Does a Judgment Mean You Will Be Garnished?

Wage garnishment is one possible result after long periods of delinquency. Once the court awards your creditor a judgment, garnishment often occurs. Since the process is costly and time consuming to a creditor, it may be open to alternatives. However, if the proceedings have progressed to this stage, garnishment may be inevitable.

Judgment

Your creditor begins to assess late charges once you are 10 to 15 days late on your payment. After 30 days, the creditor reports the delinquency to the credit bureaus. After 90 to 120 days, the debt is charged off or sold to a collection agency. After continued non-payment, the creditor seeks judgment against you. If the court sides with the creditor, you must repay the judgment or face wage garnishment. The judgment stays on your record until you repay the obligation.

Garnishment

There are two types of garnishment -- wage and attachment. In a wage garnishment situation, the creditor makes arrangements with your employer to deliver part of your salary to pay your debt. In an attachment scenario, the creditor seizes funds from your bank account to repay the debt. Wage garnishment is more common in individual delinquency cases. Under Title III of the Consumer Credit Protection Act, the garnishment encompasses the lesser of 25 percent of disposable earnings or the amount by which disposable earnings are more than 30 times the federal minimum wage.

Problems

Wage garnishment is not always an option for creditors. At the time of publication, four U.S. states -- Pennsylvania, North Carolina, South Carolina and Texas -- only permit wage garnishment in tax situations. Creditors in these states look to asset seizure as a method of recouping losses. Even in states that allow garnishment, the process is long and expensive for creditors. The progression encompasses legal fees, a lengthy court process and the retention of bad debt.

Alternatives

Because of the difficulty in carrying out wage garnishment, seek alternatives with your creditors. Start a dialogue before you get to the court process. If that point has passed, contact the debtor and attempt to reach a settlement. If that option does not work, consider filing for bankruptcy. Once you file for bankruptcy, you are granted an automatic stay. An automatic stay prevents your creditors from continuing action against you until the bankruptcy is settled.

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How to Receive Unemployment

If your hours have been cut to part time, or if you have already lost your job, you may qualify for unemployment benefits in your state. The specific amount of money that you need to have made in the past 18 months before unemployment varies by state, but each state has the same basic qualifications for getting unemployment compensation. The amount of weekly compensation you will receive also varies by state.

Instructions

1

Lose your job or have your hours reduced to part-time. If you have either of these things happen and it is not your fault, you can qualify for unemployment. An example is getting laid off or having your hours cut due to lack of work. Quitting your job does not count.

2

File for unemployment through your state's unemployment office. Usually you can do so over the phone or online. The Employee Issues website (see Resources) has a list of state unemployment websites. To submit your application, you must give your full work history for the past 18 months, your name, address, date of birth, Social Security number and driver's license number.

3

Wait to get your award letter from the state unemployment office. This usually takes seven to 10 business days to arrive by mail. It will let you know if you are awarded any unemployment benefits. If so, the weekly benefit amount will be listed, and you will get your first claim form in the mail a few days later.

4

Hunt for a job while you are unemployed and submit your claim forms each week to the state unemployment office. You are required to be actively looking for a job in order to continue receiving unemployment benefits. The claim forms ask about your job search activities.

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Interest Rates Vs APR

Many people assume that the interest rate and APR (annual percentage rate) on a loan are the same thing. The truth is that the APR is the real cost of your debt, while the interest rate is more of an estimation. You should ask your creditors about the APR that you will be paying before closing or signing papers for a new debt account.

Interest

The interest on a debt is the cost of doing business with a creditor or lender. It is pretty much synonymous with "profit" for the creditor.

Misconceptions

APR is not the same thing as the interest rate. The APR is the yearly interest rate plus additional finance charges associated with the use and generation of the debt, such as transaction fees and balance transfer fees.

APR and Mortgage Loans

When it comes to mortgage loans, your APR includes your interest rate plus closing costs and any points the lender is charging.

Considerations

While the interest rate on your loan is a good estimation of what your debt will cost you, don't neglect the importance of the APR when making a decision regarding a loan.

Requirements for Interest Rate and APR

When you get a mortgage loan, the lender is required by law to list both your interest rate and your APR conspicuously.

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How Do I Take Someone to Court to Collect a Debt?

Loaning money to an individual is always risky. No matter how careful you are about who you loan to or how sincere the individual may be about wanting to pay you back, circumstances beyond his control may result in the debt going unpaid. Should this happen to you, you have the right to legal recourse. By taking the debtor to court, you can attempt to obtain a court judgment that forces him to pay you what he owes.

Instructions

1

Verify that the debt collection statute of limitations has not expired in the debtor's state. If the statute of limitations on the debt has expired and the debtor is aware of it, she may contest your lawsuit and have it thrown out of court.

2

Notify the individual in writing that he is late repaying what he owes and that if a prompt payment is not received, you intend to take legal action. The court will want to see that the debtor was properly notified of the debt and given plenty of time to repay it.

3

Compile any documentation you have proving that the individual owes you the money. A written and signed loan agreement, along with proof of previous payments, will help you prove your case in court.

4

Contact the courthouse in the debtor's county. Find out what the small claims court limitations are for that district. If the debt is higher than the small claims court limitations, you must file a civil lawsuit.

5

Decide how much you want to sue the debtor for. You can add late fees, court costs and attorney fees to the original unpaid debt.

6

File a "Statement of Claim" at the county courthouse. You must provide the details of the lawsuit, how much you are suing for and attach copies of any documents that prove the debt is valid.

7

Request a "Notice to Appear" form. Attach the form to a copy of your "Statement of Claim" and send the documents to the debtor via registered mail. You may also request that the Sheriff's office serve the debtor the papers in person. In some districts, the court will do this for you for a fee.

8

Attend the pre-trial hearing. Bring all your supporting documentation and arrive on time. Should the debtor not appear at the hearing, or appear without a valid defense, a judgment may be immediately entered in your favor. If the debtor admits owing the debt, you may negotiate a settlement or the judge may send the case to mediation.

9

Attend the trial if mediation is unsuccessful. You must bring all your supporting documentation and both you and the debtor must state your case to the judge. After the trial, the judge will make a decision on the case.

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How to Erase Dispute Items on a Credit Report

Accurate credit reports are incredibly important because credit reports are used in so many financial matters. If youre thinking of buying a house, applying for certain jobs or making a big financial decision, check your report for errors. Dispute errors so that your report doesnt hurt your credit history. Under the Fair Credit Reporting Act, you have a right to an accurate report.

Instructions

1

Identify errors on copies of your credit reports. Credit reports are created by the credit bureaus and updated periodically. Compare credit reports from each of the major credit bureaus, such as Equifax, so you know exactly what errors are listed on each one. The credit reports may not be identical, and comparing them will save you time in the dispute process. Order free copies by contacting Annual Credit Report.
Annual Credit Report
(877) 322-8228
annualcreditreport.com

2

Write a letter about the problem. The credit bureau will often resolve disputes by mail. The credit bureau address will be listed on the credit report, so write a letter that includes details on each dispute, such as the date it appears on the report, the creditors name and how you want the information corrected.

3

Make copies of your documents and include that with your letter to the credit bureaus. Documents like bills and bank account statements will be the best evidence against errors. Organize them and double check that youve made copies of the relevant documents.

4

Stay organized while waiting for responses. Write down when and how you contacted the credit bureaus. This will help you track the dispute process and help you remember to follow up with them if necessary. The Federal Trade Commission states that you should expect to hear back from credit bureaus within about 30 days.

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How to Stop Bill Collectors from Calling My Place of Work

Creditors, such as the bank you have borrowed money from or the department store where you purchased a plasma TV on credit, may sell your account to a collection agency if they decide that you are unlikely to pay your bills without legal action. Once the sale is complete, the collection agency assumes the legal right to receive all debt payments, as well as late fees and, depending on the circumstances, legal costs. Collection agencies have a variety of tools at their disposal, but may not use harassment tactics. You have numerous ways to stop harassment by collection agencies.

Instructions

1

Present a payment plan to the collection agency. A collection agency can no longer contact you if you agree to, and stick to, a payment plan. The collector has no obligation to agree to anything other than payment in full, but many agencies accept reasonable monthly payment plans if they are convinced that what you are offering is the best they can get.

2

Contact a lawyer to represent you against the debt collection agency. If your payment plan is refused or you believe the charges are unjust, it is best to seek the help of a legal representative. Once you find a lawyer to represent you and inform the collection agency of this decision, the collector must only contact your legal representative and can no longer call your residence or workplace.

