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Friday, August 31, 2007

How Long After Repossession Does a Judgment Happen?

When you finance the purchase of a vehicle by obtaining a loan, you are legally obligated to make the monthly loan payments on time. Failure to make the scheduled monthly payments will result in the loan being placed in default status. Once a loan is in default, the lender may repossess the vehicle and sell it at auction. If the proceeds from the sale fail to satisfy the balance owed on the loan, the lender may file a lawsuit for the deficiency and obtain a judgment against you. Many factors will affect how long after repossession a judgment is entered; however, on average it will take 60 to 120 days.

Default

    Each lender has its own procedures and time frames for declaring a loan in default. In most cases, a vehicle loan has a grace period within which the borrower must make the payment. Grace periods are typically between five and 30 days. Although most lenders will work with borrowers facing temporary financial problems, a lender can legally declare the loan to be in default when a single payment is considered late. The terms of the contract you signed, as well as the laws of the state where the contract was entered into, will also dictate when the loan may be declared in default.

Repossession

    Once the loan is in default, the vehicle may legally be repossessed. Again, state laws will dictate how, when and where a vehicle may be repossessed; however, in most cases, a lender may repossess a vehicle at any time and any place. A lender may also enter onto your property to repossess the vehicle as long as they do not commit a "breach of the peace" when doing so. You do have a right to have personal property located inside the vehicle returned to you; however, the towing company may charge you a fee for storage of the items.

Redemption and Auction

    Once the vehicle has been repossessed, most states allow the borrower to redeem the vehicle or even reinstate the loan. Redeeming the vehicle requires repayment of the loan in full plus expenses. If you cannot redeem or reinstate, then the lender will sell the vehicle at a public auction. The lender is usually required to publish notice of the sale, which means the sale may not take place for 30 to 60 days after repossession. The lender does not have to seek the highest price for the vehicle or sell for its actual worth. As a result, there may still be a balance due on the loan after the vehicle is sold.

Judgment

    If the vehicle was sold at auction but the sale did not net enough money to pay off the balance due on the loan, then you will have a deficiency balance due. If, for example, the balance due on the loan was $10,000 and the vehicle was sold at auction for $7.000, you still owe $3,000 plus any expenses the lender incurred in the repossession. The lender then has the option to file a lawsuit against you for the deficiency balance. The length of time it takes to complete the lawsuit will depend on the court where it is filed and whether or not you choose to defend the lawsuit. If you do not defend the complaint, a deficiency judgment could be entered against you within 30 to 60 days on average.

How to Negotiate Interest Rate Reductions With Credit Card Companies

Credit card companies profit from interest rates on consumer purchases. The amount of interest you pay is based on your credit rating. Credit card companies are willing to loan money to people with high credit scores at a lower interest rate because they are less of a credit risk. No matter your current credit score, you can negotiate interest rate reductions with your credit card companies, saving you hundreds, sometimes thousands, of dollars in interest each year.

Instructions

    1

    Maintain an excellent payment history. If you are a customer who pays your bills on time each month, you are ready to negotiate. However, if you recently missed a payment or made a late payment, maintain at least six months of on time payments before starting your negotiations. This builds your credit history while demonstrating your loyalty to the creditor's products.

    2

    Research current credit card interest rates by visiting an online money management website such as Bankrate.com or Money.CNN.com. Your basis for negotiating a lower rate is obtaining a competitive rate reflective of the best options on the market for your card type.

    3

    Contact your credit card company using the customer service number provided on the back of your card. Follow the prompts to speak to a customer service representative.

    4

    Request that your interest rate be lowered to a specific rate. Advise the representative that you were offered a lower rate with one of their competitors. If they do not budge, ask to speak to their supervisor.

    5

    Explain to the supervisor that you are a good customer, but are unhappy with your current interest rate. Inform him or her that you do not want to, but will close your account if a competitive interest rate can not be offered.

Credit Card Debt After Death in California

If a spouse or loved one has passed away in California owing a significant amount of credit card debt, it's wise to be aware of state laws governing this situation. While it's possible that the debt will die with him, in some cases if you are a close relative, you may have to become involved.

Joint Credit Cards

    If you were a joint account holder for the credit account, you will be held liable for the entire amount of the debt. The card company will not care which partner ran up the debt or who benefited from the purchases; you are legally liable to pay off the balance once the joint account holder has died.

Community Property

    California is a community property state. This means that any debts incurred by one partner in a marriage can be regarded as the liability of the other partner. If the law is interpreted strictly, it will not matter if you do not have your name on any of the accounts; you may still be required to pay back the debt. It's worth retaining a lawyer in this situation who can help you understand how community property laws are applied.

Probate

    If you are able to avoid liability for the credit card debt, it will be considered as part of the estate of the deceased person. This means the executor will have to work out whether there's enough in the estate to satisfy the debt or whether some of it will go unpaid. If you are the inheriting spouse, paying off credit card debt through the estate can have an impact on what's left for you to inherit.

Advice

    You should seek advice if a loved one or spouse has died leaving significant credit card debts. The credit card company or the collections agency will tell you what is in its interest but may not share the whole truth of the situation with you. Get independent advice from an estate planning attorney or debt counseling service about your true liabilities.

Statute of Limitations on Co-Signing Student Loans

The statute of limitations is a legal principle that prohibits a plaintiff from filing a civil action in court beyond a specified period of time after his cause of action initially accrued. Each state establishes its own limitations period for each distinct legal cause of action such as negligence, fraud and breach of the terms of a student loan contract. A civil action filed outside the designated limitations period is considered time-barred and may be dismissed by the court.

Actions for Breach of Contract

    Since the obligation to repay a debt is based on the existence of a legally binding contract between the lender and the borrower, the relevant statute of limitations period that governs student loans would be that period established for breach of contract actions.

Differs by State

    The statute of limitations period for breach of contract actions varies from state to state. For example, the limitations period for written contracts in Colorado is six years, in Delaware, it is three.

Timing

    The limitations period begins on the date the cause of action for breach of contract accrued, which would be the date on which the borrower defaulted on the repayment terms of the loan obligation. The period ends on the day a complaint is filed in court. If a lender files suit against the borrower but omits to name the co-signer as a defendant to the action, the statute of limitations clock continues to run as against the co-signer.

Effects

    The existence of a co-signer on the student loan has no bearing on when the statute of limitations has expired. If the lender does not name the co-signer as a co-defendant to the lawsuit when it files suit against the borrower, the statute of limitations clock continues to run on any future actions the lender may file against the co-signer.

Considerations

    Since the co-signer has liability for the full amount of the loan, once a borrower defaults, most lenders will name both the co-signer as well as the borrower as defendants in their lawsuit for repayment. If the complaint was filed within the applicable limitations period, neither the borrower nor the co-signer can raise the statute of limitations as an affirmative defense. If the lender decides at a later date to file suit against the co-signer after having previously filed suit against the borrower and the applicable limitations period has then expired, the lender is absolutely barred from filing suit against the co-signer.

Thursday, August 30, 2007

Tips to Pay Off Debts

Tips to Pay Off Debts

As the old adage goes, "The worst part about being poor is that it takes all of your time." Though being in debt and being poor aren't necessarily one of the same, it's hard to get a head start in the world when a large chunk (or all) of your income goes right out again. While some debt is unavoidable, there are ways to help ease the pain of debt, and to take the edge off.

Types

    Are you burning through your cash?

    There are many types of debt: personal loans, student loans, credit card debt, medical bills and car payments, among others. The worst debt is that with a high interest rate, which tends to be store credit cards, standard credit cards with a high APR and those where cash advances were used.

Identification

    Put unused items on the auction block

    The first step is to find where your money goes. You should have a pretty good idea how much comes in and how much goes out, so it's just a matter of knowing exactly where it goes. See what can be eliminated or downgraded. For example, if you're single and have two cars, that means two car payments, two insurance payments, etc. Eliminating one will help reduce your monthly expenses. Do that with every bill; do you really need every premium channel on cable? Is unlimited minutes and texting on your cell phone necessary? Do this with every bill that goes out, and you'll be surprised how much you can save.

Considerations

    Too much debt, and you could lose your house

    Make a plan that determines which debts to pay off first, and stick with it. Although common sense tells us to pay off the highest interest bills first, paying down the debts with the highest monthly totals can free up money faster. Then that extra money can be used to hack away at the stubborn, high-interest debts. Taking out a low-interest loan to pay off high interest credit cards is a good idea, provided that you don't rack up the credit card debt again.

