February 2006 ~ Credit And Debt Management

Tuesday, February 28, 2006

Credit Scores & Reasons for Debt

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If you have a loan, a credit card or a mortgage, you have a credit score. Whether you have a high or low credit score depends on how well you managed your finances. Your debt plays a part in your credit score. People have many reasons for going into debt. Whatever the reason, carrying large debts hurts your credit score.

When factoring your credit score, the Fair Isaac Corp. considers how much credit you have, the types of credit you have, how many times you applied for new credit in the recent past, how long you have been managing credit and how much debt you own. The amount of debt you have factors heavily into your credit score. American Student Assistance reports that your total debt makes up 30 percent of your credit score. Carrying a high balance on your credit cards also affects how a lender sees you. Prospective lenders see a maxed-out or high-balance credit card as an inability to manage credit.

Many people go into debt after a sudden financial crisis in their lives. For example, if you lost your job, you may have to rely on credit cards to cover daily expenses. Without steady income, you cannot afford to pay the entire balance on your credit cards each month, and the debt piles up. Others live beyond their means. If you spend more than you make, you will rack up debt. Some people accumulate debt from a lack of proper budgeting. If you do not know how much you can afford to spend, you can easily charge more than you can afford to repay.

Carrying large debts will bring down your credit score. If you let those debts go unpaid, the lender will report your account as a charge off and turn it over for collections. Charge offs and collection accounts cause black marks on your credit report. You will have a harder time getting out of debt the longer you allow the debt to build up. Lenders charge you interest on any unpaid balance on your credit card. The interest compounds every month you do not pay off the balance.

Creating and following a strict personal budget will help you get out of debt. To create a budget, calculate your total monthly bills, including the minimum payment due on any credit cards. Subtract your bill amounts from your take-home income. You can use any excess income to pay down your debts. You can start by paying down the smallest debt first, or by paying down the debt with the highest interest rate. Paying debts by size will help you get through all your debts faster. Paying debts according to interest rates will save you money over time.

How to Pay Off Bills on My Credit Report

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Banks and other lenders loan money based on your credit report. When you have unpaid or delinquent bills on your credit report, you credit score is reduced and the chances of getting a loan also are reduced. The first step in improving your credit rating is to pay off those bills. This can seem difficult, but with determination and setting a budget, you can pay off those bills and start improving your credit scores.

Instructions

Obtain a copy of your credit report from each or the three major credit reporting agencies: Equifax, Experian and Transunion. You can contact each agency individually, or go online to annualcreditreport.com for a free copy of all three reports.

Look at your reports and find the bills you owe. The credit report will show you what accounts you owe, how much you owe and, in most case, an address and phone number for the creditor.

Figure out your financial budget. Determine how much you can afford to set aside every month to pay off your bills. The key is setting an amount that you can stick to paying every month.

Contact your creditors and ask for current account balances. Then ask about an "Offer in Compromise," which is a negotiation between you and the creditor that can reduce the amount you owe with interest. Creditors that accept an Offer in Compromise probably will require a lump payment in a specified short amount of time. Negotiate the lowest possible payment with the rest of the creditors, and commit to sending that payment every month

Pay off any Offers In Compromise that you have agreed to with creditors first. This not only pays off the bill, but often can save you a lot of money over the original debt. However, there is a catch: For any Offer in Compromise over $500, the creditor will send you a tax form. So, for example, if your bill is $700 and the creditor settles for $500, you must claim the $200 reprieve on your taxes. Check with your attorney about specifics.

Make a list of the remaining bills you owe, starting with the lowest payoff amount. Pay the minimum amount on all your bills each month, including the smallest debt. When you pay off the smallest debt, apply that money to the next debt on your list.

Continue this process of paying off the smaller debts and applying those payments to the next debt, while paying the minimums every month. Although this process takes time, you will eventually pay off your bills.

Collection Agency Problems

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A collection agency may work on commission for a creditor, receiving a percentage of the amount it collects, or it may purchase bad debts from creditors for far less than face value. The agency then makes a profit by adding interest charges and fees and collecting more from the debtor than it paid to buy the debt. Although collection agencies are required to follow the law, consumers should be aware of potential problems that may arise when their debts are managed by a collection agency.

One of a collection agency's primary weapons is the telephone. If you owe a debt to a collection agency, you can expect to get numerous telephone calls a day from debt collectors. A collection agency may send letters demanding payment and report the debt to the credit reporting agencies. This results in a collection account appearing on your credit report. Some collection agencies intentionally re-age the debts on collection accounts to ensure that the derogatory entries remain on a debtor's credit report for longer than the law allows.

Calling a debtor and threatening to sue is a common collection technique employed by debt collectors that can leave consumers scared and confused. A collection agency must take legal action within the statute of limitations for debt collection in the debtor's state of residence. If it does not, the consumer may cite the expired statute of limitations as a legal defense and have the lawsuit thrown out of a court.

The Fair Debt Collection Practices Act (FDCPA) contains the laws that govern collection agencies and the actions they can and cannot take to collect a debt. Individuals who have problems with collection agencies can review the FDCPA to find out if the debt collector they are dealing with is breaking the law. In the event that consumers feel their FDCPA rights are being violated, they may file a civil suit against the collection agency, as long as they do so within one year of the alleged violation.

Consumers who feel that they have been victims of illegal collection methods should report the collection agency to the Federal Trade Commission (FTC). Although the FTC does not mediate individual complaints, it does keep a record of the complaints it receives. If multiple complaints are received concerning a particular company, the FTC may investigate. If the problem proves to be valid, the FTC has the power to fine the collection agency or even revoke its license to conduct business.

Settling with a collection agency for a lesser amount may seem like a good way to get rid of your collection agency problems. Unfortunately, agreeing to a debt settlement may be just as dangerous as not paying the debt at all. Unless you request a written contract that states otherwise, the debt collector retains the right to sell the "forgiven" amount of the debt to yet another collection agency. It may also fail to acknowledge your settlement once the amount you originally agreed to is paid if you do not get the agreement in writing.

Rules for Home Equity Lines of Credit

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A home equity line of credit (HELOC) frees up part of the excess equity in your house. Because your house is collateral, the interest on your withdrawals most likely is tax-deductible. When housing values were rising, lenders only had to be concerned with the continued credit-worthiness of the borrower. When they were falling, as happened in 2007 through 2009, lenders began reducing those lines to protect themselves from loss. As a result, the federal government enacted rules to protect the consumer.

The federal government reaffirmed the existing Truth In Lending Act that makes it illegal for a lender to demand payment in full on a HELOC unless the customer has lied on his application or perpetrated a fraud. Of course, a lender continues to have the right to terminate the agreement if the customer is past due. A lender can also protect himself from loss by disallowing new advances, lowering the line or changing the terms of payment. However, no lender can unilaterally raise the monthly payment scale on the loan. Even if it is the law, the federal government asks lenders to work with their customers to find ways to lower their risk.

Published by the Federal Reserve Board, this regulates when a lender can lower a customer's HELOC limits. Regulation Z says that the relationship between the house's equity and the HELOC it supports must be at least half of what it was at the time the customer was granted the loan. When a lender determines the lower value of the property, he may not use generally accepted figures. Rather, the lender must use local figures, although he will not be required to have an appraisal of the property.

While a lender can make certain that she will be paid back, she may not discriminate on the basis of the applicant's race, country of origin, sexual orientation or religion. Also, the lender may not exclude a property based on its location, sometimes called redlining. In addition, if a borrower's HELOC is reduced or her use is suspended based on what appears on her credit report, the lender is required to state that in what is called an adverse action report. Finally, a lender continues having the right to restrict the loan's usage if the financial circumstances of the borrower have materially changed.

How to Order a Credit Report & Score

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A credit report is information about how you pay your bills, whether you've been sued, arrested or declared bankruptcy, and your general credit history. The Fair Credit Reporting Act allows consumers to receive a free copy of their credit report through The Annual Credit Report website, from the three major national credit reporting companies, once every 12 months. Those three companies are: Equifax, Experian, and TransUnion. Once you receive your credit report, you may purchase your credit score, which is a number used by a lender to determine a consumer's risk, from Equifax, Experian or TransUnion.

Instructions

Go to the The Annual Credit Report website and fill out the free form to start your credit report. The Annual Credit Report website is the only website authorized by the Federal Trade Commission to fill orders for free annual credit reports. Or you can call 1-877-322-8228 to order a free report over the phone.

