May 2007 ~ Credit And Debt Management

Thursday, May 31, 2007

Statute of Limitations on Secured Debt Collection

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The statute of limitations is a principle of law that provides that those who have actionable legal claims against others must file their lawsuits in court within a specified period of time from the date the cause of action accrued. Each distinct legal cause of action, e.g., breach of contract, negligence as well as an action to recover on the balance due on a delinquent secured debt, has its own distinct limitations period.

Since the obligation to repay debt arises out of the existence of a binding legal contract between the creditor and debtor, the applicable limitations period for bringing an action to recover the balance due on a secured debt would be that period established by each state for breach of contract actions.

There is no uniform statute of limitations period for breach of contract actions. Each state establishes its own limitations period, which may be the same or different than that designated in other jurisdictions. For example, the limitations period for breach of contract actions is eight years in Montana, but it is only three years in North Carolina.

A secured debt is a transaction where the creditor takes a security interest or collateral in the underlying property for which the loan was taken. The most common form of consumer secured debt transaction is a car loan. Most secured debt is enforceable by virtue of the borrower executing a legally binding promissory note with the lending institution. Once the borrower defaults on the repayment terms of the promissory note, the lender can take possession of the collateral, sell it and apply the sales proceeds toward the balance due on the loan. The borrower remains liable for any deficiency that remains.

The statute of limitations clock begins on the date the cause of action accrued; which, in the case of an action to recover on a secured debt, is the date on which the borrower defaulted on the terms of the promissory note. The clock stops on the day the creditor files suit in a court that has jurisdiction to hear the matter.

Once a borrower defaults on his secured loan obligation, even though the lender may recoup a portion of its losses by selling the underlying collateral, the lender must still comply with the applicable state statute of limitations period if it wishes to file suit for any remaining balance due. The statute of limitations is an affirmative defense that must be raised by the borrower after the complaint has been filed against him in court. If suit is filed outside the relevant limitations period, only by request of the borrower will the court dismiss the action as time-barred. Once dismissed, the lender has no further legal recourse against the borrower.

Tips for Paying Off Debt

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The emotional weight of debt causes stress and anxiety for the entire family. A difficult economic climate can make debt seem inevitable. Paying off debt lifts the burden from your shoulders, providing financial freedom which makes life more enjoyable. Choosing a frugal lifestyle for a short period of time allows the debt to be eliminated more quickly.

Create a list of every outstanding balance you owe. Use a spreadsheet to organize the information into columns. Include columns for the name of the creditor, contact information, balance, interest rate and the minimum monthly payment. Add a column for special notes, such as an introductory interest rate that may be ending soon. Update your list each month to reflect the amount paid and the new balances. Use the list as a visual reference and motivator to continue paying off the debt.

Change your spending habits to prevent more debt. Avoid taking on any new debt in any form. Track your spending for a month to determine where you're spending your money. Use that information to devise a workable budget for your finances. Include all sources of income, as well as all monthly expenses. Consider paying with cash to help stick to the budget. Withdraw only the amount outlined in the budget for expenses such as groceries, entertainment, gas and dining out.

Focus on paying one card off at a time, putting any extra money toward that card. Refer to the list you created showing the money owed. Prioritize the list to determine the order in which you will pay off the credit cards. Consider all factors when determining the order. Focus on credit cards with special financing terms that may soon end. Pay off these credit cards before the special financing ends to avoid extra interest or fees. Some experts recommend starting with the lowest balance, paying it off quickly so its minimum monthly payment can be applied to the next lowest balance. Others recommend starting with the debt holding the highest interest rate. Consult with a financial adviser for further advice on how to prioritize your debts if you are unsure how to proceed.

Focus on finding extra money to put toward your debt. Review your budget to find areas that can be cut or reduced. Consider taking your lunch to work instead of going out to eat, shop clearance racks instead of buying clothes at full price or take the bus instead of driving the car. Pick up extra hours at work or take on a second job to provide extra money until your debt is paid. Develop a frugal lifestyle which will allow you to pay down off your debt quickly.

Can I Add Funds From a PayPal Line of Credit to My Debit Card?

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PayPal is an online money service that allows clients to electronically transfer funds to the accounts of others. The site permits users to send and receive money without dealing with back accounts, thus protecting information such as bank routing and account numbers. Users can withdraw money by transferring it to a bank account or through other means. Though PayPal is not a bank, it allows users to connect accounts to bank accounts and spend on credit.

PayPal allows users to link their accounts directly to a bank account. When PayPal links to a checking account, it deposits money directly into that account via electronic transfer. This money then becomes available in the debit account of the user. PayPal does not allow users to transfer funds not available in an account to a bank account, meaning the direct link between a PayPal account and a checking account cannot be used as a line of credit. All transfers must be completed manually. The company sends physical checks to users for a fee of $1.50, as of the date of publication.

PayPal offers a debit card in conjunction with MasterCard. This card allows users to withdraw money from a PayPal account from any ATM worldwide and can be used at any point of sale accepting MasterCard. The funds for the PayPal debit card come directly from the account of the user. If a user wishes to spend more money than a PayPal account holds, that user may connect the PayPal debit card to a bank account. This protects users from overdrafts or potentially denied purchases. The PayPal MasterCard can connect to a debit account, though does not provide a line of credit to users.

PayPal offers a credit card to users, also in conjuction with MasterCard. This card works just like a regular credit card. It extends a predetermined line of credit to users and offers points on the purchase of certain items. The PayPal MasterCard allows users to withdraw cash from PayPal accounts at ATMs and make payments on the card directly from a PayPal account. The PayPal credit card does not allow users to connect the line of credit extended by the card to any other line of credit such as a debit card account.

PayPal Smart Connect constitutes a line of credit available to PayPal members. Site members sign up for Smart Connect through their accounts. PayPal must approve users for the service. Once approved, users may purchase items on credit from their PayPal accounts. The company specifies the amount of credit available to each Smart Connect approved member upon approving individuals for the program. Users cannot connect the Smart Connect credit line to a debit or credit card; all credit purchases are billed directly to an individual's PayPal account and must be purchased through that account.

PayPal users have the option of purchasing items online through PayPal accounts without the use of Smart Connect or a PayPal debit or credit card. Certain websites connect to PayPal, so that when a user purchases an item, that user enters his or her PayPal account information and the site withdraws payment directly from the account. Users without funds in their accounts cannot use this function. Purchasing items in this manner circumvents the need for a credit or debit card or bank account when making online purchases.

Can Social Security Disability Be Used to Pay Off a Judgment?

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A creditor can obtain a judgment against a debtor and place a freeze on his bank accounts. A judgment may prompt the debtor to negotiate a payment plan with the creditor. Certain types of income, including Social Security Disability, are exempt from collection. A creditor may not freeze these funds or take any of them to repay the debt.

Certain income is exempt from collection. A creditor may not take any of it even if he has a legal judgment against the debtor. Exempt income includes but is not limited to Social Security, disability payments, retirement accounts, private and public pensions, veteran's benefits, public assistance, unemployment compensation, workers compensation, alimony and child support. If a creditor places a freeze on a debtor's bank account that contains these funds, the debtor has a right to file an exemption claim to regain access to the money.

A debtor may negotiate a debt settlement or a repayment plan with the creditor. A creditor may be flexible with payment arrangements if he cannot collect the debt due to exempt funds. While a creditor cannot take the Social Security Disability out of a debtor's bank account, the debtor can make payments to the creditor with the income he receives. Upon reaching a payment agreement, the debtor should request to receive the agreement in writing, as verbal agreements are difficult to prove in court.

To pay a creditor, a debtor must gain access to the funds in his account. If he has Social Security Disability or other exempt funds in his bank account, he can file an exemption claim and request a court order to release the funds. By law, the bank must send him an exempt notification and a claim form no later than one business day following the freeze. The account holder has 10 days to file the claim with the court. Failing to file by the deadline will allow the creditor to hold the funds up to 90 days. Once the court issues an order, the bank will release the funds immediately upon receiving the papers.