Prevention/Solution

    Credit card debt is easy to get into

    Although it's hard to plan for some things in uncertain times, the best way to avoid debt is to live within your means. Projecting today's riches over the next several years is a recipe for financial disaster, as the bonus that finances your car loan, country club membership and timeshare might not be happening next year. Provide a cushion in your savings account, and if things go south financially, prepare yourself to be able to get out of long-term financial commitments. Quickly.

Warning

    Gambling is a sure-fire way to increase your debt

    Downgrading your expenses, moving to a less expensive apartment and working a second job are all great ways to help pay off debts, but many use that as an excuse to spend even more. Resist the temptation to do this, and cancel all but one credit card once they're paid off. Slaving at chipping away at debt is hard enough, so it's not something you want to do more than once in a lifetime.

How to Avoid Eviction & Utility Shut-Off

How to Avoid Eviction & Utility Shut-Off

Avoiding eviction and having your utilities shut off is a challenge that many face in hard economic times. Residents who make their home in an extreme climate are especially vulnerable. If you are facing eviction and utility shut-off, find out what options are available for you in your area. It can mean the difference between home sweet home and out on the street.

Instructions

    1

    Apply for the Low Income Home Energy Assistance Program (LIHEAP). Find out if you qualify for this program by calling 866-674-6327. Have your income information ready because guidelines will vary according to the state in which you live. To receive these benefits, most states require that your income fall at least 110 percent below the level of poverty. If you are able to obtain LIHEAP benefits, the proceeds will normally be paid directly to your utility company and lower your fuel or electric costs.

    2

    Look into discounted rate programs. Contact your local utility company to see if they offer any reduced rate programs for people who meet certain income guidelines, senior citizens or individuals who have become disabled. Ask what the qualifications are for these programs.

    3

    Be calm. Do not make threats. If you are faced with an eviction notice, be sure not to say things which can be used against you. A lawyer could use your words and actions against you if you were ever to appear in court. Remain quiet and deal with the situation in a respectful way.

    4

    Go to a local house of worship for assistance. Call the churches in your area to determine if they offer any programs for area residents who need financial help. Be prepared to travel to these places if you are not able to reach them by phone.

How to Request a Credit Card Charge Off Settlement

Credit is important if you are looking for financing or even securing a job these days.The average outstanding credit card debt for households that have a credit card was $10,679 at the end of 2008, according to a 2009 Nilson Report. One main ingredient in your credit score calculation is factoring in your charged off or non-paid accounts to creditors. If you are interested in repairing your credit, you may be searching to find out how you can resolve old unpaid credit card debt. Debt settlement is one way to repay charged off debt, and even have it removed from your credit bureau report if handled correctly, improving your credit score.

Instructions

    1

    Review credit bureau report. Here you will find the creditor information and pertinent contact resources such as mailing address and phone number. It is very common to find that the original creditor has sold the debt to a collection agency; therefore, you will need to be in touch with them. Reports can be ordered online, by mail or by phone. You can order all three credit bureau reports free once per 12 months at AnnualCreditReport.com.

    2

    Contact the creditor to determine the balance owed. Compose a letter requesting the current balance due or payoff amount of debt. Mailing a letter is the most efficient way to handle the communication, as you can request a return receipt for your records.

    3

    Request a debt settlement. Once you know how much needs to be paid off, you are ready to negotiate a settlement agreement. Many times the creditor or collection agency will contact you first initiating a settlement offer. Creditors usually settle the charged off debt for pennies on the dollar, if you are in the position to pay in full. Always get in writing the settlement agreement, and the guarantee that the delinquent debt will be removed from your credit report, before sending in money.

Who Pays Off the Balance of a Deceased Person's Credit Card?

When a person dies, the estate of the deceased is responsible for paying off that person's credit card. However, that is just one of several financial obligations for which the estate is responsible. If you are an authorized user on the credit card account, or co-account holder with the deceased, you may be responsible for paying off the balance, depending on the terms of the credit card agreement.

Function

    The state in which the deceased lived has rules regarding in what order debts must be paid by the estate. Unsecured debts, such as credit cards, usually come after things like funeral costs and outstanding medical bills, but before disbursement of inheritance funds to heirs.

Effects

    If the deceased has an estate large enough to satisfy all outstanding financial obligations, that estate must pay the balance of the deceased person's credit card in full. However, if the deceased person's estate is insolvent, depending on the state's rules regarding the order of debt payment for estates, only part of the credit card debt may be paid. Unless there were cosigners on the account, no one is legally responsible for the remainder of the debt.

Considerations

    The Credit Card Accountability, Responsibility, and Disclosure act of 2009 affects credit card debts of the deceased as of August 22, 2010. During the process of estate settlement, credit card companies may not allow fees and interest to accrue. Furthermore, a credit card company must issue a statement of the deceased person's balance to the executor of an estate within 30 days of a request from same. The estate then has 30 days from the date of receipt in which to pay the balance in full. As long as the estate complies with that rule, no further interest can be charged.

Warning

    Despite the fact that spouses and other relatives of the deceased are under no legal obligation to repay the deceased person's credit card debts, debt collection companies will still try to collect. You may of course pay such debts if you feel morally obligated to do so, which is why debt collectors persist in calling the bereaved. Companies that specialize in this type of debt collection are often trained in dealing with grief, and may be polite and friendly while trying to get you or loved ones to agree to pay off Grandpa's debt. Be aware that they, like other debt collectors, are legally not allowed to harass or threaten you according to the Fair Debt Collection Practices Act.

Prevention/Solution

    If you no longer wish to receive such calls, the Privacy Rights Clearinghouse advises that you first provide the debt collector with contact information for the executor. Should the debt collector persist, send a letter requesting cessation of all contact with you via certified mail with return receipt. Debt collectors cannot legally contact you except regarding legal proceedings after they receive such a letter.

Sunday, August 26, 2007

How to Reduce Mortgage Payments Without Bankruptcy

It's a good idea to continually find ways to reduce your expenses, but it's imperative in times of financial distress. Some people seek protection from their creditors by filing for bankruptcy, but they should explore other ways to deal with their woes because of the damage a bankruptcy causes to their credit ratings. If you are facing a mortgage payment that is more than you can currently afford, here are some ways that you can reduce it.

Instructions

    1

    This first option is for you only if you consider your financial problem to be temporary. Apply for a second mortgage or a home equity line of credit (HELOC), which will provide funds to make your first mortgage payment. If you foresee the problem as being long-term, you will only delay your day of reckoning. A lender's decision will be based on both the equity in your home and your ability to make monthly payments. After your financial problem is solved, you can take out a new first mortgage to cover all that you will owe.

    2

    Refinance your current mortgage, particularly if current interest rates are less than they were when you bought your house --- this can reduce your mortgage payment significantly. Furthermore, if you have had your mortgage for several years, if you simply refinance for the same amount, this will yield the cash to make your payments.

    3

    Talk with you mortgage-holder about ways to reduce your monthly payments. During difficult economic times, most lenders would rather that you temporarily reduce your monthly payment rather than foreclosing on the house or your declaring bankruptcy because those alternatives will be very costly. Some of the ways he might suggest are for you to make interest-only payments until you are back on your financial feet. Or he might agree to a reduction of the amount of principal that is owed on the mortgage, which will reduce your monthly payments.

    4

    Sell your home and begin renting. If you anticipate that your financial woes will last, it would be preferable for you to sell your home and pay off the outstanding mortgage rather than file for bankruptcy or to have your first mortgage lender foreclose on the property. Those solutions will have a long-term effect on your ability to secure credit in the future because either one will appear on your credit reports. Besides, if you have had your mortgage for a number of years, you will receive your equity in the house, depending on its selling price.

How Long Do Charged Off Accounts Stay on Your Credit Report?

Some credit report entries -- such as charged off accounts, or charge-offs -- can have a negative affect on your credit history and credit score. Charge-offs appear on credit reports after a lender or creditor sells a delinquent account to a collection agency. Collection agencies attempt to recover the funds owed, and they receive a commission if they are able to collect. If charge-offs appear on your report, make sure you understand the consequences.

How Long Charge-offs Remain on Your Report

    Similar to other negative credit items, once a creditor or lender reports a charge-off on your credit report, this information typically stays with you for a period of seven years. Creditors and lenders do not charge off a debt after a few missed payments, however. Instead, they will attempt to collect the debt for a period of 180 days or six months (on average), according to Bankrate. Collection attempts by creditors and lenders cease after a debtor fails to pay his debt for an extended period.