Mail a copy of your request if you prefer. Send it to: Annual Credit Report Request Service, P.O. Box 105281,Atlanta, GA 30348-5281

Order a credit score from Equifax, Experian and/or TransUnion once you've received your free credit report. You can buy one from one or all of the three companies. A credit score is a calculation obtained with information from your credit report and can range from 280 to 850. A higher number is a better score. This number determines the risk for a lender.

Prices vary depending on what each company is offering with the credit score. Prices can range from $15.95 to $39.95 depending on whether or not you get a credit monitoring report with your credit score.

Positives & Negatives of Credit Cards

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Credit cards are everywhere, from the pile in your wallet to the ads you receive in the mail and the payment portals at retail stores and on websites. Before you decide to apply for a new credit card or use your card for a purchase, consider the positives and negatives of credit cards.

If you do not have any credit, the credit bureaus cannot generate a credit report for you. Not having a credit report makes you a huge credit risk because lenders have no idea whether or not you will be able to handle making payments. Using a credit card wisely and paying the bill on time helps you build a good credit score, which can help you get loans with good interest rates in the future.

If someone steals your credit card, you are liable for no more than $50 of the fraudulent charges on the card. The credit card company might also reimburse you for the cost of an item if it is defective and the retailer will not offer a refund or if you purchase something and do not receive it, as could be the case if the company you purchased from goes out of business.

If you try to pay for something with a debit card when you have no money in your checking account, the purchase does not go through. However, you can spend thousands of dollars on a credit card, even when you cannot afford the purchases. This allows people to get in debt by making purchases without having the money to pay for them when the bill comes.

People who use credit cards irresponsibly can ruin their credit scores. Failure to pay a credit card bill lowers a credit score, as does maxing out a credit card by borrowing all the way up to the credit limit. In the worst case, people who use credit cards to spend way too much and cannot afford the payments might have to declare bankruptcy, which is a big hit on the credit score.

Credit cards have all sorts of fees, from interest charges to annual fees, over-limit fees, late payment fees and fees for special features such as cash advances or balance transfers. These fees can add up to significant costs to the cardholder. For example, a person who carries a credit card balance of $6500 at 16 percent APR pays $86.67 per month in interest alone.

Simple and Effective Strategies for Debt Reduction

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Debt has a number of advantages. It allows the purchase of a home over time, the acquisition of large-ticket items, such as cars, on a pay-as-you go basis and the convenience of credit cards. It also has the stellar disadvantage of high usage cost through interest rates and the tendency to allow a person to live above their means. Paying down debt takes time and effort but isn't complicated.

It takes gumption to call your credit card companies and ask for the interest rate to be decreased. Talking with a customer service representative probably won't get you anywhere. Ask to talk with a supervisor. The downside is the credit card company could take a long look at your account and decide to lower your credit line. That impacts your credit score. One of the factors in determining credit scores is the amount of used credit as a percentage of the available credit. Lowering the credit line increases that percentage.

Interest rates vary from 10 percent to nearly 30 percent on credit card balances. If the company refuses to lower the interest rate, pay the higher interest rate cards off first. For example if you have $250 available over and beyond the minimum payments due, put it all toward the highest interest rate card. When it's paid off, pay the $250 to the next highest card and so forth.

Go over your expenses. Set a dollar amount goal for expense reduction. Start with the expenses you won't miss too much. Groceries are a major expense for many families. Change out frozen dinners for homemade, shop bargains and use coupons and you could save several hundred dollars a month.

If you never use Aunt Matilda's sterling silver flat wear set, sell it. Use the proceeds to pay down your highest interest rate credit card first. Go through jewelry you own and do the same thing. Consider having a garage sale. Sell items on auction sites or classified ad sites. You'll end up with a less cluttered home and less debt as well.

Credit card debt isn't the only debt for most families. There may be personal loans, a car payment or two and a mortgage and second mortgage. When the credit card debt is paid off, don't stop there. Continue by paying off the car loans. Consider trading in that expensive car for a more economical model with a lower payment. If you divide your monthly house payment in half and pay it every two weeks, that results in an extra payment every year. Fifty-two weeks divided by two equals 26 half-payments or 13 whole payments in one year.

Can Wages Be Garnished in North Carolina for a Domestic Judgment?

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Failing to pay debt may result in negative consequences. A creditor may respond to your past due debt by sending you collection letters and calling you to convince you to pay your debt. If your account becomes more than 30 days past due, the creditor may also report the delinquency to credit bureaus, which can reduce your creditworthiness. A creditor may also sue you for the debt in a North Carolina court. However, in most cases, a creditor cannot garnish your wages in North Carolina.

The North Carolina Wage and Hour Act prevents a private creditor with a valid domestic judgment from ordering your employer to withhold any portion of your wages for repayment of a judgment debt. A domestic judgment is a judgment that was granted by a county or district court in North Carolina.

Although the North Carolina Wage and Hour Act prohibits private creditors from executing a garnishment for debt under a civil judgment, it does not prohibit garnishment for certain other types of debts. If you default on student loan debt or taxes, the creditor to which you owe the defaulted balance may send a letter to your employer demanding the withholding of a portion of your wages for repayment of the debt. North Carolina also permits garnishment for debts arising from unpaid ambulance service charges, alimony and child support.

A foreign judgment is a legal decree obtained by a creditor in a state other than North Carolina. The North Carolina Wage and Hour Act does not prohibit wage garnishment used to collect payment under a foreign judgment. For example, if a creditor sues you for credit card debt in Ohio, and you move to North Carolina after the Ohio court issues judgment, the creditor may take up to 25 percent of your post-tax wages. Allowing wage garnishment for foreign judgments prevents debtors from escaping legal debt obligations by moving to North Carolina.

Staying in contact with your creditor and making a good faith attempt to repay your debt may help prevent your creditor from seeking a domestic judgment in North Carolina. If you cannot repay your debt, bankruptcy can also prevent a domestic judgment. Although most judgment creditors cannot use wage garnishment as a collection strategy in North Carolina, it is still important to avoid a money judgment. A domestic judgment can severely impact your credit score. Also, judgment creditors may also use other methods to collect a judgment, such as bank account garnishment, real estate liens and liquidation of personal property.

How to Answer a Summons for a Delinquent Credit Card Account in Ohio

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In Ohio, a summons is the notification of a lawsuit, according to Ohio Legal Services. Attached to the summons is a complaint, which explains why you are being sued and provides details, such as when you opened the account and when you stopped making payments. The summons also lists the address of the court, the name of the party filing suit against you and the deadline for you to respond to the allegations. If you fail to respond, a judge will hold you in default and enter a judgment against you for the full amount.

Instructions

Write a response to the lawsuit, called an "Answer." Write short statements as you respond to each numbered statement in the complaint. You have three options as you respond, according to Ohio Legal Services. You can deny the allegation, admit it is true, or indicate you lack sufficient information to deny or admit to the allegation.

State your defense in the Answer. A number of defenses are possible in Ohio, including fraud. You could allege that someone illegally opened the credit card account in your name, so you are not responsible for the debt. Another defense is that you paid the debt, so the lawsuit should be dismissed.

File your answer within 28 days to avoid a default judgment, according to Ohio Legal Services. Take your answer to the court listed on the summons and file it with the assistance of a clerk. Send a copy to the party filing suit, and await notification of a court date to appear before a judge.

Business Debt Relief Scams

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Debt relief scammers prey upon those who are already in difficult financial straits, hoping to con them into paying big bucks in return for reducing their current debt burden. While there are plenty of ethical debt relief and credit consulting firms, this sector of the financial industry remains a hotbed of fraud and deception. Before you seek debt relief, arm yourself with the knowledge of scammer tactics.

If you're in the market for debt relief, go shopping for an agency on your own. A credit counselor that calls you on the phone should raise a red flag. Legitimate debt relief agencies don't call you out of the goodness of their heart no matter what the salesperson on the other end of the line says. Never give out your private financial information over the phone unless you initiate the call and you know the person on the other end is reputable. Contact a local bank or the Chamber of Commerce and ask for a referral to a local agency.

