October 2005 ~ Credit And Debt Management

Monday, October 31, 2005

Is it Legal to Garnish Wages in Georgia?

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Georgia follows federal regulations for wage garnishment. This means the state has no separate laws for garnishment and instead opts to allow federal law to take precedence. Georgia law does maintain a separate statute of limitations for creditors to pursue judgments to force wage garnishment. Each type of debt is assigned a different statute for debt collection purposes.

Georgia law places a varying statute of limitations on debt collection conducted within its borders. A debt collector has up to four years to sue you to force payment of an open account such as a credit card, six years for a written contract, seven years for a domestic court judgment and five years for a judgment obtained in a foreign court. If a creditor in Georgia sues you after the statute of limitations expires, you may use the expiration as a defense against wage garnishment or lien against your property in civil court.

Wage garnishment in Georgia is permitted for almost all forms of consumer debt, including back taxes, credit cards and student loans. According to the website for the United States Department of Labor, a consumer's disposable income may be garnished in one of two ways: the lesser of 25 percent of a consumer's disposable income, or $217.50. This last figure represents 30 times the federal minimum wage limit of $7.25 an hour. If a worker in Georgia earns less than $217.50 per week his wages are exempt from garnishment.

Child support and alimony garnishments are calculated differently than other consumer debts. A consumer who is making child support payments may have up to 50 percent of his disposable income garnished if he is actively supporting a child and up to 60 percent if he is not physically involved in supporting the child. The 50 percent garnishment also applies to a spouse making alimony payments in accordance with a Georgia divorce settlement.

The Consumer Credit Protection Act makes it illegal for an employer to fire an employee because the worker's wages are garnished to pay one debt. The worker may have multiple credit actions in regard to the debt including liens against property. As long as all the actions apply to just one debt, the worker cannot be legally terminated. If the employee's wages are garnished a second time by a separate creditor, the employer may terminate the worker.

Repossession Laws on Rent-to-Own Companies in Michigan

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A rent-to-own transaction allows a buyer to take possession of a product without paying the full purchase price. The buyer pays the balance of the purchase price in periodic installments and acquires full legal ownership only after the full purchase price is paid. If the buyer defaults prior to full payment, the seller can repossess the item. Michigan has enacted special provisions to protect buyers who default on rent-to-own agreements.

Michigan has enacted buyer protections applicable to rental purchase agreements, because this type of transaction has been used to exploit low-income lessees. Some vendors have structured transactions to encourage the lessee to default near the end of the installment period -- by providing for a large "balloon payment" as the final installment, for example -- so that the vendor can keep all rental payments made and still repossess the item so that it can be rented to someone else.

Michigan law prohibits rental purchase agreements from allowing a vendor access to the lessee's home to repossess items subject to a lessee default. It also voids any contractual provision that purports to waive any claims or defenses that the lessee may otherwise be able to assert in a lawsuit. These provisions are designed to prevent vendors from forcibly entering a lessee's home for the purpose of repossessing an item and to prevent them from gaining an unfair advantage in any lawsuit that may arise from a repossession.

If the lessee returns an item to the vendor after missing fewer than four periodic payments, Michigan law allows him to reclaim the item and retain his original contractual rights as soon as he pays his overdue balance plus a reinstatement charge equal to the lesser of $5 or 5 percent of the overdue balance. The reinstatement fee must be waived if the lessee has only missed one payment. If the lessee misses four payments, he loses the right to reinstatement and cannot reclaim the item unless the vendor waives his right to repossession.

Normally, a vendor must obtain a court order to repossess an item subject to a lessee payment default, and a judicial officer must execute the repossession. If the vendor auctions the item to pay the lessee's outstanding balance and auction proceeds are insufficient to retire the debt, the vendor may sue the lessee for the remaining debt.

Is It Legal to Pay a Mortgage With a Credit Card?

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Paying debt with a credit card is an option that is used not only as a convenience or in times of financial distress but to earn rewards offered by credit card companies. Many types of debt can be paid using credit cards, such as utility bills, credit cards, personal loans and even auto loans and mortgages.

While it is legal to pay your mortgage with a credit card, it does not mean that you will be able to pay with a credit card. There are many issues involved with a lender being set up to accept credit cards. Contact your mortgage company to see if the company has the capability to accept credit cards. There may be other ways to pay via a credit card even if your lender doesn't directly take credit cards.

Credit card companies use rewards, lower interest, no interest and other gimmicks to get customers. Your credit card may offer a bill payment service, and you can set up the account to pay your mortgage. You must make sure the credit card company will mail out a paper check for this to work. Your bank may offer a bill pay service using your credit card as the funding source. Contact your credit card issuers as well as your local bank to check if this is an option.

Many credit cards have reward programs where you earn points toward cash back, travel rewards or other gifts. For each dollar spent, you earn a set number of points. By charging the credit card, you earn the points for a purchase you would have paid anyway. Many people pay a bill with a credit card and immediately send a payment to the credit card company. By paying the credit card immediately, interest is not charged, and you have earned the rewards.

Using a credit card to pay a mortgage should be done either as a last resort when there are no other options or with full knowledge that the funds are there to repay the credit card. Using a credit card without plans to repay the debt can result in finding yourself in a serious financial situation leading to poor credit or bankruptcy.

How to Activate My Credit Monitoring

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Credit monitoring is a paid service that offers access to your credit reports and monitors changes to your credit profile. The service helps prevent identity theft by notifying you of critical changes to your credit profile. After signing up for a credit monitoring service, you will need to activate the service before you can use it. You can normally activate your service by phone, email or on the Web.

Instructions

Call the customer service phone number for your credit monitoring service. If you did not sign up for credit monitoring over the Internet, you will normally use this method to activate your credit monitoring service. After signing up, wait until you receive your welcome package by mail from the credit monitoring service. The package will provide the customer service phone number for the service. Tell the customer service representative that you would like to activate your service. After you verify your identity with the customer service representative, he will activate your credit monitoring service.

Go to the activation website for your credit monitoring service. After signing up for the service, you will receive information that lists a website to activate your service. If you signed up on the Internet, you will normally follow a link immediately after signing up to activate your account. If you did not sign up on the Internet, you will receive a welcome package by mail. This package will list the website address to activate your service. Enter the requested information to verify your identity and activate your account.

Check your email for the activation link. Some credit monitoring services send you an activation email after you complete the sign-up process. Click on the activation link and answer any security questions to activate your credit monitoring service.

How to Open a Bank Account With a Bad Credit History

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You may be pleasantly surprised to learn that despite a bad credit history, most banks won't hesitate to let you open a bank account. While some banks check potential customers' credit reports before allowing them to open accounts, others do not. Rather, such banks rely on the ChexSystems, which tracks people who make it a habit to write bad checks. Thus, that loan you defaulted on or credit card payments you fell behind on will not impact your ability to get a bank account as long as you go to the right bank.

Instructions

Call the bank and ask if it checks credit histories of people applying to open a checking account. If it does, call other banks in your area until you find one that relies solely on check-writing histories.

Visit the bank in person to fill out an application. Such applications typically ask for your name, date of birth, Social Security number, current and previous home addresses, and employer name and address. You may also be asked to provide a picture ID, your Social Security card and a recent utility bill as proof of address.

Allow the representative or teller to conduct a ChexSystems check based on your Social Security number. This won't take long. She will then tell you whether you are approved to open a checking account.

Present the representative with cash or a check to deposit into your new account.

Ask to open a savings, instead of checking, account if you are denied a checking account based on your ChexSystems file. Most banks will allow people who fail a ChexSystems check to open a savings account. After six months or responsible account use, the bank may reconsider allowing you to open a checking account.

Join a credit union if you need a checking account immediately, since these financial institutions tend to be more lenient, even if you have a bad credit history and poor ChexSystems record. Complete an application as you would for a bank account and provide cash or a check to deposit into your new account.

What to Do When a Hospital Bill Gets Sent to a Collection Agency

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Tens of millions of people have problems paying off debt. Although hospitals shy away from hardball collection tactics, the medical provider can still write it off by sending the bill to a collection agency. Once the debt goes to a debt collector, it can pursue the debt by any legal means, which might mean a lawsuit.

If you have concerns about the validity of the debt, such as when the bill contains erroneous charges, you can dispute the bill with the credit-reporting bureaus. The bureau will investigate the legitimacy of the bill. At the very least, the credit report's account must contain a notation that you dispute the delinquent bill's accuracy when you initiate a dispute within 30 days of receiving notice that the balance is in a collection agency's hands.