3

Ask your employer to inform the collection agency that it is not allowed to contact you at work. The Federal Trade Commission states that a debt collector cannot contact your place of employment if it has been informed that your employer prohibits such communication. If your employer has documented this policy, you can also send such things as an official memo or a copy of the corporate handbook to the collection agency. This tactic stops the phone calls at work but does nothing to resolve the matter.

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How to Use Balance Transfers to Get Out of Debt

Being in debt can be quite overwhelming. In fact, it can sometimes feel as if you will never be out of debt again. While there are many strategies that can be used to help you get out of debt, one of the best involves taking advantage of balance transfers and using special rates to your advantage. With this step-by-step guide, you will learn how to use balance transfers to help you get out of debt.

Instructions

1

Add up all of your current credit card debt. Make sure to include all of your credit cards, including those that are from department stores.

2

If you have a current credit card that is offering a low APR on balance transfers, check your available credit to see if you can pay off all of your other credit cards with that card. If so, call the number on the back of your credit card in order to ask how to complete balance transfers for all of your cards.

3

If you do not have a credit card with a low APR on balance transfers or if you do not have a credit card that can pay off all of your credit card debt, look on the Internet for a credit card with a great introductory rate on balance transfers. Many will give you a 0% APR for the first year of cardmembership. Apply for the new card and complete balance transfer information on the application.

4

Create a budget that will allow you to pay off the balance transfer credit card before the introductory rate is complete. If this is not possible, pay off as much as possible before the introductory period expires. You may need to consider applying for another balance transfer card when the introductory rate is complete in order to avoid high APRs.

5

Stick to your budget and pay off the balance transfer card while also avoiding putting new debt on your other credit cards.

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What Debts to Pay Off First

Bills arrive in your mailbox every month, all demanding payment. Each one is important, and you know creditors will call if you don't pay them on time. High-priority debts should always be paid before everything else. After that, you must tackle all your other debts. How you choose to do this depends on whether you prefer to pay less interest over time, or to have more consistent rewards over the course of repayment.

High-priority Debts

Most people have certain crucial debts that must be paid prior to other debts. Crucial debts include anything that is an absolute necessity, such as food, shelter and transportation to and from your job. If you don't pay your mortgage or rent on time, you will soon end up on the street, so this is a crucial debt. If your car is your only means of getting to work, that's a crucial debt as well. Pay these types of debts before tackling any others you might owe.

Other Debts

Every creditor wants you to consider its debts as a high priority. However, anything that isn't a crucial debt that is essential to your ability to live your life is lower priority. These types of debts include credit card debt, student loans and medical bills. You still need to make at least minimum payments on them, but they are not typically as important as your crucial debts. For one thing, these debts are typically unsecured. Creditors can send stern notices and turn your accounts over to collections departments if you have delinquencies, but they cannot usually take drastic measures, such as repossessing property or foreclosing on your house.

Snowballing

For less crucial debts, try the snowball method of payment. Make a spreadsheet that shows each current debt, the total amount owed, your current interest rate and the minimum payment amount for each account. Budget your money so that you pay at least the minimum payment on each one. Use any extra money you have to pay down the debt with the highest interest rate. Every extra dollar you put toward paying off that debt means you pay less interest on it, because you pay it down more quickly. Once you pay off your highest-interest balance, take the amount you were paying toward that debt and put it toward your next highest balance. Continue until all debts are paid in full.

Lowest Balance First

Snowballing saves money, but can sometimes feel like it's taking a long time to see results. Even though you know you're helping yourself save money, it's nice to receive positive affirmation that you're on the right track. If you feel that you're more likely to maintain your motivation to pay off your debts by getting small rewards along the way, change the way you order your debts. Pay off your debts in order of the amounts of your balances, starting with the lowest one first. Use the same principle as with snowballing, and make at least minimum payments on all your debts. Then use whatever extra money you have to pay off the lowest balance as soon as possible. Work your way through the rest of your debts, moving on to the next lowest balance after the first is completely paid off. This system provides you with a more consistent sense of reward, although you will end up paying more interest.

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How Much Does Your Available Balance Affect Credit Scores?

The FICO score is shrouded in mystery. Nobody other than the people at The Fair Isaac Corporation, the inventors of the FICO score, knows how to calculate this three-digit number that is based on information in a person's credit report. People routinely try to arrange their lives around the known factors that affect their credit scores, one of which is how much available credit a person has.

Effects Of Credit Utilization

Even though the formula for the FICO score is not published, The Fair Isaac Corporation does allow people to know the factors that play a part in calculating their credit scores. Available credit has the second-largest impact on your score; 30 percent of your credit score depends on your ratio of balances to credit limits. For example, if you have a $5,000 credit limit with a $2,500 balance, you have a 50 percent credit utilization ratio.

Ideal Ratio

The Fair Isaac Corporation has also published information on an ideal credit utilization ratio. To have a positive impact on your credit score, keep your credit card balances at less than 30 percent of your available limits.

Impacting the Ratio

A credit card holder can affect his credit utilization ratio by either paying down his balances or requesting and receiving credit line increase. Requesting an increase is sometimes a catch 22; if your balances are close to your credit limits, your credit score may not be sufficient to secure credit line increases. In most cases, it is better to pay down your balances. You will not only reduce your utilization ratio, but you will also reduce your total amount of debt, making yourself more financially sound. Canceling cards will also affect your utilization ratio, but usually in a negative way by decreasing available credit.

High Amounts of Available Credit

Many people believe that having large amounts of available credit -- even with low debt utilization ratios -- reduces your credit score. This is not true. The FICO score does not take into account available credit alone, but only as it relates to balances. At one time, mortgage bankers would figure your credit limits on all of your cards as potential balances, and they applied that number to their debt ratio underwriting guidelines. This is not the case anymore, and the key to a good credit score is careful management of your available credit and keeping the utilization ratios in the ideal range.

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Credit Card Remediation Programs

Credit card remediation, or debt relief programs, enable Americans with serious financial troubles to get out of debt faster, according to the Federal Trade Commission. But before entering any private credit card remediation program or enrolling for federal bankruptcy protection, the consumer should thoroughly study his options and also accept that debt relief may not necessarily help his credit rating.

Self-Help

If you have regular income and can implement better financial habits, you may be able to get yourself out of serious credit card debt. Some creditors will negotiate the terms of your repayment plan directly with you, especially if you are a reliable customer. For example, if you typically pay your bill on time but recently experienced a financial hardship, the creditor may take your payment history into account and work with you through your issue. Even if you do not wish to use a credit counselor to remediate your debts, a budgeting session with one may help you find ways to save money and accelerate your debt repayment.

Debt Management Plans

Some credit counseling agencies offer debt management plans, but use caution before enrolling in one. A credit counselor remediates your debt repayment terms with your credit card companies. For this service, you will likely pay an enrollment fee as well as a monthly service fee. Thoroughly investigate any credit counseling agency before using its debt management plans. The Federal Trade Commission and the Office of the Attorney General in states such as Florida handle many consumer complaints about agencies mishandling payments.

Chapter 7 Bankruptcy

If you're in serious credit card debt and have few resources to repay it, you may need to file for debt liquidation under Chapter 7 bankruptcy. While Chapter 7 will erase most of your debts including honestly-incurred credit card bills, the drawback is that the filing damages your credit rating for 10 years and you may lose some of your assets. Generally, you must earn less than your state's annual median income level to file Chapter 7. At the time of publication, the yearly median income level for a family of four in Puerto Rico is $28,382, while the qualifying income level for a Connecticut family of four is $103,314, according to the U.S. Trustee Program.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy enables court officials to remediate most of your debts, including credit card bills. Unless you lied to get credit or charged cards right before filing bankruptcy, a judge will partially or fully absolve you of pre-existing credit card debts. Chapter 13 creates a partial debt repayment plan that takes three to five years to complete. But during this time, you cannot legally get any new credit, which includes refinancing your mortgage without a bankruptcy judge's consent.

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How Is the Interest Rate on a Line of Credit Determined?

A line of credit is the amount of money that a bank or other lender is willing to let a person or business have at any one time. A line of credit is generally backed by a form of a collateral, such as the equity on a property. A holder of the line of credit is not obligated to borrow the money, but can draw funds as he needs to.

Features

Unlike home equity loans, which are issued at fixed interest rates, home equity lines of credit have variable rates of interest. The interest rate that a borrower will pay on any loans drawn on the line of credit will generally be pegged to one or more indexes that track prevailing market interest rates. Typically, the borrower will pay interest equivalent to the current index rate, plus a fixed margin set by the lender.