Consequences

    Because charge-offs can haunt credit reports for seven years, acquiring new financing during this period can be difficult. Other creditors and lenders will order your credit report before approving your application. They'll take note of your charge-off, and this one item can ruin your chances of getting a new loan or credit card. If you couldn't or chose not to pay an older debt, the prospective lender concludes there's a chance you'll repeat this pattern.

Considerations

    Paying a charge-off will not remove the negative item from your credit report. However, if you decide to pay off this old debt, your creditor or lender may update your credit report to read, "paid charge-off." A paid charge-off may not improve your credit score, but this update can help you qualify for loans. Lenders reviewing your credit will take note of the gesture to satisfy old debts, and this may improve your chances for approval. Some mortgage lenders require that old debts be paid off before they will approve your home loan application.

Avoiding Charge-offs

    Communicating and negotiating with creditors and lenders may help avoid a charge-off on your report. If you experience hardship that prevents timely payments, rather than default and let the account go to collections, contact your creditors or lenders. Discuss possible provisions to keep your account current, such as skipping payment options, reducing monthly payments or changing/extending due dates.

Saturday, August 25, 2007

How to Stop a Writ of Garnishment

How to Stop a Writ of Garnishment

After suing you, a creditor can request a writ of garnishment from the court. A writ of garnishment grants your creditor the right to seize funds from your bank accounts or force your employer to withhold money from your paycheck each pay period and submit it to the creditor as payment for the debt. You have options to stop an ongoing garnishment or prevent one from occurring.

Instructions

    1

    Contact the creditor and make arrangements to pay the remainder of your debt. Although a creditor with a successful judgment is unlikely to agree to a payment plan, it may withdraw the garnishment if you propose an upfront lump-sum settlement.

    2

    File a motion with the court that originally award the judgment and request that it vacate the judgment. You may request that the court set aside the judgment if you were not properly notified of the original lawsuit, if you do not owe the debt, or if circumstances beyond your control prevented you from appearing in court and presenting a proper defense. Should the court decide in your favor, your creditor will lose its garnishment order.

    3

    File for personal bankruptcy. You may file for Chapter 13 or Chapter 7 bankruptcy. Once the court processes your bankruptcy petition, it will prohibit all collection activity through an automatic stay. The stay protects you from garnishment and gives you the opportunity to either discharge your liability to the debt or repay it over time without having your wages or bank accounts garnished.

Deadbeat Dad Law in Indiana

The term "deadbeat dad" refers to fathers failing to pay child support, though the concept can also include any noncustodial parent. The laws dealing with such cases vary from state to state. Indiana parents delinquent in paying child support, as well as parents seeking just compensation, should familiarize themselves with the deadbeat dad laws in Indiana. This will familiarize debtors with the consequences of their actions, as well as inform parents seeking payment of their legal options.

License Suspension

    In 2008, the office of Governor Mitch Daniels announced a new program designed to get deadbeat parents to pay up. Noncustodial parents owing more than $25,000 in back child support will have their driver's licenses revoked by the state. At the time, it was estimated that this would effect as many as 4,000 parents throughout the state. These parents would receive a number of notices as well as 60 days to respond before losing their license.

Liens

    You may be in a situation where the nonpaying parent has a large amount of property. In such a case, you can pursue having a lien put on any property the parent owns. This does not provide you with payments immediately, however. A lien only states that you must receive money owed to you before the seller can receive any monetary benefit from the sale of property. Put simply, you will not receive any money until the owner sells.

Garnishment

    The State of Indiana will take measures to garnish the wages of nonpaying noncustodial parents shirking court-ordered child support. State law limits the amount of wages that can be garnished. It is the lower figure of either 25 percent of disposable income or income greater than 30 times the federal minimum wage. Garnishment can be used by the state to obtain both new payments and old payments still outstanding.

Protected Property

    Not all property can have a lien attached to it. Indiana state law prohibits courts from placing liens on primary residences and equipment the nonpaying parent needs to make a living. This means, for example, that you cannot have a lien placed against a truck the noncustodial parent uses in his moving business. Unemployment benefits and other federal and state benefits are not protected from payment orders under Indiana state law.

What Is the Statute of Limitation for Unsecured Debt Collection in Nebraska?

The statute of limitations for unsecured debt in Nebraska varies by the debt's specific classification. An unsecured debt may fall into almost any debt category depending on how the loan or other extension of credit was created. Each type of debt has a corresponding statute of limitations that serves as a creditor's timeline for debt collection should the debtor default on the loan or line of credit.

Credit Card Debt

    Credit card debt is usually considered unsecured because the creditor has no collateral to seize in the event of account delinquency and default. Credit card debt is commonly considered an open account in Idaho and other states. An open account has an open-ended term of repayment, and the debtor may continue to use the credit available in the account as long as he makes timely payments on his account balance. The statute of limitations on an open account for debt collection purposes in Nebraska is four years.

Written Contracts

    A written agreement is considered unsecured when no collateral, including a home or automobile, is available for the creditor to seize and liquidate. The creditor has little choice but to pursue the debtor directly to recoup some of the extended credit or payment for services rendered under contract. The statute of limitations for debt collection for a written contract in Nebraska is five years. A creditor may sue a debtor in civil court to obtain a judgment to garnishee up to 25 percent of the debtor's weekly disposable income or up to 30 times the minimum wage in the debtor's weekly earnings, whichever is the lowest amount. Only 15 percent of disposable income for a debtor who files his taxes as head of household is subject to wage garnishment in Nebraska.

Court Judgments

    A court judgment is a ruling by a court requiring a debtor to repay a debt. A creditor obtaining a judgment from an Idaho court has five years to collect the debt. A creditor with a foreign court judgment also has five years. The statute of limitations for a domestic court judgment is renewable upon appeal to the court. This allows the creditor more time to recoup the debt owed. The statute of limitations for a foreign court judgment is non-renewable in Nebraska.

Statute Expiration

    A creditor can no longer successfully sue a debtor in civil court once the applicable statute of limitations on the debt expires. A debtor may point out the time-barred status of the debt to the court if a creditor sues after this expiration date to have the lawsuit dismissed. The statute of limitations only applies to a creditor's right to obtain a court judgment. A corresponding negative notation on the debtor's credit report may remain for up to seven years.

What Does It Mean If a Company Writes a Debt Off?

If you fail to pay a debt, the creditor may write it off at some point in the future. When a company writes off a debt, this does not necessarily mean that you do not owe the debt anymore. This is simply an accounting procedure that companies use and the debt is still intact.

Function

    Companies write off or charge off debt when it sits uncollected for an extended period of time. This is simply a procedure that companies use in order to take debts that are unlikely to be collected off of the regular books. At this point, the debt is generally added to a separate book of bad debts. It could also be sold to a debt collector at that point. The debt collector could then try to collect the debt.

Time Frame

    The debt has to sit without any payments for an extended period of time before a company writes it off. Each company writes debt off at a different point, but as a general rule, most companies do this once the debt has gone for at least six months without any payment. The company may contact you during the six month period to try to collect and then cease after that.

Credit Impact

    When you have a charge off on your record, it can negatively impact your ability to obtain credit in the future. A charge off remains on your credit report for at least seven years. This means that anytime you go to obtain credit, the creditor can see the write off on your report. This will also lower your credit score, which also compounds the problem of getting additional credit.

Repayment

    When a debt is written off, you should not mistake this for the debt being forgiven. You still owe the debt and it would be in your best interest to repay it if possible. Even if the company sells the debt to a collection agency, you should still consider repaying it. This would potentially help your credit score and it would show future creditors that you plan on repaying your debts.

Debt Settlement

    Debt settlement is a similar term that deals with a company writing off a portion of your debt. With debt settlement, the company may agree to take less than what you owe in return for a lump sum of money. This settles the debt and the company reports it on your credit report. This can also damage your credit score, but it does take care of the account balance.

Arizona Payroll Laws: Employee Engaging in Illegal Activity While Working

When an employer discovers that an employee is engaging in a crime while working, this creates a number of problems. First, the employer may begin to distrust the employee. Second, the employee may be neglecting his work. And, third, the employee may be opening the employer up to a variety of legal actions. In Arizona, the employer is allowed to fire the employee in most cases, but he may not be able to withhold pay.

Payment

    If an employee is committing an illegal act while working, the employer is not automatically allowed to withhold pay. Whether pay can be withheld will depend on a number of factors, including what the employee's contract says; the nature of the offense that the employee committed; whether the employee was neglecting his job while he was committing the activity; whether the employee was formally charged with a crime; and whether the offense puts the employer in legal danger.

