortable paying only the minimum on credit cards each month. These small payments may not impact their personal finances. But if you are serius about solving debt problems, minimum payments are not enough. Higher payments are key to eliminating debt fast. Send triple the asking minimum each month, or use funds from tax returns or bonuses to pay down debt.

Home Equity

Pulling money out of your home's equity and using this money helps eliminate high interest debt. Home equity options include a loan or line of credit using the equity as collateral, or refinancing the mortgage loan with a cash-out option. Equity options do not necessarily get rid of the debt. Instead, equity options provide a means of consolidating debts at a lower interest rate. Because consolidating tends to result in a better interest rate, it's possible to pay off your debt sooner.

Get Creative

You don't have to rely on your present income alone to solve debt problems. Often, paying off your balances calls for earning income in addition to your regular employment. It's tiresome working two jobs to pay off your debt balances; however, debt-free living is well worth the sacrifice. Stay focused on the end results and create a plan. If you owe $3,000 in credit card debt, resolve to earn an additional $500 a month to pay off the debt is six months. That breaks down to $125 a week.

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Helpful Hints to Control Credit Card Debt

Credit cards fall into the category of "bad debt," or the type of debt that typically has an interest rate above 10 percent, does not offer any tax benefits and will not appreciate in value over time, according to The Motley Fool. These factors make it necessary to control credit card debt as much as possible through drawing up a budget, debt restructuring and careful planning.

Drawing Up Budget

To even begin to control your credit card debt, you must first draw up a budget of your existing expenses, and not just the ones that involve your credit cards. The Federal Trade Commission advises writing down all your fixed expenses, such as your mortgage or rent, car payment, minimum credit card payments or student loans in one section. Those are expenses that you know will not change or may change only by a few cents occasionally from month to month. Next, write down your fluctuating expenses, such as clothing, entertainment and groceries. Finally, write down the current balances and interest rates of all your credit cards, as well as their required minimum monthly payments. Remember to chart all your sources of income as well, so that you have a clear picture of where your money goes and from where it comes. Make sure you are making more money than you are spending per month. If you are not, you need to adjust your finances accordingly: spend less or find a way to make more.

Credit Card Debt Trimming

Once you know what you make and what you must spend on bills, it is time to begin trimming down your credit card debt. Personal finance author Trent Hamm of The Simple Dollar advises that you hide all your credit cards from yourself, while The Motley Fool advises keeping one or two cards with the best rates and terms in your wallet, then hiding the rest. Whichever solution you choose, the idea is to make it less easy for you to spend carelessly with your credit cards by sticking them in a cup of water in your freezer, stashing them in that dusty box at the back of your attic or anything else that makes them inaccessible. Other ways to slim down your existing credit card debt include using balance transfers to consolidate it into one or two cards with the lowest interest rate, calling creditors and asking for a lower interest rate due to your customer loyalty, and seeking a low-interest personal loan through your bank or credit union. By making it harder for you to spend money, you make it easier to pay your existing debt by not incurring much more. By trimming your interest rates in any way you can, you potentially save yourself money and time.

Debt Repayment Planning

Trent Hamm suggests that there are two main ways to go about this: through personal finance author Dave Ramsey's "Snowball" method, or through Hamm's fastest method. Using Ramsey's "Snowball" method, you first pay all your minimum credit card payments each month. Then, with whatever money you have left over, you make a single big payment to whichever credit card has the lowest balance. This allows you to more quickly feel accomplished because that lowest balance will disappear quite quickly. Hamm's method works similarly, but starts from the other end of your debt: you pay that extra money toward the card with the highest balance, rather than the lowest. While you will not feel that sense of accomplishment as soon as with Ramsey's method, it will save you money and time in the long run. Which method you choose depends largely on personal preference, but both will work if you stick to them.

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How to Pay Off a Home Equity Line of Credit

Home equity lines of credit have become quite popular. You can borrow whenever you need money and deduct the interest on your income taxes. However, this debt can become a burden, especially when the interest rate increases (see Reference 1). Make paying off your home equity line of credit a priority so that your financial future becomes more secure. If you plan carefully and allocate your money properly, you can get out from under this burden of debt.

Instructions

1

Make certain that your home equity line of credit (HELOC) does not carry a pre-payment penalty. If you do not know, contact your lender.

2

Make a list of all your loans, including credit card debt, your HELOC and other consumer loans. "Making the Most of Your Money Now" author Jane Bryant Quinn suggests writing down the interest rate, lender and debt amount. Quinn says you should pay off the debt with the highest interest first, usually credit card debt. Tackle your HELOC only when higher cost debt has been retired.

3

Cut your regular spending and put the savings on your HELOC every month. You will need discipline, but you can cut back on optional expenses in every category, such as dining out, fancy groceries, entertainment, cable, phone and clothing. You do not need to cut any category to zero. Eat out less often, use coupons and shop in your closet. Switch to antenna TV or basic cable. Finance author Ric Edelman calls nearly all expenses optional (see Reference 2.). Choose where you can cut back and put the savings on your line of credit each month.