Considerations

According to the Federal Reserve Board, lenders often offer borrowers a lower introductory interest rate on a line of credit, which typically lasts for the first six months of the line's life. If the line of credit is secured by a property, such as a home equity line of credit, federal law requires that the interest rate on the loan be capped at a certain level, even if it is a variable-rate loan. Some lines of credit also have a "floor" on interest rates, as well. Additionally, the Board states that after a loan has been drawn against the line of credit, some lenders will allow the borrower to shift the loan to one with a fixed rate of interest.

Interest Rates

Prevailing interest rates--to which most home equity lines of credit are tied--are affected by actions of a country's central bank, such as the rate at which it is willing to lend money to large financial institutions, and the investment climate as a whole.

Personal Credit History

Although the interest rate of home equity lines of credit is based on market rates, the margin added on top of the rate is based in large part on the lender's perception of the borrower's ability to pay off the loan. Borrowers with a better credit history are more likely to receive lower margins.

Expert Insight

According to the Federal Trade Commission, consumers should be aware that the rate of interest often advertised for a home equity line of credit is for the interest alone and does not include other costs, such as the margin placed on top of the loan and fees charged by the lender. In some cases, it makes better financial sense for a consumer to refinance her mortgage or take out a home equity loan rather than a line of credit.

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What Is National Debt Relief?

The commercials for national debt relief make some very appealing claims. "President Obama recently signed legislation that will extend relief to main street," one advertisement states with authority. "If you are a consumer struggling with $10,000 worth of credit card debt, you may qualify for the national debt relief program. We may be able to reduce your debt by up to 50 percent. Call us now for a free consultation."



For many consumers struggling with credit card debt, a national debt relief program sounds like welcome news. But the fact is, there are for-profit and nonprofit organizations competing for your business, and results may vary.

What National Debt Relief Promises

According to the National Debt Resolution website, national debt relief can "reduce your balances up to 60 percent," let citizens "avoid creditor harassment and let someone else do the work" and "help you find debt relief in just 12 to 36 months."

National debt relief is represented as a government-backed program that is federally sponsored for the benefit of the American consumer. National debt relief firms also promise that the process will either improve your credit or have no negative effect on your credit. Consumers are promised amazing results with no pain.

In reality, "national debt relief" is really just a new name for a debt settlement program, which come in nonprofit or for-profit varieties.

What National Debt Relief Really Is

National debt relief is actually just a new way for debt settlement companies to market themselves. Debt settlement has been around for decades, but in the midst of the most recent recession of 2006 and after, debt settlement companies are representing their programs to sound like legitimate federally mandated programs.

Debt settlement is actually a process where your creditors agree to accept a payment of less than the original amount owed on a debt. In many cases, the debt is already in collections.

Debt settlement companies agree to collect and hold your payments for you in an escrow account while negotiating with your creditors. Settlement firms then negotiate with your creditors to reduce the balance on your debt. Once the creditor has agreed to accept a settlement amount, the settlement firm will pay your creditor from the funds in your account.

How Settlement Works

Usually, citizens are contacted by a representative from a debt settlement company. This individual walks you through the benefits of settlement. You are told that the company will get the creditors to stop calling, the balance of your debt will be negotiated down and your credit will be improved.

You accept the terms of the program and return your paperwork. Your debt is "enrolled" into the program and you begin to make payments. Your payments are placed in an escrow account to accumulate while the settlement company negotiates with your creditors.

When there is enough money in your account to satisfy a balance of one of your creditors, the settlement company contacts that creditor to negotiate acceptance of less than face amount to satisfy your debt. If the creditor agrees to the terms the settlement company proposes, the money is paid to satisfy that account.

Usually, settlement companies start with the debt with the lowest balance to show some progress. The process is then repeated with the account with the next lowest balance.

What's the Catch?

Though the settlement process can seem pretty straightforward, there are many pitfalls in the process for consumers. When it comes to debt settlement, the devil is in the details.

Many times, settlement companies will only work with you if your debt is $10,000 or more. And while debt settlement firms promise to reduce your balance by up to 60 percent, many companies fail to mention how much you are ultimately going to pay in fees.

Typically, many debt settlement companies will take the first three or four monthly payments to cover the program's fees. This means you can pay into a settlement program for up to a year sometimes with absolutely none of the money being applied to your debt. Some settlement companies collect a fee upfront, a monthly fee, as well as a fee once the account is settled.

Settlement companies can only work with unsecured debt since there is no collateral to repossess when you stop making your payments. There are some less-than-credible settlement companies that will not tell you this upfront.

Another pitfall is that many settlement companies will counsel you to stop paying on credit cards you still have active. The reason is because many original creditors will not settle a debt with a consumer.

On its Think Debt Relief website, Amerifree Financial claims, "Unlike a bankruptcy, our debt settlement program will NOT show up on your credit report." To settle, however, a debt typically has to be held by a third-party debt collector who usually pays anywhere from 7 to 14 cents on the dollar to acquire the debt. When you stop paying your current accounts the negative effects on your credit can be significant. Settlement programs only make sense if the debts being enrolled are already in collections.

Many settlement programs take longer than you anticipate. If you are having trouble paying your bills on time each month, it can be difficult to stay current with a settlement program. The less-than-honorable settlement companies end up keeping any payments received, even if you drop out before completing the program.

A quick visit to the websites of settlement companies such as Freedom Debt Relief, Freedom Financial Network, National Debt Assistance and National Debt Relief reveals the use of the terms "up to" and "could" when referring to how much you could save in a debt settlement program. The fact is, no matter what you are promised on the phone by a representative from these companies, how much you will save in a debt settlement program isn't guaranteed.

As a consumer, perhaps the greatest thing to be aware of is that you can usually settle your own accounts for far less than having a settlement company settle for you.

Debt Management and DIY Settlement

If you are struggling with credit card debt and the accounts are current, you may be better served working with a legitimate debt management program (see Resources for one example). These programs will negotiate with your creditors to lower your interest rate.

A DMP doesn't reduce your total amount of debt. Instead, by obtaining lower interest rates for you, DMP programs help you pay your outstanding debt off quicker than you could by yourself, since a greater portion of your debt goes to principle instead of to interest. You will pay more of the debt back in a DMP, but your accounts are kept current instead of lapsing to collections.

To settle with a collections account, acquire the mailing address of the creditor listed on your credit report. If the debt is still within the statute of limitations, write a letter offering to pay the collections agency a percentage of the debt in exchange for that account being removed from your credit report.

If the debt collector agrees to your terms, pay the agreed upon amount with a money order.

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Creditors Calling at Work

Getting calls from creditors or collection agencies at work can be irritating, not to mention embarrassing. But it can be difficult, if not impossible, to get them to stop. Luckily, all consumers are protected by the Fair Debt Collection Practices Act, which offers guidelines for what creditors and collectors can and cannot do legally. This act can help you prevent creditors from calling your workplace.

Legal Considerations

The federal Fair Debt Collection Practices Act states that creditors or collection agencies have the right to call you at home or work to collect a debt unless you ask that they stop calling. After you have requested this, they can still call you to inform you that they plan to stop calling, sue you, give your account to an attorney or discontinue trying to collect on the account. Whether you have asked that they stop calling or not, it is illegal for a collection agency to deceive you by claiming it is someone else, threaten you or involve your co-workers to get in touch with you. Unfortunately, companies often receive only small fines for infractions that they are sued for, so many continue calling even after they are asked to stop.

Solutions: Conversation

If you don't ask a collection agency or creditor to stop calling you, they won't. The next time you receive a call, state specifically that the agency stop calling you. This typically works. If a debt collector calls you after you make the request, you are entitled to take legal action. If you do not believe that you owe the debt you are being contacted about, discuss this with the collection agency as well. If you know that you owe the debt, asking the creditor to make a payment plan or offer you a reduced deal can help you resolve the debt and stop the calls to your workplace.

Solutions: In Writing

If you still receive calls from collectors after asking them verbally, write a letter. State that the letter is a request to discontinue contact with you and your workplace, and that this is your right under the Federal Debt Collection Practices Act. You are not required to state why you cannot pay this debt, but it may benefit you if you do. If you cannot pay because of current financial hardship, say so in your letter if you like. If you do not want the creditor to call you at home either, include this in your phrase. Sign, date and make a copy of the letter. Also request delivery confirmation from your post office, or send it certified so you have proof that the letter arrived. Finally, send a copy to the Federal Trade Commission as well.