Termination

    In most cases, an employee will be allowed to be terminated in the wake of committing an illegal crime. If the employee is employed "at will" -- meaning that he is not guaranteed employment over a set period of time -- then the employer can fire him immediately. In addition, if the employer's contract has a clause that forbids illegal activity, this will also allow him to be fired.

Lawsuits

    Whether an employee can withhold pay may ultimately be worked out in court. While no Arizona payroll laws specifically relate to the commission of a crime while on the job, employers may be allowed to sue the employee if the commission of a crime left it at risk of a lawsuit or in fact cost it money. Similarly, an employee may sue the employer for wrongful termination if the offense did not legally merit firing.

Considerations

    Because of all the variables involved in Arizona law related to the commission of a crime while on the job and the withholding of pay, an employer should be sure to consult an employment lawyer before attempting to alter an employee's pay schedule as punishment for committing an offense during work hours. The attorney will need to examine the employee's contract and be briefed on what the employee did before weighing it against relevant laws.

Friday, August 24, 2007

What Happens to Debt When Your Spouse Dies?

After the death of a spouse, it can be a struggle to deal with everyday life. Debt can complicate the matter, making it difficult to know what to do with life insurance money and whether to stay in your home. It is important to understand the debt for which you are responsible and the debt for which you will not be held accountable.

Cosigner Assumes Debts

    If you are a cosigner on any accounts with your spouse, you become solely responsible for those debts when he passes away. Both spouses typically sign on mortgage and car loans, and they may both sign for credit cards issued to both spouses. This debt is your debt, and you must pay it off. You should contact the creditors to inform them your spouse has passed away, but generally you can continue to make payments on the same schedule.

Estate Stands for Debt

    Any debts for which you are not a cosigner will not be your responsibility. For example, if your husband had a credit card that was only under his name, you will not be responsible for those debts. However, any assets in the estate must be used to pay off the debts before anyone gets an inheritance. This means any assets your spouse owns must go toward the debt. If you both owned the home, one-half of the value of the home must be applied to your spouse's debt. You must either sell the house and give half of the proceeds to the estate or pay off the debts by refinancing and withdrawing half of the home's equity. Any savings in a bank account must be split and used to pay off any outstanding debt.

Life Insurance Money

    Life insurance money is not considered part of the estate and does not need to go toward unpaid debts in your spouse's name. This money can be used for any expenses you have or invested to help pay for things such as your children's college. However, you may want to use the money to pay off outstanding debts so you can keep your home or other valuables. Depending on your situation, it may not make sense to pay off the debts if you cannot afford to stay in the home on your salary alone. It may be better to sell the house and keep the life insurance money for other needs.

Settling Debts

    The executor of the estate is responsible for settling the debts of the deceased. He must contact the creditors and inform them the person has passed away. The executor must send a copy of the death certificate and any final payments that the estate can make. Generally, he will divide any remaining assets among the creditors, along with a letter stating that the estate did not have enough to cover the remaining debt.

Quickest Way to Pay Off Debt

Quickest Way to Pay Off Debt

Getting out of debt can seem like an uphill battle. The stress and strain you face can be overwhelming and depressing. But it is possible to gain control of your finances. When the bills arrive in the mail, confront them and get busy with your plan to get out of debt. Here are some tips on the quickest way to pay off debt.

Cut Out All Unnecessary Expenses

    Don't eat out every weekend

    We all spend money on things we do not need, from trips to the movies to brand-name grocery items. Add up the cost of any weekend expenses you generate such as restaurant dinners and movies, fast food purchases made in the average month, and the amount you spend in an average month on clothing. Pay yourself that amount each month. You can break it down by the week if it is more manageable. Use this money each month to put toward your debt. Once you are out of debt, you can make weekend plans again on a monthly or semimonthly basis, but only if you can afford the splurge.

Pay Highest Interest Credit First

    Cut up those cards

    Take all of your credit cards and loans and list them on a spreadsheet with the balance, interest rates, and minimum payments. Take the highest interest card or loan, excluding any 15- or 30-year mortgage loans, and pay as much as you can (more than the minimum) on that account while paying the minimum on the remaining accounts. Continue paying this way until the highest interest rate account is paid off. Then move to the next highest interest rate account and pay the amount you were paying on that paid-off account along with the minimum payment you were previously paying. Keep this strategy going until all of the accounts are paid.

Sell Items And Work More

    Find additional money sources

    If you're wondering how you're going to be able to pay any additional amount toward your debt there are several ways to generate funds. You can sell your used, unwanted items through online auctions or through online or offline classified ads.
    If possible, try to get overtime at work or get a temporary part-time job until you pay off your debts.
    If you have a talent for fixing things, advertise your labor through online or offline classified ads. Get the word out to neighbors, friends, and relatives that you are looking for side work.
    Let neighbors and friends know you can babysit or petsit.
    Look through the wanted ads and see if someone wants to buy something you can sell.
    The ways to generate funds can be endless. Be sure to put this additional money toward your debt.

Wednesday, August 22, 2007

California Law for Nonpayment on a Credit Card

When credit card debt goes unpaid, it can have dire repercussions for the user. The company may sue to get the funds back or hire a collection agency to harass the user about payments. In California, strict laws govern the handling of credit card debt, in order to ensure fair practices on both sides. The intent is to provide the card company with reasonable means of securing payments, while ensuring that the cardholder doesn't suffer excessive harassment in the process.

Collection Agencies

    Once debts go unpaid, a collection agency often steps in to induce the money from the credit cardholder. In California, the federal Fair Debt Collection Practices Act governs how and where collection agencies may act in this regard. For example, they may only contact the cardholder by phone between the hours of 8 a.m. and 9 p.m. local time; they must stop communicating after receiving written notice; they cannot communicate with a third party about the debt; and they cannot contact the cardholder at his job if his employer tells them that such a practice is unacceptable. Such stipulations prevent the collection agency from using actively abusive and/or deceptive practices when securing a debt.

Statute of Limitations

    California places a statute of limitations of four years on any credit card debt. That means that the credit card companies have four years from the card holder's last payment to instigate a lawsuit. After that, they can still continue to pursue the debt, but they must do so without the aid of the public courts.

Nonpayment After Death

    California is a community property state, which means that married couples jointly share any assets and debts acquired during the course of the marriage. If one partner dies, the surviving partner must pay off any debt accrued by the deceased. If a single person dies with credit card debt, the credit card company must obtain payments through the estate and cannot pursue the matter further if there are insufficient funds to fully repay the debt.

Cancellation

    In order to cancel the card for nonpayment in California, the credit card company must give 30 days' written notice to serve as a fair warning. The exception comes when the cardholder has not made a payment within 90 days or violates any aspect of the agreement first signed when the credit card was issued. The card issuer may also cancel the card when it possesses "evidence or reasonable belief" that the cardholder has no intention of paying or is unable to pay the debt.

Debt Contract Law

Whether you promised to pay a doctor, an ex-spouse or a credit card bill, you entered into a legally binding debt contract when you made that agreement, according to both Experian and "How to File for Chapter 7 Bankruptcy."

Potential Consequences

    Violated debt contracts can lead to negative credit reporting, civil lawsuits against you and wage garnishments.

Misconceptions

    Even bankruptcy cannot eliminate your legal obligation to pay certain debts, such as child support, alimony, court fines, tax bills less than three years old and civil damages owed due to illegal activities.

Statute of Limitations

    Bill collectors seeking payment of credit cards and loans cannot use the courts to sue you once your state's statute of limitations expires, according to CreditCards.com. The time frame depends upon your state of residence; for example, Alabama residents cannot legally be sued for debt contracts after three years, while Colorado residents can be sued as long as six years after the contract was initially violated.

How Does a Permanent Loan Modification Work?

Loan modification is an option many borrowers use when they fall behind on mortgage payments and want to avoid foreclosure. Borrowers can modify their loan either before they stop making payments or after they default on the loan. Modifying before default helps save borrower credit and is advisable, but borrowers must prove their financial difficulties before the lender will consider this option. A loan modification can have several different results depending on the negotiation between the lender and borrower. After a brief trial period, the modification to a loan will become permanent in a new, signed contract.

Modifying Rate

    When lenders modify a rate, they change the rate so that the borrower does not have to pay as much interest. This means lowering the interest rate down from its current position; a lower rate will be applied to the same principal amount, creating a lower payment for the borrower. This reduces the amount of profit that a lender makes but can be very beneficial to borrowers who are struggling making their monthly payments.

Modifying Payments

    Lenders will also often agree to modify the loan payments themselves. In this case, lenders may lengthen the mortgage so that the payments are spread out over a longer period of time, lowering the payment amount per month. At other times, lenders will only place late payments back into the mortgage in order to make it current again and easier for the borrower to maintain.