Unfortunately, the Internet is teaming with scammers who send out mass emails, promising to reduce debt, lower monthly payments and interest rates, and wipe some debt totally off the books. Some of these crooks are very creative and highly skilled at creating authentic-looking websites. If you receive unsolicited emails offering debt relief, delete them and block the sender. Sometimes, just clicking on the links may transfer you to a site that attempts to leach private information from your computer.

Satisfied clients are the backbone of the success of any service-oriented company, and debt relief agencies are no different. However, just because you read a glowing testimonial doesn't mean that person even exists. Find your own references by inquiring among your acquaintances, religious groups, social clubs or just by talking to your neighbors.

A legitimate debt relief agency may be able to negotiate with your creditors and get your debt reduced, but you can do the same thing on your own. Before contacting a credit counselor, call your creditors and explain the situation. Request a reduction in your balance or a lower interest rate. Make it clear that you are in dire straits and your next move is to consult a credit counselor. Many creditors will work with you in order to recover at least part of the money you owe them.

Bypass the check-cashing stores that promise easy money now. The interest rates and fees they charge are very high, and the service will cost you much more in the long run. Consider borrowing from a relative until payday, and resolve to live within your financial means.

Call the National Foundation for Credit Counseling (NFCC) to find ethical debt relief counselors in your community and report fraudulent debt relief scams to your State Attorney General's Office (see Resources below).

Hardship & Debt Reduction

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Debt can be reduced at the debt collectors discretion. This is usually done if the person owing the debt is experiencing some sort of financial hardship. These arrangements arent mandatory, but when they occur, debt reductions due to financial hardship require verification and are accompanied by a payment agreement.

Hardship is anything that causes a borrower to become unable to pay for basic needs of food, shelter and clothing. It is caused by job loss, death of a primary earner, disability or catastrophic event.

Reduction of private debt is more like debt settlement, which is a negotiated and reduced debt amount agreed upon by both the borrower and the debt collector. Some debt settlements are granted without consideration for hardship.

The IRS also allows debt reduction for hardships in the form of offer in compromise. There are several requirements for the program, but essentially the taxpayer must pay at least 20 percent of the original tax bill and must prove hardship, or that he cannot pay the full amount.

The IRS has several tax credits, deductions and exemptions for those who have hardship due to a natural disaster. Some banks also have disaster relief programs to help mortgage holders and other borrowers in this situation.

As a result of the 2009 Making Home Affordable Program, the U.S. government has created the opportunity for borrowers to modify their mortgage loans through reduction in interest and in some cases the principal owed.

Credit Repair Programs

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There seems to be a plethora of companies advertising credit repair programs. Some claim that they can raise your score in a matter of weeks, while others promise to ease the burden of debt. Unfortunately, there is no magic formula to improve credit, although some company advertisements promise otherwise. Exercise caution when dealing with credit repair companies. It is better to work with a company that will develop a long-term solution to debt issues and put them on the road to repairing credit.

Credit repair programs start out by looking for quick ways to raise your score. They usually do this by going through your credit report and disputing negative items with the credit agencies. The policies of the credit agencies mandate the removal of disputed information from your report until resolved. Resolution takes 30 days, and if no response comes by the 31st day, the item is removed from the credit report. This is something the average consumer can do, however the repair programs have more experience.

Some companies attempt to help you rebuild credit with debt management. Debt management companies, reduce your multiple payments to one. The debt management company takes on the responsibility of making the monthly payments to your creditors while you pay them. These companies also negotiate better interest rates and payment terms with your creditors. Credit counseling companies help you to repair credit by assisting in developing a budget and by analyzing your credit situation to determine changes that can raise your score.

Some credit repair companies use unscrupulous methods. Reports of companies recommending customers obtain a new Social Security number to create a new credit history have been made. Credit repair companies may try to overload the credit agencies with multiple disputes in the hopes that some negative information is removed if the credit agency does not respond on time. Many credit repair companies mislead customers and take their money without actually delivering on their promises, according to the Federal Trade Commission. Some debt management companies take payments from customers without passing the payments on to the creditors, in essence making the credit history worse than before.

Before spending money on credit repair companies, you may want to look into repairing your credit on your own. Consumers are able to obtain their credit reports and contact the credit agencies to dispute errors on the reports. It also is possible to negotiate payment terms and lower interest rates with your credit card companies, just like debt management companies do. While rebuilding your credit takes time and patience, it can be done, and the Internet has tools to help you. The Federal Trade Commission offers advice for consumers looking to repair their credit.

Can a Collection Agency Sue After They Put Collections on a Credit Report?

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A collection agency can sue you at any time it likes. What is important to you as a debtor is how likely a collection agency is to win a lawsuit. Only after a collection agency wins a lawsuit can it pursue direct action against your assets in an attempt to garner payment. Being on the wrong end of a lawsuit as a debtor can be much worse to your credit report than a collections notation.

A creditor will not normally assign your account to collections unless you are seriously delinquent. Different creditors have different definitions of what being seriously delinquent means, but typically after a few months of non-payment, a creditor may consider either assigning your account to an in-house collection agency or hiring a third-party collector. At this point, your account will reflect a collections notation on your credit report. Since you still owe the debt, a collection agency can continue to pursue you for non-payment, including filing a lawsuit against you.

After your account goes into collection status, you may be even more likely to be sued by a collection agency. By not paying your debt for a number of months, you indicate either an inability or an unwillingness to make good on your debt. By filing and winning a lawsuit, a creditor can force you to make payments, if at all possible. If you receive a valid lawsuit, your only real remaining options are to make payment or file bankruptcy. Since many debtors are reluctant to file bankruptcy, a collection agency can possibly speed up payment by filing a lawsuit, even after it goes to collection status on a credit report.

If you file bankruptcy after your account goes into collection on your credit report, a collection agency can no longer sue you. Since the court needs time to evaluate the merits of your bankruptcy petition, all legal action against you must cease until the end of your bankruptcy case. This process is known as the automatic stay of bankruptcy. If your case results in discharge, your creditors lose all rights to file lawsuits against you, as your debts are discharged. With a case dismissal, you are once again subject to the collection actions of your creditors.

Even if a creditor hasn't turned your account over to collections, damage has already been done to your credit report just by missing a payment. Although longer-term delinquencies can cause more damage to your credit score, any type of delinquency, including a 30-day late payment, will remain on your report for a full seven years. Only a bankruptcy with its 10 year duration will stay on your credit report longer.

What Can You Do When You Are Unable to Pay a Payday Loan?

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A payday loan is a loan issued for short time, usually several days to a month, that carries a very high rate of interest -- up to 391 percent, according to the Federal Trade Commission. In addition to interest payments, many payday lenders also charge various fees to borrowers, particularly for defaults on payments. There are a number of things that you can do to avoid defaulting on a payday loan.

When a lender issues a payday loan, it will generally require that you provide it with some form of payment in advance. This will generally include a postdated check, credit or debit card number, or a number to a checking or savings account that the creditor can use to take out money when the loan comes due. If not enough money is not in the account when the lender makes the withdrawal, you go into default.

If you are unable to pay back the loan, you have several options. The simplest option is to simple allow the loan to go into default. When a loan is not paid back, the loan will roll over into another payment period, meaning it will accrue additional interest. You will also likely be charged a number of fees and may face a higher rate of interest than you were required to pay on the original loan.

To avoid default, you can also consider making partial payment on the loan. Many lenders allow you to pay only a portion of the loan, similar to the "minimum balance" that a person is allowed to pay on a credit card. Making this payment will allow you to avoid being charged penalty fees for late payment. However, the loan will still roll over into the next payment period and you will be required to pay more interest.

According to the Federal Trade Commission, there are a number of alternatives to payday loans, most of which can be used to pay down the payday loan. These include taking out a line of credit with a credit card company, taking out a loan from a credit union, or borrowing money from a finance company. While you will still owe money, the rates of interest charged on these loans will be significantly less than that owed on the payday loan.

What Portions of a Debt Can Be Disputed With Collection Agencies?

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The federal Fair Debt Collection Practices Act (FDCPA) lays out specific rules related to how debt collectors can and cannot treat you. Just because you owe a debt does not mean you can get harrassing phone calls, or have your work and neighbors called about your debt. In fact, you can legally request that collectors communicate with you through mail instead of the phone.

Unfortunately there are times when debt collectors have things wrong, and to get these problems fixed the debts must be disputed. Technically you can dispute any debt you'd like, but specific instances of debt you should dispute include the ones below.