Solutions: Legal Action

To take legal action, you must gather proof that the collector is doing something illegal. It is best to reserve a lawsuit for situations when the creditor's behavior goes beyond simply calling your workplace to actually being offensive or harassing. Gather all letters and proof of mailing or receipt. Also gather call logs that show the creditor called your workplace and record phone calls if your workplace and state regulations allow it. When you go to court, produce adequate proof; otherwise, the court will not rule in your favor.

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How to Get Rid of Student Debt

Graduating college with tens of thousands of dollars of debt can be a burden. College is expensive, and unfortunately, most students need financial aid to complete their education. As a result, many begin their adult years with debt. Although student loan lenders can be flexible and offer low monthly payments for 15 years, you may prefer to get rid of your debt sooner. Fortunately, there are ways to accomplish this.

Instructions

1

Look into programs that offer loan forgiveness. Eliminate a percentage of your debt with programs that ask you to volunteer time or enroll in a special program in exchange for loan forgiveness.The Peace Corps, Americorps and the military provide such programs to graduates. Loan-forgiveness programs are also available to graduates who work as teachers or in the health field.

2

Elect a shorter term and higher payments. Make personal sacrifices, such as forgoing the purchase of a new car or home, and use this money to pay off debt. Student loan payments are typically low and have a 15-year term. Double or triple your payments to pay off the debt in half this time.

3

Use your equity. Homeowners can borrow money from their equity and use this cash to get rid of their student loan debt. Talk to a mortgage lender about a home-equity loan or cash-out refinance. Schedule a home appraisal to see whether you have adequate equity in your home.

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Can You Garnish Someone's Income Tax for Restitution?

When a person commits a crime, he will often be ordered to make a payment to one or more person's injured by his crimes. This compensation is known as restitution. This payment of restitution constitutes a legal obligation. If a person fails to make good on it, then the state has -- in most cases -- the right to seek garnishment of the offender's wages.

Restitution

Restitution payments are issued at the time that an offender is incarcerated. However, the payments are generally not made until the offender has been released from jail or prison. When he is released, he is given a payment schedule that he must meet. If he fails to do so, then the state can treat the missed payments like any other delinquent debt and pursue repayment.

Garnishment

Garnishment involves the siphoning off of a debtor's income stream, which is then directed to the party to whom the debtor owes money. In the case of restitution, the payments are generally made to the state. This means that the victim of the crime cannot garnish the ex-offender's wages, as the debt is technically to the state, not the victim. However, the victim may be able to sue the offender for damages in a civil court.

Income Tax Refund

Garnishment orders can sometimes be attached to the payment of an income tax refund. While private debt collectors are not allowed to garnish income tax refunds -- except in Michigan -- governments generally are, although rules vary from state to state.

Consideration

While wages can often legally be garnished by a state for restitution, this does not mean that the state will necessarily choose to do so. In many states, thousands of offenders who owe restitution are delinquent. However, states do not seek out garnishment orders against all of these individuals. Garnishments must be sought at the discretion of a local district attorney.

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How to Show Proof of No Work to Get Financial Help

Help from public and private organizations is often available for people suffering from unemployment. Direct financial assistance ranges from grants to donations, depending on the organization. Indirect financial assistance is also available for those who qualify. Examples include free or subsidized food programs, temporary or government-subsidized housing and medical care at certain health clinics. Virtually all of the programs require proof of unemployment, and possibly other information about assets and debts and the applicant's current living situation.

Instructions

1

Get copies of job termination or layoff notices given to you by previous employers. These notices offer proof of unemployment.

2

Print out copies of bank statements showing an end to direct deposits of payroll checks.

3

Obtain records for your application for unemployment benefits compensation and the decision by the unemployment commission in your state. Qualification for unemployment benefits is usually ample proof of being out of work. If you haven't applied for unemployment benefits, do so before seeking financial help if you're eligible for the benefits. A charitable organization such as the Salvation Army can offer local contact information for filing for unemployment.

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Debt Help for Low-Income Families

For a variety of reasons, many families find themselves facing financial difficulties at some point. These circumstances can also result in the accumulation of debt. Fortunately, when paying rent or mortgage payments, and buying food, clothes, and other essential items becomes difficult, there are many different resources available for low-income families seeking debt relief and help.

State Programs

Every state has a variety of resources and programs designed to help low-income families. These programs range from temporary assistance with rent, mortgage, and utility payments, to credit counseling, employment services, and emergency food assistance. Contact your local Department Of Health Services office for more information.

Federal Programs

Programs operated by the Federal Government and designed to help low income families make ends meet and get out of debt include low-income legal assistance and counseling, as well as work assistance and low-income housing assistance through U.S. Department of Housing and Urban Development (HUD). Your local U.S. Department of Human Services (DHS) is also a good resource for obtaining more information about these types of programs.

Credit Counseling

Credit counseling and debt consolidation loan programs are also available to low-income families, provided that they meet certain qualifying criteria. Many private counseling agencies exist for this purpose, and generally base their fees on a sliding scale, depending on income. Credit counselors will work to negotiate affordable payment plans with creditors and to plan a realistic budget and financial goals.

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Credit Counseling & Repair

You hurt your credit if financial problems cause you to run up big loan and credit card balances and pay your bills late, but credit counseling and repair may help you get back on track and salvage your credit score. First, find a legitimate counseling firm and choose your best option with the counselor's help. Then focus on credit repair to improve your credit reports as much as possible while you pay down your debt.

Definition

Credit counseling refers to the process of working with a professional agency when you cannot handle your debt on your own. The Federal Trade Commission, or FTC, website explains that legitimate firms have counselors trained and certified by outside agencies and offer services for reasonable fees, including educational materials, classes and individual counseling sessions. Credit repair refers to getting rid of negative material on your Experian, Equifax and TransUnion credit reports so lenders do not see it and it does not get considered in your credit score calculation.

Finding a Counselor

The Better Business Bureau website recommends finding several potential credit counseling agencies through professional organizations like the Association of Independent Consumer Credit Counseling Agencies and the National Foundation for Credit Counseling (see Resources). Ask agencies in your area about their licensing, services, non-profit status, fees and counselor qualifications. The counseling firm you choose should agree to provide a written contract detailing its services and costs.

Options

Legitimate credit counselors base their recommendations on your personal situation, not on options that generate fees for the counseling agency, the FTC advises. Your counselor may help you develop a new budget or refer you to educational materials or financial classes or seminars. You may get a recommendation for a structured debt management plan in which the counselor works with your creditors to develop a repayment schedule to gets you debt free within a few years if you pay it as agreed. The counseling firm then administers the plan. The counselor might even propose bankruptcy if your situation is not salvageable by less drastic methods.

Credit Repair

Credit repair is doable whether you are paying your bills with a personal budget or through a debt-management plan. You can even do some cleanup after a bankruptcy. The FTC advises using annualcreditreport.com to get free Experian, Equifax and TransUnion credit reports, which you are entitled to once each year. Find and dispute negative mistakes by writing letters to the bureaus. The Fair Credit Reporting Acts imposes a 30-day limit during which they must investigate your allegations. Unverified material must be removed, which repairs your credit by getting rid of some of the negative entries.

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How to Reduce Credit Card Payments Without Damaging Credit

When your minimum credit card payments are too high for you, do not just stop making the payments. This will lower your credit score when the credit card company reports the late payments. Enrolling in a debt management program or debt settlement program can also lower your credit score because the company might mismanage your debts and charges you fees that slow down your progress toward reducing your balances. Instead, try a few different ways to lower your monthly payment so you can keep up with it and maintain your credit history.

Instructions

1

Stop using the credit card. If you are making at least the minimum payment each month and are not adding any new charges to the card, your balance will gradually decrease, which in turn gradually decreases the amount of the minimum payment.

2

Call the credit card company phone number printed on the back of the card and ask for a lower interest rate. This helps lower the minimum payment because the credit card company sets the payment as the interest plus a fixed percentage of the balance. The interest portion of your payment will decrease if you have a lower interest rate.

3

Pay half of your credit card bill every two weeks. This helps you in three major ways. First, you pay less interest on the portion of your bill that you pay early because you don't let the interest accrue for the whole month. Second, you cut the bill in half so you can better manage your cash flow out of each bi-weekly paycheck. Third, you make 26 half-payments per year, which is equivalent to 13 full payments. This one extra payment helps you reduce your balance faster and pay less interest, which lowers your minimum payments.

4

Open a new card with a zero percent or other low interest rate for balance transfers. Transfer the balance to this card. Opening the new credit card will slightly lower your credit score, but you should bounce back quickly because you will be reducing the balance much faster than you could if you had to pay interest.

