August 2008 ~ Credit And Debt Management

Sunday, August 31, 2008

Debt Settlement Programs in Arkansas

7:40 AM 1 comment

Arkansas residents worried by their debt burden can seek help through the federal bankruptcy process or non-profit debt settlement services. Before signing up for any type of financial relief, it is important to understand that all types of debt settlement will negatively impact your credit standing for seven to 10 years.

You must get credit counseling before filing bankruptcy in Arkansas or signing up for a debt settlement plan. Non-profit agencies work with creditors to get interest rates reduced and over-the-limit and late fees waived. Then, you will pay one monthly payment to your credit counselor plus a small administrative fee. If you have some cash on hand, you can settle many of your unsecured debts with a one-time lump sum payment.

If you cannot financially handle a debt management or settlement plan, you can file for debt relief with the United States Bankruptcy Court for the Eastern and Western District of Arkansas. Consider your assets before filing a case; if you have lived in Arkansas for at least two years you can use state asset exemption laws to protect up to $2,500 in real estate equity, according to Bankruptcy Action. You can also protect up to $20,000 of retirement account contributions made in the year prior to your bankruptcy case filing as well as up to $1,000 in life insurance benefits.

Arkansas residents with at least six months living in the state and steady income can request partial debt repayment under Chapter 13 bankruptcy. As of 2011, this debt settlement plan cost $274. It usually takes three to five years to finish a Chapter 13 plan. Ineligible debts include child support, alimony, recent tax debts, court fines, bills charged right before bankruptcy and any lawsuits related to the commission of a crime.

Chapter 7 bankruptcy permanently purges many pre-existing debt obligations, but Arkansas residents generally must earn less than the state's annual median income level to qualify. As of 2011, a single Arkansas resident could earn up to $32,834 a year and still qualify for Chapter 7, while a four-member household could bring in up to $54,401 annually, according to the U.S. Trustee Program. People earning more money must get permission from an Arkansas bankruptcy judge to file Chapter 7 and prove their inability to partially repay creditors under Chapter 13 while handling household expenses.

Can I Settle My Credit Card Debt With a Creditor?

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In times of economic hardship, people sometimes turn to methods of getting out of debt that they would not normally even consider. For most people, the thought of bankruptcy is an unacceptable or only a last resort. Some people turn to debt settlement as one means of tackling some of their current debt, especially unsecured debts like those accrued through the use of credit cards.

It is possible to settle your debt with your credit card companies, but you should take into account the various legal considerations in doing so. It is possible for a creditor to win a judgment against you, making it possible to have your wages garnished. However, there are considerable legal expenses involved in this process and many credit card companies are simply not willing to incur the additional expense needed to take you to court. Chances are that your debt will be sent to a collection agency. The fact that a credit card company sends your debt to the collection agency indicates some willingness to settle. Collection agencies typically purchase a debt at pennies on the dollar and try to collect whatever money they can on that debt, even if that means settling the account for less than the original amount.

One way that people settle their debts with the credit card company is by hiring a debt settlement company or attorney to do it for them. The way that this usually works is that the client pays the settlement company or attorney a set fee plus the percentage of the amount of money that they save you on your debts. How they go about collecting these fees may vary. Some may require that you pay up front or retain your first several months worth of payments that would have gone to the credit card company had you been paying on the debt. Because you are paying someone else to settle for you, you may not actually save as much money in the long run using this method, but it does take some of the hassle and angst out of the process.

Whether you do it yourself or retain the services of someone else to settle the debt for you, the process of settling a debt is basically the same. The first step is to stop paying on the debt. Any payments made during the settlement period will start the process over and eliminate any negotiating leverage you may have had. The credit card company will usually try to collect the debt on its own first before sending your debt to collections. After several months have passed and you have been harassed by more than one collection agency, you will likely have better leverage to negotiate a settlement. You will need to contact the original lender to settle the debt.

Settling a credit card debt is not easy. It requires patience and a willingness to ignore collectors' phone calls. Having caller I.D. and some kind of call screening service can make your life simpler as you move through the collection and settlement process. Putting money aside as you move closer to negotiating with the credit card company will also be helpful. When you finally reach an agreement on an amount, the creditor will send you a settlement statement in the mail. There is usually a conditional period of time for the settlement, so you should ensure that you actually have the proper funds available when you finally settle on an amount.

Can a Bank Sell Your Debt to a Collection Agency Without Your Knowledge?

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If you default on a loan or credit card, your bank can sell the debt in order to recoup its losses. In many cases, the company that buys your debt is also a collection agency, which means that it can begin aggressive collection action against you.

If you fall behind on loan or credit card payments, your bank will contact you about your account. The first contacts will come in letters and phone calls, which will become more frequent as you fall further behind on your debt. If you don't bring your account current, your bank will "charge-off" your account. This means that the bank writes-off your debt as a loss and then turns the account over to a collection agency. The bank isn't under any obligation to tell you that it is selling your debt, though you can usually expect the sale to take place after about 6 months of delinquency and default.

Collection agencies come in two main types: Contingency and debt buyers. If your bank wants to continue to own the debt, it can assign the debt to a contingency collection agency. The contingency agency will attempt to collect the debt on behalf of the bank, and keep a percentage of what it does collect. Debt buyers, on the other hand, buy and own the debt, cutting your bank out of the picture. Debt buyers usually pay original creditors a small percentage of the debt's value, and then keep whatever their collectors manage to get from a debtor.

If the collection agency that buys your debt from the bank isn't successful in collecting from you, it may re-sell it to another debt buyer. In some cases old debts can be re-sold several times. Because no laws exist against re-selling a debt, you may face collection action for years, even decades, after you first defaulted on the debt. Debt buyers don't have to notify you about the re-selling of your debt.

If a collection agency contacts you, the federal Fair Debt Collection Practices Act (FDCPA) gives you the right to demand verification of the debt. You also have the right to tell a debt collector to stop contacting you, though this can cause some collectors to immediately file a lawsuit against you. Pay attention to your state's statute of limitations laws: Some debt buyers specialize in collecting debt that is no longer collectible in court. They do this by tricking you into "resetting" the statute of limitations by agreeing to pay all or part of the debt. Before working with a debt buyer, verify that the debt is yours and that it is still covered under the statute of limitations. If it isn't, send the buyer a "cease and desist" letter, and prepare for the possibility that the debt buyer may re-sell your debt to another collection agency.

Government Assistance for Credit Card Debt

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Government assistance for credit card debt is offered through bankruptcy. Bankruptcy severely damages credit scores, but it is the only program available from the government for directly eliminating credit card debt. Bailouts for credit cards are not available through the government as of 2011, and the government does not offer debt consolidation loans for credit card debt or other financial assistance such as tax credits or grants.

Bankruptcy remains on credit reports for a minimum of 10 years, and it significantly hurts credit for a while. People emerging from bankruptcy usually need two or three years to restore their credit ratings.They rehabilitate their credit by opening new credit accounts and making on-time payments while keeping balances low.

Chapter 7 Bankruptcy appeals to many people because it eliminates credit card debt in three or four months. Income guidelines, which vary from state to state, prevent many people from qualifying, however. People who qualify usually have low incomes or are suffering from long-term unemployment of more than six months. Federal bankruptcy courts offer Chapter 7 programs, which focus on selling certain assets to pay off credit card companies and others. However, many assets, such as houses, cars and household items, are exempt from the process, and some people emerge from Chapter 7 without losing any assets. At the end of the process, the debtor has no further responsibility for credit card debt listed in the bankruptcy.

Chapter 13 bankruptcy is another option, but it requires a repayment plan lasting three to five years. The bankruptcy trustee helps the debtor create a court-monitored spending budget. The budget allows for reasonable expenses and monthly payments on secured debts, such as mortgages and automobile loans. Money left over is contributed to a payment plan for credit card companies and other unsecured creditors. Credit card companies may receive full payment over three to five years, or they may receiver a percentage or nothing at all. It depends on the debtor's income and the budget arranged by the trustee.

The government also helps by making free credit counseling available through counselors certified by the U.S. Department of Housing and Urban Development (HUD). The counselors can recommend other legal and ethical options for resolving credit card debt, including debt management plans and debt settlement. Debt management plans allow counselors to manage a person's unsecured debt over a given period, often four years, with a goal of eliminating or greatly reducing the debt over that period. The agencies charge a monthly fee for the service. Counselors can also teach people how to settle delinquent credit card debt for considerably less than the amount they owe.