Identity theft is a growing problem in today's world, and when your identity is stolen it can cause major problems with debt accumulation and credit collectors.

If your identity was stolen and debts were created illegally in your name, you can dispute one hundred percent of those debts with the collection agencies. They are required by law to take specific steps to investigate debts caused by identity theft.

Collections agencies are run by humans and mistakes can be made. Sometimes a collection agency may contact you about debts that are not actually yours. If they've confused you with someone else, you can dispute the entire debt they're attempting to collect.

On a similar note, the collection agency may have the wrong amounts listed for debt you do owe. You can send letters of dispute for the wrong amounts of the total debt as well as when you feel the fines, interest or fees are unusually large.

If you are contacted by a collection agency about previous debts you had but already paid and settled, you may need to send a dispute letter. When sending a dispute letter about paid debts, try to include copies of all pertinent information, especially the cancelled checks or credit card charges showing the debt was paid.

Does Debt Relief Hurt Your Credit?

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When you are in financial trouble and your debt level is becoming impossible to handle, you will probably begin to notice the many advertisements enticing you to try debt relief. If you notice, the term "debt relief" is supposed to calm you down and lure you in. Before you complacently turn your trust and your money over to a debt relief firm, you may want to consider how debt relief hurts your credit.

Differences exist between legitimate credit counseling agencies, such as ones you can find through the National Foundation for Credit Counseling, and ones that can cause you to be in even more debt. The reputable agencies will advise you on how to manage your money and your debts and will offer you free educational materials and workshops, according to the Federal Trade Commission. A legitimate credit counselor can work with you to develop a personalized plan.

Debt relief companies are looking for people who want the easy way out. In addition, these companies do nothing to solve the problems that got the consumer in trouble to begin with, which is generally overspending, according to the MSN Money website. These organizations tell people that they can get creditors to accept 50 cents on the dollar, or some such figure. If you agree to let them handle your debt load, the first thing you do is to stop paying your creditors, which will have a negative effect on your credit.

Once you stop paying your creditors, you start paying money to the debt relief company, which is putting your money away in an account for you until enough is in it to pay the debt relief company's fee and for the debt relief company to make an offer to your creditors. It could take years to gather enough money for that to happen, and in the meantime, your creditors are reporting to the credit bureaus that you are paying nothing on your accounts, even though you are paying the debt relief firm.

Some creditors will not stop at just reporting you to the credit bureaus. Some creditors may sue you to try to collect their money. Your credit score will be at the lowest level ever, meaning your ability to get a loan for anything will be very low, if not impossible. The bottom line is that if you use a debt relief company to settle your debt for you, it could cause ongoing damage to your credit report, according to the Military Money website. Debt relief firms can cost you more money than your initial debt when you consider the impact on your credit rating and the fees they charge you.

Whatever you do to try to get out of debt, the best advice is to stop using your credit cards, says MSN Money columnist Liz Pulliam Weston. You don't have to close your accounts. Just cut up your credit cards or freeze them in a block of ice.

Are Adult Children Responsible for a Deceased Parent's Debt?

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When your parents leave debts behind when they die, you will not be directly responsible for the debt. However, the debt can negatively impact your inheritance and will have to be paid if some assets are still left to pay them. Otherwise, debt will be forgiven by the creditor at that point.

When your parents pass away with a debt, you will not simply take over the debt when they die. For example, if your parents racked up a credit card debt, you will not have to come up with the money to pay for that credit card debt when they pass away. The credit card company may try to contact you and ask for payment, but you are not legally obligated to pay for the debt.

Although you are not technically responsible for the debt when your parents pass away, it can negatively impact the amount of assets and money that you are able to inherit. When an individual passes away, creditors must be paid from the assets left in the estate. This means that all of the outstanding debts must be paid before you can inherit anything from the estate. If the debts are substantial, they can hurt your chances of inheriting anything.

One situation in which you could inherit debt is if you have a joint account with one of your parents. For example come in some cases, adult children will get joint credit card accounts with an elderly parent. When this happens, you will typically be responsible for the debt when he passes away. If your name is on the account, you will be held liable for the debt by the credit card company. The credit card company will expect you to start paying the bill or you will face legal action.

When your parents had secured loans, those loans will also have to be dealt with before you can inherit anything. For example, if your parents had a mortgage debt, it will have to be paid off. This can be done by refinancing the mortgage if you want to keep the property or you can simply allow the home to be foreclosed upon by the lender. You could also try to sell the house and pay off the loan if it has enough equity.

How to Calculate the Time to Pay Off a Credit Card

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One of the most frustrating aspects about credit card debt is how long it can take to pay it off. Each month you make a minimum payment, but it seems to barely reduce the total balance. It's easy to wonder if you'll ever pay off the debt. There is a way to determine how long it will take to pay off credit card debt and how to calculate your payoff date.

Instructions

Don't use your credit card. Your calculations won't be accurate if you continue to use the credit card. Also be sure to make your payments on time to avoid late fees and penalties such as increased interest rates.

Write down your balance, interest and minimum payment from your statement.

Visit CNNMoney.com to use its "When Will You Be Debt Free" calculator (http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp). The calculator can be used to find out when your debt will be paid if you stick to the minimum payment, or you can ask it to calculate your payoff date based on a monthly payment of your choice. You can even use it to select a date for payoff and it will tell you how much you need to pay each month to reach that goal.

Do the math yourself. You can estimate your time to pay off a credit card using your calculator and some basic math. First you need to divide the interest rate of the credit card by 100. For example, if your interest rate is 20 percent, divide 20 by 100 to get 0.20.

Multiply your interest rate percentage from Step 1 with your remaining balance. This answer is the amount of interest you pay each year if the balance remains the same. For example, if you have credit card debt of $3,000 at 20 percent interest, you'd multiply 3000 x 0.20 to get 600.

Add the result from Step 2 to your balance due. Using the previous example, you'd add $600 to the $3,000 balance to get $3,600.

Divide the answer in Step 3 by your minimum payments. The result is the amount of time in months it will take to pay off your credit cards by paying just the minimum payment each month. $3,600 divided by $120 comes out to be 30 months. If you're able to pay more, divide the answer in Step 3 by the amount you're able to pay (e.g., $3,600 divided by $200 would equal 18 months).

If you'd like to calculate the amount you need to pay to pay off the debt within a specific time frame, divide the answer in Step 3 by the number of months. If you want to pay off the debt in two years, divide the answer from Step 3 by 24 (2 years equals 24 months). Using the previous example, $3,600 divided by 24 would equal a $150 monthly payment.

How Long Is Money You Owe on Your Credit Report?

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Failing to pay money owed to your creditors or lenders can significantly hurt your credit score. Creditors and lenders regularly report delinquencies to the credit reporting bureaus, and this information serves as warning for future creditors. Stay current on your bills and pay monies owed to creditor to avoid credit damage and a lower credit score.

Different types of delinquencies indicate failure to pay money owed to a creditor or lender. After several months of non-payment, creditors and lenders may update your credit information and include notations about your delinquent account. These notations can include accounts that are charged off or sent to collection; or creditors and lenders can go to court and request a judgment. A credit report full of delinquencies hurts your chances of qualifying for mortgage loans and auto loans; and if you are able to qualify, you can expect a much higher interest rate.

Owing money to a creditor doesn't go away quickly. Avoid a delinquent account because this information stays on your personal credit report for seven years. Credit scores drop quickly after a creditor or lender updates your file with a delinquency, and it takes time to rebuild your credit score after a negative update. Owing money to a creditor not only reduces your FICO score, it can also negatively impact your employment options with a bank or another job that involves managing money or cash.

Paying old delinquencies is key to cleaning up your credit report and rebuilding your credit score. Credit repair is a gradual process, but with timely payments on current debts, and by paying down older debts, you can build a better score and slowly reverse the effects of delinquencies. Contact creditors, lenders or collection agencies handling your delinquent accounts and create an installment plan to satisfy your past-due balances.

Updating credit reports with positive information can quickly add points to your credit score. Charge-offs, collection accounts and judgments don't immediately disappear upon paying a delinquent debt. But to improve your personal record, the removal of this information is imperative. Negotiate with creditors prior to mailing a payment and discuss removing the negative item from your report once you've paid the balance. Creditors aren't obligated to remove charge-offs and collection accounts but they might comply because you're taking the initiative to satisfy your debt. Get this agreement in writing before paying the debt.