You can settle any debt, even one with an entity not viewed as a creditor, such as a hospital. Offer to pay the entire bill in return for the collection agency declaring the entire delinquency a "mishap." You could negotiate directly with the hospital. Make sure you receive in writing a promise to remove the collection account from the creditor you owe money; you hold no leverage once the collection agency receives payment. Paying the balance in full gives you the best chance of seeing that the collection agency will agree to this request.

Selling a debt to a collection agency does not "renew" its life, so the credit bureaus can report it only for seven years from the date that the hospital writes it off. If the bill is close to the drop-off date, you might do better just waiting it out, even if paying it back is the ethical thing to do. Once the collection leaves your credit report, do not even acknowledge you owe the money, or else it can appear on your report with a more current date.

Review your state's law on debt collections. Hospitals, for example, must send the patient a bill before selling the debt to a collection agency. Dispute the debt with the credit bureaus as soon as it hits your credit report. Try to pay off the entire bill, but avoid settling. A settled debt is worse for your credit score than an open or "paid as agreed account." In the future, talk to your doctor about your finances before he has to send a bill to collections. Many doctors will work with you to get some amount of payment.

What Percentage Can the VA Take for a Debt From SSI?

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Most creditors are prohibited from garnishing you social security income in any way thanks to Section 207 of the Social Security Act. However, the federal government may garnish wages from SSI if you owe a federal debt. Examples include tax payments, food stamp overpayments and government backed mortgages. If you default on a home loan backed by the Department of Veterans Affairs, the government can garnish your SSI.

When you default on a VA loan, you actually default with a private lender first. Once the VA has assumed your mortgage, which it may do if you have a guarantee on the loan, will you owe the money directly to the VA. At that point, the VA will issue a notice of outstanding debt to you. If the VA intends to garnish your wages in any way, you will receive a notice from the VA stating this.

If your SSI is greater than $750 per month, the VA can garnish the wage. If you earn less than this threshold, your earnings are protected. This amount can change by year based on laws and regulations. Similarly, at the time of publication, the most the VA can garnish is 15 percent, but this can change by year.

You may feel like a 15 percent reduction in your SSI would prevent you from meeting your financial obligations. In this case, you may file for protection with the court. Filing for bankruptcy is one option. While federal debts are rarely excused in bankruptcy, you may be able to reduce the amount of the garnishment in accordance with your income and financial responsibilities. If you intend on fighting wage garnishment, you should file with the court as soon as you receive notice the VA intends to garnish your SSI.

Aside from garnishing your SSI, the VA can garnish other income you are receiving. Typically, much of your income would be protected from garnishment, including unearned retirement income or unemployment income. These income sources are not protected in the face of wage garnishment by the government. Federal law limits wage garnishment to either 25 percent of your disposable income per week or no more than 30 times the federal hourly limit, whichever is lower.

Can Effective Rate and Nominal Rate Ever Be the Same?

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Effective rates can be the same as nominal rates; however, the effective rate is usually higher. These rates refer to the amount of interest charged to a specific balance, and the nominal rate is the base rate used in calculating the effective rate. Sometimes the nominal rate does match the effective rate due to factors that affect when and how much interest accrues on the balance, and how it is calculated.

The nominal interest rate does not apply to previously accrued interest. In other words, the nominal rate is the agreed upon rate applied to a remaining principal balance only. This is why the nominal rate only equals the effective rate when no interest has been previously applied to a balance. For example, a 15 percent nominal annual percentage rate applied to a $100 balance after one monthly billing cycle will have the same $1.25 nominal and effective interest charge due to no previously carried over interest.

The effective interest rate is a more accurate measurement when interest is compounded. Using the previous example to illustrate, 15 percent nominal APR charged to a carried over balance of $101.25 will be a charge of $1.27 for a total effective interest rate of 15.12 percent. Thus, in the second billing the nominal interest rate will not equal the effective interest rate due to the nominal rate being applied to the new balance with interest included.

Both nominal and effective rate charges are incurred within the total length of a financial agreement, such as credit card debt. This total period is divided into interest accrual or compounding periods. These periods differ from the periodic payment period or time interest can be paid before being included in the following billing cycle. These periods are key in determining equality between the nominal and effective rate depending on if a balance carries over between them and how much of that balance is paid.

Terms of financial instruments also determine if nominal and effective rates will match. For example, if the grace period on a credit card purchase with an existing balance is 25 days, and payment on that balance is paid after 30 days, the effective and nominal rates will not be the same. Moreover, the two rates will both be zero if payment in full is made within the grade period of that credit card's terms.

What Do I Do If There Is Fraud on My Credit Score?

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If you are receiving more credit card offers in the mail than normal or if you receive a credit card bill for an account you did not open, then you may be the victim of credit fraud. Once you suspect credit fraud, you should take steps immediately to protect your credit.

According to the Federal Trade Commission, a fraud alert will help prevent any unauthorized credit accounts from being opened in your name. When a fraud alert is on your credit report, the credit issuer is advised to contact you before approving an account.

A fraud alert remains on your credit account for 90 days. If you ask for an extended fraud alert, then that can remain on your credit file for up to seven years.

Placing a fraud alert on your account is free with all three credit reporting agencies.

An alternative to a fraud alert is a credit freeze. In most cases, victims of identity theft do not have to pay to have a freeze put on their accounts. A freeze prevents anyone from adding credit to your name, even yourself. In order to add a credit account, you must pay to lift the credit freeze.

Aside from costing money to execute, a freeze also differs from a fraud alert in that creditors are required by federal law to not authorize a credit account with a freeze on it. A creditor can ignore a fraud alert and issue a card in your name if they choose to.

What Affects My Credit Score?

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The importance of good credit cannot be overstated. Credit scores determine how much you will pay for a loan. It's difficult for most people to pay for items such as a car, a home or a college education without borrowing money. Further, many employers now routinely review the credit records of their applicants as a part of their background checks of prospective employees. Some insurers also review credit scores when determining insurance rates. Given the significant role credit scores play, it is crucial to know how your score is determined and what factors can affect your score.

Your credit score is generally calculated as follows: 35 percent payment history; 30 percent current debts; 15 percent credit history; 10 percent new credit applications; and 10 percent types of current credit. These factors all play a role in determining your credit score.

This is the most well-known factor that can influence a credit score--whether or not you pay your debts on time. To maximize this portion of your score, pay your bills on time. If you have stopped making payments on a debt, contact the creditor and make a payment arrangement.
If you have trouble obtaining credit due to poor payment history, secured credit cards can help raise your score. Secured credit cards require a deposit and offer you a credit limit equal to that deposit. Secured credit card issuers generally report your payment history to the credit bureaus every month, which can have a rapid positive impact on your score if you make timely payments.

Your score also reflects how much credit you are using relative to how much you have. If you consistently carry balances on multiple cards that are, say, 90 percent of your limit, your score will drop as you will be considered at greater risk of default. Keep a small balance on credit cards, and make regular, timely payments to maximize this portion of your score.

A longer credit history generally increases one's credit score. This portion of your score also takes into account the last time you used particular accounts. If you have zero balances on multiple lines of credit that you have not used in years, your score could drop.
If you have a short credit history, be aware that opening up multiple accounts will not have an impact on this portion of your score, and can, in fact, hurt your overall score.

Ten percent of your score reflects whether you are opening multiple new credit accounts over a short period of time. Each time a lender checks your credit for a new account, a notation is made on your credit report. Credit scores account for the previous 12 months worth of inquiries. Rapidly applying for and/or opening multiple credit accounts will lower your credit score. If you are applying for credit for a major purchase, such as a mortgage, it is a good idea not to request new credit applications in the months previous.

Your score also accounts for the different types of credit you have. Having multiple credit cards is viewed less favorably than having one or two as well as larger term loans such as a mortgage and an educational loan. Old loans, both those dutifully paid in full, as well as those on which you have defaulted, remain on your record for some time and will continue to play a role on your current score, regardless of your current mix.

Facts About Debt Collectors and Wage Garnishment

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Being in debt is stressful. Being wage attached, or garnished, for your debt is even worse. There are federal guidelines, laws and rules in place for wage garnishments by debt collection agencies. Types of debts and the amount of the garnishment are limited. Each state may have additional laws, but they have to abide by the federal statutes.

The maximum garnishment is 25 percent of your disposable earnings. The only exceptions are for court-ordered payments and state or federal taxes.

The 25 percent of your disposable earnings cannot leave you with less than thirty times the federal minimum hourly wage.