Debt Forgiveness

    Some loan modifications end in debt settlement, where the lender agrees to forgive all or part of the loan debt. This is more common when the borrower is in serious trouble and uses a loan consolidation, paying off old debts with a new loan such as a refinance. Sometimes borrowers will fully pay off the loan to close the account, but at other times the borrower can only make a partial lump sum payment. The lender may accept this payment and close the loan account in order to end the problem completely.

Temporary Modifications

    While most types of loan modification become a permanent part of the loan after the trial period, or end the loan entirely, some types of modification are temporary and may be better options for borrowers who are not yet late on their payments. A common temporary action is a forbearance, where the lender stalls the loan and does not require payments for at least several months, allowing time for the borrower to recover from a financial crisis, then resuming payments according to the old schedule.

Ways Your Information Can Be Obtained for Identity Theft

Ways Your Information Can Be Obtained for Identity Theft

Anyone can be the victim of identity theft and have his financial information stolen and used for fraudulent purposes. The Consumer Sentinel Network accumulates consumer fraud-related data for the Federal Trade Commission. In 2009, the Consumer Sentinel Network received reports of over 278,000 cases of identity theft in the United States. To protect yourself, you need to understand the ways that information can be obtained for identity theft.

Trash

    Your bills and mail from organizations such as the Social Security Administration all have your account numbers, Social Security number, home address and other important personal information on them. If you throw out that mail without shredding it, then a criminal can steal your trash and obtain all of that personal information. If criminals get your Social Security number and home address, then they can also take those pre-approved credit card offers you get in the mail and apply for the card. Use a shredder to destroy any document that has personal information on it.

Change of Address

    Unfortunately, it can be easy for a criminal to submit a change of address form to the post office and have your mail delivered to a different location. If you are not receiving mail for more than three consecutive mail days that mail is supposed to be delivered, contact your local post office immediately. Bring photo identification and utility bills addressed to your home to your postmaster and find out if a criminal has re-routed your mail.

Phishing

    Phishing is an email tactic criminals use to collect your account login information. The criminals send out random emails that look like they are official emails from a bank or other online business to random victims. In some cases, those victims do not have accounts with those organizations so they ignore the email. But people with accounts may be tempted to click on the login link and try to log into their account. The phishing email login link a goes to a website that looks like the right login page, but is actually a page that collects usernames and passwords for criminals. Never log in to an account from a link in an email. Report all suspicious emails to the company that they are purported to be from.

Purchasing Information

    As frustrating as it sounds, you are not always able to initially protect yourself from identity theft. Some criminals are able to purchase your credit card information from store clerks or online websites looking to make extra money, according to the Equifax website. Federal law states that every American consumer is entitled to one free copy of his credit report from each of the three major reporting agencies every 12 months. Order your free reports once a year and look for suspicious activity. You should also monitor your credit card bills for purchases you do not recognize.

Tuesday, August 21, 2007

Debt Reduction Help in Ohio

If you live in Ohio and cannot pay your consumer-oriented debts as promised, you potentially qualify for several types of debt reduction help. The federal government, nonprofit credit counseling agencies and your lenders are all potential resources for assistance if you get in serious financial trouble. Also, even if you must take a drastic step like filing for bankruptcy you can usually retain at least some of your assets under Ohio exemption laws.

Debt Management Programs

    Ohio debt management programs, usually run through nonprofit divisions of Consumer Credit Counseling Services, allow eligible debtors to partially repay some of their bills. A certified credit counselor renegotiates your debts and the repayment terms with your creditors. You pay one monthly lump sum, including an administrative fee, directly to your selected credit counseling agency. But the fact that you reduced your debt repayment terms will negatively impact your credit rating for seven years.

Lender Hardship Programs

    With diligence and a solid repayment plan, you can try to renegotiate your debt terms with your lenders, according to Bankrate. But this does not always work. You should have a good repayment history, steady income and a compelling reason for the financial problems you encountered. If you cannot successfully renegotiate your debt terms and would rather not use an Ohio credit counseling service, you may need to file bankruptcy.

Chapter 7 Bankruptcy

    If you earn less than Ohio's annual median income level, you qualify for full relief of pre-existing consumer debts, according to the book "How to File for Chapter 7 Bankruptcy." As of 2011, the annual median income level for a single Ohio resident was $41,724, while the figure for a couple was $52,030, according to the U.S. Trustee Program. The figure for a family of three was $61,552 a year, while families of four could earn up to $73,040 annually.

Chapter 13 Bankruptcy

    If you have steady income, you can partially repay your creditors under Chapter 13 bankruptcy. It usually takes three to five years to finish a Chapter 13 plan in Ohio. If you have lived in the state for at least two years, you can keep at least some of your assets in any type of personal bankruptcy under Ohio asset exemption laws. As of 2011, you could retain $20,200 of homestead equity, $400 of cash, $1,500 in household goods and $1,500 of jewelry, according to Bankruptcy Action. You can also keep up to $3,225 in motor vehicle equity and $2,025 in work-related tools regardless of your bankruptcy status.

Monday, August 20, 2007

What Is a Variable Interest Rate?

What Is a Variable Interest Rate?

A variable interest rate is a type of interest rate whose effective rate is tied to a collection of representative rates called an interest rate index. Variable interest rates help keep lending instruments profitable during changes in the general level of interest rates.

Risk

    Variable interest rates help minimize the risk lenders incur when making a loan at a specific interest rate. For example, if the market interest rate is 3 percent, a bank makes a loan at 5 percent interest expecting to make 2 percent in profit from interest. If market rates increase to 4 percent, the lender only makes 1 percent in profit and will lose money if interest rates rise above 5 percent.

Benchmarks

    Banks minimize exposure to interest rate risk by tying lending products to a certain benchmark interest rate. This ensures that the loan remains profitable within the margins the bank requires. Benchmark rates include the prime rate, which is used often in short-term business lending.

Lending

    An adjustable-rate mortgage changes the interest rate a homeowner pays at regular intervals to keep up with changes in market rates to keep the mortgage profitable for the lender. Credit cards are often priced similarly with banks charging interest based on the prime rate.

Who Can Help With Credit Repair?

Who Can Help With Credit Repair?

Good credit is essential for saving money on everything from buying a home to auto insurance. If your credit score needs improvement, there are several options for credit repair. Law firms and other companies specializing in credit repair are among those who can help improve your situation, but you can also help yourself with a little bit of knowledge, persistence and patience.

Identification

    The highest possible credit score you can have is 850. Good credit is considered by most lenders to be anything above 720, according to creditscoring.com. Your credit, or FICO, score is based on your payment history, how much you owe, your credit history, the types of credit you are using and new credit inquiries.

Significance

    The lower your credit score, the harder it is to qualify for any kind of loan. If you do manage to qualify, your interest rate will be higher if your credit score is low. Insurance premiums are also higher for consumers with bad credit. Repairing your credit can significantly and positively impact your finances.

Function

    Credit repair can raise your score by eliminating incorrect information from your credit report. Law firms like Lexington and Credit Bureau Experts charge a monthly fee for disputing items on your credit report. There are many other companies offering credit repair services, but you can save money by doing it yourself. The first step is to order a credit report from all three reporting agencies. Creditinfocenter.com lists contact information for Experian, TransUnion and Equifax along with a wealth of other information to help you repair your credit (see Resources below).

Misconceptions

    Disputing incorrect or outdated information on your credit report is the only way to have it removed. You do not need to pay a lawyer or anyone else to help you repair your credit. There is an abundance of good information online, forums like creditboards.com and websites like creditinfocenter.com can answer your questions and show you the way to an improved credit score. If you can write a letter listing a disputed item from your credit report, you can repair your own credit.

Warning

    Beware of the companies who offer to help you repair your credit by giving you a new identity. They imply that you can use a new employer identification number to start fresh, but this is a federal offense and you can be prosecuted for it. Also be aware that the credit repair industry is filled with scams, so make sure you check with the Better Business Bureau before you pay for credit repair services (see Resources below).

Sunday, August 19, 2007

Fastest Way to Improve My Credit Score

Your credit score is determined by five primary factors: your payment history (35%), your debt to credit ratio (30%), the age of your credit history (15%), the types of credit you have (10%) and the amount of new inquiries or new credit you apply for (10%). Improving your credit score takes time and responsible borrowing behavior. There are a few tricks, however, to improve your credit score quickly.