Commercial Credit Tools for Kids

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Children should be taught about money and how to use it wisely. These lessons can help prevent kids from facing financial hardships later in life and teach them how to deal with them when they do face them. There are a variety of tools available to help parents teach their kids about money in fun, practical ways.

Dave Ramsey's "Financial Peace Jr." is geared toward kids ages 3 to 12. This program includes an audio CD of lessons, an instruction manual and a variety of tools that help kids learn how to manage their money. The product includes a calculator; dry erase board to track earnings and savings; envelopes to encouraging giving, spending and saving; and a coin carrying case. The cost of the program is $19.95. Only debit cards are accepted through the company's website.

The Lampo Group

1749 Mallory Lane

Brentwood, TN 37027

888-227-3223

daveramsey.com/store

The Pay Jr. Chore and Allowance system is a free online tool to teach children 12 and under how to manage their money. Parents set up an online account and select the chores for children to complete, including how much each chore is worth. Children are sent email reminders to complete their chores and note on the site when each chore has been completed. The program then tracks how much money children earn by completing chores.

CardLab, Inc.

1701 West Northwest Highway, Suite 100

Grapevine, TX 76051

214-618-7048

payjr.com

The Money Game is a financial literacy curriculum that teaches kids about money through a game. As part of the game, students are given imaginary pay using paper money and are required to allocate that money for practical needs such as rent, savings, education and living expenses. Kids continue to play the game as they learn the program's five money habits, including the concepts of paying themselves first and investing. The program is available in a down-loadable format for $79 or a ready to play kit for $179.

Creative Wealth International, LLC

135 Chapala St.

Santa Barbara, CA 93101

800-928-1932

winthemoneygame.com

Why Do a Financial Statement Analysis?

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Financial analysts comb through companies' accounting reports for the same reason attentive parents delve into their children's grade reports: to find out how well a company performed during a specific period, and identify elements that dragged overall performance down. Financial statement analysis requires attention to detail, familiarity with accounting principles and knowledge of regulatory rules.

By preparing accurate, complete financial statements, corporate management provides valuable information about the firm's products and services, and directs investor queries to specific personnel. For example, external financiers may question managers in a business unit that posted mediocre performance, asking why their segment is lagging behind others, with respect to revenue and sales growth. By reviewing financial statements, investors can set profitable companies apart from market losers. A full set of accounting data summaries includes a statement of financial position, a statement of profit and loss, a statement of shareholders' equity and a statement of cash flows.

In the global marketplace, external forces and uncertainty often change the way businesses operate, transforming the competitive landscape every now and then. This continuous metamorphosis clears the way for market winners, helping escort losers out of the economic playing field. Financial statement analysis tells investors and the public which firms are more likely to remain in business in the long term --- such as in one, two, five or 10 years. To analyze a company's accounting reports, investors can use one of three methods: horizontal analysis, vertical analysis and ratio analysis. Horizontal analysis indicates to investors whether a particular period --- such as a fiscal year --- was pivotal to the business, financially speaking. This method compares performance data period after period. Vertical analysis helps investors compare financial-statement items with a specified benchmark. For example, business heads may compare net income and administrative expenses with sales revenue --- sales revenue being the benchmark. Ratio analysis relies on the use of financial metrics, such as net profit margin and debt-to-income ratio, to review corporate performance data.

Financial-statement analysis tells business partners the challenges that corporate management faces, and how department heads confront rivals' marketplace tactics. This constant scrutiny is essential to preventing bad investment bets or day-to-day business decisions. For example, business partners --- such as lenders, suppliers and customers --- keep a close eye on a firm's financial statements to make sure it's not tinkering with bankruptcy.

Various groups benefit from financial-statement analysis. For starters, corporate management can adjust the firm's strategic course by reviewing financial statements. Government agencies also heed accounting reports to understand how the activities of various market players could affect the viability of an economic sector, something economists dub "systemic risk." A third group of beneficiaries includes investors and portfolio managers.

What Makes Credit Scores Better?

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Credit scores build up over years of credit and payment history. Whether you have poor, good or excellent credit, these tips will help better your score and ensure you receive the best interest rates.

Roughly 30 percent of your credit score is calculated by the amounts and balances on your accounts. You will get more bang for your buck paying off your credit cards than you will paying off installment loans. Credit rating agencies see credit card spending as a sign of daily financial health--and the more debt, the more likely one is to miss a payment or default. Typically, having a balance that is roughly 30 percent of the credit limit will go a long way in raising your score. That means if you have a credit limit of $1,000, a good maximum balance to try to have is around $300. This proves to creditors that you are maintaining a close watch on your finances and are using your credit wisely. The key here is to pay off the cards that are closest to reaching their limits.

Consumer credit report accuracy surveys have found that 79 percent of credit card reports contain false information. This information ranges from the inconsequential, such as a wrong address, to the harmful, such as a credit card attributed to you by accident. Get a copy of your credit report and comb over every line of it. For example, there may be 10 inquiries into your credit history in one day that you were unaware of, and this kind of activity will negatively impact your score. Call the companies that ran the checks and if your use of credit did not trigger the inquiries,call the credit rating agencies to dispute the charge. You may have triggered the inquiries if, for example, you previously shopped around for a car loan.

A goodwill adjustment is an adjustment granted to you by a creditor for being a good customer. This means that you've paid your bills on time for months or years, and are asking to have those one or two late payments removed from your record. This will not work in all cases, but if you are successful, you will improve your credit score substantially and remove negative information.

A portion of your FICO score is calculated based on how long you've had your accounts open. Generally speaking, the longer you have an account open, the better it looks on your credit report. Maintaining credit cards is a good way to show consistency to potential lenders. Closing an account that you have not used, especially when you have higher balances, has the potential to negatively affect your score rather than help it. If you have an unused credit card, use it for about five months, pay off the balance, and then close the card. This will prove to creditors that you are making sound financial decisions, and are closing the account because you no longer need the card, not because you are seeking to quickly boost your FICO score.

Credit rating agencies base your future credit score on your past credit activity. A sudden drop in your use of credit will not allow the agencies to develop any new information about your spending habits. The best strategy here is to make small purchases and pay off the balance before the end of the month. This will prove you are being responsible with your credit cards.

How to Compare Automobile Insurance Rates

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Each state in the United States requires its residents to register vehicles that are operated on roadways with the Department of Motor Vehicles. Because automobile insurance also may be a state requirement, compare rates to save yourself money.

An insurance premium is the amount that the company charges you to provide you with automobile insurance coverage. Always compare the cost of the insurance coverage, as well as weighing additional fees for roadside assistance and medical coverage, as they can effect your insurance premium.

The deductible that you choose will determine the cost of your automobile insurance. The deductible is the amount that you are responsible for before your insurance will pay, if you have to file a claim. According to Net Quote, the higher the deductible, the lower the insurance premium.

Determine payment options, such as monthly, quarterly, semi-annual or annual, to pay your insurance premiums. If your carrier offers payments for your insurance premium, check to see if you are charged a service fee.

Ask the insurance company for possible discounts. You may be able to receive discounted premiums if you are a good student, completed driver's education, are a member of certain organizations or have multiple policies with the carrier.

Can My Wages Be Garnished if I Am Below the Poverty Level in Oklahoma?

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The federal government uses the federal poverty income level guidelines to help figure out eligibility for various low-income assistance programs. The guidelines apply to most states, including Oklahoma. The state of Oklahoma allows creditors to garnish wages for delinquent debts. Depending on your situation, your wages cannot be garnished if you are below the poverty level.

The amount that constitutes "poverty level" depends on the size of your household. For example, in 2011, the poverty level for a family size of two is gross monthly income of $1,226, or $7.07 per hour; for a family size of three, the poverty level is $1,544 monthly, or $8.91 hourly.

A wage garnishment is based on a certain percentage of your disposable income---your pay after legally required deductions. To garnish wages in Oklahoma, a creditor must file a lawsuit against you, win the suit by obtaining a judgment then apply for a wage garnishment with the same court. If you do not earn enough for garnishment to occur or if the garnishment will cause you financial hardship, the judge can set aside garnishment until your situation improves. If a current wage garnishment is causing financial hardship, file a hardship claim with the court.