If a debtor misses a deadline for exemption filing, he may file a request to vacate a judgment. He may need the help of a qualified attorney to prepare the papers. The court will vacate a default judgment if a debtor has a good reason for not responding to the judgment papers or if he believes he does not owe the money to the creditor. An attorney will prepare the documents according to the individual situation. At the hearing, the court will vacate a default judgment and release the funds to the account holder.

How to Withdraw From Your Retirement Account to Clear a Debt

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While a retirement account should never be used as a go-to fund for everyday spending, it can, in very special circumstances, be used for emergency funding--for example, when purchasing a new home, paying off medical bills and clearing credit card debt. Before withdrawing any money from your retirement account, weigh your options. Begin the withdrawal process by first understanding whether your withdrawal is subject fees, taxes and penalties.

Instructions

Contact your creditors for a bottom-line figure. Before paying off your debt, inquire about the total amount of debt owed. Decide if you want to clear the debt on one credit card account or pay a fraction of the total amount of debt due over several accounts.

Research the terms and conditions of your retirement account. For example, ask if you qualify for a loan through your 401k account. Explain that you want to use the loan to clear a credit debt as not all employers administer loans for this reason. Typically, you can only borrow 50 percent of your account balance, up to a specified maximum amount.

Withdraw contributions from a Roth IRA or traditional IRA. While you can you withdraw contributions, you cannot withdraw the interest you've earned over the life of your account. You must pay any regular federal income or state income tax due on the withdrawal as well as a 10 percent tax penalty, according to Money-zine's website.

Complete the necessary paperwork to withdraw the money you need. Contact the human resource department at your employer if the account is associated with your job. The human resources department can administer and walk you through the loan and withdrawal processes for a 401K account.

Decide on a repayment plan and then authorize your employer to take weekly or monthly deductions from your paycheck, if necessary.

Contact your broker to obtain funds from an IRA withdrawal.

Can a Lender Garnish Wages in Louisiana for Voluntary Vehicle Repossession?

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If you cannot make the payments on your vehicle, you may opt for a voluntary vehicle repossession -- relinquishing ownership of your vehicle to your creditor instead of waiting for it to be repossessed. The lender then sells your vehicle, typically at an auction. You are responsible for the difference between the balance of your loan and the sale price. In Louisiana, a creditor may garnish your wages to collect a deficiency.

Before a creditor can garnish your wages to collect a deficiency, it must file suit against you, usually in the parish where you reside. The creditor will typically use other collection strategies, such as letters and phone calls, before resorting to a civil lawsuit. However, if the creditor can demonstrate to the court that you owe the deficiency, and that it has made reasonable attempts to collect the deficiency, the court may award the lender a judgment against you. A judgment is a legal validation of the debt you owe the creditor.

After winning a judgment from a Louisiana court for the deficiency, the court may apply for a writ of garnishment from the court. A writ of garnishment is an authorization from the court that allows the creditor to contact your employer and demand that a portion of your wages be held back for the repayment of a judgment debt. Once the creditor receives a writ of garnishment, it may order your employer to garnish your wages. The garnishment is effective immediately upon notice to the employer.

Typically, the creditor can continue garnishing your wages to collect a deficiency on a voluntary repossession until the balance, which includes vehicle storage and sale fees, interest, attorney fees and court costs, is fully repaid. Judgments for written contracts are valid for 10 years in Louisiana. This means that your creditor has a decade from the date of judgment to collect from you through garnishment and other tactics. However, if the creditor cannot fully collect within the 10-year period, it may apply to the court to renew the judgment, which gives the creditor an additional 10 years to collect.

A judgment creditor cannot legally take all of your wages. Louisiana law limits garnishment to 25 percent of your disposable income, which is your pay after tax deductions. Wages less than 30 times the federal minimum wage per week are exempt. Other types of income, such as Social Security benefits, disability payments, retirement and worker's compensation payments are also partially or completely exempt from garnishment.

Indiana Credit Report Law

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Residents in the State of Indiana have the advantage of additional laws and protections in regards to credit reporting. Indiana residents have the right to "freeze" access to their credit reports. At their discretion, they can decide who can and who cannot access their credit information.This very important law provides significant security consumer protections for Indiana residents.

You determine who can see your report, and for how long.

As a resident, you can notify the major credit reporting bureaus--Equifax, Experian and Transunion, to place a freeze on access to your credit report, if you choose to do so. You can impose the freeze for as long as you wish, revise it, and uplift it whenever you wish.

Indiana laws protect against fraud and identity theft.

By placing a security freeze, you will restrict the type of businesses and entities that can obtain your credit report. In addition, you will put a very important security feature in place to protect yourself against identity theft and fraud.

Once you elect to impose a freeze, the credit reporting bureaus are bound by law to provide you with a unique Personal Identification Number (PIN), within 10 business days after your request.

After you receive, confirm and activate your pin number, access to your credit report will be frozen. Any business entity or person who attempts to use your name to apply for credit will have to know your secret PIN to complete any application for credit. This will protect you from any fraudulent attempt to use your identity to get credit in your name.

You will have control to decide whom you wish to grant access to view your credit report. You will protect yourself against fraud. You will have control to implement the freeze for as long as you wish, and revise or edit restrictions at your discretion.

If someone accesses your credit report without your express permission while a freeze is in effect, you have the legal right to sue that business entity or person as a resident of Indiana.

Every credit reporting bureau where you have a freeze in effect is required by law to notify you of any attempt to access your credit information. They must inform you about the occurrence by mail, by telephone or by email.

If it is confirmed that the attempt to access your information was fraudulent, the credit bureau must also notify all other major agencies. In addition, if the action is confirmed, it will be classified as a breach of security, and reported to the Indiana Attorney General's Office.

If you are seeking a loan or applying for credit, you will want to make sure that you amend or grant permission to companies that you want to have access your credit report. For example, this could temporarily take place when applying for a mortgage or credit card.

Your right to impose a freeze is a unique and very important right that not all states provide. Explore how this state right can be of benefit to you as an Indiana resident. Utilize it as and when needed.

What Is the Statute of Limitations for Payday Loans in the State of Illinois?

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While the statute of limitations for payday loans is the same for any other debt in Illinois, other restrictions on payday loan collection apply. State law places restrictions on the collection activities of payday loan companies and provides additional protections for members of the military.

In Illinois, the statute of limitations for debt is 10 years for debt if a written agreement is involved, which would apply to most payday loans. If the payday loan company gets a judgment against a borrower, the statute of limitations on collecting the judgment is 20 years.

Under Illinois law, payday lenders cannot file a lawsuit against a borrower unless the loan is at least 28 days past due. If a loan is at least 35 days past due, a borrower can request a repayment plan.

Payday loan companies cannot garnish the wages of a member of the military or continue collection efforts against a service member who is serving in a combat area. Payday loan companies are also forbidden by Illinois law to contact a service member's commanding officer about the debt.

Debt Among College Students Living in Apartments

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As a college student living in an apartment, you need money for rent, meals, transportation and other basics which can be difficult to manage. According to the Harvard Law School website, if your annual loan payments are more than 20 percent of your gross income, your expenses are excessive. The sooner you can get your debt under control, the greater freedom you will have.

When several students live in one apartment, keeping track of who pays the next bill helps avoid overdue payments and debt accumulation. Setting up a spreadsheet can keep roommates organized with a debt-sharing plan. For each month, water, electric, Internet and other debts can be listed on a spreadsheet with their total cost to be paid in the next column, followed by the amount per person, the person responsible for making the payment, and the due date of the payment. The spreadsheet can be posted to the fridge or other common area as a daily reminder.

Instead of living alone in an apartment, get a roommate. If you prefer to live on your own, get a studio apartment. Use convertible futons to serve as both a bed and a couch. Cook as many of your own meals as you can.

A job can help you keep your debt under control and manage your rent and all of your apartment-related costs. You can manage your debt by making extra money through a part-time student job as a tutor, creating websites, as a student photographer, or helping with college events. You could also see if your college is hiring students to give tours to high school students.

If you are living in an apartment away from campus, you will not be able to walk to class and must arrange for transportation. A car could be pricey when you factor in insurance, gas and parking and unexpected repairs, and you may need to pay extra to rent a parking spot on your apartment lease. A bus pass or carpooling with a friend may be a more economical alternative.