Your employer cannot terminate your employment because they received a garnishment request for your debt. Violations are subject to large fines and/or imprisonment.

Social security payments are normally exempt from garnishment. The exemptions are only for federal taxes and in some cases delinquent child support payments.

Most states allow your employer to retain a certain percentage of the garnishment from your paycheck for bookkeeping compensation. This amount is in excess to your garnishment amount.

If I Pay My Creditor Will the Collection Agency Still Report This Bad Credit?

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Collection accounts within your credit file are always considered derogatory by the credit bureaus and, according to the Fair Credit Reporting Act, will remain for 7 years from the date you originally defaulted on the debt. Depending on the arrangement your creditor holds with the collection agency, paying your creditor may prevent a collection account from ever appearing on your credit report.

Creditors have the option to either charge-off a debt and sell it to a collection agency or maintain ownership of the account and pay the collection agency a percentage of however much the company can successfully collect from you. The type of arrangement your creditor holds with the collection agency will impact how paying the account affects your credit report.

If your creditor sold your account to a collection agency, the creditor can no longer accept payment on the defaulted debt due to the fact that it no longer owns the debt. Thus, as the debt's owner, the collection agency reserves the right to update your credit report accordingly. If your creditor only assigned the debt to a collection agency for recovery, you can pay the original creditor. Doing so, however, does not erase any derogatory report the collection agency has already made to the credit bureaus.

Many consumers believe that their debts are held by a third-party collection agency when, in fact, the debts are merely in "collections." Most creditors have a collection department within the company that takes over recovery responsibilities for unpaid accounts before selling or transferring them to an outside agency. Should you submit payment on an account held by a in-house collection department, only the original creditor's report will appear on your credit file.

Missing payments on a debt to a creditor will result in the creditor reporting the missed payments to the credit bureaus. Should the creditor subsequently charge off the debt, this fact will also appear within your credit files. Missed payments and charge-offs are considered negative entries by credit scoring formulas and damage your credit rating. Thus, your creditor doesn't have to transfer the debt to a collection agency for your credit rating to suffer as a result of not submitting payment on an account.

Paying a collection agency doesn't necessarily mean that the company will report the debt to the credit bureaus. Many collection agencies provide consumers with a window of time in which to pay off the defaulted debt before the company formally reports the account. If a collection account already appears on your credit report, some collection agencies will agree to remove the derogatory entry in exchange for payment.

What to Do When Your Car Is Repossessed & the Company Won't Give You a Settlement?

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Automobile repossession is a serious issue and, in extreme cases, can lead to bankruptcy. A company or lender that will not offer a settlement on auto repossession may be preparing to resolve the issue by filing a civil lawsuit, if necessary. A lawsuit allows the lender to win a judgment for the full balance on the loan after the repossession.

Lenders sell cars at auction or private sale after repossession. Repossession usually occurs after the owner falls two or three payments behind. The repossession takes longer if the owner hides the car or tries to avoid repossession. Some people who know they cannot afford the car payments make arrangements for a voluntary repossession. The lender agrees to a date and time for the debtor to return the car during voluntary repossession.

Money from the sale of the car isn't always enough to pay off the balance on the loan. Cars depreciate so rapidly that it is common for the balance on the loan to exceed the car's value. For example, the lender may sell the car for $7,000, but the balance on the loan is $10,000. That leaves a $3,000 gap the former owner of the car must pay if the lender pursues the remaining balance.

The lender can consider settling the remaining balance -- or file a lawsuit for the entire amount. Debt settlement allows a debtor to pay off a debt for less than the full amount owed. However, the lender is not required to agree to a settlement, and he can take a hard stance by indicating a willingness to sue for the entire amount. A court victory by the lender results in a so-called "deficiency judgment" that requires the former owner of the car to pay the full amount. If the debtor does not pay, the lender can seek garnishment of the debtor's bank account or wages.

There are few options for a debtor whose lender will not settle. The possibility of a judgment and garnishment gives the lender complete leverage. One option for the debtor is to file for bankruptcy. A deficiency judgment is an unsecured debt and typically is wiped out in just a few months during Chapter 7 bankruptcy. Chapter 13, another form of bankruptcy, is also an option, but it requires a payment plan lasting three to five years. A debtor must list all debts in bankruptcy, not just the deficiency judgment. Usually only people with low incomes qualify for Chapter 7 because of income limits set by states. People who want to avoid bankruptcy following repossession should try to negotiate an agreement to pay the full balance in installments, or borrow money from another source to pay the debt.

How to Become Debt Free Fast

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Becoming debt free has become more important as economic conditions in the world continue to fluctuate. The process of getting rid of debt can be a tenuous one, but it is possible.

Instructions

Cut 'em up. That's right, cut your credit cards in half, with the exception of one for emergencies only. This doesn't mean you are closing your accounts; you are just denying yourself access to them. This first step must be taken before any others because if not, once you have paid off your old debts, you will only feel tempted to give yourself permission to overspend again. Credit cards are the most common form of debt and the most dangerous. Many people buy on credit, never thinking about the large bills that are to come later.

Draft a plan on paper. List everyone and every company you owe money to. Write down dates that accounts were opened, what you owe, how far behind (if at all) you are and contact information for each company/person. You must have a plan so you know exactly what you owe and just how deep in debt you really are.

Call your debtors and try to make a deal. Most debt collectors or even regular companies just want what you owe. More often than not, they are willing to settle up with you for a fraction of your actual debt. In fact, some companies will go so far as to offer up to 75% off of what you owe them in exchange for some payment, any payment at all. Call or write to the companies that hold debts in your name and ask them if they would consider a settlement offer. If they accept, be sure you pay as soon as you are able to. If you don't hold up your end of the bargain on the deal, chances are you won't be offered a settlement opportunity again.

Divert as many extra funds towards paying off debt as possible. It may mean a few months of eating a home instead of in a fancy restaurant or skipping over getting an entirely new spring wardrobe. However, that money you spend on extras really adds up, and you may find that paying off a bill every time you have some extra money will get you out of debt faster than you ever dreamed possible.

If your debt is overwhelming, get help. Some people are in such a deep pit of debt, it doesn't matter how much they scrimp and save to pay it off, they will never get there. At this point, it may be prudent to find a reputable debt consolidation agency that can help you consolidate all of your bills into one affordable payment. This option might not be as fast as some of the others, but is sound and reliable and is a surefire way to get out of debt without drastically altering your current lifestyle.

How to Make My Debt Less

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Drastically reducing the amount owed to your creditors can improve your personal finances in a major way. Some people spend a huge percentage of their monthly income making debt payments. This results in less income for savings and dealing with unexpected expenses. Learn ways to lessen your debt load and increase your disposable income.

Instructions

Buy items when you have the cash. Buying merchandise you can't afford increases debt because you're more likely to use credit cards or financing with retail stores. Save up when you need to make a purchase and use cash instead of credit.

Reduce spending altogether. Having extra income isn't an excuse to spend uncontrollably. Reign in shopping and spending and use whatever savings to pay down your debts and reduce your outstanding balances. For example, if you normally spend $300 a month dining out, starting eating at home and put this cash towards your credit card debt.

Pay on time. Avert interest rate increases and late fees, which can increase balances, by paying creditors and lenders on time each month.

Get rid of your credit cards. Cut your credit and charge cards in half or use a shredder with the ability to destroy credit cards. Removing cards from your possession can eliminate unnecessary spending.

Downsize to save money and reduce debts. If house payments and automobile payments prevent debt elimination, re-assess your monthly expenditures and make changes to live within your means. This may require getting a roommate to share household expenses or moving to a place with a cheaper rent or mortgage.

Review your interest rate on credit cards. Help pay down your principal quicker by working with creditors to have your rate reduced. This alleviates high interest charges each month, and creditors apply a larger portion of payments to the outstanding balance.

Is It the Right Choice to Reduce Credit Limits to Increase Credit Scores?

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Improving your credit score is a good idea, but in most cases, reducing your credit limits is not the way to accomplish this. In fact, reducing your credit limits can actually hurt your credit scores significantly. There is no easy fix for improving your credit; it takes time and good management to improve your scores.

Your lines of credit, credit limits and payment history all factor into your credit score. Your credit limits themselves do not raise or lower your scores. Late payments, missed payments and how close you are to your limits do factor into your score. Withdrawals exceeding your available credit also damage your score. In addition to these factors, the length of your credit history, new credit accounts and the types of accounts you have all affect your credit score.