4

Locate money to make a large lump-sum payment to reduce your home equity line of credit debt. Jane Bryant Quinn suggests selling stocks, taking money out of savings or hosting a yard sale. You could also sell larger items such as excess furniture, a camper or a second or third car. Put the proceeds on your debt. Quinn does not recommend jeopardizing your future by taking money from retirement accounts (see Reference 2.).

5

Use your income tax return, bonus or other windfalls to help pay down your line of credit. If you feel deprived, spend a small portion to reward your progress. But put most of the windfall on your debt.

6

Keep yourself motivated by charting your progress and displaying it in a prominent place, as Quinn suggests (see Reference 2). If you stay disciplined, you can pay off your home equity line of credit completely.

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Debt Collection and Legal Rights

Having bills that are in collections is a stressful situation. Not only do you have the stress of not being able to pay your bills, you also have to deal with another group of people that will be contacting you regularly and asking you when you plan to pay, even if you don't owe the bill. The Fair Debt Collection Practices Act (FDCPA) defines the legal rights you have when dealing with debt collectors.

Covered Debts

The FDCPA applies specifically to debts that are being handled by a third-party collector and not by the original creditor. Many states have passed stricter laws that apply the provisions of the FDCPA to the original creditor. Some courts have also interpreted that the FDCPA applies to original creditors as well. Most creditors play it safe and abide by the provisions of the act to protect themselves legally.

Contact

The FDCPA defines guidelines for contact that debt collectors can have with you. Generally, debt collectors cannot contact you before 8:00 a.m. or after 9:00 p.m., unless you tell them otherwise. You also have the right to tell the collector that she may not contact you at work. If you have a lawyer, a collector must talk with him about the debt, but he cannot talk to anyone else specifically about your debt. Collectors may contact other people, such as family members or neighbors, to find out where you live or how to contact you. Collectors must also stop contacting you if you tell them in writing not to do so.

Prohibited Practices

Collectors cannot harass you. This means that they cannot use the telephone repeatedly to annoy you. Collectors cannot threaten you with harm. They also cannot use obscene or profane language. Collectors cannot make false claims, representing who they are or how much you owe. They cannot say that they are sending you legal forms when they are not or vice versa. Collectors cannot threaten you with arrest or say that they will seize your property or wages unless they are legally allowed to do so. They cannot charge you any unlawful fees, and they cannot deposit a post-dated check early.

Recourse

If a debt collector has violated the FDCPA, you can take action against the collection agency. You can sue the collector in federal or state court for damages. These damages include lost wages and medical bills. The court can order the collector to pay you up to $1,000, even if you cannot prove that you have suffered any damages. You may also be paid for your legal fees and court costs. You can also report violations to your state attorney general's office or to the federal trade commission, and they may pursue action if they choose to do so.

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Retirement Garnishment

Garnishment is an involuntary collection process by which a creditor may seize certain forms of income when an individual fails to pay a debt. Most creditors cannot legally garnish debtors without first having a court order allowing them to use garnishment as a debt recovery tool.

Facts

Some forms of income, such as Social Security benefits and retirement pensions, are immune from garnishment by most creditors. Because the majority of the income most retired persons receive qualifies as exempt from garnishment, creditors are often unable to use garnishment effectively against retired individuals.

Significance

Funds that are exempt from most creditors aren't exempt from the federal government. Thus, a retired individual who owes a government debt, such as back taxes, may lose a portion of his retirement pay or federal benefits. In addition, the government may withhold tax refunds as payment for any federal debt.

Considerations

Bank account levies occur when creditors garnish the funds an individual holds within her bank account. In order to prevent creditors from seizing exempt funds, a debtor must notify her bank of the types of exempt funds contained in her account and the amount that is exempt.

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What Type of Credit Information Would Keep Me From Getting a Job?

Employers are always looking for new ways to better screen job applicants. When resumes, interviews and references are not enough, an employer may look to your credit report to see if you are worthy of a position in the organization. Some job candidates are even finding out that a less than pristine credit history can be the factor that prompts the employer to disregard the application and send a notice of rejection.

Money Handling & Monitoring Jobs

For jobs requiring direct handling of money or profit and loss responsibility, many employers will look at a credit report for activity that may indicate irresponsible financial behavior or tendencies. Employers may be hesitant to hire you to make financial decisions within an organization if you have a history of poor financial management, charge-offs and late payments.

Company Policy

In some cases, an employer simply has a policy requiring a certain credit score or the absence of negative remarks for you to be considered for employment. Some universities have a policy of not hiring applicants for professorships if student loans are still outstanding or in default. Companies are allowed to cite poor credit reporting as part of the reason for not hiring or terminating employment, but only if you agree in advance to having your credit report screened.

Focus on the Job

If your credit report is laden with wage garnishments, judgments and late payments, the employer may question your ability to focus on the job. Additionally, the employer may consider that the salary that would be available for the position may not be adequate to cover these obligations. An employer may also be concerned about the paperwork and additional administrative workload involved to garnish wages. This may lead an employer to choose a candidate with a clean history for the job, since bringing him on board would require fewer headaches.

Rules Apply

There continues to be great debate about the employer's ability to use a credit report in the hiring and firing of employees. Fortunately, there are rules that protect the employee in the event the employer wants to use information on the credit report to make an employment-related decision. The employer must request and be granted permission from the employee to check the employee's credit and the employee must be notified if any of the information from the report was used in making an employment-related decision.