How do I Clear Up Debt in Ontario?

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When you are in debt, you might feel frustrated, sad, depressed and even angry. Getting into debt is easy these days, with the accessibility of credit cards, loans and other lines of credit. Getting out of debt is the hard part. Even if you are in over your head, there is no unsolvable debt problem. You can get the help you need and regain control of your finances. If you live in Ontario, Canada, and are struggling to get out debt and get on track financially, there is a process to help clear up your debt.

Instructions

Obtain a copy of your credit report. This is the essential first step to take. You might think you have a good idea of where you stand financially, but you can never truly be sure until you see your credit report. There are two major credit bureaus for Ontario residents: Equifax and TransUnion. Contact both for a separate copy of your credit report, as each might display different debts.

Cut up your credit cards. Although you are already in debt, it can still be hard to fight the temptation of overspending on credit cards. This is spending money you do not have, so the best idea is to cut the cards up and get rid of them. According to Liz Pulliam Weston, a personal finance columnist for MSN Money, the average American household has over $9,300 in credit card debt alone. It is fine to keep one credit card for making purchases online, for business and other purposes, but having multiple credit cards can be unnecessary and unwise.

Start contacting your creditors. The worst thing you can do is nothing. This shows creditors you have no interest or care regarding your debt and you are ignoring the problem. They will likely send your debt to a collection agency, damaging your credit as a result. You might not know exactly how to deal with your debt yet, but you can inform them you are in the process of dealing with your debt, and arrangements are being made.

Seek help. Credit counseling services and financial advisers are all over Ontario. Take a visit to your bank, and speak to a financial adviser regarding your debt, or call a credit counseling service that caters to Ontario residents. This helps relieve your stress and give you a professional in finance to talk to. They can look at your credit report and other financial documentation, do a proper assessment of your current situation and offer advice.

Apply for a debt consolidation loan. This is one of the more common methods of dealing with debt in Ontario. A debt consolidation loan pays off your outstanding debt, and you are left with only a single loan payment to make each month. This is easier and more convenient than trying to keep track of multiple bill payments each month. You usually get a lower interest rate with a debt consolidation loan as opposed to a credit card or line of credit. To apply for a standard debt consolidation loan, you need personal identification showing your name, address and a color picture as well as a recent pay stub from the last 30 days.

File for bankruptcy. Bankruptcy is a word no one wants to hear, but sometimes filing is the best way to get out of the hole. To decide whether bankruptcy is right for you, weigh the pros and cons first. The main advantage of claiming bankruptcy is it stops all collections actions by creditors. Bankruptcy is beneficial to those who owe a large amount of money to multiple creditors. It gives the chance to start anew and start rebuilding your credit. However, your credit report will have the mark of bankruptcy for up to 10 years. Any time a potential lender or even employer reviews your credit rating after you file for bankruptcy, they see this.

Sign up for budgeting or personal finance courses. Learn budgeting and money management skills that can help you in the future. Become more knowledgeable on how to plan your money. This is a proactive step to prevent future debt problems.

Free Credit-Counseling Programs Overview

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Consumers struggling with debt are often bombarded with offers for help with programs advertising free or low-cost credit counseling services. These programs may seem tempting, yet not all services offered by these counselors are free. Before you join, make sure you understand what you will get and what the potential costs will be.

Most programs that offer free or low-cost services include counseling, education services and budgeting help. According to the National Foundation for Credit Counseling (NFCC), this can be offered in person, online, through the mail or over the phone. This counseling may include credit management education, budgeting help, counseling about credit and debt, mortgage counseling and tips about buying a home. Sometimes it will also include education about bankruptcy.

The companies that advertise free services will make money by charging fees on services outside of credit counseling. For example, they may offer debt-consolidation plans, bankruptcy filing services or a for-fee debt-management program. If you choose to participate in any payment plan through your credit-counseling firm, inquire as to how the payment will be disbursed, and learn what percentage of the payment will be used to cover the agency's overhead. The NFCC indicates that some companies receive funding from contributions from creditors participating in debt-management plans, private funding and grants.

When you call an agency offering free credit-counseling services, you will be asked to gather financial documents and other information before your counseling session. At your counseling session, the counselor will look over your financial situation and offer helpful suggestions as to ways you can better manage your debt, often including a budget plan you can use to both pay down your debts and cover your day-to-day expenses. The Federal Trade Commission (FTC) recommends finding a company that offers in -erson counseling, rather than having a counseling session over the phone or online.

If you are in a financial position where you cannot see your way out, free credit counseling services can help. They provide budgeting help and the option for a workable payment solution. Counselors can also help you see where you might be misusing funds that could be going to pay down your debts. You need to be aware of the potential costs you may face as you enter the program, and you need to be able to say no to services you do not want or need or simply cannot afford.

Most credit-counseling companies will offer free information or a free initial consultation. The FTC warns consumers to avoid those companies that refuse to offer this free information without first requiring personal financial information, such as credit card or bank account numbers. They could be scammers looking to steal your identity. Also, avoid companies that try to enroll you in a debt-management program without taking the time to first review your financial situation or provide tips on budgeting strategies. Finally, avoid programs that ask you to enroll in a debt-management strategy before your creditors have agreed to the program.

Government Approved Debt Relief

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The federal government offers business owners and individual citizens the ability to regain financial footing through the bankruptcy process. But if you owe recent income tax debts, the only way to find debt relief is to negotiate a repayment plan directly with the taxation agency, warns the Internal Revenue Service. Also, federal bankruptcy judges will not discharge your government-issued student loans unless you are severely disabled or were allowed to attend classes without a high school equivalency diploma or academic placement test.

Business Chapter 7 bankruptcy requires the assistance of an attorney, warns the U.S. Securities and Exchange Commission. This type of bankruptcy permanently eliminates all business debts but also closes the company's operations. Bankruptcy officials sell any business assets and distribute any profits to creditors and stockholders. In some cases, creditors and stockholders do not recoup their financial losses.

Filing personal Chapter 7 bankruptcy does not require an attorney's aid, but getting legal assistance may prove helpful. Chapter 7 permanently eliminates many pre-existing personal debts for people earning less than their state's annual median income level, but in many cases the debtor's assets are sold to offset creditor losses. Also, Chapter 7 will not affect child support, alimony and court fines. Pre-bankruptcy credit counseling is also required. A Chapter 7 case damages a consumer's credit ratings for 10 years from the date of filing.

Chapter 11 combines business and personal obligations into a partial debt repayment plan. This type of bankruptcy requires the help of an attorney, whether the debtor is self-employed or owns a company. Many businesses can stay afloat after Chapter 11, as the filer can keep virtually all business and personal assets. Chapter 11 cases harm personal credit ratings for seven years from the date of filing.

Chapter 13 creates a partial debt repayment plan, but only for personal debts. It usually takes three to five years to complete Chapter 13, and during this time the debtor cannot get any new credit without a bankruptcy judge's consent. As of 2011, people with more than $360,475 in unsecured debts and more than $1,081,400 in collateral-secured debts could not file Chapter 13, according to the United States Bankruptcy Court. A Chapter 13 plan damages a consumer's credit rating for seven years from the date of case filing, even if a judge denies the request.

Can School Financial Aid Be Garnished?

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When you owe money on a debt, the creditor can get a judgment against you and eventually garnish your wages to collect the money owed. A garnishment only involves money that you earn. When it comes to student aid, you do not have to worry about this money being garnished.

One of the most common forms of financial aid is the student loan. The federal government provides student loans in the form of Stafford and Perkins loans. With these types of loans, you are not actually earning any money. You are simply borrowing the money from the lender and paying it back in the future. Since you are not earning the money, your creditors cannot take the money you are borrowing in the form of student loans.

Another type of student financial aid is the federal grant. For example, the Pell Grant is a common form of student aid. With a Pell Grant, you are awarded a lump sum of money to help pay for educational expenses. Federal benefits are considered exempt from wage garnishment. You did not earn this money from working, and creditors cannot take it in the form of a wage garnishment.

A private student loan is another form of student aid. With a private student loan, you borrow money from a private lender; the loan is based on your credit score and your ability to repay the amount borrowed. Creditors cannot garnish the amount of money that you get from the lender, because you are simply borrowing money, not earning it.