One of the top factors in your credit score is how much of your available credit you use. For a good score, your debt should be less than 30 percent of your available credit. This means that if you have $10,000 of available credit, you should have less than $3,000 in debt. If you reduce your credit limit to $5,000, that 30 percent limit reduces to $1,500. If you have $2,500 in debt on a $10,000 credit card, this portion of your credit score is in good shape because you are only using 25 percent of your available credit. Reducing your credit limit to $5,000 will damage your score because even without any additional debt, you are now using 50 percent of your available credit.

Reducing your credit limits is only a good idea if you are not carrying debt and want to limit your future potential to get into debt. This is a choice to impose psychological spending limits on yourself and back them with monetary limits. However, your available credit from all sources is calculated together from your score. This means that if you are under the 30 percent limit on all of your credit accounts and choose to lower limits on one account, it can still push your general percentage of debt higher. For example, imagine you have three cards with $10,000 limits and carry a balance of $3,000 on two of them and a balance of $2,000 on the third. Your total credit available is $30,000 and your total credit used is $8,000 or just under 27 percent, which is a good score. Then you reduce the limit on your lowest-balance card to $5,000. Your credit usage percentage is pushed up to 32 percent, even though you still have $17,000 in available credit. For this reason, wait until all of your debt is paid off before reducing limits on any account.

The amount you owe is the second-largest factor in your credit score. The largest is whether your payments are on time, accounting for 35 percent of your score. The amount owed calculation accounts for 30 percent of your score, but there are other factors as well as the straight percentage, including how much of the original balance is paid off and which types of accounts carry balances. To increase your credit score, focus first on paying all bills on time and second on reducing consumer debt balances such as credit cards. Don't worry about reducing mortgage debt until after credit card balances are down, as a mortgage generally carries less negative score weight as well as lower interest rates than consumer credit cards.

How to Negotiate with Bill Collectors

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Bill collectors are relentless, and they'll call your house or place of employment for a payment. Ignoring bill collectors may seem like a logical approach if you don't have the money. However, ignoring the telephone calls doesn't make the problem disappear. If anything, collectors are less willing to negotiate when you ignore letters or phone calls. Communication is the key to negotiating with collectors and resolving debt.

Instructions

Settle for less than you owe. Agree to pay something on the account. Communicate with your bill collectors and negotiate a pay off amount to satisfy the debt and stop all collection attempts. Make a reasonable offer. For example, if you owe $2,000, offer a settlement of $1,000.

Restructure the debt. If your current terms inhibits regular payments, ask your creditors to restructure or change the terms of your agreement. Suggest a lower interest rate or monthly payment to increase affordability and alleviate late payments or delinquencies.

Request forbearance. If you don't have the means or ability to make payments due to money issues, discuss your hardship with your collectors and negotiate a forbearance period. Payments are not required during forbearance, but some creditors will continue to charge monthly interest.

Retain proof of agreements. Once your collector accepts your settlement, agrees to change the terms of your account or grants a forbearance, ask them to put everything in writing and mail or e-mail you a copy of the agreement for your records.

Five Reasons Why It Is Better to Lease

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Leasing an automobile carries may distinct advantages over a traditional auto loan. Many consumers buy into the myth of a lease agreement with hidden fees that will devour any savings and leave drivers owing thousands of dollars at the end of lease terms. Responsible use of leased vehicles leads to savings and the ability to continually switch vehicles.

Leasing a car allows for a short-term commitment to a vehicle at a lower price than taking out an auto loan. With a lease, you're only paying a portion of what the vehicle is worth as opposed to an auto loan where you must pay the entire sale price of the car, plus interest on your loan, to own the vehicle free and clear. For example, leasing a $20,000 automobile over a 24-month period may cause the vehicle to depreciate to $13,000 at the time of your lease end. Your lease agreement makes you responsible for only the $7,000 difference in vehicle value over the life of your lease.

Two to three years is a common length for auto leases around the country. The short-term commitment allows you to enjoy a vehicle while the car is at peak performance and hand the vehicle back to the dealership before any problems begin to arise. This also allows you more buying flexibility since you always have something new to drive. If you get bored with your car easily, leasing is the ideal option to keep your wheels fresh and entertaining.

If you lease your car for business purposes, the IRS allows you to deduct your monthly lease payments from your federal tax return at the end of the year. Even if you don't use your vehicle for a business, most states still afford you a tax break because you only pay taxes on your monthly lease payments and not the total sale price of the vehicle. According to Lease Guide's website, if you live in states like Illinois and Texas you must pay sales tax on the full value of the leased vehicle.

The dealership leasing you the vehicle will probably offer you the opportunity to purchase your leased vehicle at the end of your agreement. This allows you to buy the car for its depreciated value absent any dealer markup. Your history of regular lease payments with the dealership also works in your favor because it can help you secure a low interest rate on your financing, which can save you even more money.

Once you sign your name on an auto loan, there's really no way out. This may not be the case with an auto lease agreement. You can get out of a lease agreement early by paying a fee and signing the lease agreement over to another credit-worthy driver. Several websites, including Lease Trader and Swap a Lease, exist solely to match parties who are looking to sign over and assume auto lease agreements.

The Responsibility of a Deceased Spouse's Debt

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The loss of a spouse is bad enough without thinking about how to settle her debts. The responsibility for paying them usually falls on the deceased's estate, but there are times the widow or widower may be liable for unpaid bills. Responsibility varies with state law, the nature of the debt and whether it was one spouse's obligation alone or a shared responsibility.

The deceased's estate is initially responsible for paying his debts. The executor must go over the deceased's records and contact creditors. State law may also require a death notice in the paper so that creditors who aren't in the file can put in a claim. The law gives these creditors a limited time to file, after which the debt becomes uncollectible. The executor must use the estate's assets to pay off the deceased's debts before distributing the assets to the heirs.

If the estate doesn't have enough assets to pay off the debts, creditors may be able to pursue the surviving spouse. If both spouse's names are on a credit-card account, for instance, the card company can hold the widower responsible for his wife's purchases. If the debt is in the deceased's name alone, responsibility may hinge on whether the couple lives in a community property or common-law state. In common law states, the living spouse isn't responsible for the deceased's individual debts.

If the spouses owned property together, the legal arrangement could make a big difference. If they owned their house jointly with right of survivorship, for example, the death of one spouse gives the other full ownership without probate; the house never becomes part of the estate, so there's no way creditors can put a claim on it. Tenancy in common, on the other hand, doesn't have a right of survivorship: The house must go through probate and could be sold to pay the deceased's debts.

Some state and federal laws provide exceptions to the general rules. If spouses file a joint return, they become liable for each other's individual tax debts. In North Carolina, one spouse can be held responsible for her spouse's individual medical bills. Even in common law states, spouses can be held liable for the deceased's debts for necessities such as food and medical care. If the estate can't pay, this sort of debt may be laid on the spouse's shoulders.

Can Credit Card Debts Be Attached to Real Estate?

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Most credit cards are unsecured debt (although consumers rebuilding their credit scores may get a secured card with a cash deposit as collateral). Only a promise to pay and a good credit history backs unsecured credit cards. This makes underwriting credit card debt risky and contributes to the high interest rates issuers charge for these unsecured lines of credit. Despite the initial unsecured status, a credit card debt can attach to the debtor's real estate after a payment default if the credit card lender sues the customer and obtains a judgment in court.

When a consumer stops paying on a credit card debt, the credit card company attempts to collect the debt through informal means. This typically involves phone calls and letters from the collections department within the credit card company. The issuer may turn over the collection process to a third-party collection agency. If these efforts fail, the holder of the debt may hire a collection attorney to pursue the borrower.

Once engaged, the collection attorney will usually send a letter demanding payment. If the debtor does not pay, the credit card company's attorney will file a lawsuit against him. Lawsuits begin with filing a complaint in court and serving a copy of the complaint on the debtor. The debtor has a limited number of days to file an answer to the complaint.

If the borrower ignores the complaint, the collection attorney can apply for a default judgment. Otherwise, the parties will continue the litigation until they settle or the court rules on the case. Unless the credit card borrower has a valid defense or agrees to a voluntary settlement, the credit card company will eventually receive a judgment from the court confirming the amount owed. The judgment can become a lien on the debtor's real estate. Once the credit card company records its judgment, the credit card company's judgment lien will show up in title reports. Then the debtor will not be able to sell the real estate without paying the judgment.

Many states have homestead laws that protect some or all of a debtor's primary residence from judgment liens. Homestead laws don't affect voluntary liens that are secured by a home (like a mortgage). But they can prevent a credit card company or other judgment creditor from foreclosing on the debtor's home and forcing him to leave.