How to Report to a Credit Agency

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Your credit report is the modern-day equivalent to "your permanent record." It contains a library of information about you--where you have lived, worked, went to school, how many student loans you have and the credit cards you have obtained. Containing all of that information is a grand feat; keeping it accurate is an even larger one. Credit agencies do a great job, but sometimes they need help. Obtaining and managing your credit report can ensure it is accurate.

Instructions

Obtain a copy of your most recent credit report. You can request a copy from any of the major three reporting agencies: Transunion, Experian or Equifax. You can submit your request by writing a letter, including your Social Security number and submitting the required payment or requesting one online (see Resources).

If you request it online, you will receive your report in approximately two weeks. If it arrives online, you may find it helpful to print out a copy to read and make notes on.

Read through each section of the report. Highlight items that are incorrect and write in the correct information. These items could be addresses, jobs, the status of credit accounts and more. Write notes about missing pieces of information and information that should not be on your personal credit report (i.e. accounts that do not belong to you that you believe to have been opened fraudulently).

Dispute inaccuracies online. Most credit reporting agencies allow this option. You will be required to log in to your account (if you already have one) or register to file a dispute.

Write a letter to the credit agency, if you prefer, outlining the incorrect items or the information that should be removed. (You may be given the dispute address when your report is issued.) Be sure to list the information that is incorrect and what the corrected information should be. You should create separate lists for items that are missing and items that should be investigated for removal. Be sure to give the most complete information. Include dates, account numbers, addresses and other important information.

Wait for the investigation and notification of changes. Once your dispute has been received, an investigation will be performed and you will be notified of any changes made or information that has been deleted. If you submit a request to have fraudulent information removed and the investigation doesn't result in this adjustment, you can add a written statement to your credit profile explaining what you perceive to be the discrepancy. Each credit agency has a customer service that can check the status of your request and give you additional assistance on how to navigate their website.

Can a Charge-Off Come Back After 7 Years?

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If a creditor attempts to collect on a debt and fails, it may declare the debt uncollectible. On the business's balance sheet, it will charge off the debt as a loss. These charge-offs are reflected on the credit report of the person who incurred the debt. Although there is a seven-year limit on how long negative information such as charge-offs can appear on a credit report, creditors can sometimes attempt to collect after this time limit has expired.

Charge-offs are debts businesses have written off as uncollectible. When a debt is considered uncollectible, this determination is reflected on the debtor's credit report. However, the fact that the business has declared the debt uncollectible does not mean creditors will not continue to seek payment for the debt. Many collection agencies purchase old debt for pennies on the dollars, debt that has been declared uncollectible, and attempt to collect on it.

According to U.S. federal law, negative information--information that brings down a person's credit score--can remain on an individual's credit report for a maximum of seven years. This means that, after a charge-off has been listed on a report for seven years, the credit reporting agency that updates the report must remove the charge-off. The agency is not allowed to put the charge-off back on the credit report, even if the debt changes hands.

Each state has its set of statute of limitations for the collection of personal debt. Creditors can only seek payment of delinquent accounts for a certain number of years. The exact number of years varies, depending on the type of debt and the state in which the debt was incurred. In many cases, the statute of limitations is longer than seven years, which means that although the debt may not be listed on a credit report, a creditor can still try to collect on it.

According to the financial reference website Card Report, the seven-year limit is based on the date of the original delinquency--the time when the debtor first fell behind and never became current again. For this reason, making additional payments will not make the charge-off reappear on a credit report after seven years have passed. However, payment in full, which would change the status of the charged off debt, would likely make the charge-off reappear on a credit report.

How to Negotiate Credit Card Debt From Debt Collectors

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Debt collectors usually earn commissions for collecting delinquent credit card debt. The more they collect, the more they earn and that is why they attempt to collect so aggressively with phone calls day and night. People who owe credit card debt can use the aggressiveness to their advantage by entering into negotiations with debt collectors. Some debtors are tempted to ignore the debt collectors, while a better strategy is often to take the collector's calls and strike a deal you can afford.

Instructions

Read the Fair Debt Collections Practices Act to understand your rights under the federal law. Knowing what the debt collector can and cannot do as he attempts to collect could make you less afraid of the debt collections process and increase your confidence for entering into negotiations. By law, debt collectors cannot threaten you with bodily harm, take your bank account without a court order, or tell your employee about your financial problems. Many other protections exist as well. Not being afraid of debt collectors is one of the most important steps in being able to negotiate credit card debt with confidence.

Review letters from the debt collector to determine how much you owe. Save 35 percent of the total as you prepare to enter negotiations. The Wall Street Journal's SmartMoney.com reports that many debt collectors will accept 20 to 70 percent of the balance to pay off delinquent credit card debts.

Call the debt collector. Tell the collector that you have some extra money in your budget this month and you are trying to pay off a few credit cards. Offer the debt collector 20 percent of the balance on the account. Raise your offer to 30 percent if the debt collector balks. Focus only on the offer. Do not discuss your overall financial situation, your assets or when you might have more money.

Send a letter to the debt collector the next day if he refuses to accept 30 percent. In the letter explain that you can increase the offer to 35 percent of the total but that's it. Ask the debt collector to call you within seven days to accept the offer or you will use the money on another debt.

Apply the money to another debt using the same tactics if the first debt collector continues to balk. Or put the money away and contact the original debt collector once each month offering 35 percent of the total. Stay in touch monthly until you have a deal.

How Can I Get an Unsecured Loan With Good Credit?

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Having a positive credit history and a good credit score makes life a lot easier, especially when it comes to finding loans with good interest rates and other terms. If you have a good credit score, you'll have no problems getting an unsecured loan of any type. You'll also be able to pick and choose between different offers to choose the loan with the best possible terms.

A secured debt is one in which the lender requires that the borrower provide a security interest to secure the loan. When you take a car loan, for example, you give the lender a security interest in the car. If you default, the lender can repossess the car to satisfy the terms of the loan. An unsecured loan, therefore, is one in which you do not give a security interest and do not provide the lender any kind of collateral.

Your credit score, a number that ranges from 300 to 850, indicated your risk to a potential creditor. Your credit score is based on your past actions as a credit user, and if you have a long history of positive behavior, you'll also have a great credit score. A good score is generally 720 or above, while a score above 750 or 760 places you in the best credit score group and will practically guarantee you the most competitive interest rates.

One of the most commonly used types of an unsecured loan is the standard credit card. When you apply for a credit card in most cases, you do not have to give the lender any collateral. Borrowers with excellent credit scores can expect to receive the lowest possible interest rates on their credit cards. Other forms of unsecured loans includes bank lines of credit, personal loans and student loans.

When you're a consumer with excellent credit, getting a loan is easy. If you go to your bank and ask what kinds of loans they have available, for example, you'll be presented with an array of options. As soon as the bank learns of your credit score, you may be given more options as well as being assured the most competitive rates. Similarly, if you apply for a credit card, you'll likely receive the lowest possible interest rates the company offers, and can sometimes even negotiate for lower rates.

What Happens When You Quit College and You Have a Student Loan?

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The cost of attending a four-year college or university is staggering. In 2011, the most recent U.S. News and World Report showed that the top 60 postsecondary educational institutions cost well in excess of $40,000 annually to attend, requiring many students to take on vast debt early in adulthood. Those who drop out not only have to repay the loans, they must do so without the benefit of a college education.

Just because you haven't earned your degree, that doesn't mean you don't have to repay your student loans, according to the website StudentLoansForCollege.org. It doesn't matter if your loan is a private loan or is federally guaranteed; it still has to be repaid. Federal and private student loans usually give ex-students a six-month grace period before the repayment period starts. Your education lender won't go away if you can't repay the loans; student loans are one of the very few types of loans that won't be discharged, even if you declare bankruptcy.

In 2008, the Department of Education announced that students who received Pell Grants and then decide to drop out must repay the money. Despite the concerns of educators who feel that students may be afraid to accept the aid if they're concerned about paying it back, the government wants students to "earn" the aid by completing their degrees, according to the website FastWeb.com. The amount that a student may owe is based on a refund calculation formula that takes into account when in the semester the student quits.