When it comes to garnishing money, creditors can only garnish wages that you earn. Of that money, a maximum of 25 percent of what you earn can be garnished, according to federal laws. States also have laws, and some only allow a smaller percentage than 25 percent to be garnished. Before a creditor can garnish your wages, it must file a lawsuit and get a civil judgment against you in court. Following this, the creditor can get a writ of execution to enforce the judgment with a wage garnishment.

Will My Husband's Short Sale Affect Me Getting a Loan?

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A short sale is the sale of a home for less than its market value. It is a popular strategy for a homeowner seeking to avoid the damage caused by a foreclosure. The damage a short sale causes to a spouse's credit depends on several factors, including when the property purchase occurred and the debtors named on the mortgage.

A short sale should not affect your personal credit rating if the mortgage in question was in your husband's name only. You shouldn't experience a problem in getting a personal loan as long as the loan does not require your husband to act as a cosigner. If he must cosign, this could make loan approval difficult, because the bank will examine his credit score and use it to determine your eligibility for the loan.

Your credit could suffer from a short sale if your name appears on the mortgage of the property in question along with your husband's or if you cosigned the original home loan application. The damage a short sale causes to your credit score varies based on how delinquent mortgage payments were prior to the sale of the property. According to Consumer Finance Report's website, a lender considers a mortgage 90 days past due as seriously delinquent and eligible for formal foreclosure proceedings. A significant delinquency like this could make it difficult to secure a new personal loan, while payments less delinquent may allow you to obtain the loan, albeit with a high interest rate. A lender typically reports a delinquency to a credit bureau when payment is more than 30 days past due.

Your husband may have to pay a deficiency judgment for any outstanding amount remaining on a mortgage after completing the short sale. According to Loan Safe's website, this could leave you and your husband owing the mortgage lender hundreds of thousands of dollars if both your names were on the mortgage. The lender may still report the short sale to major credit bureaus, and Loan Safe states it may lower you and your husband's credit score between 85 and 160 points. Even if you and your husband can afford to pay off the remaining balance on the loan, the damage to your credit could keep you from getting a loan.

States usually consider assets held prior to the marriage, including real property such as a home or business, as separate from marital assets. This means your credit should not suffer if your husband conducts a short sale on property he held prior to your marriage. Your ability to secure a new loan in your own name remains unaffected. You should continue to carry debts in your name only, because your husband's credit probably will be lower than yours after the short sale.

Consumer Credit Collection Laws

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If you have ever fallen behind on your credit card bills, you might have experienced abusive, unfair or deceptive practices when it comes to debt collection. Congress has found abundant evidence of this fact and has enacted many laws so that consumers will not experience abusive behavior from collection agencies, lawyers hired to collect on regular debt and companies who buy credit debt accounts and try to collect on them.

Congress has passed the Federal Debt Collections Protection Act of 2006 in an effort to protect consumers from the unlawful harassment during debt collection. Through Congressional findings, they found harsh collection practices lent to a large number of bankruptcies, marriage instability, job loss and the invasion of privacy. The Federal Debt Collections Protection Act has stopped the abusive collection practices from debt collectors, insures those debt collectors who refrain from such abusive behavior are not disadvantaged from their job and promotes the continuation of state action to protect consumers from collection abuse.

Passed by Congress in 2009 and officially turned into law on February 22, 2010, the Credit Card Accountability Responsibility and Disclosure Act was enacted to provide full written disclosure of consumer accounts on their billing statement. The credit collection companies must provide information of rate increases, finance charges and notices of cancellation stated in legible type on the first page of the billing statement.

Congress passed The Federal Credit Reporting Agency to provide consumers with accurate and fair credit reporting by banking systems concerning the credit worthiness, credit standing and reputation of the consumer, according to The Federal Trade Commission. Consumer reporting agencies must adopt reasonable procedures to insure fair commerce for credit, insurance and other consumer information.

Debt Plan Solutions

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Too much debt may stop you from doing the things you want to the most. Debt can make it difficult to start your own business, take your dream vacation or from retiring early. It is important to have a plan to deal with your debt, and to consider all solutions before choosing the right one for your needs.

A debt payment plan can help you get out of debt without negatively affecting your credit. List your debts in order from highest interest rate to lowest. Apply any extra money to first debt on your list, while continuing to make minimum payments. An effective budget is an important part of this plan. You can use your budget to find areas to cut spending so you have more money to put toward debt. It can also stop you from accumulating more debt.

Another option is to settle your debt with your creditors. This option only works if you are several months behind on your debt, and it will negatively affect your credit, which may make it difficult to qualify for a mortgage or business loan. Save up about 50 percent of what you owe on a loan, then contact your creditor and offer a lump sum payment to settle the debt. Do not send any money until you have received a letter stating that the payment will count as settlement in full. You will need to pay taxes on any amounts that are forgiven. There are companies that will do this for you, but you need to make sure they are in good standing with the Better Business Bureau and have been open for several years.

You can negotiate better terms on your debt while you are working to pay it off. Contact your creditors to see if they will reduce your interest rate or waive late fees. Another option is to move all of your debt to an interest-free credit card or to take out a consolidation loan to lock in a lower interest rate while you work on paying off your debt. A credit counseling agency will be willing to work with your creditors for you, but it will affect your credit report, and you need to choose a reliable agency.

When you are working on getting out of debt you need to commit to staying out of debt as well. This means stopping using your credit cards and saving money for bigger purchases such as home repairs or a new car. Acquiring debt while working to get out of debt does not make sense. Set aside money in an emergency fund to help you cover car repairs and medical bills so you do not have to rely on your credit cards.

Debt Negotiation Vs. Debt Consolidation

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If you are overwhelmed by the amount of debt you have, debt negotiation and debt consolidation both offer solutions to your problem. Both of these options require you to pay off the debt that you currently owe, but they work to reduce your monthly payments and to save you interest over time. These are long-term solutions to your problem and not a quick and easy fix. Which one is right for you depends on your debt load and your current income level.

Credit counseling agencies will work with your creditors to negotiate lower monthly payments and interest rates and to settle your debt. They will also work with you to set up a monthly budget and teach you to manage your money more effectively. Some of these agencies are not reputable and may stop operating while you are in the middle of the service. For this reason, you should carefully choose the agency and check with your Better Business Bureau. Working with this type of agency may negatively affect your credit, but if you are already behind on payments it will not make a big difference.

Some people choose to negotiate with their creditors instead of using an agency to do it for them. To do this you will need to call each creditor yourself and ask them to reduce interest rates or lower your monthly payment. If you have a legitimate reason such as a job loss many creditors are willing to work with you, though it may take a few phone calls and concessions on your part, such as freezing your account. If you are behind on your payments you can often negotiate a debt settlement where you pay a smaller amount to settle the loan and they forgive the rest. Any amount forgiven is taxable at the end of the year, and you should only work on negotiating the debt once you have the cash to settle it.

Debt consolidation is when you take out a larger loan to pay off a group of smaller loans. This often locks in a lower interest rate than what you would have on your credit cards. The monthly payments may be lowered because the length of the loan is often stretched over a longer period of time. This can make your monthly debt payments more manageable, but you may have a difficult time qualifying if you have already missed payments. Do not use a second mortgage or home equity loan for debt consolidation because your home will be at risk if you miss any payments.

As you consider the three options take a careful look at your debt load and income. Set up a budget and a debt payment plan to see if you can work out a solution on your own. Then make the decision based on your current situation. If you are already behind on payments, debt negotiation may be the better option. If you want to change your situation before it gets out of control debt consolidation can help you pay off your debt more quickly and save money on interest.

How to Establish Credit After a Foreclosure

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If you have just been through a foreclosure, the future can seem pretty bleak, at least when it comes to getting another house and repairing your credit. The good news is that with some diligence and a little hard work, you can completely recover from a foreclosure. Typically, you will need to wait three years before applying for a new mortgage, but this will give you time to fix your credit.

Instructions

Settle your debt with the bank. Often, after a foreclosure, the bank will require that you pay back at least some of what you owed. This is the debt you need to focus on first. If possible, get the bank to offer you a partial settlement deal or try to work out a payment plan that you can stick to.

Pay down your credit cards. You will need to keep your balances as low as possible. This will help your credit score go up since you will have plenty of available credit that you are not using. This is probably the best way to establish credit after a foreclosure.