Although many people worry primarily about credit card debts reaching their home, the credit card companies have other powerful collection tools after the court awards a judgment. A judgment allows the credit card company to garnish wages and bank accounts until the judgment is paid in full.

Who Should Use Interest Only Loans?

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Most types of loans require interest on monthly payments. However, some mortgages, home equity loans and other loans allow you to pay only interest for part of your repayment period. Whereas this sort of loan isn't for everyone, some might find them preferable.

Those anticipating a rise in income from entering the workforce or taking a new step in their career can benefit from an interest-only loan. Exclusively paying interest enables borrowers to access money when they need it, then delay principle repayment until a more opportune time.

If you have a low interest rate and can apply tax deductions to the interest you pay, it can make more sense to pay interest at first and use the extra money to invest. For example, rather than building equity in your home by making principal payments now, you might prefer to invest your money and have it earn a return for you. Later, you can convert the return into home equity by making principal payments, if you can regularly invest at least the amount you would have paid for your mortgage.

If a significant portion of your income is in the form of irregular commissions, an interest-only loan can help you balance out your cash flow. You only have to pay interest so you can make these small payments on months when your income is low. When you do get a commission, you can use the extra money to pay some of the principal balance.

Interest-only loans cost more in interest than traditional amortized loans. This is because you are not reducing the principal balance during the interest-only period, so your interest cost is the same every month. In contrast, if you make principal payments, you reduce the amount you owe and therefore pay slightly less interest each month. In addition, interest-only mortgages will not build home equity. If your home's market value drops, you will owe more on the home than it is worth, which will make it difficult to sell.

What to Do When You Receive a Collection Letter?

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If you have unsettled debt, or a collection agency thinks you do, you might get a collection letter. Third-party collection agencies sometimes purchase your debt from the company you originally owe the money to, so your debt is owed to whichever company sends you the letter. Before taking action, you should thoroughly understand why you received the collection letter and your rights as a consumer.

The Federal Fair Debt Collection Practices Act (FDCPA) dictates that collection letters must include the amount of money you need to pay, to whom you owe the debt, the address of the debt collector, the fact that you are legally allowed to dispute any part of the debt and the fact that you have the right to request any contact information of the original creditor. If the collection letter you received doesn't contain all of this information, the collector who sent it to you is in violation of the FDCPA.

When you receive a collection letter create a file for your record keeping. Your file should include pertinent information, such as the date you received the letter, the name of the agency and the employee who signed the letter, and copies of the letter and the envelope it came in. If and when you choose to respond to the collection agency, you should do so in writing and send your letters via certified mail with a return receipt requested. This will help you have a solid record of your correspondence with the agency.

You should never ignore a collection letter, even if the debt isn't yours (reference 1). If you ignore the letter, the collector will certainly continue to contact you and may even file a lawsuit against you (reference 1).

If you need to dispute some or all of the debt, write a letter to the collection agency within 30 days of receiving the collection letter. You should never pay a debt that isn't yours just to make the collection agency go away. According to the Privacy Rights Clearinghouse, paying a debt acknowledges your responsibility for that debt.

If you need help paying the debt or deciding what to do about your debt, you should contact the National Foundation for Consumer Credit because it can help you find a credit counselor in your area and answer some of your questions (reference 1).

If you think the collection agency that sent you the letter may have violated the FDCPA, report the problem to your state's Attorney General's office and the Federal Trade Commission. Each state's laws on what constitutes unlawful behavior on the collector's part vary, but your Attorney General's office can help you determine what your rights are in your state.

Impartial Debt Advice

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Personal debt makes your finances difficult to manage, and finding assistance is not necessarily easy. A person with an interest in your debt, such as a creditor, does not usually offer financial advice that is impartial and relevant to your personal circumstances. While not every person's debt level or options is the same, some advice applies to nearly every circumstance.

A budget, or listing of all of your income and bills for each month, allows you to plan ahead and see where your money actually goes. You'll be able to compare your monthly debt to how much you make per month; you must decrease your expenses if you are not making enough to pay everything. Unnecessary costs, such as eating out at restaurants, can be eliminated to help you pay down credit card debt faster, and your budget helps you see what other money you're currently spend needlessly.

Your debt sources should be identified and evaluated. You may be in the habit of using a certain credit card for all of your purchases, but you could have another card with a lower interest rate. Credit card companies change terms; check your accounts to see if your interest rate has been hiked or if an annual fee has be added to your account. Pay off or rarely use those cards with excessive fees to save yourself money. Personal loans usually have a higher interest rate because the loan is not secured by any property. Paying down personal loans should be a priority, as the interest you pay makes the loans harder to pay off.

Both traditional debt consolidation, when you move all of your debt to one creditor, and nonprofit consolidation, through a credit counseling plan, have benefits and pitfalls. Traditional debt consolidation can work if you move the debt to a source that will not raise the interest rate, such as a second home mortgage, but you must not incur more debt afterward. Credit counseling plans are beneficial if your counselor slashes your debt and you are given an affordable plan payment. You must be able to make the monthly plan payment on time.

Bankruptcy, a federal filing that allows you to wipe out your debts entirely or receive a court-ordered repayment plan, is necessary in some cases. Your debt may be too high to pay off over any reasonable length of time when you consider your actual income. Creditors can make your situation worse if your wages are garnished or your bank accounts seized. Bankruptcy affects all aspects of your finances and should be investigated thoroughly before you file, but the federal protection you receive from creditors may be vital.

Definition of Disposable Wage for Garnishments in Maryland

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Maryland wage garnishment is a debt collection process that occurs when a debtor fails to pay a debt. Wage garnishment allows creditors to obtain payment for past due services, lines of credit and bills. After obtaining a judgment against the debtor, the creditor may request an employer deduct a portion of a debtor's paycheck each pay period to reconcile a debt. The amount a creditor can garnish depends on the amount of the debtor's disposable income.

Disposable wages are the money that remains after an employer deducts certain items from a debtor's paycheck. These deductions occur during the payroll process before direct deposit or payment of wages by check. Applicable deductions include federal and state taxes, Social Security and medical or unemployment insurance. The amounts of these deductions are exempt when determining the amount of the garnishment each pay period.

Any non-employment expenses, such as mortgages, vehicle payments or out-of-pocket doctors' expenses do not count when determining disposable income. For example, a debtor may have a mortgage obligation each month that he pays with his wages. The amount of the mortgage is not an applicable deduction and the payment is non-exempt from wage garnishment. A debtor must use his remaining wages to continue paying the mortgage, even if it lessens the amount of money he receives each pay period.

As of publication, a creditor may only garnish 25 percent of a debtor's disposable income in Maryland. For example, a worker receives wages of $1,000 after deductions for Social Security, taxes and insurance. The entire $1,000 is subject to wage garnishment because it is disposable wages. Since Maryland only allows a garnishment deduction of 25 percent of these wages, a debtor would have his wages reduced by $250 each pay period until reconciliation of the debt. In providing the 25-percent limitation to the garnishment, a debtor may not have his entire paycheck garnished at one time.

The definition of disposable wages changes if a debtor makes minimum wage. For this circumstance, Maryland wage garnishment laws consider disposable income 30 times the hourly amount the debtor receives. As of publication, the federal minimum wage is $7.25 per hour. Anything over 30 times this amount is not disposable wages and is not considered when deducting the 25 percent for wage garnishment.

Death & Debt

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People sometimes mistakenly believe that their debt will die when they do. Unfortunately, this is often not the case, as a death can leave the deceased person's loved ones saddled with the unpaid debts. Understanding what debt can survive debt and who inherits it can help you plan accordingly for the future, ensuring that your debts don't haunt your loved ones from beyond the grave.

Credit card companies often write off debt owed by someone who has passed away. However, in some cases, a credit card company may try to get paid by collecting from the person's estate. This means that items that would otherwise have been inherited by children of the deceased will instead be sold to pay off the credit card debt. Plus, the credit card company gets first dibs on any money willed to family members. In cases where credit cards were jointly held, however, the debt passes on to the other person on the account.

Private loan companies can go after a deceased person's estate to try to satisfy the debt during the probate process. Loans taken out with a cosigner, however, become the sole responsibility of the survivor, if there is one. In community property states such as Wisconsin, Washington and Texas, all assets -- and debts -- are considered joint property, even if the debt was taken out before two people got married. So even if you did not cosign on a loan for your spouse but you live in a community property state, you inherit the debt.

