September 2008 ~ Credit And Debt Management

Tuesday, September 30, 2008

Standard Bank Debt Consolidation

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If you are thinking of consolidating your debt, you can go to a specialist company and pay them money to do it for you. Or you can go straight to the bank and get a loan directly from them. A debt consolidation loan is not very different from other types of loans you can get at your bank.

When consolidating debt, you take out a single low-interest loan and use that money to pay off many small, high-interest loans, including personal loans and credit cards. It can save you money in the long run and get you out of debt sooner. It can also make your debt easier to manage.

Debt consolidation can be an elegant solution to a messy debt problem. If you are the sort of person who forgets the due dates for your bills, a single loan could be easier for you to manage than many different bills. You can use it to improve your credit score by making all the payments on time. Some people find themselves in debt suddenly. You may have lots of high-interest debt and a high credit score at the same time. Consolidating the debt into a single low-interest loan can save your credit score.

Debt consolidation can cost more money than it saves. Unless you have a good credit history, you may not qualify for a loan with a low interest rate. A high-interest loan will not save you any money. In addition to the interest, there are fees. You pay fees to the lender and to the debt consolidation company. If you want to pay off the debt sooner, there may also be a fee for that. For many people, debt consolidation results in more debt than when they started. It will do nothing to stop you from overspending, which is how most people get into debt in the first place.

Most people choose to go through a specialist company when consolidating debt. These companies do not loan money. Instead, they match up lenders and borrowers. As with all middlemen, they charge for their services. Even nonprofit debt consolidation companies have to pay the salaries of their staff. Either they charge the borrowers directly, or they charge lenders, who pass the fees onto the borrowers. When you are deep in debt, the last thing you want to do is waste money on a middleman. You can consolidate the debt yourself by applying for a loan directly with the bank. If your credit history is good enough to get you a good deal on the loan, you should have no problem going without the middleman. If not, then debt consolidation probably is not the best option for you.

Should You Consolidate Your Debt Through a Second Mortgage?

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Debt consolidation can help you get control of your finances. There are several different options when considering a consolidation loan. Many people choose to use their home as collateral on the loan to get a lower interest rate than other options. This is generally done through a second mortgage.

The advantages of a debt consolidation loan is that it can be used to pay off several smaller loans and give you one monthly payment; the interest rate is often lower than the original loans, which will make it easier for you to pay off debt. If the payments have become too much for you, you may have the opportunity to "rest" the length of the loan, which means you can choose a lower monthly payment. However, that will extend the amount of time it takes to pay off your loan and increase the amount you pay in interest.

When you obtain a second mortgage you cash out the equity in your home and can use it to pay off other debts. However, if the market were to drop you may own more than your home is worth, and you may have a difficult time selling it in the future. Another problem with a second mortgage is that you are putting your home at risk because you are tying debt to it. If you were to default on a second mortgage loan your home could go into foreclosure and you could lose it. However, if you were to keep the smaller loans separate from your home loan and you defaulted, your home would still be safe.

An alternative to using your home as collateral for a loan is to choose something else such as a boat or car. You can also take out a loan with no collateral or a signature loan as a consolidation loan. These loans usually have a slightly higher interest rate than a second mortgage, but the benefit of protecting your home outweighs the higher rate. Another alternative is to make a debt payment plan and work to pay off the debts by applying extra money toward the loans each month. A credit counseling service can help you pay down debts and address your spending issues by setting up a budget.

Debt consolidation only addresses the problem of too much debt without looking at the behaviors or the situations that caused it. Many people find themselves able to consolidate debt only to have their credit cards maxed out again in just a few years. If you choose debt consolidation, it is highly advisable to stop using your credit cards and start following a specific budget to avoid making the situation worse.

How to Qualify for a Credit Card With No Preset Spending Limit

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Credit cards without pre-set spending limits are actually charge cards. Theoretically, you are allowed to charge as much as you want in a given month, with the requirement that you pay the balance after receiving your statement. The card company will monitor your spending habits, payment history and credit score as it determines how much to allow you to charge. To qualify for a card without pre-set limits, you generally need a good credit score, a record of stable employment and sufficient income. Income needed will vary by the card company and type of card.