Make all your monthly payments on time. This is a very vital step that will make a big difference not only in your credit score, but also with how future lenders will view you. Many times, underwriters will value a good payment history and weigh this against your past foreclosure.

Open a secured credit card. If you have defaulted on your credit card payments and the accounts have been closed, you will need to get one good payment history on your report to establish credit after a foreclosure. The easiest way to do this is to open a secured card, keep the balance low and make your payments on time.

Monitor your credit score. It is a good idea to keep an eye on your credit score when you are trying to establish credit after a foreclosure. Seeing the numbers go back up will help keep you motivated and provide you with incentive to keep trying.

Can They Garnish My Husband's Wages?

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Whether a person can have his wages garnished depends on a number of factors. The person must be declared by a civil judge to be legally in debt to another party. Second, the debtor must not be eligible for exemptions that would protect him from income garnishment. Third, the debtor's income stream cannot be protected from garnishment under the law. A husband's wages cannot be garnished for his wife's debts, because they are not his debts.

To begin collection actions such as garnishment, a creditor must secure a legal judgment that specifies how much he is owed by the debtor and precisely who the debtor is. If there is some legal confusion about who is responsible for the debt, the judge clarifies this in his ruling. Only the parties named liable for the debt in a lawsuit can be subject to garnishment.

Even if a person is found liable for a debt, this does not necessarily mean a garnishment of his wages is legal. Some people have too little income to have their wages garnished, based on a means test a state applies to the garnishment order. The chances that a person can have his wages garnished decreases if he has dependents, such as a spouse or child, to support.

Several types of income are not eligible for garnishment by creditors not associated with a government agency. For example, nearly all federal benefits cannot be garnished, except by a federal agency. If a person's only source of income is federal benefits or another kind of protected income stream, obtaining a garnishment order on the debtor may be difficult. In such a case, a creditor cannot try to garnish a spouse's wages instead.

A spouse cannot be held liable for his partner's debts unless it can be shown that he shares responsibility for these debts. This means that all collection actions, including garnishment, can only be aimed at the debtor and not his spouse. However, although a spouse's wages cannot be garnished, the wages may be frozen and seized if they are deposited in an account that is controlled jointly by both partners.

What If a Collection Agency Can't Prove What You Owe?

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One of the strategies that many people use when they are faced with debt collection is asking a collection agency to validate the debt. This requires the collection agency to provide proof that the individual actually owed the money to begin with. If the debt collector cannot prove this debt, you may not have to pay it.

As a debtor, you have the legal right to ask for debt validation when a collection agency contacts you. When the collection agency contacts you, you have the right to ask for documentation that shows you actually accumulated the debt. For example, if the disputed item is a credit card account, the collection agency would have to send a copy of your credit card statement or a similar document. During this process, the collection agency cannot continue trying to collect from you.

One of the issues with having an account in collections is that it can hurt your credit score. The account will show up in your credit report as a negative item. If a debt collection company contacts you and you ask for validation, the company cannot put a negative item on your credit report if the debt is not validated. This helps protect your credit from items that are not legitimate debts that you owe.

In some cases, when the collection agency cannot prove what you owe, it will during the debt back over to the original creditor. At that time, the credit card company could provide proof of the debt and ask you to pay the bill.

If the collection agency and the original creditor cannot prove that the debt exists, you are not legally obligated to pay it. The creditor might file a lawsuit against you, but unless the creditor can prove that the debt exists, you will not have to pay it. At that point, you can write a letter to the collection agency or the creditor to cease and desist communication in regards to trying to collect the debt.

How to Win a Summons for a Credit Card if You Are Unemployed

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If you've fallen behind on your credit card payments for several months or longer, there's a chance you might get sued by your creditors. If you receive a summons about the credit card debt, this means the creditor has sued you and is trying to win a court's judgment so it can collect its money. A summons is merely the notice that the creditor has sued you and that you are expected to be in court. You cannot "win" a summons, but you can fight the case. Whether you are unemployed is irrelevant to you getting sued, as a lawsuit can and will proceed regardless of whether you have a job.

Instructions

Read the summons carefully. The summons is a court notice telling you that someone has sued you and that the court has scheduled a hearing for a specific date. It also may state a date by which you must file an answer to the lawsuit. An answer is your written response to the lawsuit, and it must comply with state requirements.

Get started immediately. Once your credit card company has filed suit against you, you only have a limited amount of time to respond. If you fail to respond, or fail to show up in court, the creditor can win its case against you without further action. After that, it can collect the money from you by taking it directly out of your bank account, paycheck or take other actions against which you have few defenses.

Research the laws in your state. All lawsuits are governed by your state's laws of civil procedure. These laws require both your creditors and you to comply with very specific steps. Go to your local library or local county courthouse and ask for information about civil lawsuits and civil procedure.

Gather evidence. If you want to fight the lawsuit, you'll need evidence that backs up your claims. Get all relevant records you might have, such as the original credit card agreements, payment histories and any communications you've had with your credit card company.

Contact the court clerk's office. The court clerk's office is responsible for receiving all court documents related to your case. If you want to file a response to your lawsuit, you have to do so at the clerk's office. Ask the clerk if there are any self-help packets or information available.

Attend the hearing. Even if you don't have anything prepared, you can still attend the court hearing. The plaintiff -- the company filing the lawsuit -- has to appear at the hearing and prove its case or the court will dismiss it. However, if you fail to appear and the plaintiff does, the court will grant a default judgment and declare the plaintiff the winner automatically.

What Happens if You're Sued for a Debt and Don't Have Money To Pay?

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Being sued for a debt and not having the money to pay can trigger other financial headaches. Creditors typically sue if you don't communicate with them or arrange to pay a debt after 180 days. Some creditors simply write off the debt, send the account to collections and never pursue a lawsuit. But creditors vary, and some go to great lengths to recover debts.

Some debtors ignore a summons to appear in court to dispute an unpaid debt. Disregarding this notification and not appearing on your court date results in the creditor winning by default, and a judgment will likely go on your credit file. Judgments indicate that you haven't paid a creditor and you owe money. You cannot escape judgments, and once reported, this information remains on your personal credit report for seven years, even if you pay the debt.

Creditors don't often stop with judgments. While a judgment indicates you owe money, some debtors choose not to pay, and then wait for the judgment to fall off their report. But a relentless creditor may ask the court to take other actions, such as granting permission to freeze funds in a debtor's bank account. Creditors often have assess to bank account numbers because debtors typically use personal checks when making a payment. With a court ordered lien, creditors can contact a bank and seize funds in the account.

Not paying a debt may also trigger wage garnishment. This involves your creditors going directly to your employer and taking money from your paycheck. With a court-ordered garnishment, employers can't ignore a creditor's request to take your earnings. You can lose 25 percent of your pay (50 percent if you owe alimony, child support or taxes) from each check.

As a debtor you can avoid bank account seizures and garnishments by discussing your economic hardship with your creditors and agreeing to make small payments until you can eliminate the debt, or until your situation improves. Creditors and lenders are often eager to work with financially strapped borrowers. Depending on the severity of your economic hardship, you may qualify for deferments, forbearance, a lower interest rate or reduced payments.

How do I Build & Repair My Credit Score?

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Building, maintaining and occasionally cleaning up a credit report is important for financial security. The best way to begin this process is to access a recent copy of your credit report and review your borrowing behavior. When you apply for loans or housing, lenders and landlords will scrutinize this report. It's best to know what is on it. If you have problems on your report, you must first prioritize them, and then take steps to fix them and ensure they do not occur again.

Instructions

Pull your credit report from Annualcreditreport.com. This is the government's free credit report website. You should also pay for a FICO score--a three-digit number between 300 and 850. This score represents your overall credit standing. Scores over 700 are excellent, and scores below 600 are poor.

Look for the negative marks on your report. These include any public records (bankruptcies, charge-offs and judgments), past due payments (over 30 days overdue) and over-limit credit cards. It can also include tax liens from either the state or federal government.

Triage these problems. The most pressing concern will be tax liens, if you have any. The government can take more invasive collection measures than private lenders, including wage garnishments and bank account levies. Prioritize the problems before attacking them.

Work up a new budget. The key to changing your credit is changing your borrowing behavior. Cut out most of your non-essential expenses. Review your bank statements to review your past expenses. Work up a new budget based on credit repayment.