The National Center for Public Policy and Higher Education sponsored a study in 2005 that examined students who dropped out of college prior to graduation, and the study reported some disturbing trends. It revealed that students who worked too many hours during the semester, didn't adequately prepare or attended part-time had a disproportionately high risk of dropping out -- and owing debt toward the degree they hadn't earned. According to the study's authors, low-income and first-generation college students shared the highest percentages of this population.

According to the same study, students who completed a four-year degree averaged between fifteen and twenty thousand dollars in education-related debt. Despite this, most students who complete their degrees are able to repay the loans with the earnings from the jobs they win after graduation. The study found that the one-fifth of borrowers who dropped out of school were ten times more likely to default on their loans. For these adults, the road to success may be long and steep.

Can I Settle My Credit Card Debt With a Lump Sum?

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The average American household had $9,840 in credit card debt in 2007. As debt increases, delinquency rates increase and savings rates drop. Many consumers have more debt than they can ever pay. They are looking for a way out from the collectors constantly wanting money. Debt settlement could be that way out.

If you are going to attempt to settle credit card debt for a lump sum, you must be delinquent on this debt. A bank or credit card company has no interest in settling your account if it is current. They would rather you keep paying so they can keep charging you interest. Generally any unsecured, delinquent consumer debt is a candidate for you to settle for a lump sum with a creditor. The creditor will want you to pay cash for a settlement, probably within 10 days of you reaching an agreement.

Settling a debt for less than you owe will be devastating to your credit, similar to the debt being listed as included in bankruptcy. Creditors are taking a loss and will report it this way. However, they know that they are not likely to collect this account in full, so they are happy to take some money now. You will receive a federal form 1099 for the forgiven amount of debt and you will be responsible for income taxes on this amount at your regular tax rate.

If you have many debts and you are delinquent on all or most of them, bankruptcy may be a better option. According to Nolo.com, you are not responsible for taxes on debts discharged in bankruptcy, and it could be less frustrating than dealing with creditors and collection agents. It also may be a good alternative if you do not have money to offer lump sum settlements.

If your accounts are current, you may be able to negotiate a lower rate, extended payment terms, or receive other benefits from your creditors. Bank of America, Capital One, Discover, American Express, Citi, and Chase are reported to be offering incentives and help for their customers. Each company has its own guidelines to qualify for these programs.

Communicate with the creditor about your desire to settle. How much you will settle for depends on the time that the account has been delinquent, but most experts say that 50 percent is average. Begin negotiating at 20 percent on the first phone call. If the creditor does not agree to the offer, end the phone call and try again in a week or so. Eventually, they are likely to listen and you will reach a settlement. Be sure that you have the cash to pay what you are offering in a settlement.

Tell the creditor that you need the settlement agreement in writing prior to sending any money. When you receive this notification, go to the bank and get a certified check or money order and mail it. Keep a copy of the payment with the settlement agreement and file them. Plan to keep them forever as proof. Do not give a creditor access to your checking account.

Never use a debt settlement company that wants you to pay a fee up front. These companies are often scams, and the FTC is cracking down on this type of debt settlement.

How Can I Repay My Debts Quickly?

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Paying debts off quickly will save you money on finance charges and give you greater financial freedom. Once the debts are paid you can use the extra money to save for retirement or start a home-based business. Some debts, such as credit cards with low balances, are easier to pay off than others. For example, paying off your home mortgage early could require a lot of discipline and patience. That can be done, but you're better off focusing initially on high-interest credit cards and other debts.

Instructions

Make a list of your debts ranked by interest rates. Paying off the accounts with the highest interest rates first will save you the most money in finance charges.

Review your household income and budget. Make changes to your budget, if necessary, so that you can devote more money to paying down debt. If necessary, eliminate vacations, cable television and eating out.

Get a part-time job and devote all of the money to paying down debt. Use the money from your second job and cuts in your budget to begin paying off debts one at a time.

Settle your unsecured debts to speed up the process -- if this is an option. Credit cards are the most common example of unsecured debts, which do not require collateral. SmartMoney reports that creditors will sometime settle unsecured debts for 20 percent to 75 percent of the balance, but the account must be three months past due and in danger of default, according to SmartMoney. Debt settlement will hurt your credit score, but it is an option for paying debts quickly. With shrewd negotiating skills, you could pay off $10,000 in debt for just $2,000 -- and possibly accomplish that in just a few months of saving or earning extra income.

Methods to Relieve Credit Problems

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In order to get out of debt and relieve credit problems, you first need to gain an understanding of your financial situation. Take the time to create a balance sheet by listing all of your assets and then all of your debts. Subtract your debts from your assets, and what is left is your net worth. If your net worth is positive, you have something to work with. If it is negative, you have a problem.

Stop using your credit cards. Don't add to the problem. Negotiate the lowest interest rate you can on your accounts. Transfer as much of the balance as you can from higher-rate accounts to the lower-rates. Pay the minimum on the lower-rate accounts and throw everything you can at the higher-rate accounts. In the meantime, cut back on other expenses. Several months of frugal living can go a long way toward changing your spending habits.

Look to other assets you have, like life insurance policies, 401(k), savings accounts, mutual funds, stocks, bonds, or equity in your house to raise cash and beat down your debt. Sell jewelry, coin or stamp collections, comic books, baseball cards or anything you may have of value on eBay or Craigslist. If your financial crisis continues to escalate, you could face bankruptcy and be forced to liquidate these items of value anyway.

Finding a second job may be one of the smartest things that you can do to reduce your credit balances. Consider borrowing money from people you know as a last resort. It is better not to go this route unless you have a high degree of confidence that you can repay the loan as agreed. Alienating people who trust you is too great a price to pay in the long run.

Stay with your plan to pay off balances and ratchet up your activity if necessary. You will have to make big changes in your life, some of them permanent. If you have a family, this means everyone has to be on board. Seek credit counseling if you feel you are not making progress. Many credit unions, military family service centers, churches or religious organizations offer low-cost or free credit counseling.

Help with Major Credit Card Debt

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Uncontrolled spending can result in serious credit problems and high credit card debt. Credit cards can come to your aid during an emergency. But some people make the mistake of using credit cards to buy things that they can't afford. When unable to pay off the charges, debt accumulates and ultimately lowers their credit score.

Stop harassing phone calls and talk to your creditors about negotiating a debt settlement to quickly pay off the debt and ease the financial burden. Creditors don't have to agree to a debt settlement, wherein they forgive a percentage of your credit card balance in exchange for full repayment of a lesser amount. Negotiating a debt settlement requires cash on-hand to pay off the debt, and once creditors collect, they cease all collection attempts.

Paying only the minimum each month prolongs credit card debt, and you'll pay hundreds, maybe thousands of dollars in interest over the life of the debt. Getting rid of the debt quickly is key to saving money on interest. Understandably, you may not have the cash to pay off your debt completely. But by taking your extra or disposable income each month and applying this money to credit card debt, you can get rid of the debt faster. Maybe you have an extra $300 each month in extra income. Don't spend this money shopping or dining out, put it towards debt repayment. This extra cash could pay off a $3,000 credit card balance in approximately 10 months.

Some debtors work with debt or credit counselors to get their interest rate on credit cards reduced. However, you can acquire lower rates without the help of a professional. This calls for communicating with your creditors and simply asking for a reduction. Credit counselors have ongoing relationships with creditors, so it's easier for them to negotiate better rates. But if you have a good payment history with your creditor, they may comply with your request and slash your rate. How does this benefit you? Creditors charge less interest when you have a low interest rate, so the greater portion of your monthly payment goes to lowering the principal.

It's challenging to get rid of major debt when only paying the minimum payments, and not everyone has extra income to put towards their debt. Eliminating high credit card balances may require you look for additional employment to increase your income. This temporary arrangement can provide you with the needed cash to quickly erase your debt and start saving. Keep this mind: earning an extra $100 a week increases your monthly income by $400. Apply this extra income to a $3,000 credit card debt and become debt free in one year.