Instructions

Establish a good relationship with a bank. A banking relationship isn't required to obtain a credit card without a pre-set spending limit. However, the cards generally are considered harder to qualify for than a regular MasterCard or Visa. Having a good relationship with a bank through mortgage, checking, savings or retirement accounts can improve your overall credit profile with that bank and make you a better candidate for a new credit card.

Get your credit report and score. Obtain a free copy of your report from the web site www.annualcreditreport.com. The site was established by Experian, Equifax and TransUnion--the three nationwide credit bureaus--to provide free credit reports under the terms of the federal Fair Credit Reporting Act. View and print your report immediately at the web site or see instructions on the homepage for ordering by telephone or mail. Included with the report will be instructions for separately ordering your credit score.

Review your credit score. According to the web site Bankrate.com, a credit score of 620 is considered at the bottom of "good" credit. You should have a score of at least 620 to qualify for a charge card without pre-set spending limits. Ideally, your score should be as close to 700 as possible, or higher. If your score is below 620, postpone your plans to apply until your credit situation improves.

Remove any inaccurate information from your report by writing a letter to the credit bureau pointing out the mistake. Inaccurate information, such as an erroneous federal tax lien, can disqualify you from approval even if your credit score is excellent. State why the information is wrong and demand that it be removed from your report or corrected. By federal law, the credit bureau will have about 30 days to fix the error after receiving your letter. Mail your letter to the credit bureau at its address on your report.

Check your credit report for any accounts showing as past due or delinquent. Make payments to bring all active accounts current. Contact creditors or debt collectors to resolve delinquent accounts that were charged off or sold to debt collection agencies. Find telephone numbers for the creditors or debt collectors on your credit report alongside the delinquent account. Wait about 60 days for your report to be updated after you make payments.

Apply for your card.

What Is the Corporate Purpose of Debt Collecting?

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Any company that issues bills, particularly companies that regularly extend some form of credit to their customers, either in the form of a loan or another kind of payment, are familiar with debt collection. When a business collects on a debt, it's collecting money that's owed to it for services rendered. Collecting on a debt fulfills a number of different functions for the business.

Debt collection can take various forms: contacting the party to remind him of his debt obligation, filing suit against him for breach of contract or garnishing his wages, for example. Yet, all of these forms are designed to help secure the creditor payment of the money that's owed him. The main corporate purpose of debt collection, therefore, is to generate revenue for the business that's carrying out the collection.

One of the main reasons that a company spends money collecting debts is that spending money on the collection of debts often makes sound financial sense. By spending money on a means of collecting money from outside parties, the company is, often, able to take in more money than it spends. In addition, the company wants to give the perception that its customers must pay its bills or face legal action.

In addition to generating funds, companies often engage in debt collection because having accounts that people haven't paid on a company's books doesn't look good to investors. Even if a company is able to collect only a fraction of the amount of money that it's owed, this is still revenue that the company can place on its books. By contrast, uncollected debt leaves a gaping hole.

Companies can actually make a substantial amount of money through assessing penalties on debts. For example, payday lenders and credit card companies often charge very high interest rates and fees on unpaid debt. The threat of having this debt collected on leads borrowers to pay these fees. Thus, in effect, the debt collection acts as a form of generating revenue that the company wouldn't otherwise have access to.

Is the Executor of a Will Responsible for the Debts?

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The executor of an estate and will is responsible for many things, but he is not personally responsible for paying off a decedent's debt with his own money. In some states an estate executor can be held personally liable for a decedent's debts if she has been found negligent or violated other probate-specific state laws. Always consult with a licensed probate attorney for your state before taking on the duties of an executor.

The executor of an estate and will is responsible for making sure all death-notice requirements are met in the time required by law. Some states require the executor to publish death notices in local newspapers for several weeks, while others only require the executor to send death notices to creditors, beneficiaries, heirs and other interested parties for the estate.