Become an Authorized Signer

    One of the fastest ways to improve your credit score is to take advantage of someone else's good credit. If possible, you should find someone who has a credit card that has a low balance and a high credit limit, and/or has been open for a while with a record of on-time payments. When you are listed as an authorized signer, the credit history from that card shows up as part of your credit history. This means that you can increase the age of your credit if the card is an old card (age of credit history makes up 15% of your score). If the card has a low balance and a high limit, it can have a positive impact on your debt-to-credit ratio (30% of your score). If the card has a good payment history, this can help improve your payment history (35% of your score). This can make a dramatic difference in your score, if someone trusts you enough to name you as an authorized signer.

Pay down debt or raise your credit limits

    Your debt-to-credit ratio makes up 30% of your credit score. The closer you are to the limits on your credit cards, the lower this portion of your score will be. By paying down debt, you can have a positive impact on your debt-to-credit ratio. If your creditors are willing to raise your credit score without doing a credit check, this can also have a positive effect on your credit limit because although you will still owe the same amount, you will have more available credit. You should not ask, however, for a credit line increase if the creditor will need to check your credit report in order to grant the increase because this can lower your score by showing up as an inquiry on your credit report (10% of your score).

Negotiate with creditors to remove late payments

    If you are a good customer with a relatively good payment record, some credit card companies will remove a single late payment from your credit report if you call and speak with a supervisor. This is done in some cases as a courtesy, especially if the late payment was in the past. If creditors will not remove late payments, you can still improve your payment history by making sure you make on time payments. The older a late payment is, the less of a negative impact it has on your score, so ensuring you pay on time now will begin to raise your score as time passes.

Can Payment Arrangements Be Made If I Am Sued for My Credit Card Balance?

When you accumulate a credit card balance, you must make at least the minimum payment to the credit card company to avoid further collection actions. In some cases, the credit card company will sue you to collect the balance that you owe. In this situation, you may still be able to set up a payment arrangement.

Civil Lawsuit

    When you sign up for a credit card agreement, you sign terms that are set forth by the credit card company. Once you start using the card, the credit card company has the right to sue you in civil court to collect the balance of the card. Once the credit card company sues you, a judgment will be issued against you unless you can prove that you did not accumulate the debt. At that point, the creditor can use the judgment to collect.

After a Judgment

    Once the credit card company obtains a judgment against you, it can use it in one of several ways. Although wage garnishment and property levies are an option, the credit card company may not use these tactics. At this point, you still have the option of setting up a payment plan with the creditor to repay the debt. The judgment is simply a legal order that forces you to pay the debt. Until the creditor takes it further and obtains a writ of execution, no other actions will be taken.

Settlement

    If you have a judgment against you, it is typically in your best interest to set up a settlement with the credit card company. This may involve paying a specific amount of money each month until the debt is eliminated. It could also involve paying a lump sum and having the debt settled by the creditor. By working out a payment agreement or a settlement with the creditor, you avoid having money taken directly out of your paycheck.

Written Agreement

    If you set up a payment arrangement with the credit card company, get it in writing. Before you send any money to the credit card company, you need a document that states the terms. Otherwise, the creditor could deny that an arrangement has been put in place and still pursue a wage garnishment order against you. Getting it in writing helps protect you and your finances.

How to Use a Credit Card Internationally

How to Use a Credit Card Internationally

Using credit cards while traveling outside of the United States is much more convenient than carrying travelers checks or large sums of cash. However, keep in mind the cost of foreign currency exchange rates and other banking fees before you travel.

Instructions

    1

    Use the phone number on the back of your credit card to contact your credit card company before you travel. Ask your credit card company if its card is accepted in the areas where you are planning to travel.

    2

    Discuss the policies in regards to foreign transaction fees. Many credit card companies will charge a transaction fee for each purchase you make in a foreign country using your credit card. Be sure you understand how these charges work. The deal that you think you are getting on that gotta-have item may not be what you thought when you get your credit card statement.

    3

    Ask your credit card company how it handles converting currencies on your statement. For example if you purchase an item in Japanese yen, what basis does it use to convert the currency on your credit card. Are you going to get stuck with an outrageous currency exchange fee?

    4

    Prevent your credit card's fraud alert system from kicking in. If a credit card company sees substantial activity in a foreign country, it may trigger its fraud alert system and freeze your credit card. Travel with two credit cards, so you have a back up. You can inform your credit card company of your trip to prevent a freeze to your account. If it happens during your trip, do not panic, just place a call to the credit card company and resolve the misunderstanding.

    5

    Check with all of your credit card companies to see which one offers the best deals in terms of foreign exchange rate charges. Capital One is known to have no exchange transaction fees. Many of the others charge between one and three percent on foreign-based purchases.

    6

    Review your credit card policy on how it handles charge disputes in foreign countries. Your company may not be willing to act on your behalf if the charge took place in a foreign country. Understand these terms if you are considering making a major purchase overseas.

    7

    Travel with two credit cards in hand. They should work at major hotels, restaurants and large tourist shopping areas. Many of these merchants are beginning to have a $30 minimum purchase limit for you to use your plastic. Remember to keep some cash on hand for places that do not accept your card.

    8

    Using cards such as Visa and MasterCard should not be a problem. Some merchants do not accept American Express because the merchants are charged higher fees for accepting this card. The Discover card is not widely used or accepted overseas.

Saturday, August 18, 2007

Debt Relief Dos & Don'ts

Debt Relief Dos & Don'ts

Resolving debt issues is a stressful and frustrating experience even when it's done right. Managing your credit and spending is the best way to avoid the need for debt relief. When you're struggling with overcoming your debt debt, a number of resources are available. Following a few simple guidelines when pursuing debt relief helps you learn from your mistakes and can keep a difficult situation from worsening.

Contact Creditors

    Do contact your creditors to negotiate your debt. Creditors may agree to lower interest rates or defer payment to help make payments more manageable. It's best to do this as soon as you face trouble paying your bills.Credit card companies may be willing to work with you to settle debts later, but resolving the situation early helps to avoid fees, penalties and the harassment of debt collectors.

Credit Counseling

    Do use a credit counselor if you need help with your finances. A counselor might be able to help you work out a payment plan with creditors and develop a budget to make sure you can meet monthly payment obligations. Credit counselors provide advice on strategies to reduce debt including ways to avoid potential penalties or common mistakes that can be prove costly. Look for accredited and reputable credit counselors who provide free information and offer fee information in writing.

Advance Fees

    Don't pay an advance fee for debt relief. If a debt relief service does charge a fee for its services, get that information in writing before agreeing to work with them. Under federal law, it is illegal for a debt relief or counseling agency to charge any fees to a consumer before they have worked out a payment plan with the consumer's creditors. Do not pay a debt relief service until after they have successfully negotiated debts with a creditor. Report violators to your state's office of the attorney general and to your local Better Business Bureau.

Bankruptcy Filing

    Don't assume bankruptcy is the only way out for severe debt. Bankruptcy can have a very negative effect on your credit and result in the forced sale of your personal property. You may be able to resolve a debt problem without the need for bankruptcy protection. Before considering bankruptcy, contact your creditors, seek professional help and enlist the help of your family, if possible. Personal bankruptcy is an action of last resort.

Friday, August 17, 2007

Credit Recovery After Bankruptcy

Credit Recovery After Bankruptcy

Bankruptcy creates a significant negative impact to a consumer's credit report. It affects borrowing ability to qualify for loans or lines of credit and lower interest rates. Rebuilding credit after bankruptcy takes time, patience and adherence to all financial agreements.

Time Frame

    According to the Federal Trade Commission and the Fair Credit Reporting Act, bankruptcy information may be reported for 10 years from the date of the order's entry for relief or the date of adjudication. The larger credit reporting agencies--Experian, Equifax and TransUnion--are members of the Associated Credit Bureaus. Those credit reporting agencies remove bankruptcies from credit reports after seven years for debtors who file under chapter 11 and chapter 13 protection.

Credit Counseling

    Credit counseling is required from a government-approved organization within six months before filing for any bankruptcy relief. Counseling provides consumers with an opportunity to evaluate their debts and receive education on how to better manage their finances. Information from such counseling sessions should be used to help prevent future financial difficulties. Credit counseling services are also available afterward to help consumers with their post-bankruptcy recoveries.

Cash vs. Credit

    Bankruptcy will make it difficult for a consumer to qualify for loans and lines of credit. Before trust can be re-established and credit privileges extended again, a consumer may have to pay cash for purchases. Cash purchases made with small independent merchants or retailers over a period of time can open the door to quicker credit approval. Once credit is extended and the account is maintained according to terms, the merchant may be used as a future credit reference.