Debt Consolidation Warnings

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Consumers will sometimes look to debt consolidation as a way to reduce their monthly obligations and get debt under control. But before you get involved in debt consolidation, there are some warnings you should heed. The more you understand the process and consequences of debt consolidation, the better prepared you will be to negotiate a favorable deal for your situation.

One of the ways in which consumers will use to consolidate debt is to transfer it to a new account that promises a zero interest rate on account transfers, according to Jenny McCune, on the Bankrate website. The danger in using a balance transfer is the zero percent interest rate is often an introductory rate that will go up after that period is over. Read the fine print on any credit account that you intend to use to transfer a balance and be sure to understand when the rate goes up and what the maximum possible interest rate will be.

The process of debt consolidation brings several high-interest rate credit accounts together into one single payment. While this can seem advantageous, if you do not watch the numbers the consolidation loan can cost more than the separate accounts, according to the Federal Trade Commission. Pay attention to the interest rate you are getting on your consolidation loan and make sure it is less than the lowest rate on the credit accounts you are consolidating. In some cases, the loan company will roll insurance and fees into the loan that drive up the costs. Compare the final cost of your consolidation loan to the cost of having your separate accounts before making the final decision.

Home equity loans and borrowing against a retirement program are two popular ways that consumers use to consolidate debt, according to Liz Weston, from MSN Money. With a home equity loan you are securing the loan with your home. If you default on the loan, you could lose your home. When you borrow against a 401k program at work you can get the money you need at a reasonable interest rate and have adequate time to pay it off. If you leave the company or are terminated, then the company can ask you to pay that 401k loan back at an accelerated rate. Be careful when using secured loans or retirement account loans to consolidate debt.

Consumers that get involved in debt consolidation can make the mistake of believing that consolidation eliminates debt. The process of debt consolidation is one way of getting your debt under control, and it should be a part of a comprehensive debt control program; however, if you need assistance creating a budget and limiting your credit spending, then you should see a credit counselor. Debt consolidation is not a final answer to debt management problems. It is one part of a solution that should address your spending habits and help you make good financial decisions in the future.

Who Can Garnish Social Security Disability Checks?

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When a person doesn't pay back a debt, he may eventually be subject to the garnishment of his wages. Garnishment, while usually applied to the money that a debtor receives in a paycheck, may also be applied to certain other income streams, such as federal benefits. However, most federal benefits are protected from garnishment by private creditors, although not from federal government agencies.

Garnishment will seldom take someone by surprise. A person who is subject to garnishment will generally have a significant amount of advanced warning. This is because all garnishments must be authorized by a court judge who has already issued a judgment in a civil case against the debtor. A judge will not authorize the garnishment of any debt that she believes to be illegal, including the illegal garnishment of federal benefits.

Although most garnishment laws are made at the state level, federal law provides protection to certain types of benefits from being garnished. This includes most federal benefits, including Social Security benefits of all types, such as disability. This means that most creditors cannot touch them. A judge will never authorize the garnishment of a federal benefit payment by a private creditor, only by a government agency.

Private creditors -- meaning all individuals and parties who are not part of the government -- are forbidden from garnishing a person's Social Security disability benefits because federal law prohibits it. Even if the debtor owes the creditor money, the creditor will neither be able to receive an order of garnishment from a job for federal benefits nor would the Social Security Administration, which administers benefits, honor such an order were it mistakenly issued.

While private creditors are not allowed to garnish a person's wages, some federal government agencies are. If the government agency is owed money by the debtor, the agency may be allowed to receive a garnishment order from a judge. For example, a person who owes back taxes may have his disability payments subject to garnishment. However, if the person was too poor to support himself, he may be immune from garnishment, even by the government.

Which Identity-Theft Protection Should I Choose?

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Having your identity stolen is a scary thought. Criminals use or sell personal information for various reasons, including opening fraudulent accounts, accessing existing lines of credit and changing account information. Having identity-theft protection does not guarantee the safety of an identity, but knowing about available services helps you make an informed choice.

Identity-theft protection plans come with various features, depending on the provider and price. Consider features that apply to your circumstances, like more detailed monitoring for compromised information. Credit monitoring allows the service provider to monitor credit reports, public records and the Internet for signs of misuse. Installed software protects against hacking and malicious activity on a home computer. Address tracking alerts the company if someone changes your address. Other benefits include insurance against expenses you pay related to identity theft, such as attorney fees, and online or phone guidance.

You receive notice as soon as a change appears on your credit report -- such as the opening of a new account -- giving you the opportunity to stop a thief in his tracks. Software deters identity theft online by protecting your computer from attacks targeted at personal information, and exposes computer vulnerabilities. An address change without your knowledge is alarming, as mail and packages go to the thief at the "new" address. The provider notifies you of an address change and helps you resolve the problem.

Plan payments vary by type, provider and protection level. More benefits and features typically raises the cost of the plan. Credit bureaus, financial institutions and specialized companies offer identity-theft protection plans on a monthly-charge basis. The average monthly fee for a typical identity-theft protection plan is $12.50 as of 2011, according to reporter Elizabeth Dunbar of Minnesota Public Radio News.

Consider needs and finances after comparing prices, features and choices. Basic plans come with credit monitoring, but select a plan with detailed monitoring after misplacing personal information, such as losing your identification, birth certificate or Social Security card. Chose a software plan if you expose a lot of personal information online or someone hacked your computer. Get an address-change tracker if you have problems with mail or package deliveries.

Adding an insurance option to a plan is beneficial if you do not have the financial resources to pay out-of-pocket costs related to an identity theft but can afford the extra amount each month for coverage.

You can put a fraud alert or security freeze on credit reports at all three of the major bureaus -- Equifax, Experian and Transunion -- by visiting the official websites of each. A fraud alert tells a credit issuer she must speak to you before opening a new account. A freeze does not allow creditors to view reports until the consumer lifts the freeze by providing personal information and an assigned pin number. A small fee may apply for lifts of a security freeze by a person who was not a victim of identify theft, depending on the state.

Read all identify theft protection plan terms, costs and benefits thoroughly before using a service. All guarantees and insurance offers should have clear terms and outline coverage so you know what to expect if you become a victim.

How to Get Immediate Debt Relief

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Your debt may have come at your quickly or it may have built up over time. But if you want immediate debt relief, it can happen more quickly than you might think. You have to have the desire to get it done fast.

Instructions

Make a list of the debt that you have. You want this to be extensive, so get a copy of your credit reports and find out what debt is on your record. This list will be used so you know how much debt you need relief for immediately and to whom you owe money.

Seek consumer counseling help. Nonprofit and for-profit consumer credit counseling services exist to help you acquire immediate relief to your debt. You meet with a counselor and bring a list of your debts and your account numbers, and the counselor negotiates lower payments that you can actually afford. This is immediate relief to your debt. You will pay monthly or weekly payments to your counseling service, which will then send your money to your creditors.

Get a second mortgage on your home. Second mortgages can instantly relieve your debt. Your credit cards and other debts are instantly removed, but you do have to pay a low monthly payment on your second mortgage. The second mortgage is secured on the unused portion of the appraised value of your home.

Cash in a portion of your retirement account. Look at the interest rate you are earning on your retirement account and compare that with the interest rate you are paying on your debt. If you are paying more in interest on your debt than you are earning on your retirement account, it might be wise to cash in a portion of your retirement account. You will be subject to capital gains taxes on your retirement account, however.

Get an advance at work. If you have a boss who is sympathetic to debt, you may just win your case to get an advance payment from work. Keep in mind, however, that that will be money that you won't be getting later. But you will have your debt relieved.

Does Paying a Settled Amount Hurt Your Credit Score?

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Debt settlement is perfect for resolving debt. The strategy allows a debtor to pay off credit cards and other unsecured accounts for a fraction of the original balance. The savings are sometimes tremendous, with SmartMoney reporting that some creditors will accept 20 to 70 percent of the balance to pay off an account. That means a debtor settling $30,000 in credit card debt could pay it all off for as little as $6,000 -- a savings of $24,000. However, there are drawbacks. Debt settlement for less than the full balance causes severe harm to credit scores during the settlement process and when you pay the settlement amount.