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How to Legally Get Out of Debt

A number of people have an excessive amount of consumer debt, including credit cards, lines of credit, automobile loans, home equity loans and mortgages. Having too much debt can be painful and create a life of stress and anxiety. You can, however, get out of debt legally and start all over again with a clean slate. There are several methods you can use---some are faster, more efficient and more effective than others. When you're faced with several debt-reduction plans, choose the one that best helps you achieve your goals and objectives.

Instructions

1

Contact a bankruptcy attorney and file a chapter 7 bankruptcy. Once you've filed, your attorney will let you know which personal items and property are exempt and don't have to be included in the bankruptcy. All of your unsecured debt will be wiped out. If you have any debts that are secured, such as an automobile or a home, a bankruptcy will not erase the liens. You can still get out of this debt by surrendering the property to the auto lender and the mortgage company. They'll sell the items and apply the proceeds to your debt. Any balance remaining will be discharged through the bankruptcy court and you won't be responsible for paying it. This will complete the process.

2

Make a note of those items that can't be discharged through bankruptcy such as taxes, child support, alimony, loans obtained through fraudulent measures, condominium and association fees, tax liens, debts incurred due to malicious injury, student loans, fines and penalties owed to government entities, and debts and judgments you incurred while driving a motor vehicle or aircraft while you were under the influence of drugs or alcohol. Check with your attorney for a full list.

3

Settle your debts (you may be able to settle your debts with your creditors). If you can arrange to settle for 20 to 40 percent of the balance, this will help you get out of debt very quickly. Be aware, however, that debt settlements can remain on your credit file for seven years and negatively affect your credit score.

4

Don't pay your debts. This measure is extreme because of its consequences. First, your credit will be ruined and it will be difficult to purchase an auto, another home or any other credit-based products. You may find that some creditors will start legal action and seek a judgment. Once a judgment is obtained, a creditor can garnish your wages, levy your bank account, and, in some cases, file a lien on your property. On the other hand, if you have no assets, no money, no home, car and no banking account, creditors won't be able to get anything from you.

5

Wait for the statute of limitations to pass. Each state has a different time frame for statute of limitations. Once the statute of limitations has passed, a creditor can still attempt to take you to court, but if you show up for court and show proof that the statute of limitations has passed, the creditor cannot win a judgment against you (the court will not rule in the creditor's favor). If you miss the court date, the creditor will win a default judgment even though the statute of limitations has passed (the creditor can send letters and make phone calls to you). If the seven-year time frame has not passed, this debt will still appear on your credit report.

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How to File for Bankruptcy After a Foreclosure Is Granted

Filing for bankruptcy during a foreclosure process can help you avoid losing your home -- but you must file before the foreclosure has been completed, or granted. Once the foreclosure becomes official, the bank or lender owns the house, and a late bankruptcy filing won't reverse that. Legal website Nolo.com reports that a bankruptcy filing before the foreclosure could immediately stop the foreclosure proceedings, allowing you time to restructure your debt and possibly save your home with the help of the bankruptcy courts.

Instructions

1

Make an appointment with a bankruptcy attorney -- immediately. According to Nolo.com, laws regarding bankruptcy and foreclosure vary by the state. Your ability to avoid foreclosure through bankruptcy may be determined by when you file according to the laws in your state. Filing early in the process could offer you the most protection and postpone a court-ordered auction of your home for several months. But filing late could provide the lender with legal loopholes for continuing the bankruptcy through additional legal motions.

2

Tell the bankruptcy attorney that you are trying to save your house from foreclosure. Show the attorney copies of correspondence you have received from the lender or the courts, including any notice of a foreclosure lawsuit. Ask the attorney about the bankruptcy process and the legal fees.

3

See a second bankruptcy attorney. Consider even seeing two additional attorneys for additional opinions and advice. Initial consultations are often free. After the interviews hire one of the attorneys -- once you are convinced that filing for bankruptcy could prevent you from losing your home according to the laws in your state..

4

Take a mandatory pre-bankruptcy counseling session required by the bankruptcy courts. The Federal Trade Commission reports that people filing for bankruptcy are required to sit through a counseling session lasting about 90 minutes. During the session the counselor will discuss the pros and cons of bankruptcy as well as alternative to bankruptcy -- and foreclosure. The counseling sessions are available from government-certified credit counselors. Find a counselor near you by searching the U.S. Trustee database (see Resources).

5

File for bankruptcy after completing the counseling session and receiving a certificate of completion. Nolo.com reports that Chapter 13 bankruptcy is the most popular form of bankruptcy for avoiding foreclosure. The filing fee for Chapter 13 was $274 in 2010, with attorney fees additional. Once you file for bankruptcy the bankruptcy court will issue a court order, called an "automatic stay," preventing your lender from continuing with the foreclosure. After that, court hearings will be held to restructure your debt and allow you to keep your home.

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My House Is Being Foreclosed: Can My Settlement Money From an Accident Be Garnished?

When you go through a foreclosure, lenders can sometimes come after you for the amount that they are unable to recover through a foreclosure auction. When this happens, the court could issue a judgment in the lender's favor against you. At that point, any money that you have on hand could be fair game to the creditor.