While a surviving spouse could seek relief from joint debt and those inherited in community states by filing for bankruptcy, educational debt is a completely different animal. Student loans backed by the government are nearly impossible to have discharged in bankruptcy, so if your now-deceased spouse owned $100,000 in student loans, you may now be responsible for paying that back.

You may not be liable for certain debts of loved one. For instance, if an elderly parent died and had no estate to satisfy the debt, the company owed the debt must simply write it off as a loss. However, many companies sell such debts to collection companies that will try to collect the debt from family members, even though they have no legal standing to do so. Know your rights and don't let yourself be bullied by debt collectors.

How to Talk to a Bank in a Short Sale

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The best way to talk to your bank about a short sale is get right to the point and make it a conversation about business -- and not emotions. Being forced to sell your home and walk away with none of its former equity is obviously stressful. Problems with selling the home may have been the tipping point for other financial problems you are having, and having to talk to the bank about a short sale could seem overwhelming. Short sales are necessary when you must sell but the home is worth less than the balance due on the mortgage.

Instructions

Hire a real estate agent experienced in short sales. If your current agent doesn't have that experience terminate the relationship and hire an agent who does. That may seem harsh but your financial future could be riding on your ability to negotiate a short sale, and your agent should be a key part of your team as you talk to the bank. Having an agent who has participated in short sale discussions could be a plus.

Confirm with your real estate agent that your home simply cannot be sold on the open market for a dollar amount matching the amount you owe on your mortgage. Before allowing a short sale the bank will want to know you have done everything possible to sell the home. The bank will also want to know if you have the money to make up any difference between a possible sales price and the balance on the mortgage. The bank could ask for a complete review of your finances, including money that might be available to you in retirement accounts.

Prepare talking points for your discussion with the bank. On paper, list your mortgage balance and the fair market price for your home, as determined by a licensed appraiser. Also list all of your debts and assets, such as other real estate including vacant land or a retirement home, all money in retirement or savings accounts.

Call your lender and ask for the loss mitigation department -- the group responsible for the direct negotiation of short sales, according to MSN Money. Be polite but persistent as you call back several times if necessary to be transferred to loss mitigation. Telephone numbers for the loss mitigation group aren't usually advertised and the customer service department may simply try turning you over to collections.

Send a letter to your mortgage company by certified mail -- to the attention of the loss mitigation department -- if you can't make a connection over the phone. List your home, cell and office numbers and ask that someone contact you directly to discuss your mortgage. Keep trying by mail or by phone until you make the connection.

Tell the loss mitigation specialist that you are unable to sell your home for the balance due on the morgtgage and that you must sell through a short sale or allow the home to be foreclosed. Speak with a strong, clear voice as you discuss the situation. Give the specialist all the required information regarding your debts and assets as you negotiate a deal. Include your real estate agent in the discussions where appropriate.

Delaware Statute on Wage Garnishment

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Allowing a debt to become past due will typically result in the creditor seeking recovery through letters and telephone calls. However, if you do not make an effort to catch up your missed payments, most states permit creditors to execute garnishment of your wages to recover the debt balance. In Delaware, wage garnishment is governed by federal law and Delaware state law.

Before most creditors can garnish your wages, they must obtain civil judgments against you by a Delaware court. However, debts involving unpaid child support or taxes do not require a judgment under federal law. A creditor obtains a judgment by filing a lawsuit against you, giving you an opportunity to contest the suit and petitioning the court for a judgment if you cannot provide a valid defense.

After a private creditor has obtained a judgment against you for your debt, it may execute a wage garnishment order on your employer, forcing the employer to withhold a portion of your earnings to apply to your judgment debt. Delaware law provides a more generous exemption than federal law -- although federal law exempts 75 percent of your earnings, Delaware's 85 percent exemption applies to garnishments effectuated in this state.

Federal law provides a complete exemption of your earnings from wage garnishment if you earn less than 30 times the federal minimum hourly wage each week. Delaware statutes do not specifically provide a similar exemption; however, because states must offer at least the same exemptions as federal law, this exemption applies to wage garnishments in Delaware.

Delaware Annotated Code Title 10, Section 4913 offers two additional exemptions not contemplated under federal law. Unlike other states, which allow distribution of garnished earnings among two or more judgment creditors, Delaware only permits one creditor to garnish your wages at a time. A second judgment creditor must wait until you have satisfied your first judgment debt before executing a garnishment order. Also, Delaware law exempts self-employment earnings from garnishment.

Banks to Help Rebuild Credit

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Several banks will give you the opportunity to re-establish your credit. Whenever your credit history is less than desirable due to bankruptcy, foreclosure, collection accounts or judgments, re-establishing credit is probably going to be your best plan of action. Before you apply, make sure you find the bank offering the most favorable and cost-effective terms and conditions.

If you want to rebuild your credit, you may have to pay higher interest rates, along with a number of fees. U.S. Bank will help rebuild your credit with a secured credit card. To obtain an account of this type, you must open a bank account with an initial deposit of $300 to $500. The credit limit on your credit card will be the amount of the deposit in your bank account. Whenever payments are late, money is deducted from your bank account. This type of account keeps you from spending more than you can afford because the credit card is secured by the bank account.

Another bank that helps customers rebuild their credit is Orchard Bank. They also have a secured credit card, which has a variable rate of 7.9 percent and the annual fee is not applicable for the first year. Orchard Bank has a, "bad credit" credit card, which comes with a variable annual percentage rate ranging from 14.90 percent to 19.90 percent. Variable rates are tied to certain indexes and if the index increases, the rate can increase, and this eventually leads to an increase in your monthly payment. If you are late with a payment, the default rate can increase to 29.90 percent and this leads to an increase in the amount of finance charges you pay. The annual fee will vary, but it is in the range of $35 to $79. The card also comes with a processing fee of $39.

First Premier Bank also helps consumers rebuild their credit with its "bad credit" credit cards. These types of accounts come with a number of fees. Some of these fees are standard, as they are with most credit cards, and other fees are different. When you apply for a credit card, you can expect fees such as a one-time set-up fee of $29, a one-time program fee of $95 and a monthly servicing fee of $7. Other fees applicable to this card include a late charge of $29, and an over-the-limit fee of $29. The annual percentage rate is 9.9 for purchases and cash advances. Extras such as the program fee and set-up fee are applicable upon approval, and your available credit will be reduced by the amount of the fees.

How to Answer a Summons if I'm Declaring Bankruptcy

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A summons is a notice of a lawsuit and is usually delivered by a courier. Summonses are very serious, because they can lead to a court judgment and even garnishment of a debtor's bank account or wages. Credit card companies and other lenders often file lawsuits in civil court to collect unpaid debts. A debtor filing for bankruptcy should answer a summons, although the bankruptcy will eventually address the debt and end the lawsuit.

Instructions

Protect your legal rights by treating the summons as if bankruptcy isn't an option. Failing to respond to a summons because you plan to file for bankruptcy could backfire if you do not file. Some people have a change of heart about filing for bankruptcy after learning more about the process and how it will affect their lives and credit.

Answer the summons according to instructions on the summons itself. How to respond depends on the laws in your state. Some states require an appearance before a judge on a certain date. Other states require a written response to allegations in the lawsuit.

Answer the summons by appearing in court if that is what the summons indicates you should do. Present a defense if you have one. For example, show evidence that you paid a debt that the lawsuit says you didn't pay.

File a written response if this is your only option. This allows you to respond to each numbered allegation in a lawsuit. Read the lawsuit, which you received with the summons. Plead the equivalent of "not guilty" to the lawsuit by indicating on paper that you disagree with the allegations in the lawsuit. You must list each allegation and write "disagree." This forces the party filing suit to prove the case in court.

Consult with a bankruptcy attorney for a timetable on filing for bankruptcy. Also, if you already have the attorney on retainer have her review your answer to the summons before sending the answer to the court, and to the lawyer for the party filing suit.

The Effects of Cooperative Loans

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Cooperative loans, or co-op loans, are relatively new loan products -- they entered the market in the 1960s. These types of loans are most common in urban areas where residents are interested in laying claim to a piece of real estate, but cannot afford to purchase an entire unit on his or her own. It's important for a buyer to understand the differences between co-op loans and standard mortgages.

Traditional secured loans, or mortgages, are loans used to purchase an entire piece of real estate. These loans buy buildings and land, as well as any other structure or byway on the surveyed property, in cluding driveways and walkways. These loans are often granted to individuals or couples and are repaid on a predetermined schedule. The property owners then have the option to adjust and make improvements to the property.