People seeking to settle a debt must miss several payments to qualify, and that's where the credit problems begin. Banks and credit card companies will not settle accounts in good standing because they have no reason to do so. That means a person embarking on a debt settlement strategy will suffer harm to credit scores each month as the lender reports delinquent payments to the major credit bureaus.

Creditors generally are willing to discuss settlement payoffs after an account falls three to six months behind. By that time, a debtor who previously had good credit may have noticed a severe falloff in credit scores. Credit scores range from 350 to 850, with scores of 720 or higher seen as excellent. It is impossible for someone to maintain high credit scores while engaging in debt settlement. Also, once credit scores fall significantly, it can take two to three years to rebuild to former levels.

Settlement is a voluntary transaction between the creditor and the debtor. There is no guarantee that a creditor will agree to a settlement, making it possible that a debtor could miss several payments preparing for a settlement and have only damaged credit to show for it if the creditor refuses to cooperate. However, creditors are usually willing to negotiate settlements when they are certain that the debtor no longer is able or willing to pay the account as agreed. Some creditors contact debtors to make settlement offers, although the debtor is free to make the first move.

Paying the settlement amount is the final part of the process. After receiving payment, the creditor will update the debtor's credit reports to show that the account was "settled for less than the full balance." That, too, hurts credit.

When Is Credit Card Settlement a Good Idea?

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Credit card debt settlement allows you to pay off your credit card debts by negotiating a lesser payment amount in satisfaction of the total debt. While credit card debt settlements may seem like an ideal solution, there are negatives that you need to be aware of before choosing this option. Determining if credit card debt settlement is a good idea for you requires that you take into consideration multiple factors and potential consequences.

Debt settlement is simply a way in which you and your credit card company come to a new agreement about how you will pay back your debt. There are several possible ways to negotiate new terms, such as by offering to pay a portion of the debt as a lump sum payment. If you agree to this kind of settlement, the card company accepts your partial payment and forgives the remainder of the debt. Other options include forbearances that allow you to not have to make any payments for a period of time or renegotiating new interest rates or payment sizes.

When you settle your credit card debts, those settlements usually get included in your credit report. This will lower your credit score and make it harder for you to receive a loan or get good interest rates on new loans and can even cause the rates on your current loans to rise. Also, if you settle a debt for less than the total amount you owed, it may be considered income by the IRS, and you may have to pay taxes on it.

Some debts are good candidates for settlement, while others are not. In general, any unsecured debts you have are usually good choices for settlement, while secured debts are not. Unsecured debts, such as medical or credit card bills, are those in which the creditor has not taken any collateral. In general, the older the debt, and the closer to the statute of limitations you are, the better terms you can usually get on a debt settlement.

Consumers considering credit card debt settlement sometimes turn to a debt settlement or debt negotiation company. Be very careful if you choose this option. Debt settlement companies may promise you the world, but can end up costing you more money than if you had negotiated a settlement on your own. Meeting with a credit counselor that is recognized and approved by the U.S. Department of Justice is usually more preferable than hiring a debt settlement company you know nothing about.

Why Lenders Might Forgive Your Debt

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For many creditors, something is better than nothing. If a creditor thinks you are going to default on a bill or file for bankruptcy, it might settle your account for a percentage of what you owe. But there's a downside to debt settlement: You may owe taxes on your forgiven debt, and your credit report may reflect the settlement to the detriment of your credit score.

In debt settlement, you negotiate with your creditors to pay a portion of your debt in exchange for the cancellation of the balance. Some creditors will expect you to pay the full amount of the settlement at once, while other creditors may let you pay the reduced balance in installments. When negotiating a debt settlement, it is usually a good idea to offer a little less than you can afford, which allows you some room for bargaining. In many cases, you can negotiate a settlement that leaves you paying anywhere between 50 percent to 80 percent of your original balance.

Original creditors, such as credit card companies, forgive debt when they fear not getting paid anything. If you file for bankruptcy, secured creditors get paid first from your assets or in a Chapter 13 repayment plan. If you don't have assets or have a lot of secured or nondischargeable debt, credit card and other unsecured debt is a low priority for repayment. Bankruptcy judges often discharge it entirely, so the creditor gets nothing.

Even if you don't file for bankruptcy, federal law obligates creditors to charge off your debt after six months of no payments. At that point, your account gets sent to a collection agency, which either buys the debt outright for pennies on the dollar, or takes a hefty commission from what it collects from you. Either way, your original creditor stands to lose a lot of money if it can't collect what it owes. If the creditor accepts what you can afford, it reduces its loss.

Collection agencies are often even more willing to forgive part of your debt in return for payment. Some collection agencies pay as little as 5 cents on the dollar for old debt, so even a very low settlements are profitable. Plus, debt collectors often work on commission making them motivated to accept a lower payment in hopes of getting some of your cash.

Debt forgiveness has potential credit and tax consequences. If the forgiven portion of your debt is more than $600, the creditor must submit a 1099-C form to the IRS, and you may have to report it as taxable income. Some creditors report debt forgiveness to credit reporting agencies. This can end up on your credit report and potentially lower your score or scare off prospective creditors.

Beware of "debt settlement" firms that make big promises about all the money you'll save by working with them. They often can't do anything that you can't do for yourself, and they'll charge you fees for their services. Get any agreement to forgive your debt in writing before you send any money: You don't want to make a payment to a debt collector or creditor only to find out that you misunderstood the arrangement or that it won't honor its settlement offer.

What Is Unsecured Debt?

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The modern world revolves around credit. Being able to get what you want now and pay for it later not only helps consumers, it drives the earnings of corporations and entire economies. Most credit is not backed by any particular asset; it is given to the borrower on an agreement to repay according to certain terms.

Unsecured debt is any debt obligation that is not secured by a lien on specific collateral. A home mortgage is a secured debt because the lender can foreclose and possess the house if the mortgage is not paid. Unsecured debt, however, is not attached to a specific item of property. Credit card debt, though associated with specific purchases, is unsecured debt.

Unsecured debt has different uses for the borrower and the lender. Those who borrow unsecured debt do not have to risk any specific assets by pledging them as collateral. The lender, not having collateral, takes on a greater risk with unsecured debt. As a result, lenders charge a higher interest rate--especially if the borrower has a poor credit rating--and potentially receive a greater total return.

The lender can lose all if a borrower defaults. The lender's only recourse in a default is to pursue a judgment against the borrower, possibly enforcing a wage garnishment if the borrower has a job. A lender can also force a defaulted borrower into bankruptcy proceedings. In bankruptcy, however, secured creditors have exclusive claim to collateral property. Under Chapter 7, unsecured creditors are paid only from the liquidation of the debtor's non-exempt property, and all remaining debt is absolved.

The unsecured debt of the average individual is made up of lines of credit. Businesses, however, can have many sources of unsecured debt. Money raised by the issuance of stock is unsecured, meaning shareholders are a sort of unsecured creditor. The holders of debentures and unsecured bonds are also unsecured creditors.

The distinction between secured and unsecured debt is particularly important in corporate bankruptcy. Under Chapter 11, a debtor company can accept new super senior loans that go to the front of the line in terms of seniority. Accounts payable to suppliers and distributors, wages and salaries owed to employees, and secured bondholders are all repaid before unsecured creditors. At the end of the line are shareholders, whose claim is limited to any remaining or future equity in the company.

How to Negotiate a Charge-Off With the Original Creditor

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A charge-off is a debt the creditor considers noncollectible, but does not mean you no longer owe the debt. If you are less than 180 days behind on your payment, the account is likely with the original creditor instead of a collection agency. Thus, you can negotiate a settlement, meaning the creditor will settle for a portion of the debt. Keep in mind this will appear negatively on your credit report and also lower your score; however, you'll be free of the debt.

Instructions

Gather all documentation showing the amount due, penalty fees and interest. Understand exactly how much you owe. Review your bank accounts, budget and funding sources to determine the total amount you can pay to settle the debt.