Repay the poorest debt first. You can consider debt settlement (whereby you settle for a lesser amount than what is due), but this will significantly reduce your credit score further. Use the "snowballing" strategy. This requires minimum payments on all accounts you are not attacking, and huge payments against the account on which you are focused.

Repeat the "snowballing" strategy when the first account is repaid. This will free up even more income to use against the credit debt. Continue this process with each delinquent and poor credit account until you have repaid all past due debt.

Focus on your revolving accounts once you have cleaned up your delinquent debt. In order to rebuild your credit, you must manage your revolving accounts carefully. Keep your balances on these accounts very low--well below 50 percent utilized. For example, if you have a credit card with a $5,000 limit, you should never carry a balance over $2,500.

Ask your creditors to raise your credit limits. Increasing the cushion between your balance and the credit limit will improve your FICO score. Also ask for lower interest rates. This will not affect your credit, but it will save you money.

How to Reconsolidate a Spousal Consolidation Loan

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Debt consolidation loans can be financially beneficial. They can reduce monthly payments and monthly interest rates and they can help you get out of debt faster and more efficiently. If your spouse currently has a consolidation loan that is burdensome, you can help re-consolidate that loan--especially if you add your income and credit to the application. Often having two borrowers on an application will improve scores and reduce indebtedness.

Instructions

Access recent copies of your credit scores. You can get free reports at AnnualCreditReport.com. You should also pay for your FICO score (a three-digit number between 300 and 850), which represents your overall creditworthiness. Scores above 720 are outstanding and scores below 600 are poor.

Review the existing consolidation loan and determine its faults. These could be a high or adjustable interest rate, a term that is too short, a high payment or no flexibility. You must know why you are re-consolidating your loan so you can steer clear of these problems.

Look at lenders. Use your credit scores as a guide. If you have excellent scores, look only at banks and credit unions. If you have weak scores, you'll need to look at finance companies, too. Research all prospective lenders at the Better Business Bureau to make sure they have a favorable, honest reputation.

Fill out applications for two or three loan products. Make sure you are both on the application as co-borrowers. Present all documents to the loan officers. This includes your income paperwork (W2s, pay stubs), your existing consolidation loan paperwork and a loan statement for the existing loan. Loan officers need to verify income and review the current loan. This will speed up the pre-approval process. Alert the loan officer if you want to consolidate other bills into the new consolidation loan.

Compare all loan offers after they've been pre-approved by underwriting. Again review your financial goals and pitfalls to avoid. Make sure the loan you choose best meets your short- and long-term financial needs.

Credit Repair & Debt Help Experts

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Carrying high balances on credit cards hurts your consumer credit scores and costs you in high interest fees. If you fall behind on credit card payments, you have a number of options. Public and private debt management resources are available. When determining which option is right for you, look at your complete credit history and make a determination accordingly.

Suze Orman warns debtors to pay above the minimum payment every month. It would take a debtor over 30 years to pay off a $5000 balance billed at an 18 percent interest rate paying only the minimum each month.

Orman also stresses the importance of paying off higher interest credit cards first, and then the rest in descending order. Paying off higher interest credit cards first frees up more money and provides the greatest savings in interest fees.

The Federal Trade Commission advises debtors to develop a realistic budget and then stick to it. Tracking your purchase patterns is a helpful way to eliminate extraneous spending. If, after developing a budget, you still cannot make ends meet, contact your creditors and request a modified payment plan that reduces your minimum payment to a more manageable level. Debt relief programs can assist you in solving your financial problems. Common options include debt management plans and debt settlement programs. Debt management plans allow you to make deposits, which are then forwarded to your creditors. Debt settlement plans offer a way to settle debts for a lesser amount.

The rate at which you use credit cards, known as the card utilization rate, significantly impacts your consumer credit scores. Kiplinger, a money magazine, warns against maxing out your cards. Keep card balances within 30 percent of your credit limit for the greatest boost to your consumer credit scores. Credit utilization makes up 30 percent of your consumer credit score.

When establishing new credit, the MyFico website says to do your rate shopping for a given loan within a focused period of time. Inquiries for many new credit lines hurt your score, whereas a search for a single loan does not. As you open new accounts, pay them off on time and check your annual credit report every year for incorrect or incomplete information. Request one free annual free credit report through the Annual Credit Report website. Dispute incorrect credit information through the major credit bureaus.

The Best Way to Settle Debt

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Debts create a lot of stress for the people dealing with them. Long-term debt can result in a massive reduction in your credit score, the possible loss of your home or car, and damage to your overall finances that can last for years. The constant pressure provided by debt collectors only serves to make the stress worse. Settling debts can be very difficult and time consuming, but the end result is worthwhile and can improve your overall quality of life.

Instructions

Communicate with your creditors to explain your financial situation and see what options they have for you. Some creditors will agree to greatly decrease your overall debt if you can make a lump-sum payment, and others have hardship programs that can freeze your interest charges and overall amount due for a set period of time while you get back on your feet.

Save up enough funds to cover at least 35 to 40 percent of the debt owed to a particular creditor. Call the creditor and offer to pay that percentage in a lump sum immediately on the condition that the remainder of your debt is forgiven. Many creditors will accept the offer or will offer a counter to it.

Consult a credit counseling firm. They will give you a consultation and assist you in figuring out your income compared to your debts and expenses. They can also negotiate with your creditors to lower your interest rates and fees and consolidate your debts into a single monthly payment.

Discuss your case with a debt settlement firm. They operate by instructing you to stop all payments to creditors, and then they try to negotiate settlements for you as you are saving up money to make the payment that they negotiate. This will void any credit counseling agreements, so don't go this route unless the credit counseling is not working for you.

Ask family members for loans that can enable you to pay off your debts. Then, you can pay them back at lower interest rates without the damage to your credit scores. Only do this if you have a realistic plan for paying them back, though.

Debt Default Consequences

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Proper management of debt is crucial if you want to establish a good credit record and qualify for a house or auto loan. It's common for people to acquire debt because of the high cost of certain items. But when you default or stop paying creditors and lenders, this creates a complicated situation and triggers credit damage.

Debt affects credit scores in two major ways. The debt acquired from credit cards and loans lowers your FICO credit score because balances make up 30 percent of scores. What's more, when you skip or miss payments to your creditors and lenders, this information becomes a fixture on your credit report and can ruin your credit history. Defaulting stays on your record for seven years, and some creditors will not offer financing because of your bad payment record and history of default.

Not only will you deal with late payment updates on your report, but if your lender or creditor sues, you can face a credit judgment along with the late payments. And if the creditor does not file a lawsuit, the company can report your name and account information to a collections department and list a collections account on your report. Collections and judgments remain on your credit history for seven years, and getting any type of future financing could call for satisfying these balances. Even if you pay the balance, the creditor or lender may attach a higher interest rate to your account.

Negative information on your credit report is only one aspect of defaulting on debt. The financial consequences of default are often burdensome. Lenders and creditors raise your interest rate because of your poor payment record, which triggers a higher monthly payment. Creditors and lenders charge late fees, and interest can continually incur until you make a payment on the account.

Some creditors and lenders write off or charge off unpaid accounts after several months and then slow down collection attempts or use a collection agency. An encounter with an obstinate creditor can lead to an ongoing debt collection battle. After acquiring a judgment, the creditor can go after your bank accounts or wages (with the court's permission) to collect on a delinquent balance.

Taking on minimum debt and knowing what you can afford helps avoid default. Saving for purchases rather than pulling out credit cards helps keep debt low, and if you must use a credit card, resolve to pay the balance within a few days or weeks to avert high balances and lower the risk of default. Plus, talk to your creditors or lenders if you experience payment problems. Communication can trigger an adjustment in your due date or a temporary payment reduction or suspension.

Is a Debt Consolidation Loan Possible Without Home Equity?

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When a consumer's personal debt starts to become too much for him to handle, he may consider debt consolidation. One debt consolidation option is a home equity loan or line of credit. Some consumers may not have enough equity in their home to do a home equity consolidation, or they may not feel comfortable putting their home up as consolidation collateral, according to the Federal Trade Commission website. There are options other than home equity to consolidate debts

If you need to consolidate your debt, contact a loan officer at your local lender and discuss getting a personal loan. A secured personal loan is one that you get using personal assets known as collateral. Your paid-off car, jewelry or other items of value can act as collateral. If your credit is good enough, you may qualify for an unsecured loan.