An estate executor is responsible for cataloging all assets and their current value. Estate assets include real property such as a home, land or vehicle, and personal property such as bank accounts, retirement funds and valuable collectibles.

An estate executor creates a list of all known debt claims against the estate and ensures that each is paid in full. When creditors receive death notifications, the state normally requires the creditor to list debt claims officially against the estate so that they can be paid. The estate executor is responsible for using the assets from the estate -- selling physical property from the estate if needed -- to pay off all outstanding debt claims. The executor does not use his own funds to pay off the estate's debt.

In several states the executor can be held personally liable for the debts of an estate if he is proven to have been negligent in the handling of the estate's affairs, if he did not follow state laws specifically, or if he was proven to have committed fraud in the administration of the estate.

How to Fix My Credit Tradelines

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Sometimes good people make mistakes. Unfortunately, those mistakes can stick with you for years, preventing you from getting a break because of the legacy they leave on your credit report. Sometimes a credit report can simply contain inaccurate information, preventing someone who never made a mistake in the first place from getting their entitled credit. For both cases, there is a recourse.

Instructions

Acquire a copy of your credit reports from all three of the major credit reporting agencies---Equifax, Experian and TransUnion. Each company is required to give you one free report each year or whenever you are denied credit. But there are services you can purchase that will give you a new credit report each month, This may be advantageous because you should monitor your report as you go along this process.

Highlight the trade-lines that you find inaccurate or incomplete. Make a note for yourself as to what it is about the trade-line that is inaccurate or incomplete. The trade-line may not be Fair Credit Reporting Act compliant or it may be missing an important piece of information, such as the name of the company that you owe.

Prepare a dispute letter to send to each of the credit reporting agencies. Some agencies allow you to do this on line. Write in the letter that you are writing in order to dispute inaccuracies in your file. Explain why you find each item inaccurate. Include any information that supports your claims and request that the agency delete the trade-line or alter the trade-line to your liking. Include your report with the circled and highlighted trade-lines that you find inaccurate.

Wait 30 days for the agencies to respond. In this time, the agencies will conduct an investigation. They will try to confirm or deny your claims by contacting the creditors you are disputing in your file.

Review your results in writing. The agency will provide you with a new credit report that will show you clearly what has been changed or deleted. If you are unhappy with the results of the investigation, you can request to include your own note in a trade line. They may require you to pay for this.

Work with the creditor. Only do so in writing to avoid accidentally renewing the statute of limitations on your debt. Do not admit that you owe the debt, but rather, in writing, request that they remove the trade-line. Offer any documentation that supports your case. Send this to as many people in the company as you can find via certified mail. If they do not respond within 30 days, then dispute again with the credit reporting agency, attaching a copy of the certified mail receipt and your letter, explaining that they never responded to your request for information.

How to Build Corporate Credit

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Building corporate credit is essential for growing a new business and establishing credit worthiness. By building corporate credit, serious business owners can never be turned down for a loan and do not have to use their personal credit to finance their business. Business owners need to take action to establish corporate credit before they apply for loans, leases, or lines of credit.

Instructions

First, you need to prepare your company with a business credit assessment (what types of credit your business needs) because you must have a real business, not just a shell company. Form a Corporation or L.L.C. to operate your business. Get a Federal Tax ID number from the IRS, to separate your corporate activities and credit from your personal activities and credit.

Establish a business address and telephone lines so creditors can easy find you. Acquire all appropriate permits, licenses and fees to be paid to the federal, state and city governments. Check with your state government to find out if you meet all the compliance checks for your business. Contact Dunn and Bradstreet to establish a Data Universal Numbering System (DUNS) for your corporation.

Begin to look for vendors and lenders that will let you have business credit lines around $500 to $5,000. Check for reasonable rates and fees from these companies. Look for vendors who offer business credit for office supplies, computers or business furniture such as Office Depot.

Credit bureaus will use this early payment history to begin developing your corporate credit profile, so pay these vendors on time. By establishing good payment histories with these companies for the next six months, you can get bigger credit lines and loans. Gather at least six companies to report on-time payments to the credit bureaus on your corporate profile and establish a Paydex accounting system to payback these companies.