Deficiency Judgments

If you have a recourse mortgage, your lender can come after you in the event of a foreclosure. A recourse mortgage is a loan that allows lenders to take further legal action on top of simply foreclosing on the property. By comparison, with a non-recourse mortgage, the lender can only take back the house and is not allowed to take further action against the homeowner. With a recourse mortgage, after the lender forecloses on your home, it will be sold at a foreclosure auction. If the house is not sold for the amount that you owed on your mortgage, the lender can then sue you for the difference. Once the lender files a civil lawsuit against you, it can obtain a deficiency judgment and come after you for the money you owe.

Collecting the Money

After the lender gets a deficiency judgment against you, several means can be used to try to collect the money that you owe. You will have a certain amount of time after the judgment is issued to pay it. Then if you are unable to pay the judgment, the lender will use other means such as wage garnishment or a bank levy to collect. Wage garnishment involves taking money out of your paycheck directly from your employer while a levy can involve taking your property or money in your bank account.

Levying Bank Account

If you have money from an accident settlement in your bank account, it is fair game for a creditor to claim it in a bank account levy. Once an order for a levy has been issued, the creditor can take most of the money in your account to repay the debt. There are no restrictions about taking money from an accident settlement. Creditors also do not have any limits on how much money can be taken out of your bank account for a levy.

What to Do

If you are faced with this situation, you could lose most of the money in your bank account. To avoid this problem, you could consider working out a payment arrangement with the lender so that he will not simply levy your account. Another option to consider is filing for bankruptcy. If you file for bankruptcy, you can stop any garnishments or levies from occurring. This should only be used as a last resort as it can significantly damage your credit.

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Debt Relief Drawbacks

When debtors use a plan or service to make the burden of debt easier to deal with, this is known as debt relief. Debt relief is a general term that can encompass a number of different strategies, including restructuring, consolidation and settlement. Restructuring is the act of changing the terms of the loan. Consolidation uses a new debt to repay an old, possibly late debt. And settlement offers a large debt payment in exchange for some measure of debt forgiveness. These options may help borrowers, but they also have drawbacks debtors should fully understand.

Credit Problems

A key factor in dealing with debt is credit. Late payments and defaulted accounts are very damaging to credit and debtors should always try to avoid them, even if they are struggling to fulfill their current debt obligations. Unfortunately, many relief options are only available once damage is already done to credit. Lenders are often willing to consider restructuring or settlements once the account has been defaulted and damage already done. This can make it a challenge to fully recover from debt problems.

Debt Consolidation Issues

Debt consolidation uses a new loan to replace older debts that are difficult to pay off. But the new loan may bring troubles of its own. If the new loan has a higher interest rate than the old debts collectively did, it can become even more difficult to pay off. Some organizations offer specific debt consolidation loans or refinances, but these start debt over, creating new periods that will extend debt pay-off farther into the future, creating more interest charges overall.

Tax Issues

Debt settlement is a popular option for older debts that are late and probably will not be paid back. In this case, the lender may agree to accept a quarter or a third of the debt in payment and cancel the rest. This may sound like a good deal, but debtors should keep in mind that the Internal Revenue Service will realize that a debt obligation has been removed. All debt forgiven will count as income for the debtor and create a tax burden that must usually be paid off in the coming tax year.

Lifestyle Issues

Debt relief strategies help fix debt problems. But they rarely help fix debt practices. Unless the debt relief strategy involves some type of counseling, many debtors will continue in the same bad habits that created their debt problems. This perpetuates debt issues long after the payment problems have been taken care of. In this case, debt relief is a Band-Aid that does not solve the budgeting and spending problems that are the root of the issue.

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Scholarship Essay Tips: Educational & Career Goals

A college education costs much more than the average high school senior has tucked away from part-time retail gigs. But higher education is a necessity for long-term career satisfaction and financial security. Personal savings are a start, but many students need loans, bursaries and scholarships to make it through college. Thinking critically about your educational and career goals will help you write the impressive essays you need to win scholarships and minimize your debt load.

Read Questions Carefully

Some institutions ask scholarship applicants specific questions about their educational goals and future career direction, while others are much more general. If the questions are specific, you need to choose an angle in your essay that answers them. For example, if you're applying to engineering and the school's scholarship committee asks "What are the key attributes of a successful engineer? How have you shown these traits in your life so far?", you need to decide on a few important qualities and explain them within the context of your own experiences. You probably don't have the space to discuss other themes that might figure into a more general essay, such as why you find engineering inspiring or what kind of engineer you plan to be after you graduate.

Choose a Theme

Sometimes, essay questions don't dictate specific themes and are more open-ended. For these essays, Ph.D Kay Pearson advises coming up with your own theme in an article on Southfield, Michigan's public school board website. Think of the main thing that you want to say about yourself and your goals. That idea is your theme, and there should only be one or two of them in a scholarship essay. For example, perhaps you want to go to school for science because you want to become a doctor. Your academic dedication and your compassion for others are your two main qualities that make you well-suited to this kind of work. Dedication and passion, therefore, are your two main themes. Discuss your achievements, activities and involvement in a way that links every story to one of your themes. This approach will give your writing a sharp focus.