In some cases, people looking to consolidate their debt have already reached a point where their credit may not be good enough to qualify them for a personal loan. If that is the case, perhaps you have a life insurance policy that you have been paying on for years that now has cash value. You can borrow against it to consolidate your debt, according to financial expert Dana Dratch, writing on the Bankrate website. Your health needs to be good for you to qualify for a loan against your life insurance.

You may get offers to open a new credit account and transfer your existing balances at a lower interest rate. Be wary of a low introductory or balance transfer interest rate. These usually last for a short introductory period, then go up. The maximum possible interest rate after the introductory period must be outlined in the offer literature you receive. If that interest rate is lower than the interest rates you are paying now, then consider making the transfer.

Just because you do not have equity in your home does not mean you cannot use it as a way to consolidate your debt. If you can refinance your current home loan at a lower interest rate and with enough extra to pay off your debt, then it is something you should consider.

Income Statement Preparation

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Preparing a corporate statement of income is similar to calculating your own disposable income, that is, money left over after you pay all your bills. A company's income statement, however, includes some specific items that you might not see on an individual's statement of revenues and expenses. Generally accepted accounting principles provide guidance on profitability report preparation.

An income statement is a document in which a company tells the public about how it performed over a specified period of time, say a year or quarter. The report is also known as a statement of profit and loss (P&L) or statement of income. It lists a firm's revenues, expenses and net income or loss.

A P&L is an important tool investors and the public rely on to gauge a company's profitability. Positive operating results translate into improved confidence in a company's solvency. Business partners, such as vendors, customers and lenders, are more likely to engage in long-term transactions if they are confident that a company will stay in business and thrive in the future.

Revenues are earnings from sales, commissions and interest income from loans to business partners. To calculate total revenues, list all earnings in one section and add them up. If you work for or own a manufacturing company, deduct customer discounts and rebates from sales to calculate net sales.

Expenses are charges that a company incurs through its operating activities. Examples include costs of materials as well as general and administrative expenses, such as rent, office supplies, utilities and salaries. Other non-cash, periodic charges include depreciation, which allocates an asset's cost over several years. Add all expenses to calculate total charges.

Subtract total expenses from total revenues. A positive result means a company generates income at the end of the period. A negative result indicates a net loss.

A company's controller asks a junior accountant to prepare the corporate income statement for the year. Sales, commissions earned and interest income for the year amount to $19 million, $950,000 and $50,000, respectively. The cost of goods sold amounts to $10 million. General and administrative expenses equal $5 million. The company's tax rate is 40 percent. The junior accountant notes that total revenues equal $20 million -- $19 million plus $950,000 plus $50,000 -- and total expenses amount to $15 million -- $10 million plus $5 million. As a result, corporate income before taxes equals $5 million -- $20 million minus $15 million. Tax liabilities for the year amount to $2 million -- $5 million times 40 percent -- thus generating $3 million -- $5 million minus $2 million -- in net income for the year.

How to Add Someone to Your Credit Card to Improve Their Credit Score

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Adding a name to your credit card results in the person becoming an authorized user on the account. Being an authorized user can help improve this person's credit score if you have good credit and manage the account well. The process is quick and simple. However, before adding a name to your credit card, consult your card company first.

Instructions

Call your card company to discuss the details. Some credit card companies do not report authorized users to the three credit reporting agencies. Before adding a name to your account, call your card company's customer service number to see if the company reports authorized users.

Provide your credit card company with the person's name, address and Social Security number. Your credit card company will need the individual's personal information to update his credit report with the new account information.

Maintain a good credit record. Your actions have an impact on the authorized user's credit score. This account appears on both credit reports. Pay your bills on time and do not miss a payment. Skipping a payment or maxing out the credit card can lower the authorized user's credit score. Timely payments and a low balance helps increase his score.

Is it Financially Sound to Remortgage to Pay Off Debts?

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Remortgaging can be a good way to consolidate high interest debt and make your monthly payments more manageable. There are several things you should consider to determine whether it's financially sound for you to remortgage to pay off debts.

Remortgaging can save you money in the long term if your other debts are carrying excessive fees or high interest rates.

Remortgaging can give your credit score a boost by reducing the number of debts you have outstanding.

Remortgaging simplifies your monthly payments so you have fewer bills to worry about each month.

There are fees associated with remortgaging which could make it costly if you do not plan to stay in your home over the long term.

Remortgaging will not solve your debt problem unless you are committed to not incurring any new debt in the future. You don't want to end up with a higher mortgage plus a new mountain of consumer debt.

Do I Settle With a Credit Card Company or Let It Go to Collections?

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If you accumulate a large amount of debt on your credit cards, the minimum payments can be hard to keep up with. You may be forced to choose between settling your debt and allowing the account to go into collection. Both of these options are unattractive, but one may be better than the other depending on your situation.

One of the options that you have when you get behind on a debt is to settle it. A debt settlement involves paying the creditor less than what you owe on the account. For this process, you typically have to be able to offer a lump sum of money that you can pay all at once. The creditor then takes less than the balance on the account and closes it out. Negotiate directly with the creditor to accomplish this.

If you refuse to make any payments or settle your debt with a credit card company, it will be turned over for collection. The credit card company will most likely send your account to their internal collection department first. If that does not work, they will then turn your account over to an outside collection agency. The outside collection agency will attempt to call you and send you letters until you pay the debt that you owe.

While the initial part of the collection process may not be very painful, eventually it could lead to negative consequences for you. If the collection agency is unable to contact you or come to an agreement, they can file a lawsuit against you. At that point, they can take the case to court and get a judgment against you. If a judgment is issued against you, the court can garnish your wages or levy your bank accounts to repay the debt.

If you have the ability to settle your debts now, it would give you control over the process. With debt settlement, you can choose exactly when you pay, and you can get a discount on the amount that you owe. If you allow your account to go into collections and ultimately to court, you will have no control over how your debt is paid. It could put you into a serious financial hardship when your wages are garnished. If you do not have enough money to settle your debts, you may work out a payment plan with the collection agency instead.

Secrets to Improving Credit And Credit Repair Information

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Having a high credit score has a number of advantages. In addition to qualifying you for lower interest rates on loans, high credit scores provide evidence of your financial responsibility to other parties, such as employers or landlords. Having a low score can be harmful, as it can lead to higher interest rates and potential problems finding a job or apartment. Fortunately, there are a number of different ways that you can hike your credit scores.

The best credit repair strategy is to pay off as much debt as possible. Delinquent debts, as well as a large number of outstanding debts, will lead a credit reporting bureau to downgrade your credit rating. Keeping a balance of below 30 percent of the credit limit on any single credit card will help you keep your score high.

When you are not using a credit card, you may be tempted to close the line of credit. However, unless you are paying an annual fee to use the card, this is generally not a good idea because your score is based in part on the ratio of your outstanding debt to your outstanding credit. If you eliminate some of your credit, this ratio will climb, leading to a lower score.

According to the Fair Isaac Corporation, which developed many of the methods that credit reporting bureaus use to calculate scores, opening too many accounts too fast can result in a decline in your score. This is because your score is based in part on the average age of your accounts. If you open a lot of new accounts quickly, the average age will fall, as will your score.

One of the best ways for you to maintain a strong credit score is to regularly check your own credit report to make sure that it does not contain any errors. Making sure that all the debts that you have paid off are indeed reported paid off will prevent you from seeing your score dinged by any charges that are not supposed to be on the report. If you notice an error, you should contact the credit reporting bureau.

Can I Find Out How Much I Owe a Credit Card That Has Gone Into Collections?

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Collection agencies are required to disclose the amount owed on a credit card account when asked. Another way to determine the amount owed on a credit card that has gone to collections is by ordering a copy of your credit report. If a creditor has not reported the debt to the credit bureaus, you'll have to refer to your own records or contact the lender for more information regarding the balance of your debt.

Order credit reports from each of the three major credit bureaus (Transunion, Equifax and Experian) using their websites or their customer service numbers. You are entitled to one free credit report every year from each of the bureaus, but you can also choose to pay a fee at any time to obtain a copy. The vast majority of credit card companies and collection agencies will report your debts to the credit bureaus on a monthly basis. You may compare the balances stated on your credit report with your own records to ensure that there are no discrepancies.