Be Wary of Offers

    Offers often arrive in the mail stating a consumer has been pre-approved for a credit card. This is based on a soft credit check, where the credit card company has viewed rudimentary or simple consumer credit information. Credit card offers may be subject to change once a credit card company receives a consumer's authorization to view the complete details of a credit report, what is known as a hard pull. Bankruptcies can result in credit denial or a higher interest rate, and those hard credit inquiries also show up on a consumer's credit report, also affecting future credit requests.

Co-signer

    Having a co-signer on a credit account is one way to help build credit. A co-signer is an individual who will take financial responsibility for a loan or line of credit if you default. By honoring the account's terms in making regular payments and staying under your credit limit, you can show financial responsibility and rebuild your credit.

Money Management

    To avoid future financial problems after bankruptcy, learn from the mistakes that may have caused you to seek such relief. If the filing was related to poor money management, learn how to budget spending to prevent future financial turmoil. Monitor expenses and cut costs to manage debt.

The Best Ways to Pay Off Debt Faster

The Best Ways to Pay Off Debt Faster

Different financial experts have different ideas about getting out of debt, though they all agree you must first stop spending beyond your means. According to Ron Lieber, who writes a money blog for the New York Times, people should automate their payments to avoid late fees and penalties for overdue credit card, student loan and other bills. Because individuals have unique financial situations, what works for one person may not be ideal for someone else. There are many schools of thought about the best way to pay off debt faster.

Set a Budget

    When you are in debt, you need to be fully aware of how and where you spend your money. Financial expert Jean Chatzky says your first step to being debt free is to calculate all of your spending over a month's time so you can evaluate your expenses and cut back wherever you can. Learn to differentiate between needs and wants, and you can use money formerly spent on (unessential) wants toward paying off your debt. This will move you toward your debt-free goal.

The Debt Snowball

    Personal finance guru Dave Ramsey says the satisfaction of eliminating smaller debts first will help keep you moving forward and working toward your debt-free goal. He advocates building momentum with what he calls a "debt snowball." For example, Ramsey advocates you make only the minimum payments on your credit cards, build an emergency fund (he recommends $1,000 to start) so you can keep yourself from accumulating new debt, and then begin tackling your credit card debt in ascending order, lowest interest rate to highest rate. By focusing on one debt at a time, you eliminate individual obligations and can use that money toward your next targeted debt. This approach works with all debts, including student loan payments, car payments and mortgage payments--as long as you remember to make the minimum monthly payments on all of your outstanding bills.

Negotiate

    Your first option is to call your credit card companies and see if you can get your fixed rates lowered, or move a balance from one card to another annual percentage rate. By lowering your monthly payment, you can continue to pay the amount your budget allows but knock down the debt faster. If you have a mortgage and/or car payment, look into refinancing at a lower interest rate. The same goes for any personal bank loans you may carry. Finally, if you have medical debt, it's worth your time to call the business office and see if you can negotiate a lower payment.

Does Medical Debt Affect Your Credit Score?

Medical debt is different from other kinds of debt, because it is usually unplanned and uncontrollable. It is considered unsecured debt, like credit cards. Under certain circumstances, unpaid medical debt can negatively affect your credit score. However, with proper attention, you can help keep the debt from damaging your credit.

How It's Reported

    Medical billing departments for hospitals and doctors' offices in the U.S. do not report to the three major credit reporting agencies. In fact, your medical bills may never appear on your credit report, as long as you pay them on time. If you become delinquent, hospitals and doctors' offices typically sell your account to a collection agency, which buy it for much less than the amount of the debt owed. If your medical debts go to a collection agency, they will show up as delinquent collections accounts on your credit report. This can drag your credit score down, even after you pay the debt.

What Hospitals Want

    Hospitals want you, or your insurance company, to pay outstanding medical bills on time. While hospitals do not typically extend credit, it may be possible to work out payment arrangements if you have a good payment history with the provider. According to John Ulzheimer, president of consumer education at SmartCredit.com, hospitals are very quick to turn over delinquent accounts to collection agencies if the payments are consistently late.

Complications

    If you have health insurance, chances are good that it should pay at least some of your medical bills. However, not all of your bills may be paid by your insurance, and even those that should be paid might not necessarily be paid on time. Accidents and errors do happen in medical billing, both on the part of hospitals and insurers. Even if an unpaid medical bill is the fault of your insurer, it is your credit score that the resulting delinquency puts at risk.

Solution

    Keep yourself informed of all activity regarding your medical bills, including those that are sent to your insurer for payment. Talk to your hospital or doctor's office billing department, and arrange to get copies of all your bills. Check that your mailing address is current and up-to-date with your hospital, your doctor's office and your insurer. If you feel that your records are incomplete regarding your bills, make phone calls and speak to the billing department until you resolve your questions. Above all, pay all your medical bills on time, so your debt is never reflected on your credit report or score.

Thursday, August 16, 2007

How to Request a Mortgage Rate Adjustment Fixed

How to Request a Mortgage Rate Adjustment Fixed

Many homeowners got in mortgage trouble when the price of homes dropped in 2008 and 2009. They may have bought a home using an adjustable rate mortgage, intending to refinance later to a more affordable loan. When housing prices dropped, it made this option practically impossible because it left many people owing more on their house than what they can sell it for. Plus, the adjustable interest rate may be adjusting higher, sometimes doubling or tripling the monthly payment. If this is the case with you, your lender may be willing to change your adjustable rate mortgage to a fixed rate that will be more affordable.

Instructions

    1

    Send your lender a letter explaining why you cannot make your mortgage payments. Also describe a plan for how you can make it work.

    2

    Give your lender a list of your income and expenses. To change your rate, you must prove to your lender that you do have more expenses than income. You may need to cut down on nonessentials or maybe take on another part-time job to show that you are taking steps to solve the problem that got you into trouble.

    3

    Ask the bank for a fixed rate mortgage (a rate that remains constant over time) and possibly an extension on the length of the loan. Banks would rather not foreclose, so they may be willing to work with you.

    4

    Offer a lump sum to pay off a second mortgage. You may try offering a lump-sum payment that is less than what you owe. If the lender accepts it, you will have gotten rid of your second mortgage.

Can You Join the Army When in Debt?

Can You Join the Army When in Debt?

Simply being in debt won't disqualify you from joining the U.S. Army. After all, most people have at least some debt. A bigger challenge could be a poor credit score, but even then a complete disqualification isn't likely.

Sensitive Positions

    A poor credit history, such as foreclosures, bankruptcies and multiple charge-offs could prevent you from holding certain jobs in the Army. The Army frowns on placing recruits with poor credit backgrounds in sensitive positions such as law enforcement and intelligence. That means you'll be disqualified, at least initially, for any Army job requiring a security clearance.

Security Risks

    The Army fears that cash-strapped soldiers with poor credit backgrounds could become security risks and subject to bribes. That's why positions requiring security clearances are reserved for recruits with satisfactory credit scores.

Still Many Opportunities

    The Army usually has openings in many occupational fields, and bad credit does not have to last forever. A recruit with poor credit theoretically could enter the Army in one field and later transfer to a sensitive area after improving his credit and gaining security clearance.

Other Armed Forces

    The Army isn't alone in its concern about credit issues. Each branch of the armed forces has its own policy, but the Army's policies are more forgiving. With the Army, you'll need a credit check only if you're applying for a job requiring a security clearance. Other branches, such as the Air Force, require credit checks for all recruits.

See a Recruiter

    Your local Army recruiter will be happy to discuss your interest in signing up. Feel free to tell the recruiter about any financial problems. She will give you the guidance you need to make the right decisions.

Which Is Better: Foreclosure or Bankruptcy?

Deciding between foreclosure and bankruptcy is a deeply personal decision that you should make only after consulting with a nonprofit credit counselor as well as real estate and bankruptcy attorneys. Every situation is potentially different, with foreclosure best for one person and bankruptcy better for another. Generally, foreclosure is the better option if the mortgage debt is your only financial issue and you are comfortable with losing your home to eliminate the debt. Bankruptcy may be better if you have a host of financial problems and you would like to sort them out while avoiding foreclosure through bankruptcy.

Impact on Credit

    Foreclosure and bankruptcy are both negative credit events, but foreclosure is better for your credit than bankruptcy. Foreclosure information remains on your credit report for seven years, while bankruptcy information remains for a minimum of 10 years. Bankruptcy information is reported when you file for bankruptcy and when the bankruptcy is completed. Chapter 13, one of most popular forms of bankruptcy, requires a payment plan of three to five years. That means a Chapter 13 bankruptcy could be listed on your credit for 15 years, starting with the date you file, then through up to five years of payments and 10 additional years following the conclusion of the payment plan and discharge.