Show Your Story and Goals

Use descriptive language and imagination to make your passion and goals come alive for the scholarship judges. For example, saying that your long-term career goal is to become a pediatric nurse is great, but linking that objective to a vivid image is better. Talk about how you picture yourself using your sense of humor and a clown nose as you stand by a sick child's bedside. Discuss your plan to treat parents with compassion and explain diagnostic terms in plain language. The same principle applies to explaining past circumstances and accomplishments. As the website Scholarship Help points out, you shouldn't just say that your family struggles financially. Paint a vivid picture of busy days juggling school with your family responsibilities and part-time job.

Show Continuity

Link your future aspirations clearly with past accomplishments to show a clear progression between who you were in the past and what you want to become. For example, if you want to work in journalism, it probably doesn't make sense to focus on your volunteer work at the animal shelter. Instead, talk about your work for the school newspaper and the political blog you write. Discuss how you discovered your passion for writing and an interest in other peoples' stories through participation in these activities.

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How to Fix Credit Health

Your credit report and score determines your credit health. And having bad credit can result in higher finance fees, bad loan deals and credit rejections. You can improve your credit health and become a desirable loan candidate. This requires good credit habits and wise decisions. Once you've reversed a bad situation, you'll be able to walk into any loan office and apply for a home loan or vehicle loan with few hassles.

Instructions

1

Walk away from credit cards. Using credit cards keeps you in debt, and high debts reduce your FICO credit rating. Cut cards in half and only carry cash in your wallet.

2

Begin paying off your credit card balances with higher payments each month. If you routinely send $20 payments each month, increase this amount to $50 or more a month to start knocking down the principal and improving your credit health.

3

Pay debts when they're due to avoid late fees and a damaged credit score. Late payments can ruin your credit score. Always send payments days before the due date to make sure they arrive on time.

4

Use credit counseling to manage your debts if you can't seem to manage your own debts or pay them on time. Send one payment to the counseling agency every month, and the agency will make bill payments to each of your creditors.

5

Visit AnnualCreditReport.com (see Resources) to retrieve your free credit report once a year. Do a thorough inspection of your credit and alert creditors to any mistakes or outdated information. Errors and/or outdated information can lower your credit score and damage your credit health.

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Ways to Quickly Fix a Credit Score

Many things can be done to raise your credit score quickly and allow yourself access to lower interest rates for larger purchases--and the ability to get credit accounts when you need them. Of the three major credit agencies, two of them, Equifax and TransUnion, use the FICO scoring system developed by Fair Isaac and Company. Experian uses its own scoring system, but it is very similar to the FICO system. Use good credit practices to raise your FICO and Experian credit scores quickly.

Your Bills

Get in the habit of paying your bills on time, and paying at least the minimum monthly payments. Each month, you should gather your bills together and mark on their envelopes what day each payment is due. If you can use online payment options to make sure payments arrive on time, then do so, but make sure each payment arrives either on or before the due date. Never pay less than the minimum payment due regardless of the situation. Try to pay a little more than the minimum payments each month to quickly raise your credit score.

Your Credit Cards

According to HomeBuyingInstitute.com at least 50 percent of your FICO score is based on how long you have had your credit and whether or not you pay on time. Nearly 30 percent of your FICO score is based on how much you owe. The longer you have had credit, the less you owe toward your balance and the better your paying habits, then the better your credit score. Continue to pay off your credit card accounts, but refrain from using them to help reduce your overall credit debt. Once you have paid off an account, do not close it. Allow old accounts to remain on your credit report with a zero due balance. Long-standing accounts with no balance due will quickly raise your credit score.

Your Credit Report

According to MSNBC, every consumer is entitled to one free credit report from each reporting agency each calendar year. Order your credit report and check the accuracy of the information on it. Make sure your personal information is accurate, including your full name, your current address, your past addresses and any aliases you may have used. Be sure you recognize all of the accounts on your credit report, and that the balances look accurate. If you see anything that does not look accurate, let the reporting agency know by using the dispute procedure outlined on the report. If there are inaccurate accounts on your credit report, then having them removed will quickly raise your credit score.

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The Best Places to Access a Credit Report

A credit report is information detailing a person's payment history, accounts, balances and payment behavior for each account. It includes a person's residential information, how he pays his bills and whether he has ever been sued, arrested or filed for bankruptcy. It is used to provide information to calculate the credit score or FICO, the three-digit gauge of one's creditworthiness. This is then used as reference by creditors, lenders and insurance companies.

Credit Reporting Companies

By law the only authorized source for a free annual credit report is AnnualCreditReport.com. The Fair Credit Reporting Act (FCRA) allows a person to access his credit report for free once a year from the three nationwide credit reporting companies: Experian, Equifax and TransUnion. The consumer must request the credit report as they are not sent automatically. If a person has been denied a loan, insurance policy or a job because of a poor credit score, then he can apply for a free credit report. Also, those applying for unemployment or who receive public assistance are entitled to a free credit report. States that offer free credit reports from each credit-reporting agency are Colorado, Georgia, Maine, Massachusetts, Maryland, New Jersey and Vermont.