Federal law says your employer can withhold no more than the smaller of the total by which your weekly disposable income exceeds 30 times the federal minimum hourly wage, or 25 percent of your disposable income to satisfy a wage garnishment. At the time of publication, the federal minimum hourly wage is $7.25. Oklahoma follows federal garnishment withholding procedures. If your wages are below poverty level and depending on your expenses, you likely do not earn enough for garnishment to take place.

For example, if your weekly wages after legally required deductions is $217.50 ($7.25 x 30), no amount can be garnished; but if your disposable income exceeds $217.50 and is smaller than $290 ($7.25 x 40), only the amount in excess of $217.50 can be garnished. Therefore, if you have a family size of one, and earn less than the poverty level of $908 monthly, it is unlikely that after legally required deductions, there would be anything to garnish from your wages.

If a creditor sues you, the court notifies you of the lawsuit. If you are below the poverty level and the garnishment will cause you hardship, follow the instruction on the notification so you can present your case to the judge. The Internal Revenue Service, the state taxation agency and the U.S. Department of Education can garnish without a court order; contact these agencies directly if a wage garnishment is causing you financial hardship.

Steps to Help Me Negoiate With Credit Card Companies

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Negotiating with your credit card companies is something that you can do on your own. As a CNN report points out, the only thing a debt counseling company is going to do for you is add fees to a process that you could conduct on your own. It is important to have an understanding of what to expect from the credit card companies and to have a plan before you start negotiating. Your chances of a successful outcome are much better if you go into it prepared.

The credit card company just wants their money. And they do not want to have to spend more money to get their money from you. That means that they are not in a hurry to hire lawyers and take you to court over a couple thousand dollars in credit card debt. This does not mean that the credit card company will not take you to court. If they feel that court is their only resource, then they will use it. But their first inclination is to work with you to find a solution and not add to the problem by throwing legal fees onto it, which they may never get back.

The main thing to remember when negotiating with your credit card company is that the principal in your credit card debt is your responsibility. It is unreasonable to approach a negotiation with the attitude that the credit card company will take whatever amount you offer. They do not have to. However, if you develop a payment plan and present that plan to them, then they may be more inclined to listen to what you have to say. It is not unreasonable for you to ask that penalties and late fees be waived, and to discuss reducing the amount of interest owed on the account. If you promise payment on the principal, then the credit card company may be willing to work with you. Have a monthly payment figure in mind as well. One that you feel is fair to paying back the debt, but also one you know you can afford. If you default on a negotiated deal with the credit card company then the next step will more than likely be a lawyer and collections.

Some credit card negotiations are not for pay-off amounts, but rather just to try and reduce your obligation for an account you are currently using. The best way to get your monthly payment lowered is to have the credit card company lower your interest rate. If you are currently at 20 percent or higher, tell your representative you would like to have your interest rate at around 12 percent. It never hurts to ask, and you can increase your chances of success by having a lower interest rate alternative ready to go if your credit card company does not agree to the rate drop. Let your current company know that you will be taking your business elsewhere if they do not help you out. This will sometimes help to influence their decision to your favor.

Debt Settlement Pros & Cons

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Debt settlement companies specialize in helping overwhelmed consumers reduce the amount of their unsecured obligations such as credit card bills. Some require a lump sum upfront to make settlements, while others manage monthly payment plans for their clients. Debt settlement companies have a number of advantages and disadvantages that should be carefully considered.

Always check into the reputation of a debt settlement company before signing up, especially if they will be administering monthly payments on your behalf. Some companies have been accused of mishandling customer payments, thus causing more credit damage to the client.

Debt settlement companies can usually negotiate quickly with your unsecured creditors, and many repayment plans can be finished in 3 years or less. This of course depends on the amount of money owed and what can be paid toward these debts at once or each month.

Debt settlement does cause some credit damage, though likely not as seriously as filing bankruptcy. Some accounts will be noted as "settled" and "closed by credit grantor," and many accounts will show that you had to undergo credit counseling.

If you are part of a monthly payment debt settlement program, you may be charged around $20 a month as of 2009 depending on the company and your debt plan. In small debts, it may be better to add this money yourself toward repayment.

Most debt settlement programs require $100 or less upfront to enroll as of 2009. Again, with smaller debt loads it may be better to use this money toward the debt repayment and try to negotiate with creditors yourself.

What Happens If You Stop Paying on Credit Cards?

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If you stop paying on your credit cards, the credit card company will contact you by phone, mail or both to find out if it was a mistake and remind you that the payment is due. Communication with the creditor is crucial at this point to avoid high interest rates, collections, negative marks on a credit score or possible wage garnishment. Most creditors are willing to work out a payment plan that will benefit both parties.

If a payment plan with a creditor is not possible or correspondence from a credit card company is ignored, the interest rate on the credit card will increase. Most credit card companies allow a 30-day grace period before they consider a missed payment late. If no payment plan or contact has been made after 30 days, the creditor considers the account delinquent. Depending on the starting interest rate of the credit card, the delinquency can cause your interest rate to rise dramatically. It's not uncommon for an interest rate to reach 30 percent or higher on delinquent accounts.

If a credit card holder cannot be contacted and the bill remains unpaid, creditors will use a collection agency to get their payment. A debt collector may contact you at home, work or even call friends or family if he is unable to contact you directly. At this stage, you may still be able to work out a payment plan with the agency to stop the collection process and prevent legal problems.

If a credit card account has gone to collections, it's very likely that a report of non-payment has been submitted to a credit reporting agency. Delinquent payments on a credit report may increase your interest rates with other lenders and hinder future lending. Negative marks will stay on your credit report for seven years, which can affect interest rates and credit approval on future credit cards, mortgages and car loans. It also can affect your future employment, because businesses sometimes check credit reports as part of the hiring process.

If collection processes have been exhausted or a credit card holder refuses to make payments, the lender may file legal proceedings with a local court. Depending on the laws for a particular state, a judgment against you may include garnishment of wages until the debt is paid.

Can a Creditor Take Child Support Money to Satisfy a Levy?

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State governments across the country consider child support money a domestic support obligation for debt purposes. This gives child support payments the highest priority when multiple creditors place levies on a debtor's bank accounts or personal property. This debt priority is also the province of other government creditors, including the Internal Revenue Service.

A bank levy is a creditor-initiated seizure of a debtor's bank account or personal property for the payment of a delinquent account. Most creditors, including mortgage lenders and credit card companies, need to win a lawsuit against a debtor to execute a bank levy. Other creditors, including government tax agencies and domestic support departments, don't usually need to win court approval to levy a debtor's bank account or personal property. Federal and state laws do require a government agency using a levy to inform the debtor in writing and give the debtor an opportunity to appeal the levy.

The court assignments priority to creditors when multiple judgments or orders exist claiming a portion of a debtor's bank account or property. Federal and state government entities, including the IRS and departments of child services, sit at the front of the line in terms of priority. This means that if a collection agency tries to execute a levy on an account where a child support claim also exists, the court must award payment for child support before the collection agency may recoup any cash from the account.

The levy of a secured creditor, including a mortgage company with a deficiency judgment or a business creditor, must take a back seat to an existing order for child support with a state government agency. A secured creditor will receive payment on a levy before an unsecured creditor, making it more likely that the secured creditor can recoup the majority of a debt owed. If child support payments take all the funds remaining in the account, then the secured creditor must look to the debtor's other assets and personal property to recoup a loan. This may require a new lawsuit and another trip to court.

An unsecured creditor, including a credit card company or medical bill collector, receives payment after all other creditors. This is because an unsecured creditor takes the most risk in extending a personal loan to a consumer. An unsecured creditor attempting to exercise a levy or lien on a debtor's bank account or property will receive payment last if multiple orders exist. The unsecured creditor that wins a judgment first receives payment for any other unsecured creditors but only after and government creditors or secured creditors receive payment.

Spousal Responsibility for Credit Card Debt Before Death

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Whether you are responsible for your spouse's credit card debt depends on two factors: where you live and how the card was signed. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are community property states, meaning each spouse is responsible for all debts incurred. Community property laws vary by state. The second factor regarding responsibility for credit card debt is to whom the card was issued.