The Automatic Stay

    For some people, bankruptcy is better than foreclosure because it possibly allows you to keep your home. Bankruptcy provides a provision called an "automatic stay" that delays or stops foreclosure. An automatic stay is a court order signed by a bankruptcy judge; it can prevent foreclosure if you file early enough in the foreclosure process. A scheduled foreclosure sale of your property typically will be postponed for a period of three or four months if you file for bankruptcy. Theoretically the delay gives you time to reorganize your finances with the bankruptcy court and avoid losing your home. The automatic stay also ends collection efforts on all other debts while your bankruptcy petition is evaluated.

Voluntary Foreclosure

    Some people choose voluntary foreclosure as a debt management strategy. They consider foreclosure better than bankruptcy because it allows them to default on just one account --- their mortgage --- instead of having to list all of their debts in a bankruptcy filing. Opting for foreclosure allows them to avoid the greater stigma of bankruptcy while allowing them to escape from a home they no longer want or can afford. A voluntary foreclosure takes place when a person purposely stops making mortgage payments and allows the house to be foreclosed.

Alternatives

    Nonprofit credit counselors such as those affiliated with Consumer Credit Counseling Service can offer alternatives to foreclosure and bankruptcy. Credit counselors specialize in foreclosure avoidance and can contact lenders directly to work out solutions for keeping your home. Options include forbearance, which allows your lender to tack missed payments onto the end of your mortgage, or loan modification, which allows for your loan to be completely rewritten to make it more affordable. If overall debt is a problem, counseling agencies can offer debt management plans as an alternative to bankruptcy. Debt management allows the counseling agency to manage your debts over about a five-year period. The agency charges a monthly management fee for negotiating with your creditors for better terms and smaller monthly payments, among other considerations.

What Debt Am I Responsible for After a Foreclosure?

What Debt Am I Responsible for After a Foreclosure?

Foreclosure is the method by which a mortgage lender calls due its security interest in your real estate by seizing ownership of the property. Mortgage lenders typically foreclose on a home when the borrower stops making mortgage payments. Although foreclosure provides the lender with the loan's collateral, allowing it to sell the property to recover unpaid mortgage debt, you may still owe debt to your lender and other creditors after the foreclosure takes place.

Mortgage Deficiency

    When you signed your initial loan paperwork, you agreed to repay the lender whatever portion of your home's purchase price you borrowed. If you lacked equity in your home or the property values in your area declined in the time since you obtained your mortgage, your lender may not be able to recoup your loan balance by selling your home.

    If your lender receives less for the property than you owed on the mortgage, the difference constitutes a loan deficiency that you are responsible for paying off unless you live in a non-recourse state. Non-recourse states, such as California, do not allow lenders to pursue mortgage deficiencies after a foreclosure sale.

Tax Debt

    If you owed a tax debt to the Internal Revenue Service (IRS), the IRS has the right to place a lien against all property that you own -- including your home -- until you pay off the tax debt in full. If your mortgage lender subsequently forecloses on the property, the IRS will continue to pursue you for the tax debt that you owe.

    In some cases, a foreclosure can actually cause a tax debt. Rather than pursuing a mortgage deficiency, your lender can opt to write off the debt as a business loss -- resulting in the IRS requiring you to claim the forgiven loan value as income on your taxes. Although the Mortgage Forgiveness Debt Relief Act protects homeowners from this requirement, it does not apply to all consumers, and its protection will no longer be available after 2012.

Second Mortgage Debt

    By taking out a second mortgage on your property, you owe a mortgage debt to two lenders rather than just one. Lien priority, however, states that the foreclosing creditor must pay off liens in the order they were attached to the property. Thus, if your primary mortgage lender forecloses, your second mortgage goes unpaid.

    Once this occurs, the second mortgage -- which was previously secured by your home -- becomes an unsecured debt. The lender then has the option to sue you for payment. Depending on your state laws, this could give your second mortgage lender the right to garnish your wages and bank accounts.

Judgment Debts

    After an unsecured creditor, such as a credit card company, sues you for an unpaid debt and wins a court judgment, it typically attaches a lien to property that you own. A foreclosure wipes away the judgment lien -- but not the debt itself. Because the judgment creditor has already won a lawsuit against you, it can immediately petition the court for a garnishment order after losing its security interest in your property.

How to Not Get Sued by Creditors

Missing one or two payments may not prompt a lawsuit by a creditor. But if you continue to miss payments, your creditor can file a suit against you to collect funds, late fees and additional interest. Rather than allow a creditor issue to spiral out of control, learn how to avoid being sued by your creditor.

Instructions

    1

    Stop ignoring creditors' attempts to communicate with you. Creditors often send letters or telephone your home before filing a lawsuit against you. Talk to your creditors and explain your situation to help prevent lawsuits. Knowing your situation may convince them to offer help.

    2

    Consider different debt consolidation options. Tap into your home's equity or borrow against a life insurance policy to acquire cash to pay off creditors and avoid a potential lawsuit.

    3

    Start paying the minimum to keep creditors satisfied. Even if you can't get rid of the debt entirely, at least make the minimum payment each month to keep creditors at bay and avoid a lawsuit. If you can't afford the minimum, talk to creditors to determine whether they can offer a reduction.

    4

    Modify your credit card terms and payments. Numerous creditors offer modification to help borrowers keep their accounts in good standing. Modifications can include altering payment dates, decreasing the minimum or lowering the rate on accounts to bring down payments. Some creditors offer the option to skip a payment to help borrowers undergoing hardship. Try to negotiate a settlement, in which the creditor agrees to accept less than the total amount you owe as payment in full. Creditors are not obligated to agree to a settlement, but some will do so to avoid the cost of a lawsuit.

Wednesday, August 15, 2007

How Do Credit Applications Hurt Your Credit Score?

A person's credit score is determined using a variety of information found on his lending history. This includes the length of the credit history, the timeliness of his payments, and the amount of debt he has outstanding. Credit reporting agencies use this information to determine the likelihood of a person paying back a loan: the more likely he is to repay debt, the higher his score. However, a check of a person's credit report by an outside party will often lower a person's score.

Hard vs. Soft Checks.

    A person's credit report is accessible to a number of outside parties with a valid interest in understanding her credit history. These include lenders, potential employers and landlords. When an outside party views a credit score, this is known as a credit check or inquiry. If the party viewing the report is a lender, this check is considered a "hard check"; checks by non-lenders, such as landlords, are considered "soft checks". Each hard check lowers a persons credit score slightly.

Credit Applications

    When a person applies for credit, he is generally required to fill out an application. The lender will use information contained on this application to check his credit report. For purposes of credit scoring, credit companies that do not receive an application and check a person's credit score without the person's permission -- such as those companies seeking to issue "pre-approved" credit cards -- do not count as lenders. Their checks do not count as hard checks and do not affect a person's credit score.

Explanation

    Although it may seem strange that the act of a lender checking a person's credit will lower her score, to credit reporting agencies, this check signals that the person may be seeking to take out a loan. A desire to take out a loan may signal that she is in financial trouble. For this reason, credit reporting agencies choose to downgrade a person's credit score to represent the increased probability that she will default on one or more loans.

Considerations

    Generally, credit checks only drop a person's score several points, when a credit score will range from about 300 to 850 points. In addition, the score drop is only temporary. Also, a series of credit checks in a short time from similar types of creditors -- for example, lenders who all issue home loans -- will signal to credit reporting agencies that the person is shopping for a single loan. These multiple checks are only counted as a single check, with the score dropped accordingly.

Should I Really Only Pay the Minimum on My First Credit Card?

Should I Really Only Pay the Minimum on My First Credit Card?

    Consider your credit card payments carefully.
    Consider your credit card payments carefully.

You Will Have More Cash Now

    Obviously, if you only pay the minimum payment due on your credit card, you will have more cash right now. This can be helpful if you have other urgent bills due, like medical expenses, utility bills or rent, and even payments to make on other credit cards with a higher interest rate.

You Will Ultimately Pay More

    Because you are paying interest on your credit cards, you will pay exponentially more in the long run if you only make the minimum payment. The minimum payment may not even cover the interest accrued that month, which means your balance will actually begin increasing, instead of decreasing, as you begin paying interest on your interest.

Bottom Line

    Making only the minimum payment on your credit card is expensive. Unless you have other urgent bills, such as food and shelter, that need to be paid, make more than the minimum payment on your credit card bill to pay it down more quickly and save yourself thousands of dollars.