Contact the customer service department of the credit card company that owned the account that was charged to collection. Ask the company how much was owed on the account, and cross-reference with your own records (if you have them) and the entry on your credit report. Under the Fair Debt Collection Practices Act, your creditors are obligated to disclose how much you owe and to produce proof that you owe the debts at your request.

If the amount that the credit card company and the collection agency claim that you owe differ from your records, you may be able to dispute the debt successfully. Your records may not reflect the sale of the account to collections. In some cases, credit card companies will add fees to your balance for the account being charged off. If a credit card company made an agreement with you to reduce your balance in return for a payment, and if you can produce proof of that arrangement, you may be able to get the balance of your current debt lowered. Contact the credit bureaus using their online disputation forms and send copies of your records when requested to attempt to get the debt amounts corrected.

Debt Payment Options

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A word that seems to correspond with the current recession is "weight." There is the weight of worrying about losing a job, how to pay bills, and how to plan for an uncertain future. Americans spend around 14.3 percent of their income attempting to pay off debts, according to Time Magazine. A significant percentage of those payments go to interest, rather than whittling away at actual debt. There are ways, though, for Americans to take charge of paying off those debts.

The idea of using savings to pay debt is a scary feeling. What if the car breaks down or you have to make an emergency trip? Think about it, though. When the interest on your debt is at 12 percent, your savings and investments would have to be earning an 18 percent return before federal and state taxes just to break even with what you're paying on your debt. Paying a higher interest rate than 12 percent on debt? That makes the use of savings and investments an even better idea to pay it down or off.

Somehow, break the habit of paying the minimum to your creditors each month. Paying the minimum is exactly what they want you to do. The longer you take to repay the principal, the more interest they earn and the less cash you have. If you don't already do so, shop in discount stores to help put a few extra dollars away each month. Have a garage sale to get rid of old junk that will put cash in your pocket. Be creative in finding ways to come up with extra funds toward your monthly payment.

The principle of the snowball plan is to focus on one debt at a time. You'll continue to make the minimum payments on all other debt. Financial adviser Dave Ramsey instructs his clients to accumulate $1,000 cash as an emergency fund before beginning the plan. The snowball plan instructs debtors to list their debts in order, with the smallest payoff amount listed first. You're not to be concerned with interest rates or terms unless two of your debts have a similar payoff amount. In that case, list the debt with the higher interest rate first.

Remember, you'll continue to pay the minimum payment toward every debt while you're concentrating on the debt at the top of your list. Focus on that debt, adding extra to your payments when you're able. As soon as you've paid that debt off, you'll focus on the next debt on the list. The next debt will have an advantage. In addition to your regular payment to them, you'll add in the amount of money you customarily paid toward the first debt, paying the new debt off more rapidly. Once that debt has been satisfied, you'll look at the next debt on your list and begin the process over. Only this time, you'll have funds from the two previous debts to pay toward the third. As the name indicates, the snowball plan builds momentum as it progresses.

Another option of paying off debt is to borrow from your retirement account. If you participate in a 401(K) retirement plan at work there is a chance that you can borrow up to 50 percent of the account's value, or $50,000, whichever amount is smaller. The interest rate is usually a point or two above prime, making it cheaper than interest rates found on standard credit cards.When you do pay back the loan to your 401(K), you're actually paying yourself, as the interest as it goes right back into your account.

As hesitant as most of us are to choose this option, borrowing money from friends and family is another way to pay off debt to a high-interest creditor. Remember, though, that you must repay whomever was kind enough to loan you money. There is nothing like an unpaid debt to ruin a relationship.

Some life insurance policies have a cash value. If that describes your life insurance policy, consider borrowing against it to repay your debt. One important caveat: if you don't repay the insurance policy, it may be worthless in the event of your untimely death, leaving your loved ones with another financial burden.

Be honest with your creditors if you're having trouble making regular payments. Tell them that if you're unable to renegotiate the terms of your loan you may have no other course than to file for bankruptcy. Be polite as you ask for a new and lower repayment plan and a lower interest rate. A creditor who knows that you may file for bankruptcy is likely to want to protect against a total loss.

If all else fails, consider speaking with a bankruptcy attorney. She can tell you what your options are and give you a realistic picture of how bankruptcy might impact your financial future.

The Statute of Limitations in Arizona for Collections

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The statute of limitations is a legal concept that precludes a plaintiff from filing a lawsuit after a specified period of time has elapsed from the date on which his cause of action first accrued. Arizona, like other states, has established specific limitations periods for bringing civil actions in court for various legal causes of action, e.g., negligence, fraud or breach of contract.

Arizona has established two separate limitations periods for actions to recover debt owed. 12-548 of the Arizona Revised Statutes provides a six-year limitations period for actions where indebtedness is evidenced under the terms of a written contract. Arizona, like other jurisdictions, has a separate and distinct statutory limitations period for revolving credit card agreements, referred to in the statute as "open accounts." Arizona Revised Statutes 12-543 provides for a three-year limitations period for filing civil actions to recover debt based on a credit card agreement.

Pursuant to the language of the Arizona statute, the statute of limitations clock commences upon the date "the cause of action accrued." For breach of written contracts, the cause of action accrues on the date the contract was breached. For revolving credit card agreements, the cause of action accrues on the date the account first went into default or delinquency. The statute of limitations period stops on the date an action for recovery of the default balance is filed in court by a creditor.

An action by a creditor that is filed outside the designated statute of limitations period is considered time-barred and must be dismissed by the court if the defense is properly raised by the debtor. Once the suit is dismissed, the creditor has no further legal recourse against the debtor.

A debtor against whom a civil action has been filed for repayment must raise the affirmative defense of the statute of limitations, or he will be deemed to have waived it. The Arizona Rules of Civil Procedure require a debtor to plead the statute of limitations in his Answer to the Creditor's Complaint. Once timely raised, on request of the debtor, the court will dismiss the lawsuit.

Operation of the statute of limitations does not extinguish the debt; it only prohibits the creditor from using the legal system to enforce payment. Even though a creditor's lawsuit for repayment is dismissed for failure to comply with the statute of limitations, he may continue -- however futile -- with traditional collection efforts such as dunning letters or phone calls.

How to Stop Credit Card Collection Phone Calls

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Struggling to pay your credit-card debt is difficult enough without being harassed by companies trying to collect money. Fortunately, the Fair Debt Collection Practices Act (FDCPA) protects consumers from collection companies. Arm yourself with knowledge of your rights to stop those annoying phone calls.

Instructions

Know the law. The Fair Debt Collection Practices Act (FDCPA) governs the ways in which collection companies can contact you, as well as your rights in dealing with collection companies. For example, collection companies cannot call you before 8 a.m. or after 9 p.m. in your time zone. They cannot continuously call you, nor can they call third parties to find you if they already have your contact information. Further, they cannot threaten or harass you or misrepresent themselves, and they cannot call you if you send a letter telling them to stop.

Start a call log. Whenever you get a call, get the person's name, the company's name, and phone number. If the person on the line refuses to give you information, let him know that you won't talk to him (you are not required to talk to collection companies). If the caller harasses or threatens you, he is violating FDCPA. Keeping good records is paramount to protecting yourself; a call log is proof of what transpired.

Request proof of the debt. By law, companies seeking to collect money must send you a debt-validation letter within 5 days of contacting you. Request this letter in writing from the collector. Send your request by certified mail with a return receipt. File a copy of the letter and return receipt for your records.

Verify the debt. The company's validation letter must show proof that it owns the debt, which includes a copy of the contract you signed with the creditor and documentation from the original creditor (if the debt was transferred). If the company fails to show proof, write back (by certified mail) indicating that the company hasn't given proof per FDCPA . Inform the company you will file a lawsuit if it does not cease collection efforts. The collection company cannot legally contact credit bureaus either, if it has not shown you proof of the debt. If the company proved the debt, but you wish to dispute all or part of the amount, you can do so in writing within 30 days. Failure to respond in 30 days will result in the company assuming that the debt is valid.

Ask for collection requests in writing. If you know you owe the debt, you can still stop calls simply by telling the company to send what it needs in writing. Follow up with a letter telling the company to stop calling (on all phones including those at work). Let the collector know that you know your rights and will take action if the provisions of FDCPA are violated. Communicate by sending a certified letter requesting a return receipt. Keep proof of your request in case the company ignores it.