5

Open a home equity loan or personal loan and use the proceeds to pay off the credit card. Opening the loan will slightly lower your credit score, but paying off the credit card in full will probably increase your credit score by about the same amount. This is because your credit score penalizes you for using a high percentage of your available credit on credit cards. Between getting a lower interest rate and a long repayment term on the loan, you can significantly lower your monthly payments.

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How to Legally Clean Your Credit

The economic conditions of 2010 have helped to fuel demand for credit cleaning services. Some people experience late payments, repossessions, foreclosures and bankruptcies. These incidents can lower your credit score considerably. Good credit is important for borrowing money, applying for a job and being offered affordable insurance rates. Over time, you can legally clean up errors on your credit report and take actions to improve your credit score.

Instructions

1

Get a copy of your current credit report from all three credit reporting agencies: Experian, Equifax and TransUnion. You can obtain one free copy per year from each credit reporting agency at AnnualCreditReport.com (see the Resources section).

2

Examine your credit reports carefully. They include identifying information about you, your credit history, public records and who has requested a copy of your report, explains MSN Money. Review each record and note any items that are not accurate or are older than seven years (ten years for some bankruptcies).

3

Dispute any entry that is not true or is too old. According to the Fair Credit Reporting Act, the credit reporting agency and the business that provided the information are responsible for it's accuracy. The Federal Trade Commission (FTC) recommends that you write to the reporting agency in order to delete the information that you think is inaccurate. Include with your letter copies of all documents that support your position.

4

Wait for the agency to respond to your request. The agency will notify the information provider that you are disputing the accuracy of a reported item. The provider must investigate. If it is found that the information is inaccurate, it must be corrected. The agency will give you an updated copy of your report and, upon request, will send it to anyone who has requested your credit report within the last six months, according to the FTC.

5

Dispute the entry with the information provider. Write a letter detailing why you think that the information is inaccurate. Enclose copies of supporting documents. The provider may report to the credit agency that there is a dispute. If the information provider finds that the report is wrong, it will be corrected and not returned to your file.

6

Write a personal statement for inclusion with your credit report, if you have not been able to have an item removed. You have a right to include a 100-word statement explaining the issues that you are disputing. According to TransUnion, representatives will help you write a statement if you ask.

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Non Profit Debt Reduction

Non-profit financial counseling services can help you reduce debt, set up a personal budget and get smarter about managing credit and debt on a day-to-day basis. Some organizations also help with debt reduction by negotiating with creditors for you and provide additional financial management services based on your personal needs. Keep in mind that just because the debt reduction service is through a non-profit organization, that does not mean the service is made available at no cost.

Budget Planning

Most non-profit debt reduction counseling services offer budget training and planning to help you get a handle on your personal finances. They may provide a personal counselor to sit down with you and discuss your income and spending habits and help you make a solid spending plan that will begin reducing the amount of debt you have while leaving room in the budget for everyday necessities.

Debt Negotiation

Some debt and credit counseling services offer negotiation with creditors as an advanced service. When you aren't able to keep up with your bills due to an unexpected life change or emergency, or you're unable to negotiate effectively with creditors yourself, the debt counseling service may offer to do this for you for an additional charge.

Debt Consolidation

Depending on the type of debt and credit counseling service you choose to work with, they may have debt consolidation options available to help with your debt reduction plans. Debt consolidation normally means you'll get one loan that is large enough to pay off all of the other outstanding debts you owe. Then you'll make one payment, possibly reduced from the total of the multiple payments you were previously making, and possibly with a lower interest rate to help decrease your monthly budget expenses.

Related Services

Some companies offer a debt management plan in which you deposit funds into a DMP account each month as if you had consolidated your debt and the company distributes payments to your creditors on your behalf. Others may offer to settle outstanding debt with your creditors. Some simply offer free education and training on how to handle creditors and debt yourself.

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Why Pay off Collection Accounts on Your Credit Report?

If you get behind on your payments, some of your accounts may be turned over to a collections agency. At that point, you may be unsure of whether you should pay off this debt or leave it alone. While you could potentially avoid paying it, it would most likely be to your advantage to pay it off so that you can avoid future problems.

Avoid Lawsuit

If you refuse to pay off your credit accounts once they are turned over to a collections agency, you might find yourself on the wrong end of a lawsuit. If the amount is very small, the collections agency may not worry about filing a lawsuit. If you are dealing with a large amount of money, they might file a lawsuit against you. If they receive a judgment against you, you could have your wages garnished or your bank accounts frozen. It is much easier to set up a payment plan or some other arrangement to take care of the debt.

Time Frame

When you default on debt such as a credit card account, it stays on your credit report for an extended period of time. You will find that a default stays on your credit report for at least seven years. This means that it will be difficult to obtain additional financing as long as this note is on your report. You may be able to work with your collections agency to get the negative information removed from your credit report if you are willing to pay.

Credit Impact

Paying off your old collection accounts can help you rebuild your credit. To determine which debts are the most important, you can look at your credit report. If the debt still shows up on the original account, it would be to your advantage to pay it off. If the debt shows up with a collections agency and not with the original creditor, it would not help your credit score to pay it off.

Debt Settlement

You may also be able to agree to a debt settlement with your collections agency. This is a process that involves giving the collections agency a lump sum of money in return for closing out the account. The sum will be less than the full amount of what you owe. Since the collections agency paid less than the total amount to purchase the account, they may be willing to negotiate.

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What to Do If You Received a Letter From a Collection Agency?

It can be stressful to receive a letter from a collection agency, but it does not mean irreparable damage to your credit rating. Collection letters often are not a surprise to those receiving them. It can be a matter of wanting to pay, but debt responsibilities exceed your ability to keep up with payments. A letter from a collection agency should prompt you to re-evaluate finances and prepare a new personal budget.

Reassess Your Finances

You need to start by examining your budget and finding areas where you can cut corners and find alternative ways to earn the money to clear up debt. Maybe you can put in five hours a week in overtime or take a part-time job. Consider selling personal items to pay off debt.

Make Contact

Do not ignore the letter or subsequent phone calls from the collection agency. Avoidance will not solve the problem and in doing so, your credit score could fall. As soon as you have assessed your financial situation, come up with a plan to pay and call the collection agency to negotiate. Most are willing to discuss payment plans.

Negotiate Payment Options

Rehabilitate your line of credit, where you recover a loan that has gone into default and again make it active. It usually is possible with student loans. Rehabilitation is better than liquidating property to pay off the debt in full. Rehabilitating a loan re-establishes a line of credit on your credit report and shows that you are making payments, which is good for your credit rating.

Express your desire to pay off your debt, and make an offer. It is best to tell the collection agency what you are able to do, such as sending a set amount every month or paying off 75 percent of it at once and having it considered paid in full.
If you know you cannot make as big a payment as you had been making to the original creditor, offer to pay what you can afford. Keep interest and time in mind when you make an offer. A smaller monthly payment usually means a longer payment schedule with added interest. Regardless of whether or not you pay off the bill in full or negotiate for smaller payments, a positive report to the credit reporting agencies should be one of your stipulations. Most creditors will be willing to report that you are paying upon receipt of the first payment, but they may not do so without encouragement from you.

Other Considerations

If you do not believe you owe the debt, do not pay it. This may be due to identity theft or wrongful recording by the original creditor. If you disagree with the amount or the validity of the debt at all, contact the collection agency and tell them you are disputing the debt and explain why you do not believe the debt is valid. Dispute the debt with the credit reporting agencies as well. Be prepared for challenges to your claims.

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How to Avoid Foreclosure in Florida

Foreclosure--when a mortgage lender takes back a home--occurs after a Florida homeowner stops making mortgage payments; usually after three to six months of payments have not been received. The lender can then file a foreclosure lawsuit in the Florida courts, asking for the house to be returned to the lender to sell, usually at auction. In addition to losing the home, a foreclosure can ruin credit ratings, limiting the purchase of a future home. If you are facing potential foreclosure in Florida, there are ways to stop the process and avoid foreclosure altogether.

Instructions

1

Contact your lender to discuss your financial situation about your home in Florida if you are falling behind on mortgage payments, or will be. Explain whether this is a short-term (six months or less) or long-term (one year or more) situation, and whether you believe it can be corrected. Ask for a list of programs offered to mortgage holders to see which program would benefit you the most. While there are some federally funded programs to assist homeowners in retaining their Florida homes, the lender may also provide a variety of programs to allow you to avoid foreclosure.