When a borrower accepts a co-op loan, he is simply buying shares in a co-op agreement. The shares he purchases give him the right to occupy a unit--usually a condominium-- and use all the services in the building (driveways, hallways). The co-op board, a group elected by members of the co-op community, makes decisions for the group concerning improvements and rules.

A member of a co-op has the backing of an organization. This means that events like natural disasters and fires will not affect a co-op member's ability to recoup losses. In addition, the payments on shares in a co-op are often far less than monthly payments on a condo mortgage. Also, co-op members usually pay far less in closing costs.

A co-op member has fewer options when it comes to improving her home. She must first petition a co-op board to get approval on any project involving shared property. Also, issues of "rights" come up frequently in co-ops. Sometimes members try to take advantage of shared spaces, resulting in conflicts personal and legal.

Co-ops can be ideal places for young borrowers and young couples to begin setting up lives. While co-op shares will not be worth as much as an entire condo, shares can appreciate in value. Therefore, if a young family moves in, sees their shares appreciate, they can sell, make a small profit, and put down money on a new home.

How to Find Broken Lease Records for Apartments

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Screening prospective tenants for broken leases or outstanding rent balances is an important part of a landlord's rental process. If a potential tenant has broken a previous lease and still owes another landlord money, this can be the deciding factor in whether or not to rent property to him.

Instructions

Ask potential tenants to provide a list of previous residences. Most landlords will limit the list to all previous residences within the last five to 10 years. Call each rental property manager and ask for information on the applicant. She can tell you whether or not he fulfilled his lease obligations and if he owes any debts to the property. Making phone calls to all previous landlords listed, however, should not be the only step taken when digging into a person's rental history. Keep in mind that lots of people may only tell you what they want you to know, especially when they know bad rental history could keep them from renting from you.

Run a credit check on rental applicants through one of the three major credit-reporting agencies (TransUnion, Experian or Equifax). This information is private and applicants will need to sign a release form authorizing you to have access to their credit reports. Any outstanding balances owed to other rental management companies or landlords will show up on a credit report as debts.

Run a search of county or district court records to check for any lawsuits that potential renters may be a party to. Visit your county's website and see if a civil litigant search feature is available. If it is not, you can call or visit the county or district clerk's office at the courthouse to search for lawsuit records. If any pending lawsuits involving a potential renter and property management companies or landlords are found, this could indicate that a lease has been broken.

How to Check Your Credit Report Online

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The federal law requires all consumers to receive a free copy of their credit report every twelve months from each of the three national consumer credit reporting agencies. These three credit reporting agencies are: TransUnion, Experian and Equifax. It is a very good idea to check your credit report for a lot of reasons. Identity theft is on the rise and you want to make sure all of the items listed on the credit report are correct (and yours). Even if you are not thinking of buying anything or need your credit report for any specific reason, you should take advantage of the free annual offer and check your credit report. You can request these reports by phone or mail, but the easiest and fastest way to check your credit report is to check it online. Once you have all of the needed information, you can instantly see your report online. The following steps will show you how to check your credit report online.

Instructions

Go to the online site for your free annual credit report. See Resources below for a direct link to Annual Credit Report, which is the website created by the three credit reporting companies to provide this free service to the consumers per federal laws. Select your state from the drop down arrow and then click on the Request Report button.

Fill in your personal information. You will have to fill in all of the fields marked with a red *. This includes your name, birthday, social security number, current address and possibly a previous address too. Once you have supplied all of the details required, type in the characters shown in the box at the bottom left of the page and click on the Continue button.

Pick the credit reports you would like to get. The page that opens allows you to select from one to all three of the credit reporting agencies. Place a check in the box next to the one(s) you want then click on the Next button. You will have to select the Next button again to go directly to the agencies site.

Verify who you are and view your credit report online. You will be asked to enter the last four numbers in your social security number and then click on the Submit button. Click on the Annual Credit Report button and then on the Submit button again. You will then have to answer several identity questions to verify who you are and then click on the Continue button to view your free report. The above steps outline the Experian agency, but the others are similar.

The Options if Getting Sued by a Debt Collector

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A lawsuit is typically a last resort for debt collectors; because litigation is expensive, collectors usually exhaust all other options, including demand letters, phone calls and attempts to offer you repayment plans before deciding to file suit against you. Avoiding a credit lawsuit is essential for avoiding financial disaster because, after the collector files suit, your options are severely limited.

After the collector files a lawsuit against you, you will receive a summons. The court will give you time to respond to the suit; the time frame varies by state but is usually about 30 days. You may appear in court or respond in writing, depending on your state's laws, to challenge the suit. Typically, you can only successfully challenge a lawsuit for debt if you can submit proof that you paid the debt, your state's statute of limitations on your debt has expired or the collector filed the suit in violation of procedural laws.

In some cases, a collector may consider a payment arrangement to repay the debt after filing a lawsuit against you. You may contact the collector after receiving a summons to inquire about a payment arrangement. However, the collector is under no obligation to provide you with repayment options and may be less likely to work with you than if you had contacted the collector before the lawsuit. Also, a payment arrangement will not avoid judgment; if you violate your payment agreement, the creditor can use the judgment to collect from you.

Filing bankruptcy will stop the lawsuit and judgment process. A personal bankruptcy provides protection from collection efforts and allows you to reorganize or erase most types of debt. Your bankruptcy attorney will notify the court of your bankruptcy as soon as you file to halt judgment proceedings. However, filing for bankruptcy protection will affect your credit for 10 years after discharge.

Although not recommended, you may choose to ignore the lawsuit. If you choose this option, the court will issue a default judgment in favor of the collector. After default judgment, the collector can place a lien against your home or other real estate, which prevents you from selling your home until you satisfy the judgment. In most states, the collector can also freeze your bank accounts, garnish your wages and liquidate your property to satisfy your debt, subject to state restrictions and exemptions.

How to Make an Offer on a Social Security Overpayment

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If you've been awarded Social Security benefits and it has been determined that you received an overpayment, the Social Security Administration takes steps to recover the loss incurred by the system. In most cases, if you receive benefits, the SSA withholds your Social Security benefit check until the overpayment is paid in full. In certain circumstances, the agency may set up a payment plan for you.

If you no longer receive benefits, the agency asks you to return the overpayment. In the event that you don't pay, and there's another person receiving benefits on your earnings record, the SSA may withhold benefits from that individual. If you receive Supplemental Security Income, or SSI, the agency may withhold your SSI check until the overpayment is paid in full. The SSA may also access any tax refund due to you to pay the amount owed.

If you believe paying back the overpayment will create a hardship for you, the SSA may accept installment payments for your debt. The agency may also offer a compromise payment: This situation occurs if the agency finds that certain circumstances apply that make it reasonable to accept as payment in full an amount that's less than the actual amount owed. To initiate negotiations for installment payments or to discuss a compromise, visit your local Social Security office or call the toll-free number for the agency at 800-772-1213. When you visit or call, be prepared to discuss your financial situation in detail.

If you set up payment arrangements with the Social Security Administration and fail to keep up with them, you may see the debt show up as a collection account on your credit report. Even if you pay the debt in full, the collection remains for as long as seven years under regulations established by passage of the nation's Fair Credit Reporting Act.

Request a review if you disagree with the Social Security Administration's overpayment decision. The agency considers your review request as an appeal. To get the process started, make a request for an appeal within 60 days from the date you received the notice of overpayment. If you can't meet the deadline, request an extension from the agency. You may use a standard Social Security document --- Form SSA-561 --- to file your appeal.

Legal Rights on Disputing Credit Reports

6:49 PM No comments

A credit report is a compilation of how you have handled your financial accounts. This report is is associated with a credit score. The credit score is a three-digit number ranging from 350 to 850. Creditors will often review your credit report and score when evaluating you for potential credit. Credit reports should be reviewed periodically to ensure accuracy. It is your legal right to dispute any errors you find on your credit report.

The Federal Trade Commission enforces the Fair Credit Reporting Act. The FCRA offers consumers the right to access credit reports and to dispute credit report errors to maintain an accurate credit report.

A consumer can dispute any error found in his credit report. Creditors must respond to a consumers dispute by updating, verifying or correcting information reported to the credit bureaus in a timely manner. If a creditor fails to respond to a consumer's request, the credit bureau must delete the entire account. When disputing any item on your credit report, you must be prepared to lose the entire account. While this may be beneficial to your credit score if the account is a negative account, it may hurt your credit score if the account is a positive account and you lose that entire record. Be very careful when disputing any part of a positive account. Correcting an incorrect balance may not be worth potentially losing the entire account.