If you and your spouse were issued a credit card as co-signers, you are both responsible for the debt incurred. It does not matter which one of you signed for the purchases. Should card payments become delinquent, you will both be contacted by the credit card company, or worse yet, debt collectors. Each of your credit scores would also be negatively impacted by late payments or a failure to pay.

An authorized user is a person who is permitted to use your credit card, but has no responsibility for the debts incurred. Although the card owner can ask the user to reimburse him for the debt, there is no legal ground to stand on. The sole responsibility for paying the debt falls on the shoulders of the card's owner or co-owners. Payments, either prompt or late, will affect only the owners of the card. Authorized users are often, but not always, the card owner's children living away from home. With the owner's consent, anyone can have his name added to a credit card as an authorized user, with no strings attached.

Rules regulating community property of married couples differ from state to state. After marriage, with the exception of a gift or an inheritance, all assets and liabilities are divided 50-50. Both parties are then liable for all debts incurred. In a community property state, the theory is that purchases are made to benefit both parties, so both should share in paying for them.

There are instances where one spouse purchases a very expensive item, such as a motorcycle or jewelry, that did not benefit the other spouse. In the event of the spouse's death, the charges for these purchases might be forgiven.

Unsecured Debt Problems

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When you accumulate debt, it's categorized in two ways: secured and unsecured. Secured debt is a type of debt tied to a piece of collateral, such as a mortgage that is tied to your house. Unsecured debt is not tied to any collateral, which is the case with credit cards. When you have too much unsecured debt, it can be a particularly stressful time in your financial life.

One of the issues with unsecured debt is that it typically carries with it a high interest rate. When compared with unsecured debt, secured debt has a lower rate because the lender knows it can take back your property if you do not pay. Unsecured debt carries no such assurances for the lender, and you are charged more as a result.

If you cannot afford to make your debt payments, creditors could file lawsuits against you and the court could deliver a judgment against you, allowing the creditor to garnishee your wages or levy assets from your bank account. When this happens, it can also significantly damage your credit rating, which impairs your ability to borrow money in the future.

When you are in trouble with unsecured debt, you have a few options to eliminate the debt. If you have only a few accounts with unsecured debts, you could try to settle them for less than you owe. Another option you could consider is filing for Chapter 7 bankruptcy. When you file for Chapter 7 bankruptcy, you can get all of your unsecured debts discharged legally by bankruptcy court. When this happens, the creditors can no longer attempt to collect the debt from you. This option should be considered only as a last resort, as it is quite damaging to your credit.

Some people make the decision to consolidate their unsecured debt into a loan. For example, many people take out a home equity loan and then use that money to pay off their creditors. When you do this, you are essentially taking unsecured debts and turning them into secured debt. This can be dangerous because your house is now tied to the debt. Before taking this step, it is important to determine if it is in your best interest as a debtor.

How to Handle Delinquent AMEX Account

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When an AMEX (American Express) account becomes delinquent, it can seriously damage your credit score. You should handle all delinquent credit card accounts as expeditiously as possible. Depending upon how delinquent your account is, you may be able to resolve the matter directly through AMEX. Otherwise, you may have to handle the matter through a third-party agency.

Instructions

Contact the American Express billing department if your account has not been placed with a collection agency. If you are unsure whether your account has been turned over to a collection agency, the AMEX billing department can advise you. The number for AMEX billing is 1-800-472-9297.

Advise the AMEX billing representative that you would like to handle your delinquent account. The representative will process your payment. If you are unable to pay the delinquent balance in full, ask the billing representative if you can set up a payment plan. If you establish a payment plan, stick to the plan until the account is brought current.

Contact the third-party collection agency that is assigned to your AMEX account if the account is no longer being handled by American Express. Advise the collection agency that you would like to handle the delinquent amount.

Collection agencies will often negotiate a lower balance with you if you are unable to pay the full delinquent amount. If you are unable to pay the lump sum that the collection agency is requesting, you can ask the representative to set up a payment plan. Stick to the payment plan until the balance is paid off.

How to Delete Inquiries on a Credit Report

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In some cases, you may be able to delete inquiries on a credit report. This is important, because excessive inquiries can reduce your credit score and make you look bad to potential lenders. Multiple inquiries, even if you did not receive or accept an offer of credit, make it seem that you may be taking on more debt than you are able to handle. If you need to delete inquiries on a credit report, here's how to do it:

Instructions

Determine whether you should take the time to delete recent inquiries on your credit report. Most lenders won't look at inquiries over six months old, and inquiries are permanently dropped from your credit report after two years.

Request copies of your credit report from the three credit reporting agencies (Equifax, Transunion and Experian). Credit inquiries will appear at the end of each report. Determine which inquiries are causing problems; "soft" inquiries made by a creditor for the purpose of extending an offer of credit do not affect your credit rating. Only inquiries by credit grantors affect your credit rating. You may likely recognize these inquiries as companies to which you applied for credit, though in some cases, you may not recognize the entity that made the inquiry.

Write letters to each of the companies that made an inquiry on your credit report. Under the Fair Credit Reporting Act, only "authorized" inquiries may appear on your credit report. See the "Resources" section below for a link to a sample letter.

Send your request via certified mail, return receipt requested. The creditors may send you copies of documents that you signed authorizing the credit inquiry, or may have spoken with on a recorded line. If the company provides this documentation, study it carefully to make sure you did, in fact, authorize the credit inquiry. If your review of the materials does not reveal explicit authorization to make a credit inquiry, or if no such materials are provided, you should insist that the company remove the inquiry from your credit report.

If you do not receive a response to your initial inquiry, or to any follow up inquiry within 30 days, call the company and demand that the inquiry in question be removed from your credit report. In many cases, the company will remove the inquiry as a courtesy or will not want to take the time to investigate whether the inquiry was actually authorized. This is the ultimate goal of your calls and letters. If the company continues to fail to respond to your request, let the company know that you will be filing complaints with the appropriate agencies, such as the Better Business Bureau, State Banking Commission. or Federal Trade Commission. Be sure to follow through and provide the company with a copy of your complaint.

Partnership & Cancellation of Debt

3:47 PM No comments

When debt held by a partnership is canceled, the debt is classified as income for a partnership. The income from cancellation of debt is taxable unless certain exclusions are met.

According to "Joint Ventures Involving Tax-Exempt Organizations" by Michael Sanders, the income from debt cancellation is distributed to partners according to their distributive shares in the partnership. If two individuals own equal shares of a partnership, each partner will receive half the canceled debt as income.

There are limited exclusions when the cancellation of debt is not classified as income to a partnership. When debt cancellation occurs during bankruptcy or insolvency of the business, the canceled debt is not treated as income. The book "J.K. Lasser's Your Income Tax Professional Edition 2009" states that canceled real estate debt that reduces the price to be paid for property is not classified as income but as a price adjustment.

According to "Ginsberg & Martin on Bankruptcy," if one partner tries to escape taxation on the debt by declaring bankruptcy, that partner must be classified as insolvent to avoid paying income tax on the canceled debt. If the remaining partnership members are solvent, the canceled debt may be classified as taxable income to the remaining partners.

How to Set Up a Debt Repayment Plan

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A little debt may not seem like a big deal, but when it grows to the point that it seems uncontrollable, it is more than just out of control. Debt can consume your life, especially if it comes from a crisis such as unforeseen medical bills, job loss and even unintentional overspending. Set up a debt repayment plan to help you find freedom from your financial woes and develop good spending habits.

Instructions

Make a list of all the debts you owe, including the total amount due, the monthly payment amount and the interest rate associated with each debt.

Rank your debts in the order of their repayment priority. Financial expert Dave Ramsey recommends paying off the smallest debts first and the largest last so you can get out of debt more quickly.

Call your creditors. Rather than have you default on loan payments, creditors often have programs that will work with you to help you make your monthly payment. The Federal Trade Commission (FTC) recommends you explain your situation to a creditor and see if they will provide you with a lower interest rate and/or a lower monthly payment.

Compare your total monthly debt payments due and your monthly budget. Plan to pay the minimum amounts you owe each month to your creditors, but use any extra money you have in your budget towards paying off the smallest debts first.

Should You Pay Debt From an Insurance Policy When Someone Dies?

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A life insurance policy provides cash to the named beneficiaries when someone dies. Generally, when purchasing life insurance, the holder has a specific purpose in mind for the money. Most parents purchase it for themselves so they can provide for their children after they pass away. Life insurance policies are separate from an estate and do not have the same regulations and taxes as an estate has.