2

Call a HUD-approved counseling agency to discuss your situation, at 800-569-4287 (800-877-8339 for TTD). The counseling agency can give advice on how to work with the lender, what to do if the lender refuses to assist you, and a list of other agencies that may be able to provide financial assistance to help you avoid foreclosure in Florida.

3

Read any paperwork that comes from your mortgage lender immediately; do not ignore it. If a foreclosure lawsuit is filed against you, you will be served papers; file a "pro se" (defending yourself without an attorney) answer within 21 to 28 days, or hire an attorney who can file the answer for you to defend the lawsuit and fight the mortgage lender from foreclosing on the Florida property.

4

Stay in your Florida home, if this is your primary residence. If the worst-case scenario happens and the home is sold, the new owner is required to follow Florida law in having the previous owner evicted. Abandoning the home makes it easier for the mortgage lender to gain a foreclosure more quickly.

5

Do not sign anything without having an attorney look over the paperwork, even from the mortgage lender. Make sure all guarantees by the lender are given in writing, and that they are thoroughly understood before any agreement is made to avoid the foreclosure in Florida.

6

Retain the Florida property by paying the full amount of the loan and any attorney or legal fees, as well as interest, that has accrued, before a sheriff's sale or auction. This may require taking out a new mortgage with another lender, or borrowing the money elsewhere to retain the Florida property and avoid a foreclosure on your credit report.

7

File a lawsuit against the mortgage lender, if you can prove wrongdoing, to stop the wrongful foreclosure of your Florida property. Courts are often deciding in favor of homeowners over proof of breach of contract, violations of "Truth In Lending Act" (TILA) laws, invalid parties affiliated with the lenders listed on the lawsuit, and even unreasonable attorney fees.

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How Long Can a Charge-Off Affect Your Credit?

Creditors and lenders extend loans and lines of credit. In exchange, they expect account holders to make timely payments each month to repay funds. But occasionally, account holders fall behind and stop paying their lenders and creditors. After several months of nonpayment, creditors and lenders may charge-off or write-off the debt.

Definition of Charge-Off

Original creditors and lenders make several collection attempts before charging-off a debt. This occurs after a creditor concludes that a debtor has no intentions of repaying a debt--usually after 180 days of nonpayment. Creditors and lenders write-off the debt for tax purposes, and often sell the account to a collection agency. Collection agencies then resume collection attempts by means of telephone calls or letters.

Charge-Offs and Credit Reports

A creditor or lender charging-off a debt doesn't mean a debtor escapes consequences. Even if a creditor sells the debt to a collection agency, information regarding the charge-off account will appear on the debtor's credit report. This information is temporary, but remains for a period of seven years. Plus, a collection agency or creditor may threaten or file a lawsuit in order to recover unpaid balances.

Affects of a Charge-Off

In conjunction with staying on credit reports for seven years, charge-offs can affect personal credit history in several ways. This type of negative information lowers personal credit scores. And when future lenders check credit reports to assess an applicant's creditworthiness, a charge-off or collection account can negatively impact approval chances or result in a much higher interest rate due to the applicant's increased credit risk.

Removing Charge-Offs

Paying a charge-off account balance can help fix a poor credit history. Creditors and collection agencies are relentless in communication attempts, and scheduling installment payments to satisfy an old debt may convince the creditor or collection agency to update your file (after receiving the full payment), and include a notation stating that you paid the charge-off. Depending on the particular creditor, they may go as far as deleting the the charge-off from your record. This gesture isn't a requirement, and removing a charge-off may require specifically asking for a deletion.

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Medical Debt in Collections

Most debts, including medical bills, can go into collections if you refuse to pay them. The original creditor might hire a collection agency or write off the bill as a bad debt, then sell it to a third-party collection agency to recoup some of the lost money. Doctor, lab and hospital bills hurt your credit rating if you neglect them long enough to get them sent to a debt collector.

Credit Reports

Your credit reports show a lot of your financial information, but medical debts are not typically reported to the Equifax, Experian and TransUnion credit bureaus. The bureaus focus more on installment loans and accounts with revolving credit limits. Bills for doctor visits, hospital stays and medical tests can show up on your credit reports if a collection agency takes over the debt. Collectors report all types of accounts to the bureaus, and their entries are perceived as negative because they are due to long-unpaid bills.

Effects

Medical debt that goes to a collection agency has a very bad effect on your credit rating because it falls into the worst possible credit scoring category. Bill payment history and related data, including collection agency accounts and court judgments, make up 35 percent of your credit score, according to the MyFICO scoring website. Your score drops as soon as a debt collector starts reporting your unpaid medical bills to the three credit bureaus because scoring formulas use credit report information.

Considerations

Privacy laws limit the amount of information your doctor or other health care provider can disclose to a collection agency. The debt collector is entitled to your name, address, Social Security number, birth date, account number and previous payment history on the account, according to the Privacy Rights Clearinghouse. Medical information, such as the condition for which you were treated, may not be passed along to collectors.

Resolution

Medical debt-related collection accounts hurt you for as long as they are visible on your credit reports, even if you eventually pay the bills. Get them removed by promising to pay what you owe if the debt collector erases the account completely instead of just marking it as "paid," Walecia Konrad of The New York Times website advises. Make your deal and get it in writing before turning over any money to the debt collector.

Warning

A type of identity theft known as medical identity theft may cause you to wrongfully have collection agency accounts in your name, the Privacy Rights Clearinghouse warns. The thief either gets medical treatment in your name, incurring the bills under your identity, or uses your health coverage information to obtain services, using up your benefits and leaving you to be billed for any deductibles and charges that are not covered. Complain to the medical provider, collection agency and credit bureaus if you have been victimized by this crime.

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How to Monitor Credit Cards

There are several reasons why consumers should regularly monitor their credit cards: interest rates, identity theft and financial responsibility. Many consumers sign up for credit cards at an introductory rate. However, after your zero percent rate expires, you could unknowingly be subject to a rate hike of 20 percent or more. Regular monitoring may allow you to cancel the card before a rate hike occurs and pay off the balance at the introductory rate. Monitoring credit card activity also allows you to keep track of what you are spending to stay in line with your personal budget and allows you to spot unauthorized charges and rectify your account with your card company in a timely manner.

Instructions

1

Keep all receipts from all credit card purchases. Set up a paper or electronic ledger for each account. Enter the date, amount and location of each purchase in your ledger at least once a week. This will allow you to keep an independent record of all authorized credit card transactions. Keep your receipts in a file folder or other segregated location. You may choose to scan them into your computer using a scanner system.

2

Check your credit card account online each week. All major credit card companies allow card users to sign up for an online account that they can use to monitor purchases and pay bills online if they choose. By doing this, you can keep track of your current interest rate, credit limit and all transactions that have been credited to your account to date. If you find any differences between your records and the credit card company's, notify the company immediately to get the charge removed or to have your account number changed or frozen.

3

Read all statements and documents you receive through the mail and/or email. Not all correspondences from your credit card company are promotional in nature or "junk mail." Cardholders often receive updates pertaining to the terms and conditions of their account. If you are unsatisfied with any of the proposed changes, such as interest rate increases, you may contact your credit card company in writing to reject the changes and close your account.

4

Compare your monthly statement with both your personal ledger and your online account each month. This will allow you to catch any unauthorized charges or statement discrepancies. If your ledger does not match your online and paper billing statement exactly, contact your credit card company in an effort to reconcile the differences or discover more information about a mysterious charge to your account.

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Is It Illegal for a Collection Agency to Do a Pay for Delete?

Collection agency reports can have a devastating effect on credit scores. The Fair Credit Reporting Act notes that these reports can legally remain a part of a consumer's credit record for seven years. Individuals wishing to remove collection accounts early sometimes offer to pay off the debt if the collection agency will voluntarily remove its notation from their credit files. This process is known as a "pay for delete." Each collection agency has its own guidelines regarding the process.

Legal Issues

Any company that can make reports to the credit bureaus also reserves the right to amend its reports. This is crucial because, in the event an information provider makes an error, it must have the ability to correct its error. Unfortunately, it is not uncommon for debt collection agents to incorrectly inform consumers that modifying their credit reports is either impossible or even illegal. In reality, no law prohibits collection agencies---or any other company---from deleting unfavorable reports to the credit bureaus before the federal reporting period on the account expires.

Compliance Issues

Collection agencies are typically uncooperative when faced with a pay-for-delete offer. This is because if the company make a habit of modifying consumer credit records, the credit bureaus may consider the company's reports unreliable and terminate its contract. Still, other collection agencies consider modifying reports a violation of their original reporting contract with the credit bureaus. Telling consumers that deleting their negative reports in exchange for payment is "illegal" is easier for a collection agency than merely saying "no." Consumers are more apt to accept the fact that the company is not legally allowed to delete an entry than the fact that the company does not wish to do so.