Talk to a lawyer. If you have hired a lawyer to help you with your credit issues, refer the credit-card agency to him. At that point, the credit agency must contact the lawyer instead of you. Again, it helps to send the information in writing so you have a record if the agency fails to comply.

How to Improve My FICO Score for Free

7:07 PM No comments

The FICO (Fair Isaac Corporation) score is derived from a specific analysis of your credit report. The score is generated from multiple factors including your payment history, number of delinquent accounts, ability to pay existing debt and length of time accounts have been opened. When your score is high, lenders are more likely to extend new credit to you, and better rates should be available.

You can raise your score by following a few simple steps. Credit repair companies cannot legally do anything that you can't do for yourself nor can they speed up the process.

Instructions

Obtain a copy of your credit report from all three credit bureaus. You are allowed one free report per year from each bureau -- TransUnion, Experian and Equifax. Free reports can be ordered by visiting the annualcreditreport website or by contacting the bureaus separately.

Review each report for accuracy. Creditors are not required to report to each of the three bureaus, so some accounts may not be listed on all credit bureau reports. This applies to negative and positive account information.

Dispute errors. Write a letter to the creditor upon initial notification of the debt, or write a letter to the credit bureau. The Federal Trade Commission has templates you can use, and all three credit bureaus also have online dispute forms. Disputing debt is free, and both the creditor and credit bureau must verify the debt before the collection effort or negative report mark is sustained.

Wait 30 days from the date of dispute. When disputing with the creditor or collection agency, the company has 30 days to provide verification to you that the debt is valid. If verification cannot be provided, the creditor cannot continue to attempt collection.

When disputing with the credit bureau, the bureau requests verification from the creditor. The creditor has 30 days to validate the debt or take no action. If the creditor takes no action, or is unable to validate the debt, the credit bureau must remove the item from your report.

Review payment history. If there are accounts that have late payments, get current with the reporting company. The late payments will stay on the credit report, but the past due balance will go down. Both past due balances and late payments negatively affect your FICO score.

Don't skip payments. If you cannot make a minimum payment, contact the creditor first to work something out before the late payment hits your report. Recent late payments hurt your FICO score more than old late payments.

Add positive accounts. If an account with good payment history does not appear on all three reports, contact the creditor and request the account be reported to all credit bureaus. This will increase your FICO score with the credit bureau receiving the new account information.

Pay down revolving credit balances. Revolving credit accounts can be reused as payments are made. Credit cards are an example of revolving credit.

FICO scores go down when credit cards are maxed out. A balance that is no more than 30 percent of your available credit is ideal. For example, a card with a $1,000 limit and a $300 balance will have a better impact on your score.

Keep inactive accounts open. Do not close credit card accounts that are paid off even if you do not use them anymore. The myFICO website illustrates how available, but unused credit, improves your score and credit utilization ratio.

Do not move balances around. Transferring balances to new credit accounts does not help your score. Consumers are attracted to balance transfer options because of lower interest rates. However, when only minimum payments are being made, over time a consumer will actually pay much more than what was originally transferred. Transferring balances does not help your score or your budget.

Bankruptcy Vs. Debt Management Plan

5:57 PM No comments

Bankruptcy and debt management are two options for dealing with debt; each has its own unique advantages and disadvantages. Which one you should choose depends upon your individual needs and financial circumstances.

Bankruptcy is a legal process in which debts are restructured or erased completely. Debt management restructures debt to make it more manageable.

You present the court with a list of your debts and assets. After mandatory credit counseling and a meeting of creditors, your bankruptcy is discharged and your debts are relieved.

Debts are consolidated into a single monthly payment and distributed to creditors through a third-party debt-management company.

Bankruptcy eliminates debt and offers a fresh start, however, it will destroy your credit rating.

Debt-management plans can save you money in interest and fees, but it can impact your credit negatively, as most debt-management plans require that you close the accounts included in the plan.

Bankruptcy is best for those who have significant debt and few assets or means to pay. Debt management is best for those who need assistance in handling their debt load.

Is It Worth Paying Back a Collection Agency?

11:55 AM No comments

When a creditor cannot collect from you, it will usually write off your account and transfer the account to a third party for collection. These third-party debt collectors, or "collection agencies," work in conjunction with creditors or alone to recover past due debts. Depending on your situation, paying a collection agency may not benefit you in any way.

One incentive many consumers have for paying off past due debt is the possibility that, should they fail to do so, they could face legal action. Each state restricts the number of years a creditor has to seek recourse for unpaid debts through a lawsuit by setting a statute of limitations for legal action. If a collection agency can no longer sue you, leaving your debt unpaid will not result in a court judgment, garnishment, a lien or any other unpleasant consequence you may otherwise face as the result of debt-collection lawsuit.

If you make a partial payment on your debt, however, you could reset the statute of limitations, depending on your state's laws. When you reset the statute of limitations, the collection agency once again has the right to file a lawsuit against you -- even if you make regular payments.

Your original creditor and the collection agency both submit reports of your outstanding debt to the credit bureaus. These reports appear within your credit record and renders future creditors less likely to work with you, as individuals with poor credit ratings pose a higher than average lending risk.

Seven years and 180 days from the date you defaulted on the debt, the Fair Credit Reporting Act requires the credit bureaus to delete credit information connected to the debt from your file. Paying off the debt only benefits your credit if the collection agency removes its negative report as a result. Once the federal reporting period expires, however, the debt vanishes from your credit for good -- eliminating any incentive you may have previously had to pay off the collection account in exchange for early credit removal.

Even if paying the collection agency does not benefit you, that does not mean that you should necessarily leave the account unpaid. Unpaid debts are valid until resolved through payment or discharged in a bankruptcy -- regardless of whether the creditor can legally sue or the debt still shows up on your credit report. For many consumers, paying off debts is a matter of honesty. If unresolved debt leaves you with guilt, paying the collection agency is worth it -- regardless of how old the debt is and whether or not leaving it unpaid carries any consequences.

Just because the statute of limitations has expired in your state or the collection account no longer appears on your credit file, that does not mean that the collection agency automatically stops contacting you. Should you choose to ignore an old collection account, you can legally eliminate constant reminders that you have yet to pay the debt. The Fair Debt Collections Practices Act notes that you can send the collection agency a letter stipulating that it must stop contacting you. If the debt collection letters and calls continue after you request that the company discontinue its debt recovery efforts, you can sue the collection agency for harassment.

Welcome to our website credit and debt managementr.

Sunday, August 31, 2008

Debt Settlement Basics

Arkansas Asset Laws

Chapter 13 Bankruptcy

Chapter 7 Bankruptcy

Legal Considerations

Debt Settlement Companies

The Process

Considerations

Saturday, August 30, 2008

Collections Process

Debt Buyers

Reselling Your Debt

Your Rights

Considerations

Chapter 7 Bankruptcy

Chapter 13 Bankruptcy

Credit Counseling

Instructions

What Is Free

How Counselors Make Money

What Happens When You Call

Can You Benefit

What to Avoid

Friday, August 29, 2008

Business Chapter 7

Personal Chapter 7

Chapter 11

Personal Chapter 13

Student Loans

Federal Grants

Private Loans

What Can Be Garnished?

Name on the Mortgage

Joint Marital Accounts

Deficiency Judgments

Assets Before Marriage

Federal Debt Collections Protection Act

CARD Act

Federal Credit Reporting Act

Thursday, August 28, 2008

Debt Payment Plan

Settling Debt

Negotiating Terms

Staying Out of Debt

Debt Negotiation Services

Do-It-Yourself Debt Negotiation

Debt Consolidation

Making the Choice

Wednesday, August 27, 2008

Instructions

Starting the Repair Process

Lawsuit

Exemptions

Incomes

Spouses

Tuesday, August 26, 2008

Debt Validation

Credit Score Impact

Turning the Debt Over

Getting Out of the Debt

Instructions

Credit Judgment

Frozen Bank Account

Wage Garnishment

Considerations

Monday, August 25, 2008

Instructions

Instructions

Financial Expert Suze Orman

Federal Trade Commission

Kiplinger Money Magazine

MyFico Website

Sunday, August 24, 2008

Instructions

Credit Scores

Judgment on Report

Late Fees

Garnishments