Call the original creditor and explain your financial situation. You may get questions about your income, employment status and bank account balances, but are not obligated to provide this information. Explain why you cannot pay your bill and await a settlement offer.

Counteroffer the proposed settlement. The creditor will try to get the highest amount possible, and may not accept your offer on the spot. Note the names, dates and times you spoke with each representative. If your offer is not accepted, end the call.

Call the original creditor, if you have received no further contact. A creditor who has repeatedly called to collect may decide to accept your offer. If not, ask to speak to a supervisor to discuss your offer. The supervisor may have authority to accept your offer or escalate it for resolution. After some negotiation, come to an agreed settlement amount.

Ask the creditor to report the debt to credit bureaus as "paid as agreed." This is more favorable on your credit report than a settlement. The creditor may refuse, but it pays to ask. Before you pay, ask for the settlement agreement in writing.

Make the payments to the original creditor per the agreed schedule. Upon completion of the final payment, look for documentation from the creditor that your balance is zero. For credit cards, it may take one to two months before your statements reflect this. Verify that the creditor's system reflects a zero balance and demand this in writing, if you have not already received this confirmation.

Lists of Ways to Get Rid of Your Debt

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The average American household has over $16,000 in credit card debt alone. Medical debt has caused over half of bankruptcies in 2001. By the time you add inyour vehicle, mortgage and utilities, it may seem like a lost cause. However, with determination and know-how, you can conquer your debt more easily than you may think.

This is the number-one step in ridding yourself of debt. Crunching numbers can set you free. Write down your net income for the month. Then create a list of all of your debts and divide them into monthly payments that you can afford. Using tools such as credit card calculators can help make a budget you can afford, and help make your goal to get out of debt more realistic.

Stop excess spending. Little things such as one gourmet coffee a day can add up to $1000 a year. One dinner out a week (averaging $20) would save you $1040 a year. Start applying the extra money you save to your bills, and you can be debt free in much less time.

Create a list of your needs vs. wants. Example: You need a vehicle for transportation. You want a sports car. Consider what fits into your budget right now. Maybe you can downgrade from a gas guzzler to a more conservative vehicle. You will save money on gas, insurance and payments. Start saving, and get your dream car once you get the debt load off your shoulders.

Cut rates in half by consolidating all your loans into one. Get a co-signer if possible to give you a better rate to save even more money. If you pay the minimums on credit cards, it can take you up to 20 years to pay everything off. Consolidate your debts into a fixed rate and save thousands in interest and reduce your term.

Settle your debts. Collectors would rather receive 50 percent than nothing at all. Call your creditors and explain why you were unable to pay the full balance. Most creditors will offer a payment plan or make a settlement offer.

Filing for bankruptcy should be a last resort. Although some have no choice, it is advisable to consider all other options first. Bankruptcy does not wipe your record clean. Seek advice from a credit counselor before filing for bankruptcy.

How Does Debt Settlement Affect Your Credit Score?

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Debt settlement is a process in which a debt settlement company negotiates a reduced payment to a credit card company on behalf of a debtor. It is a method used by people who have gone so far into debt that they are struggling with paying off what they owe their creditor.

When you hire a debt settlement company to negotiate a reduction of your debt to a creditor, generally the debt settlement company collects an upfront fee from you to secure its services and then a regular payment from you for an agreed upon period of time, often three to six months. After you finish paying the company, it contacts your credit card company to negotiate an arrangement in which the credit card company is paid the amount the debt settlement company has collected from you. This amount is usually about 30 percent to 50 percent of the amount you owe to the credit card company. If the credit card company agrees, then the debt settlement company pays your creditor the amount it has collected from you and you no longer owe the credit card company the full amount of the debt.

Though there can be several negative consequences for a debtor who goes through debt settlement, the consequence that often does the most damage is the effect debt settlement has on a debtor's credit score. There are primarily two reasons for this.

First of all, when a debtor goes through debt settlement, he doesn't end up fulfilling the agreement he made with the credit card company. As a result, though the debt will be marked as "paid" on his credit score, it will not be marked as "paid-as-agreed." This can adversely impact one's ability to receive credit from other companies.

Secondly, during the time a debtor is going through the debt settlement process and is paying a monthly fee to the debt settlement company, the credit card company is not being paid. This will significantly affect a debtor's credit score.

As a result of these two issues, though the debtor would no longer have the debt to pay, it will be difficult for the debtor to receive credit from other companies while this information is on his credit record.

Legal Assistance for Debt

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If you're in financial trouble, you should first pay your rent or mortgage, your basic needs such as food and your car payment, advises the Connecticut Network for Legal Aid. Once creditors are constantly calling, you probably need legal assistance such as a debt management plan or some type of bankruptcy. Also, if you're the victim of debt collector harassment or identity theft, you may need to consult with a local attorney or legal assistance office.

Debt management plans are usually administered through a nonprofit credit counseling agency, according to the Federal Trade Commission. You would meet with a certified credit counselor to discuss your budget and existing debts, such as credit card bills, personal loans and medical obligations. The counselor will then negotiate reduced payment terms with your creditors. You would pay one lump sum monthly, including a modest administrative fee, to the credit counseling agency. But some credit counselors do not properly distribute payments; also you cannot get any new credit while under a debt management plan.

Even if you owe tens of thousands of dollars, debt collectors must follow the federal Fair Debt Collection Practices Act. If you are being sued for debts that are not yours, being threatened with physical harm or receiving collection calls at unusual hours you should consult with a lawyer or legal assistance office. Collection representatives cannot legally call you outside of the hours of 8 a.m. to 9 p.m. in your time zone and must stop all calls if you write them a letter demanding they cease telephone contact.

If you meet economic qualifications, you potentially qualify for bankruptcy relief, according to the book "How to File for Chapter 7 Bankruptcy." Chapter 7 permanently eliminates your obligation to pay many pre-existing debts, excluding bills such as recent taxes and child support. Generally, you must earn no more than your state's annual median income level to qualify. As of 2011, the annual median income level for a single Virginia resident was $50,296, while the yearly median income figure for a family of four in Texas was $65,477, according to the U.S. Trustee Program.

Chapter 13 enables struggling debtors to partially repay their debts under court supervision. Chapter 13 filers cannot legally get new credit while repaying their debts; it usually takes three to five years to complete Chapter 13. Like other types of bankruptcy, debtors cannot include debts related to recent taxes, familial support or the commission of a crime.

Tips on Overcoming Credit Card Debt

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The new set of tires for your car, the spur-of-the-moment trip to Vegas, those cute shoes that you had to have -- it's easy to just hand over the plastic and charge purchases and worry about paying them later. But when the bills come in (and they always do), you might find yourself in a mountain of debt that seems impossible to pay off. With dedication and planning, though, you can pay back what you spent and be debt free.

The first step to overcoming credit card debt is to stop using the cards. Take them out of your wallet and put them in a safe place. If you have your card information saved with any online stores, delete the information to avoid temptation. Discontinue any automatic payments that you have set up using the cards and pay with a check or automatic debit from your checking account each month instead. Do not close the credit card accounts, though. Closing the accounts will cause your overall available credit to decrease, which can lower your credit score.

Interest rates and fees continue to add up on your credit cards even if you don't make any new purchases, and the higher the interest rate, the more you'll pay. Tackle the cards with the highest rates first. Commit to paying off those cards by paying more than the minimum payment each month. Read your credit card statement; by law, card issuers must include a payoff time frame on the monthly statements. This time frame will indicate how much you can save by paying a larger amount on your card. Or use an online payoff calculator that can help you calculate how much you need to pay each month to reduce your debt within a certain time frame.

When you pay off one credit card, take the money that you were paying toward that card each month and add it to the payment for the card with the next highest interest rate. For example, if you are paying $200 per month to the card with the highest rate and $50 per month to the next card, when you pay off the first card, add the $200 to the second card for a payment of $250 per month. Keep rolling over the payments as you pay off cards, until the balances are paid off. If you get an extra influx of cash, such as a tax return or cash gift, use that money to pay off your credit cards.