Your credit report will have a dispute address shown. Send a letter to this address, and provide your name, address and last four digits of your Social Security number. List each item that is incorrect. Provide the name of the creditor, the amount and any portion of the account number shown on the credit report. Give a brief explanation as to what the error is and send the letter. All three credit bureaus also offer the option of calling in to the credit bureau and disputing online (see Resources).

The FCRA allows the credit bureaus 30 days to investigate your dispute. This 30-day period starts on the day the credit bureau receives the request. The credit bureau will send you a report of the investigation. The report will show whether the account was updated, verified or deleted.

Truth About Debt Consolidation

11:22 PM No comments

Debt consolidation is paying off multiple accounts with funds from a new loan. Many people pursue this option because it allows them to focus on only one, possibly lower, monthly payment. While it can help in some ways, one problem is that people often return to the same financial habits that got them into trouble in the first place.

When a person chooses debt consolidation, he typically takes out a home-equity loan to pay off other accounts. Then the individual pays only one payment to the home-equity lender. In many cases, the interest rate and monthly payment are lower. If a person does not have a home, he could also get a personal loan or put all his debts on a single credit card, though this will be more expensive.

Even though you may get a lower payment using debt consolidation, it can actually cost you more in the long run. Your interest rate is much lower, but the term is likely much longer. With a home-equity loan, you might have to make payments for 20 years to pay off your debt. This adds up to thousands of extra dollars in interest over the life of the loan.

Another problem that many people have with debt consolidation is that they do not fix the root behavior that led to the debt in the first place. They simply put it in a different package and get a more affordable monthly payment. If they do not change their spending habits, they will most likely accumulate a large amount of debt again.

If you use your home equity to pay off your other debts, you can possibly get a tax deduction. When you itemize your tax deductions, you can deduct the interest that you pay on a home-equity loan. At the beginning of your loan term, the majority of your payment will be interest.

While using a home-equity loan can help you consolidate your debt, you are essentially risking your house with this process. If you default on the home-equity loan, the lender can foreclose on your home. With this type of debt consolidation, you are attaching unsecured debt like credit cards to a valuable piece of collateral. You have to be aware of the risk that comes with this decision, as it could end up in losing your home.

What Is in Not-for-Profit Financial Statements?

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Government agencies, including the Internal Revenue Service, attempt to set rules to monitor the way nonprofit organizations record and report their operating data. Even though charities and other nonprofits, such as universities, don't operate with a profit motive, philanthropic institutions cannot withhold performance data or hide the truth about its finances.

A statement of financial position reflects the solvency of a nonprofit, telling readers how top management is administering the organization's resources. The report indicates assets, liabilities and net assets, which equal assets minus liabilities. Assets include everything the charity owns, from cash and inventories to land, buildings and equipment. Liabilities refer to its debts, which range from accounts payable to salaries due and mortgages payable. When presenting a nonprofit's net assets, accountants must distinguish unrestricted net assets from temporarily restricted net assets and permanently restricted net assets. The nonprofit can use unrestricted net assets as it wishes. For net assets that donors have temporarily or permanently restricted, the institution must meet the donor imposed conditions before using the funds.

A statement of activities presents how much money a nonprofit recieved from contributions and other sources over a given period. This may cover a month, quarter or fiscal year. The report indicates such income sources as contributions, fundraising inflows, legacies and bequests, donated services, gifts and interest revenues. Expenses range from fundraising charges to general and administrative costs, which include rent, insurance and office supplies. At the bottom of a statement of activities, accountants indicate the increase or decrease in net assets, depending on whether revenues exceed expenses.

The statement of cash flows of a philanthropic institution tells readers how the organization spends its money and whether management is effectively administering donor funds. The statement displays three specific sections: cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. This trifecta also tells donors and the public how much money the institution started a period with, how much it spent for investments and operating activities, and how much cash it has left at the end of the period.

There are similarities and differences between nonprofit financial statements and the accounting reports that businesses prepare. A business prepares four, not three, financial statements. The report missing from the nonprofit reporting catalog is the statement of shareholders' equity, also known as a statement of owners' capital. This makes sense since a nonprofit cannot, by definition, have shareholders with a profit motive. There are similarities among both types of accounting reports. A statement of financial position is also known as a balance sheet. In the business arena, a statement of activities is referred to as an income statement. The statement of cash flow doesn't change its title in both accounting schemes.

How Do Consolidation Loans Work?

6:10 PM No comments

As of the year 2007, consumer debt amounted to $2.5 trillion. This amount was derived from credit cards, student loans and automobile loans. Many consumers have turned to consolidation loans to get a handle on accumulated debt.

In a nutshell, a consolidation loan is made up of several smaller loans, or debts, all rolled up into one lump sum. There are benefits to consolidating your debts, as well as disadvantages. This article will address what to expect when consolidating your debt.

There are a couple variations on consolidation loan types. The type of loan depends on the type of debt you have, and if you'll be putting up collateral.

Secured loans are collateral loans where typically houses or cars are held by the lending agency in exchange for the money loaned. These types of loans generally carry lower interest rates because of the collateral's value.

Unsecured loans are used to cover credit card loans, student loans, or any loan where there's no collateral exchange. Interest rates on these loans are higher due to the "unsecure" status of the loan.

What makes consolidation loans so appealing are the lower interest rates and the easy payment schedule that replaces the multiple payments paid out to different creditors. If done right, you can even end up paying off your debt in a shorter amount of time than before.

In some cases, a consolidation loan can be used to free up monies needed for an unexpected expense. By paying on a single loan at a lower interest rate, you can use money that otherwise wouldn't be available before.

There are several routes you can take when consolidating debt. Some harbor less reputable practices and should be avoided if at all possible. Here is a partial list of available debt consolidation agency types:

Debt settlement: These agencies work on your behalf with creditors to settle on a repayment amount, usually less than what was originally owed. Use caution when considering a debt settlement agency, especially if they charge large, upfront fees. Also, any settlement offers arranged by these agencies on your behalf may not be acceptable to a particular creditor. A worse case scenario would be your creditor ends up suing you, rather than settling with the agency.

Debt consolidation: A simple bank loan can act as a consolidation loan. You can put up collateral to lower your payment and interest rate or you can apply for an unsecured loan with a good credit rating. Do keep in mind that any collateral used can be confiscated by the bank if you are unable to payback on the loan.

There are also debt consolidation agencies. Those that charge large, upfront fees are the ones to avoid. Always do a background check before committing to a debt consolidation agency contract.

Credit counseling: These agencies work with you to develop repayment plans, assist with budgeting and some offer workshops on money and debt management. A number of these agencies are non-profit entities but not all of them live up to this claim. High fees or hidden fees are possible. Always ask.

Debt management plan: This is a plan set up by a credit counseling agency. Money gets deposited into an account with the agency and is used to make payments to your creditors. This option generally takes anywhere from 3-5 years to pay off your debt. The credit counselor negotiates the payback terms with your creditors.

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Monday, October 31, 2005

Statute of Limitations

Wage Garnishment Percentages

Child Support and Alimony

Consumer Credit Protection Act

Ethical Concerns

Prohibited Provisions

Reinstatement

Repossession Procedure

Legal

Alternatives

Benefits

Cautions

Instructions

Sunday, October 30, 2005

Instructions

Saturday, October 29, 2005

Dispute the Debt

Settle It

How Old Is It?

Tip

Friday, October 28, 2005

VA Loan Default Basics

VA Loan Wage Garnishment Guidelines

Reducing Wage Garnishment

Wage Garnishment of Other Income

Nominal

Effective

Period

Terms

Fraud Alert

Time Frame

Cost

Credit Freeze

Warning

Thursday, October 27, 2005

How Your Credit Score is Determined

Payment History

Current Debt Ratio

Credit History

New Credit Applications

Types of Current Credit

Wednesday, October 26, 2005

Percentage

Monetary Exceptions

Termination

Social Security

Employer Compensation

Tuesday, October 25, 2005

Types

Significance

Misconceptions

Features

Considerations

Monday, October 24, 2005

Process

Loan Balance

Deficiency Judgment

Alternatives

Instructions

Instructions

Credit Score Factors

The Importance of Percentages

Effects of Limit Reduction

Considerations

Instructions

Saturday, October 22, 2005

Leasing is Cheaper

More Buying Flexibility

Lease Tax Benefits

Option to Purchase

Getting Out Early

Friday, October 21, 2005

The Estate

The Spouse

Joint Ownership

Considerations

Thursday, October 20, 2005

Referral to a Collection Attorney