Violating the Law

While there's nothing unlawful about deleting an accurate collection report in exchange for payment, refusing to delete an inaccurate collection report is against the law. If you note a collection account on your credit report that does not belong to you, the Fair Debt Collection Practices Act allows you to force the collection agency to either validate its claim or delete the notation from your credit record. You can also dispute entries directly with the credit bureaus. Should a collection agency continue to pursue a debt that it cannot prove, you have the right to file a lawsuit against the company in either state or federal court.

The Process

Although more and more collection agencies are hesitant to approve a pay for delete agreement, there are some steps you can take to make your proposal more attractive to the company and protect yourself in the process. Offering to pay the full debt in one lump sum is more attractive to a debt collector than offering a settlement or paying the debt in installments. Asking to speak to a supervisor rather than a representative also gives you an edge since a supervisor has the power to approve your proposal on the spot and representatives often do not. Should a collection agency agree to delete its report in exchange for payment, ask for the agreement in writing before paying off the debt. This ensures that you have legal recourse in the event the company does not hold up its end of the bargain.

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What Happens When Credit Cards Go to Collection?

The Basics

Cash flow has always been a problem that producers, merchants and consumers resolve by trusting the other party to honor a debt. Where the charge plates of an earlier era allowed a consumer to use credit to buy at a specific retailer or producer with a promise to pay within a certain period of time, "revolving-credit," introduced by general-use "bank" cards, allowed consumers to buy anywhere and make partial payments over time. The practice of buying while paying on old balances led to the largest expansion of consumer buying in history---and to new urgency in collecting debts. Where "in-house" charge accounts were most often (and still are) handled by a "credit department," new charge cards had financial institutions that handled all purchases and collections. As the economy expanded, consumers accumulated "plastic"; applying for new credit cards and moving balances from high-interest cards to lower-interest accounts.

Creditor Collections

Creditors with a direct relationship with the customer (department stores, oil companies) tend to contact delinquent customers and "work things out". Merchant and broker collection departments try to promote payment by adding penalties for late payments and over-limit spending. Credit cards, unlike debts secured by property, are "unsecured" or "open" debts. Creditors are able to negotiate payment schedules and reduced interest rates with cardholders. Creditors may choose to sue debtors but must file within the statute of limitations for the suit to be considered by the court. This period of "life" for a suit varies by state from as little as three years to as much as ten years beginning with the last charge or payment on the account. Since legal costs can be expensive, lawsuits are practical when large amounts are likely to be recovered. Only a court order can force garnishment of wages, savings or liens on property and only the owner of the debt can file suit.

Agents and Resellers

Creditors who cannot collect a credit card debt may choose to "assign" the debt to a collection agency or sell ownership of it to a "secondary" creditor. Creditors typically try to collect for about six months before assigning or selling debts but some will turn debts over sooner. The Fair Credit Reporting Act requires that creditors wait 180 days to report collections to credit bureaus. The actions that debt collectors can use are listed in Title VIII---Debt Collection Practices of the Fair Debt Collection Practices Act (15 USC 1692a). Both types of debt collectors may call or write in attempts to collect debts but must follow rules as to when, where and how to contact debtors, may not make false statements or add unauthorized charges to the debt. Agents charge the creditor for their services; they often arrange payment plans and accept less than the total due. Secondary creditors may settle for what they've paid for the debt. Debtors can demand by letter that collectors cease contact but each time the debt is sold, the new collector can begin contact again.

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How to Delete Derogatory Accounts on Credit Report

If you have any derogatory debt on your credit report, it will have a significant impact on your credit score. Your first thought may be to pay it off as soon as possible. However, this will not erase it from your report. The only way it will be erased is if the lender does this on your behalf.

Instructions

1

Contact the lender to whom you owe the money. This may be a collection agency or the original lender.

2

Tell the lender that you will pay off the debt in full if it promises to remove the derogatory account from your credit report. Do not pay the debt until you have this in writing.

3

Pay the debt in full. Your credit report should now say that the debt has been paid.

4

Contact the lender and refer to the guarantee it made to you to remove the derogatory account from your credit report. Insist that it do so right away.

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Repayment Assistance Programs for Law Schools

The American Bar Association, or ABA, states that the average law school graduate incurs a debt of $80,000. Coupled with undergraduate loans, the total debt for new lawyers can run as high as $120,000. Loan Repayment Assistance Programs, or LRAPs, are a way to relieve law school debt. Participants in LRAPs can have loans forgiven, interest rates lowered or payments postponed. LRAPs are administered by states, law schools and employers.

Law School LRAPs

Equal Justice Works notes that more than 100 law schools offer LRAPs to their students. Graduates apply to an LRAP in order to receive funds that help with law-school loan repayment. Aid is available to law school graduate working in lower-paying legal fields such as government or public interest. Specific eligibility requirements may need to be met. For example, graduates from California Western School of Law are eligible to apply for repayment support if they are employed full time in a law position at a nonprofit or legal services organization; applicants must have at least $50,000 in law school debt in order to be eligible for assistance.

State-Based LRAPs

Twenty-three states offer LRAPs to law school graduates. The state-based programs are administered by nonprofits, state education foundations and bar foundations. State-based LRAPs will typically require applicants to hold qualifying employment. Qualifying employment includes public defense and prosecution, civil legal aid and nonprofit legal work. Applicants may need to meet state requirements with respect to income, type of loan and amount of debt they hold. Some state-based LRAPs, such as the one offered by the Arizona Bar Foundation, only offer aid to applicants who work for approved nonprofit agencies.

Employer LRAPs

Employer LRAPs are offered by public-sector and public-interest organizations such as public-defender offices and civil legal service organizations. Equal Justice Works notes that 77 organizations offered repayment assistance in 2008. Attorneys received an average of $2,500. Federal government employees at agencies such as the Department of Justice and Securities and Exchange Commission are eligible for repayment assistance benefits. LRAP benefits are used by employers in the government and public sector to attract and retain qualified applicants.

Other LRAPs

The Civil Legal Assistance Attorney Student Loan Repayment Program, or CLAARP, is a program that repays a portion of federal student loan for civil assistance attorneys who are employed full time. The John R. Justice Student Loan Repayment Program, or JRJ, provides repayment assistance for state and federal public defenders and prosecutors who agree to remain in their positions for at least three years.

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Is a Debt Settlement for Credit Cards a Good Thing or Not?

Credit card debt burdens can weigh down a person's financial stability with excessive interest rates, enormous fees and the ever-present threat of having to file for bankruptcy. A large number of people find themselves buried under too much credit card debt at some point in their lives, but there are a number of things consumers can do to climb out of debt. Debt settlement is a popular option for dealing with credit card debt, but this technique may not be the best decision for your personal situation and financial goals.

Settlement Process

Debt settlements are essentially negotiations between creditors and account holders. During normal settlement negotiations, creditors or collections agents offer to close the account if the account holder pays an agreed-upon amount in full at the time of the agreement. The settlement amount is generally lower than the total amount outstanding. With interest and fees added in, however, settlement amounts can be larger than your original debt if the account has been in default for some time.

Another way to reach debt settlements is to consult with a professional debt consolidator. A debt consolidator will negotiate with your creditors and pay off your debt itself, creating a single, new account for you to repay.

Advantages

The advantages of debt settlements are widely understood. Account holders are released from their debt burden for less than they would have otherwise paid if they had settled on their own. People using debt consolidators gain the advantage of reducing their overall debt burden through lower interest rates and more favorable fee structures, while avoiding the threat of legal action for defaults.

Disadvantages

The disadvantages of debt settlements are less well known than the advantages. When creditors close an account after a settlement, they report the settlement to the major credit bureaus, which can have a detrimental effect on your credit score. Potential creditors in the future will think twice about granting you an account if they see you settled with other creditors for less than you owed.

Using a professional consolidator can be even worse for your credit reputation. Consolidators often use aggressive, persistent tactics to pay off your debt for pennies on the dollar. This can cause creditors to report an "aggressive settlement" on your credit report, which can cause future creditors to deny you an account.

Conclusion

Your personal situation determines whether debt settlements are a good thing or not. If your main goal is simply to get out from under your debt burden, settlements can be a very good thing. If your goal is to improve your credit score while reducing your debt, however, you may be better off seeking alternative means of getting out of debt, such as freezing accounts and creating custom repayment plans with creditors, or by obtaining a new loan and paying your credit accounts in full without negotiation.