A life insurance policy will be paid in full to the individuals listed on the policy. The money from the policy is not included in the final estate or considered when it comes to unpaid debt or credit card bills. The recipients can use the money in any way they wish without fear of the credit card companies demanding it be used to repay the decedent's debts.

When someone passes away, the estate must stand good for all of the debts incurred by the deceased. This means that any money in savings, investments and property that the decedent owns must be sold and the proceeds paid toward the debts collected. If your spouse dies and he had outstanding credit card debt, the estate may be required to sell the house and take half of the money to apply toward outstanding debts. Often, if this is the case, the creditors will work with you on setting up a payment plan.

Once the estate is liquidated and the money divided among creditors, any outstanding debt is forgiven. The executor of the estate will need to mail a copy of the death certificate and a letter stating that there are no remaining assets to cover the debt. The unpaid debt will be forgiven. If a cosigner on the debt is still alive, she will become responsible for the debt.

If your spouse dies and you both owned your home, you may be forced to sell it to pay off the outstanding debts. Similarly, if you are a cosigner on any of the debts, you will be held liable for those debts. Under these circumstances, it makes sense to use the life insurance money to pay off the debts. This will allow you to keep the home you are currently living in and prevent you from having your wages garnished if you cannot meet the payments.

Statute of Limitations for Collecting Debt in Louisiana

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Louisiana's statute of limitations places some restrictions on creditors seeking to collect delinquent debts from residents. The statute doesn't erase debts that residents owe, but it does give them some protection from legal action that creditors and collectors may take. However, differences in the statute also may create problems for people who have delinquent credit card debts.

Louisiana doesn't have the same statute of limitations for all types of debt, which could create debt-collection problems for residents. A statute of limitations restricts the amount of time creditors and debt collectors have to sue consumers to force them to pay delinquent debts. Louisiana has a three-year statute of limitations for credit card debts, but it increases to 10 years for other types of debts. The potential problem for residents is that some creditors may treat credit card debts as debts governed by written contracts. In such cases, a creditor may have up to 10 years to sue a Louisiana resident to collect a delinquent credit card debt instead of three years.

Creditors may treat credit card balances as debts accumulated under written contracts because the accounts come with written cardholder agreements. Therefore, a creditor or debt collector could have up to 10 years to sue to collect a delinquent credit card debt. Louisiana residents who are facing a debt-collection lawsuit may need to consult with an attorney to determine if the three or 10-year time limit set by the state's statute should apply. In some cases, a court may have to decide if the creditor has the right to apply the 10-year time limit.

The Louisiana statute doesn't prevent debt collectors from contacting consumers even if the statute has expired and they can't sue to collect an old debt. Nonetheless, people should be careful about what they say to debt collectors. Just acknowledging you owe a debt could restart the statute of limitations and give the collector the right to sue you to recoup what you owe. Agreeing to a payment plan or making a payment toward an old debt also can restart the statute of limitations.

Louisiana's 10-year time limit on debt collection lawsuits also applies to oral contracts and promissory notes. Residents who make a verbal agreement to repay money someone loaned to them are under an oral contract. The lender has up to 10 years to file a lawsuit if the debt goes unpaid, but oral agreements are often difficult to prove in court. A mortgage is a type of promissory note that's collectible through a court judgment for up to 10 years. Promissory notes differ from written contracts because the note sets the borrower's scheduled monthly payments and interest rate.

How to Consolidate Alternative Student Loans

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Alternative student loans, also known as private student loans, are designed to help students pay for any tuition, fees and living expenses remaining after federal aid is dispersed. Alternative student loans are credit based, meaning applicants must have sufficient credit in order to qualify. In addition, alternative student loans generally have higher interest rates than federal student loans.

Alternative student loans must be repaid, just like federal financial aid. If you have several alternative loans, it's wise to consolidate those loans into a single loan. By consolidating, you simplify your student loan payments; in addition, you can qualify for a lower interest rate if your credit score is higher than it was when you applied for those loans.

Instructions

Collect all of the information on your alternative student loans. Your lenders should be sending your periodic statements while you are in school. After you graduate or drop below half-time status, your lenders will send you repayment information on your loans. If you kept those statements and repayment information, use those to determine who your lenders are and how much you owe.

If you don't have that information, look on your credit report to find your balances and lender contact information. These student loans are credit-based and are reported to credit bureaus just like credit cards and other types of loans. Your school's financial aid office should also have the information if you cannot locate it anywhere else.

Contact your lenders and compare their private student loan consolidation programs. Lenders will have different options when it comes to consolidating alternative loans and shopping around will help you find the lender with the best interest rate and repayment terms.

Apply for an alternative loan consolidation. Applying for your consolidation loan soon after making your decision allows you to take advantage of its benefits quickly. The lender will take care of the actual consolidation process. All you have to do is provide your lender information and loan amounts.

Make each consolidated loan payment on time. Many alternative consolidation loans offer an interest rate reduction after your make a certain number of payments on time. Missing even one payment may disqualify you for this reduction, and your credit might take a hit if your lender reports this information on your credit reports.

Credit Card to Help Rebuild Credit

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Having bad credit is not in and of itself a bar to getting a credit card. However, if you don't learn how to use a credit card responsibly, no credit card will help your credit score. Consumers who want to improve their credit need to understand how credit scores are calculated and how to use a credit card to raise their scores.

Your credit score is based on your past activity as a credit user and calculated by various companies that use different formulas to arrive at a score. In general, scores are calculated by weighing five main factors -- credit payment history, average length of each credit instrument, the varieties of credit used, the number of new accounts and the amount of available credit utilized. Any card that allows you to positively change any of these factors will help you raise your score.

Whenever you apply for or use a credit card, this gets recorded on your credit report and impacts your credit score. To build your score, you have to pay your bills on time, keep the amount you carry as a balance on your card low, not have a lot of open accounts or new accounts, and keep your cards for a long time. Contrary to what many people believe, you cannot generally raise your credit score by canceling credit cards, unless you have more cards and debt than you can manage.

For people with very bad credit, the only kind of card they can often get is a secured credit card. Unlike most credit cards, which are unsecured, a secured credit card requires a user to pay a security deposit or post some other form of collateral. If the user is then unable to repay the debt, the credit card company can repossess the collateral.

No matter what kind of credit card you have, the activity you take with your credit card is far more important that the card itself. In addition to paying all bills on time, a wise consumer uses less than about 30 percent of each of his credit cards' available credit limit. This keeps your available credit utilization low and shows you don't use your cards too much. Also, you shouldn't rely on only one form of credit.

Welcome to our website credit and debt managementr.

Tuesday, February 28, 2006

How Credit Scores Work

Why Debt Happens

The Effect of Debt

Resolving Debt

Instructions

Features

Time Frame

Benefits

Considerations

Warning

It's Prohibited

Regulation Z

Other Laws Governing HELOCs

Instructions

Monday, February 27, 2006

Positive: Build Credit

Positive: Security

Negative: Allow Overspending

Negative: Destroy Credit

Negative: Costly

Renegotiate

Highest Interest Rate First

Reduce Living Expenses

Sell Assets

After Credit Card Debt

Sunday, February 26, 2006

Domestic Judgments

Exceptions

Foreign Judgments

Preventing Domestic Judgment

Instructions

Saturday, February 25, 2006

Contact

Email

Testimonials

Self-Serve

Resolve

Solutions

Friday, February 24, 2006

Hardship Definition

Debt Settlement

Offer in Compromise

Disaster Relief

Mortgage Modification

How Credit Repair Programs Work

Debt Management and Debt Counseling

Warnings

Do It Yourself Credit Repair

Thursday, February 23, 2006

Credit Report and Collections

Lawsuits

Bankruptcy

Long-term Effects

Wednesday, February 22, 2006

Issuing Loans

Default

Partial Payment

Alternatives to Payday Loans

Fraudulent Debt

Incorrect Debt

Paid Debt

Types

Effects

Features

Warning

Prevention/Solution

Inheriting Debt

Affecting Inheritance

Joint Accounts

Secured Property

Instructions

Time to Debt Payoff: The Fast Way

Time to Debt Payoff: The Math

Types of Delinquencies

Length of Time

Satisfying Debt

Updating Credit Reports

Tuesday, February 21, 2006