Requesting Reports

The consumer should not contact the three nationwide consumer reporting companies individually. Go to AnnualCreditReport.com to access the credit report online. To access it via phone, call (877) 322-8228. Alternatively, order or print a brochure from the Federal Trade Commission and complete a form at the back of it. The consumer then mails it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281. To get the free report, the consumer should give her name, address, Social Security Number, date of birth and previous address if she has moved in the last two years. For security purposes, she will be asked to give some information that she only is privy to, like her monthly mortgage payment. The questions vary depending on the company.

Online Fraud

The Federal Trade Commission advises consumers against paying for free credit reports. The three reporting agencies, Experian, Equifax, and TransUnion, are accessed by AnnualCreditReport.com without charge. The rest are fraudulent and charge for the "free" report by charging for other services on their website. Others steer the consumer into a for-profit marketing enterprise, according to a World Privacy Forum in-depth investigation and report.

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Legal Debt Solutions

Legal debt solutions are available to consumers and businesses to help with debt. Consumers aren't always aware of the various debt solutions available. Often, it is possible to avoid bankruptcy or repossession by working with creditors, credit counselors or government agencies that help set up manageable payment plans. A credit counselor might be able to reduce finance charges and collection calls, as well as help debtors establish a budget that will permit them to pay down debts.

Credit Counseling Assistance

The front line of legal debt solutions usually involves a credit counselor. Credit counselors are financial professionals who work with you and your creditors to negotiate and resolve debt. Despite the claims of some, credit counselors cannot relieve you of legal debts or remove accurate negative information from a credit report. They can help you create a budget, develop strategies to repay debt and work with creditors to make monthly payments more manageable.

Debt Management Plans

In concert with creditors, credit counseling agencies sometimes develop a debt management plan as a path out of debt. Among other things, debt management plans help consolidate and simplify payments, lower finance charges and reduce collection calls. Debt management plans are usually arrangements where credit counselors collect monthly payments from you and distribute them to various creditors, reducing the risk you might miss a payment. It usually takes between three and five years to pay off debts completely with a debt management plan.

Foreclosure Assistance

Homeowners in financial hardship sometimes struggle to make their monthly home loan payments. If you fail to make mortgage payments on time, your lender begin to take action toward foreclosure. Under foreclosure, lenders can repossess a home and sell it to recover the homeowner's remaining mortgage debt. The federal government and state agencies provide counseling to struggling homeowners to help avoid this outcome. The government might be able to help modify the conditions of a home loan, reduce monthly payments or help you relocate without foreclosure. Homeowners should contact the Department of Housing and Urban Development (hud.gov) and the Home Affordable Modification Program (makinghomeaffordable.gov). Homeowners may also call a HUD-approved housing counselor through the HOPE hotline, at 1-888-995-HOPE. Housing counselors are able to connect homeowners with information about programs specific to their state as well.

Bankruptcies

While usually a solution of last resort, bankruptcy is sometimes the only way to escape a severe debt burden. Bankruptcy is a legal proceeding where the courts can liquidate the debtors' assets and cancel unrecoverable debt. Different kinds of bankruptcy have different rules. For example, under Chapter 7 bankruptcy, courts usually sell the consumer's property and render the proceeds to creditors to help pay down debts. Under Chapter 13 bankruptcy, courts develop a repayment plan proposed by the consumer based on their wages. Some debts, like child support payments and tax debts, cannot be resolved in bankruptcy.

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Should You Do Debt Negotiations?

Debt negotiations are methods that debtors can use to help reach a better financial position. These negotiations are generally possible because of two different reasons. First, lenders are often willing to negotiate in order to keep a loan profitable and avoid taking losses or resorting to legal measures like foreclosures. Second, many government and nonprofit programs exist to help debtors seek debt negotiation or renegotiation in order to improve the economy as a whole. Debt negotiations can be very useful and should be one of the first steps that borrowers take when confronted with debt problems.

Temporary Debt Changes

One of the first and easiest types of debt negotiation is temporary alterations to the debt payment plan. This occurs when the lender agrees to make a change to the loan that only lasts a specific amount of time, usually several months to a year. Most often lenders forbear or defer the loan, delaying the necessary monthly payments while not marking the loan as late or defaulted while the debtor pays off other debts and reaches a more secure financial position.

Debt Restructuring

Debt restructuring is another useful method of negotiation and should be pursued by debtors that cannot afford to make their current monthly payments, even if those payments were paused for a time. In a restructure, the lender agrees to permanently change some aspect of the loan to make it easier for the debtor. For instance, the lender may agree to lower the interest rate back to a previous level, making monthly payments lower. The lender may also agree to combine late payments back into the loan to make it easier to pay off.

Debt Settlement

Debt settlement is a type of negotiation that results in a portion of the debt being permanently forgiven by the lender. While this may seem like an attractive option, debt settlement comes with strings attached. Lenders will usually only agree to settlement when the debt has been late for years and caused many financial problems, such as low credit ratings. Also, any portion of the debt the lender forgives will be taxed as income. Debtors must be prepared to pay a portion of the debt in order to win a settlement, such as a third or a fourth of the total debt.