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How to Check to See If a Collection Agency Can Collect in Your State

A common misconception among consumers is that all states require collection agencies to obtain a state license in order to conduct collection activity in that state. While no federal regulations exist requiring debt collectors to obtain a license in each debtor's state of residence, some states enforce specific rules regarding collection activity. Minnesota, for example, requires collection agencies to register with the state, pay a licensing fee and pass a screening process in order to collect from Minnesota residents. If a collection agency contacts you, find out if the company can even legally collect in your state before making a payment.

Instructions

1

Contact your state's attorney general's office. Ask if debt collection agencies must register with the state government or hold a formal license before collecting from residents. You may also refer to the Privacy Rights Clearinghouse's State Debt Collection Law Sheet in the Resources section to locate your state's regulations with regards to collection agency licensing.

2

Read over any written demands for payment that you've received from the collection agency. Note the full name of the collection agency.

3

Visit your state's Department of Consumer Affairs website and attempt to verify whether or not the collection agency is licensed in your state. Some states, such as New York, provide public licensing information online for consumers to review.

4

Call your state's Department of Consumer Affairs if you cannot locate the collection agency in the government agency's online database or your state does not offer an online database. Give the representative you speak with the name of the company and ask him to conduct a license check.

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Steps for Settling Debt

If you are struggling with high levels of credit card and other high-interest debt, it can be all but impossible to get out from under that burden without renegotiating the terms of your repayment agreement. Fortunately, it is often possible to negotiate more favorable terms with your creditors, since it is in the best interest of those creditors to keep you out of the bankruptcy courts.

Instructions

1

Make a list of all your debts, including the total amount you owe to each creditor and the required monthly payment. Sort the debts according to the interest rates, with the highest interest rates on top. Working with the highest interest rate debt first will allow you to save the most on interest payments.

2

Look up the customer service telephone number for each creditor and contact the creditor with the highest interest rate. Ask to speak to a supervisor immediately, since the rank-and-file customer service representatives will not have the authority needed to change the terms of your repayment or lower your interest rate.

3

Explain your personal financial situation to the creditor as clearly and precisely as you can. A sudden shock like the loss of a job or an unexpected expense can leave many previously financially secure people unable to pay the total amount they owe. The more information you can provide to the supervisor, the better off you can be.

4

Continue to contact each creditor on your list, working backward from the highest interest rate. Be sure to live up to the terms of each payment agreement you enter into, since missing a payment or paying late could cause the entire agreement to be canceled.

5

Contact your bank about a debt consolidation loan if you are unable to negotiate better terms with one or more creditor. Use the funds from the debt consolidation loan to pay off all your debts, then vow to avoid accumulating any additional debt.

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Can I Settle a Wage Garnishment?

If you fail to repay a debt you owe, and you do not attempt to work with the creditor, the creditor may choose to sue you in civil court to obtain a judgment against you for your debt. Once a creditor has obtained a judgment, most states permit the creditor to execute a wage garnishment order, which forces your employer to withhold a portion of your wages for repayment of the judgment debt. However, in certain cases, you may be able to settle with the creditor to end wage garnishment.

Definition

A settlement is an agreement between you and the creditor to consider a debt paid in full without paying the full balance of the debt. In a settlement, you agree to pay a portion of the debt, typically in a lump sum. Once the creditor receives the payment, it ceases collection activity, which may include garnishment of your wages. It also reports the debt as paid to the court that issued the judgment.

Benefits to Creditor

A creditor with an active wage garnishment order may be less willing to settle a debt than a creditor that has not yet sought a civil judgment against you. This is because the creditor has already incurred expenses such as court costs, hiring an attorney to handle the judgment lawsuit and obtaining a writ of garnishment. However, settling a judgment debt may help the creditor avoid ongoing garnishment costs, such as periodically refiling a garnishment order to keep the garnishment active. It also allows the creditor to receive a lump sum instead of having to collect against the judgment over time.

Settling a Judgment

You can attempt to settle a judgment and end wage garnishment by contacting the creditor or the attorney who represents the creditor. If you can provide a lump sum immediately, the creditor may be more willing to accept a settlement. The higher the percentage of your debt you can pay in a lump sum, the better your chances of successfully negotiating a settlement.

Considerations

If you successfully negotiate settlement of a judgment debt to end wage garnishment, ask the creditor to provide the agreement and receipt of the settlement payment in writing. This will provide evidence of the settlement if you have to request a court hearing to end the garnishment. Also, if you settle a judgment debt for more than $600 less than the full balance, you will have to pay taxes on the forgiven amount as earned income.

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What Is the Statue of Limitations on Credit Card Debt in North Carolina?

If you live in North Carolina and are worried about old credit card debt, you should be aware that it may be uncollectible under statute of limitations laws. These laws allow you to ask that a lawsuit filed against you by a credit card company be dismissed because of the age of the debt. You should also be aware, however, that just because a debt is outside the statute of limitations, a creditor or bill collector can still attempt to get you to pay it. Plus, the statute of limitations on obtaining a court judgment has doe snot effect credit reporting. Negative debt can still appear on your credit report for seven years.

Time Frame

The statute of limitation on collecting an unpaid debt in North Carolina is three years. This means that if a creditor files a lawsuit more than three years after your credit card debt was "charged off", which usually happens six months after you last made a payment on your credit card account, you can ask the judge to dismiss the lawsuit because the debt is older than the statute of limitations.

Judgments

If the credit card company or the collection agency handling your case, has won a lawsuit against you, the situation becomes far more complicated. Under North Carolina law, the statute of limitations on collecting a judgment is 10 years and to make matters worse for debtors, it can be renewed for another 10 years.

Credit Reporting

Don't confuse the statute of limitations on collecting a debt with the time limit on reporting negative credit information. Most negative credit information can remain on your credit report for seven years, four years longer that North Carolina's three year statute of limitations on debt.

Collection Efforts

Just because a debt is no longer collectible in court, does not mean that a creditor or a third-party collection agency, can't enforce collections. They are within their rights to contact you by mail or phone to attempt and persuade you to pay the debt. However, under the Fair Debt Collections Practices Act, you do have the option of asking a collection agency to cease communications. Send them a letter via certified mail asking them not to contact you again. By federal law, they can only contact you one more time to let you know what they plan to do with your case.

Warning

There are unscrupulous buyers of old debt that may attempt to sue you for a debt that is long past the statute of limitations. If this happens, don't ignore the lawsuit: Doing so can result in a default judgment against you. To prevent this from happening, send a debt collector a letter via certified mail that states that the debt is past the statute of limitations. If they file a lawsuit anyway, you can file a motion to dismiss the case on the grounds that the debt is no longer collectible.

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How to Use Credit Cards for Security Deposits

Security deposits are used to provide a landlord some financial protection and security in case you terminate the lease early, fail to pay your rent, or cause damage to the property. A security deposit is usually equal to one month's rent but can be more or less in certain cases. A landlord establishes the required deposit and decides on other factors, such as when the deposit is due and how he will accept the payment.

Instructions

1

Ask the landlord if he is capable of accepting credit cards. Many property management firms offer multiple ways of accepting a security deposit, while private homeowners may not have the capability. If your landlord can accept a credit card, provide him with the credit card or credit card information to process the deposit.

2

Call your credit card company and ask the agent to send you a check to use for withdrawing the funds from your available credit. Ask how long it will take to process your request. If you have time to wait for the check to arrive, complete the request and then use the check to pay for your security deposit.

3

Take your credit card to your local bank and request a cash advance. The bank teller will process your request in only minutes and will provide you with cash. If you prefer a check, ask for a certified check made out to the landlord.

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What Is the Purpose of a Line of Credit?

A line of credit is a ready source of funds from a bank or lending institution. It can be used for a variety of purposes, including unplanned expenses, family vacations, auto repairs and college tuition.

A Pre-Approved Loan

The line of credit costs nothing until withdrawals are made. After that, it can be repaid in monthly installments or all at once.

Another Credit Source

Some borrowers like the line of credit because it allows them to use their credit cards for day-to-day purchases, while reserving the line of credit for big-ticket items.

Bill Consolidation

Other people use their line of credit to pay off high interest rate credit card bills and other debts. That may result in a lower overall monthly payment, as well as significant savings on finance charges.

Great for Seasonal Workers

The line of credit can be excellent for temporary or seasonal workers, giving them access to cash for living expenses until they resume working.

Tax Time

Many consumers also tap into their credit lines to pay property taxes or federal income taxes. They appreciate the peace of mind that comes with knowing the credit line will be there when they need it.

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