If you are drowning in credit card debt, and have trouble making the minimum payments, never mind adding extra each month, get help. A certified credit counseling or debt management service can help you pay off your debts within a specified period and save you thousands in interest charges and fees -- and help you keep your credit rating intact and stop collection calls. A debt management company will negotiate a lower interest rate, get fees and charges removed and develop a repayment plan that fits your budget and meets the creditor requirements. Do your research before hiring a debt management company, and avoid any companies that charge excessive fees for their services.

How to Check Credit History for Tax Liens

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Tax liens are filed against people who owe federal or state taxes and don't pay those taxes on time. Tax liens are reported to the credit bureaus and can remain on your credit record for 15 years if unpaid and seven years if you pay them.

Finding tax liens on your credit report is the first step in resolving the debt. You may opt to pay the tax debt so that it disappears from your credit report after seven years. Outstanding tax liens can hurt your credit score and thus your ability to obtain credit.

Instructions

Gather the information you'll need to access your credit file. You will need your full legal name, Social Security number, date of birth, your addresses for the past two years and the name of your current employer. You may also have to answer security questions regarding information that appears in your credit file.

Decide how you're going to obtain your credit report. You can access your credit report by mail, phone or Internet. Under the Fair and Accurate Credit Transactions Act, you are entitled to a free credit report every 12 months. You can contact each individual credit bureau or visit AnnualCreditReport.com (see Resources).

Search the public records section of your credit report. Any federal or state tax liens will be listed there. The notation submitted by the government taxing entity will state the status of the tax lien, when it was filed and how much you owe.

The Difference Between Non-Profit Credit Counseling & a Non-Profit Debt Management Program

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If you're overwhelmed by debt, there's a good chance you are also confused about where to turn for help. Bankruptcy, credit counseling and debt management plans are all terms you've probably heard, but may not understand. Consulting a non-profit credit counseling organization can help you to determine what you need to do next, and while a debt management plan may be one of the solutions, it's not always the end result of credit counseling.

A session with a non-profit credit counseling agency can help you to determine where your money managing skills need help and what you can do to alleviate crushing debt. Reputable non-profit credit counseling agencies can help you learn to budget, educate you on financial topics and offer you free workshops and materials to supplement their consultations with you. Counselors should be certified and have adequate training.

If educating you about how to handle your finances is not enough to help you get out of debt, a non-profit credit counseling agency may recommend that you enroll in a debt management plan. When you enroll in a debt management plan, you pay the credit counseling agency, which will use your payments to pay your bills, such as credit card bills, medical bills and student loans. The credit counseling agency will work with your creditors to work out lower payments, reduced interest and---in some cases---reduced balances. Debt management plans usually take several years to complete, and the result is that you come away debt-free or with greatly reduced debt. You may be required to agree not to use credit while you're enrolled in the plan, and your creditors may note the debt management plan on your credit report.

While a debt management plan can be a viable way of relieving your debt problems, it can only work if your creditors agree to the conditions, and if you can make the payments. Even if the credit counseling agency tells you they can work with your creditors, double-check with your creditors. Continue to make payments to your creditors until the plan has been accepted and confirmed by your creditors.

The most important decision you will make if you choose to seek credit counseling is the credit counseling agency you choose. While many companies advertise themselves as non-profit agencies, this does not mean that they are reputable. Beware of any credit counseling agency that does not offer free budgeting and money management advice, or that pushes you toward a debt management plan before thoroughly discussing your financial situation with you.

Is Debt Consolidation a Rip Off?

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Debt consolidation is one of many options available to people who are having trouble managing their debt. This method can be a viable option, however, consumers must be aware of possible dangers involved.

This method does not reduce the amount of money you owe. Rather, it will take all of your existing debt and reduce it to one single payment. This tends to lower the monthly payment and can reduce interest charges.

In its most basic form, debt consolidation can help a consumer whose payments have gotten too large. There are many banks that offer such consolidation loans and they are perfectly legitimate.

Using a consolidation company, however, is a bad idea.These companies don't really offer you loan, they negotiate a lower payment to the credit card companies. The consolidation company will take your money and send it (minus their cut) to the credit card companies--if they remember to make the payment. According to MSN Money's research, these companies sometimes forget to pay your bills, and this is then negatively reflected on your credit report.

Additionally, these companies will charge you 10% to 35% of the monthly payment as their "cut," This is a very steep cost for negotiating a better rate and lower payments with your creditors--something you can do yourself.

A debt consolidation loan can be a solid solution if you are using a reputable lender. Do not be taken in by debt consolidation companies who often use scare tactics to make you believe you can't solve your debt problems without them.

Debt Management Methods

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Proper debt management methods are the best way to get out of a deep financial hole. However, learning said methods is not always easy due to the overwhelming nature of financial debt. From harassing calls from creditors to the mountain of bills facing you each month, it can be hard to even know where to start.

This is the first place to start managing your debt, because without knowing how much is going out versus how much is coming in, you will continue to financially flail. Track all expenses for 30 days and notate how much actual income you receive. Particularly if you are self-employed or have your own business, don't estimate how much you think you will earn. Instead, record how much you actually do earn; being conservative is always best because you can do something with extra money, but it is much harder to make it with less money.

If you subtract your monthly expenses from your monthly income and there is little to nothing left over, then it's time to start slashing the budget. Anything that is not essential to your daily survival has to go; in other words, anything that is not essential to clothing, feeding, housing and transporting you is not a necessary expense. Once you slash expenses, you can use the excess income to start paying down debts.

Once you are prepared to pay off your debts, tackle the ones with the highest interest rates or the highest likelihood of adversely affecting your credit first. Higher interest rate credit cards accumulate more per month, so the bill gets higher faster. Pay this first and then move on to lower rate cards. The same applies to any accounts about to be charged off or reported as unpaid to the credit agencies; pay them off or at least set up a payment plan in lieu of credit report, if the company is willing to do so.

If you have a secondary talent or hobby, parlay it into a side hustle that will bring in extra income each month. From freelance writing to babysitting to baking and more, there are numerous ways to get a side gig that ups your monthly income levels. Start small by catering to family and friends and then branch out to offer your products or services to other paying customers.

At the same time, reign in your spending. Write down everything you purchase so you can review your spending regularly. Take your time when you buy something and ask yourself if you really need it. The more you can increase the income coming in while reducing the amount going out, the quicker you can get your debt under control.

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Thursday, May 31, 2007

Breach of Contract

Established by Each State

Nature of Secured Debt Collection

Running of the Clock

Considerations

List Your Debt

Spending Habits

Prioritize Your Debts

Extra Money

Linking PayPal to a Bank Account

The PayPal Debit Card

The PayPal Credit Card

PayPal Smart Connect

Shopping Online with PayPal

Wednesday, May 30, 2007

Exempt Income

Negotiating With Creditor

Filing Exempt Claim

Vacating a Judgment

Instructions

Monday, May 28, 2007

Validation of Debt

Writ of Garnishment

Time Limit

Garnishment Limitations and Exemptions

Indiana Residents Can "Freeze" Access to Credit Reports

Security Freeze Protects Indiana Residents

How It Works

Benefits

Notification of Unauthorized Access

Considerations

Statute of Limitations

Collection Restrictions

Members of the Military

Managing Apartment Utility and House Supplies

Reducing Apartment Expenses

Extra Income

Transportation

Sunday, May 27, 2007

Instructions

Charge-Offs

Credit Reports

Statute of Limitations

Considerations

Instructions

Secured and Unsecured Debt

Good Credit Scores

Types of Unsecured Loans

Obtaining a Loan

Saturday, May 26, 2007

Student Loans

Financial Aid

Who's Most Affected

Average Debt Load

Friday, May 25, 2007

Debt That Can Be Settled

Effects

Alternatives

Current or Less Delinquent Accounts

How to Settle Delinquent Accounts

How to Pay a Settlement

Warning

Instructions

Renegotiate Credit Card Rates and Shuffle Balances

Borrow from Yourself

Options

Stick With Your Plan

Thursday, May 24, 2007

Discuss Debt Settlement

Increasing Monthly Payments

Slashing Interest Rates

Other Options for Debt

Wednesday, May 23, 2007

Balance Transfers

Costs

Loans

Focused Solution

Garnishment