Debt Consolidation

Debt consolidation is a useful option for debtors if the lender does not want to change the loan but does want to give the borrower a fresh start. Consolidation uses a new loan to fully pay off the old debt and replace it with a new chance to keep up on payments, possibly with a lower interest rate that leads to lower total monthly payments. There are refinances, second mortgages and dedicated consolidation loans that can help with this process.

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Features of Debt Settlement

Debt settlement can reduce the amount of debt you owe and help clear debts you have stopped paying. Many lenders are willing to negotiate a settlement, because they want to receive some money for the debt rather than none at all. However, most companies will not negotiate debt settlement with you until you are several months behind on your payments.

Settling Your Debts

When you settle a debt, you agree to pay a portion of what you owe to the company, and the creditor forgives the remainder of the debt. This is an option only if you are currently behind on payments. The Money-zine website reports, "Many credit card debt accounts will settle in a range of 30 to 70 percent of money owed." You should save a sufficient amount to make a lump sum payment before calling a credit card company to ask them to settle the debt. When you reach a credit card representative, offer a percentage of the amount you owe to count as settlement in full. You can negotiate based on that first offer. If the creditor accepts the settlement, you should request a written statement that the amount will count as settlement for payment in full. After you have received the letter, you can submit the payment. Keep a copy of the letter and payment on file. If the creditor will not settle for an amount that seems reasonable, you may save the money you have accumulated and call again later.

Choosing a Debt Settlement Company

Another option when choosing debt settlement is to have a debt settlement company settle your debts for you. The company will contact your creditors and negotiate the settlement amount for each debt on your behalf. Generally, these companies charge a high fee for this service. Additionally, you may be required to make monthly payments to them so they can collect the money needed to settle the debts. Some of these companies do not follow through on their promises, and some close down suddenly and take your money. It is important to research the company with the Better Business Bureau and choose a company that has been in business for several years.

Debt Settlement Warnings

The forgiven amount of any debt settled will be counted as taxable income at the end of the year. You should track the amount you have settled and set aside extra money to cover the tax bill at the end of the year. If you are current on your payments, you should consider a different option to get rid of your debt. If you are behind on your payments, this may be a suitable option to begin to clear up your financial problems, but debt settlement will damage your credit score for several years and make it difficult to obtain credit.

After Debt Settlement

Once you have settled all your debts, you need to stay current on any other debt payments to improve your credit score. Most companies will be unwilling to lend you money for several years, because a debt settlement entry on your credit report makes you a high credit risk. Budget carefully and pay cash for your purchases if possible, because you probably will not qualify for a favorable interest rate. After about three years, you may be able to qualify for better rates and begin building your credit score again.

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Can You Negotiate With a Collection Company to Remove Negative Credit Reports?

Collection agencies regularly report consumer debts to the credit bureaus. A collection account within your credit history has a significant derogatory impact on your credit score and can cause lenders to turn you down for new credit. Depending on the collection agency that currently holds your debt, you may be successful negotiating for the removal of the negative entry from your credit report.

Facts

A collection agency may agree to modify its reports to the credit bureaus in exchange for payment. While certain collection agencies will provide this service and also offer you a settlement agreement, others only delete negative credit report entries in exchange for payment in full. Still others do not modify credit reports at all. Every company's policy regarding modifying credit bureau reports differs.

Features

Debt collectors make a commission on the debts they recover. Because of this, unethical debt collectors say whatever is necessary to coerce debtors into making payments. Unfortunately, this includes agreeing to modify credit bureau reports. If a debt collector agrees to your proposal, asking for the agreement in writing before sending the company a payment protects you in the event the collection agency fails to modify its negative report.

Time Frame

While you can negotiate with collection agencies to remove their negative reports from your credit history, you only need to do so if you incurred the original debt within the past 7.5 years. According to the Fair Credit Reporting Act, unpaid debts older than 180 days are subject to a seven-year run on your credit report. After seven years, the original debt, and any subsequent collection accounts that resulted from your failure to pay it, will vanish from your credit history.

A collection agency that inserts negative information on your credit report for a debt older than 7.5 years is in violation of federal law. You do not need to negotiate with the company to remove its entry. You can demand that it remove the report and file a lawsuit against the collection agency should it fail to do so.

Considerations

Negotiating with collection agencies is most effective if the company knows it cannot collect the debt from you any other way. Although a collection agency can sue you, it can only sue you for a limited period of time before the debt becomes obsolete. The statute of limitations in each state determines when a lawsuit is no longer an option for a creditor. A collection agency that has no other way of collecting the debt will be more willing to negotiate with you for payment.

Warning

If you agree to a payment plan with the collection agency in exchange for full deletion of the negative report once you pay off the debt, missing a payment nullifies the agreement. This gives the collection agency the right to let the derogatory report remain on your credit report, even if you resume payments.

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Can I Be Sued if a Creditor Has Written Debt Off?

The longer you go without paying back your debts, the worse your consequences become. If you fall far enough behind on your debts, your creditors may end up suing you for repayment. The timing of any lawsuit is at the discretion of the creditor and can vary widely. However, even after a debt is written off, your creditors can still sue you.

Debt Write-Off

As a debtor, a debt write-off sounds like something positive, as if you would no longer be responsible for paying back your debt. Unfortunately, a write-off, also known as a charge-off, is simply an accounting entry by your creditor. By writing off your debt as uncollectible, your creditor is entitled to a tax benefit. However, you receive no such benefit and are still liable for your debt. Continue nonpayment will often result in a lawsuit against you.

Lawsuits and Judgments

A creditor will normally try to avoid filing a lawsuit if there is any hope of your voluntarily paying back your debt, since a lawsuit costs the firm money. However, by the time a creditor writes off a debt, it is essentially acknowledging that you will probably never repay your debt except by force. In this case, filing a lawsuit may be the company's last resort to get money out of you, since a lawsuit can result in an enforceable judgment against you.

Consequences

The consequences of a lawsuit and a judgment are severe. A judgment essentially provides your creditor with the backing of the court in terms of directly collecting money from you. With a valid judgment, your creditor can place a lien against your property, garnish your wages or levy your bank account, subject to the debtor protection laws in your state. Your creditor can collect money from you up to the total amount of the written-off debt, plus interest.

Bankruptcy

The final defense to a judgment after a credit card charge-off is often bankruptcy. Since credit card debt is typically dischargeable in bankruptcy, you should be able to file bankruptcy and block any judgments against you. As soon as you file, your creditor loses the right to enforce the judgment due to the automatic stay.

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What is a Signature Bond?

A signature bond, like other types of bonds, allows a suspect to be freed if he promises to show up in court. If he is not present for his court date, a bench warrant will be issued for his arrest and whatever amount of money was agreed upon between the court and the suspect will be paid to the court. In essence, a signature bond ensures that a suspect will show in court or pay a sizeable fine and be physically turned over to the courts.

Function

A signature bond, or recognizance bond, is a promissory that is signed by the individual who was arrested in order to be released on bond. Though no monetary transaction takes place when the promissory is signed, a signature bond contends that the arrested individual will pay an agreed upon amount if he fails to appear in court on the given date and time.

Size

The amount of a signature bond can vary, though it usually depends on the seriousness of the person's crime. For example, a white-collar criminal who has stolen $10,000 of his employer's money may be released on a $1,000 signature bond. However, a suspect accused of grand theft auto may be released on a $10,000 signature bond. Most signature bonds do not exceed $25,000. Courts can also add additional conditions to a signature bond. They may forbid the arrestee from discussing the incident with other suspects or witnesses or from using drugs or alcohol.

Types

There are typically four different types of bonds that can be issued after a person is arrested. There is the signature bond, the cash bond, in which the arrestee must pay the bail amount upfront before he is released, the 10-percent bond, in which the arrestee must pay 10 percent of the bail amount upfront before he is released and a surety bond, in which a bail bondsman, which is approved by the court, promises that court that the arrestee will appear on his court date, and that if he does not the bail bondsmen will pay the bail amount in full.

Identification

Common crimes that may result in a signature bond include theft, fraud, federal corruption, trespassing, disorderly conduct, drunken driving, drug possession, child pornography possession, indecent behavior and sexual intercourse with a minor.

Considerations

Courts do not have to offer signature bonds, but when they do it is usually offered to individuals who do not have a prior criminal past, are not a flight risk and have committed a minor crime, usually a misdemeanor.

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Legal Tactics for Debt Elimination

People who get deeply into debt are sometimes tempted to bend the rules a bit to escape it. This is not a good idea, because it could lead to legal repercussions. Furthermore, it isn't necessary, because there are many options available for people who are experiencing debt problems. Making a long-term plan for escaping from your debt is critical to your eventual success.

Prepayments

If your debt problems are not so serious that they have totally disrupted your cash flow, you can reduce your long-term debt burden by making prepayments on debts such as your mortgage or car loan. This will introduce a heavier financial burden in the short run, but will save you a lot of money over the long run. To put your finances back on a stable footing, the long run is what you should be focusing on. By developing a frugal financial profile and applying it to your expenditures over a period of years, you can slowly lift yourself out of debt.

Consolidation

Gain control of credit card debts by consolidating them onto one card and getting rid of all the other cards. This will make it much easier to keep track of your debt. A common problem with intrusive debt problems is a lack of awareness about the true amount of debt and the severity of the problem. By having only one credit card, and one number to remember every month, you can remain on top of your debt and focus on reducing it every month. Also, you will have only one credit card to max out, and you won't be able to increase your debt further using other cards.

Negotiating With Your Bank

Lenders are often open to negotiating with people who are having difficulty with debt. After all, the bank is not eager to repossess your house; it would much rather have the cash that you give it through your mortgage or loan payments. If you can't meet your payments, request a meeting with your loan manager and explain the situation. Some banks are willing to lower your payments or extend the conditions of your loan in situations of financial distress. Don't do this unless it's necessary to meet your payments; extending your loan will almost certainly mean that you pay out more in the long run.

Bankruptcy

Declaring bankruptcy should be a last resort, because having this on your credit history will not help you at all the next time you need to borrow money. In extreme cases of debt and financial distress, however, sometimes bankruptcy is the best option. To declare bankruptcy, you need to prove to the bank and to your lenders that you have no assets with which to pay them what you owe them. You are allowed to retain a small amount of personal necessities, but all other assets need to be liquidated and applied to your debts before you can be freed from them through bankruptcy.

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