Now you are eligible for larger credit lines of $5,000 to $50,000 and can apply for this type of funding. Repeat the same process for these companies and pay all bills on time. You can now move on up to unsecured business credit from banks and other lenders in the range of $50,000 to $250,000.

At this step, the lenders will probably require a personal credit check and guarantee from you. You will need to start early building up a strong personal credit record and have a corporation with strong sales and future business growth. Prepare a detailed and concise business plan to offer to the lenders with the purpose of the loan, exact amount of money used, company needs and for how long and how your business will repay the loan.

Can a Lender Garnish Pension Benefits?

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Creditors can use a number of different methods to attain payment of a delinquent debt. One of the most severe methods is the garnishment of an individual's wages. When wages are garnished, it means that the employer siphons off a portion of the payment to the creditor. This is generally done until enough money has been set aside that the debt has been paid off. Pensions, however, cannot be legally garnished.

In order to garnish a debtor's wages, a creditor must first receive the permission of a civil court judge. Before receiving this permission, the creditor must win a judgment against the debtor. Usually this will be done by filing a breach of contract suit alleging that the debtor violated the terms of a loan agreement. All garnishments must be undertaken with the express permission of a judge; a creditor cannot attempt garnishment extra-judicially.

Certain types of income are exempt from garnishment, including pensions. While a normal paycheck can usually be garnished, a pension -- a regular payment made to a retired person by his former employer -- cannot. Federal law prohibits most types of retirement benefits, including Social Security benefits and disability payments, from garnishment. Pensions are considered a type of retirement benefit and remain exempt.

While a pension cannot be garnished, it can be seized from a frozen bank account. Although pensions are exempt from garnishment, they are not exempt from other types of forcible seizure. So if a debtor deposits the pension in a bank account, a creditor could petition a judge to have the bank account frozen. After an account is frozen, the lender may be allowed to withdraw money from it to pay off the debt.

If a person cashes a pension check instead of depositing it in his account, creditors may be unable to seize it. However, many pensions are deposited through direct deposit, meaning the recipient may not have a chance to access the money before creditors freeze the account. Money can be deposited in a frozen account but not withdrawn. Also, although pensions are not exempt from seizure, some other types of retirement benefits are. All Social Security benefits, for example, cannot be removed from a person's bank account.

What Steps to Take If You Are Being Sued for an Old Debt?

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More companies are focusing on collecting old debts, hoping to profit from getting consumers to pay delinquent debts they may have accumulated several years ago. Some of these collection efforts are legitimate, but others may be sidestepping state law and suing consumers to turn a profit. People facing lawsuits should ensure they understand their state's debt-collection laws to protect their rights.

When called by a debt collector, do not commit to pay or acknowledge an old debt if a debt collector calls and demands payment. Simply note the account information about the debt the collector claims you owe and end the conversation, even if the collector threatens to sue you. Investigate the information you received to make sure the debt is yours. Even if it is, the debt may be too old to collect through a lawsuit because the state statute of limitations may have expired. Each state has laws that limit the amount of time a creditor or lender has to recover delinquent debts.

In some states, making a payment to a collector or acknowledging a delinquent debt is yours can change the statute of limitations concerning that debt, even if it has expired. Making even a partial payment can make an old debt new again by restarting the amount of time a collector has to recoup the debt. In such cases, a collector would have several more years to sue you for payment based on the time allowed for debt collection in your state.

Consider seeking advice from an attorney experienced in consumer law or the consumer protection department of your state's Attorney General's Office. Ask for information on debt-collection laws in your state to help you determine if the statute of limitations for collecting on your debt has expired. According to Bankrate.com, a creditor loses the right to sue a consumer for payment if the statute of limitations has expired. In any case, don't ignore a debt-collection lawsuit. A court could automatically decide the case in the collector's favor if you don't respond to a suit and require you to pay whatever is owed.

You may want to settle an old debt to avoid a lawsuit, but you should be careful about how you settle it if you can't pay the debt in full. One option is to offer a large lump sum payment. Debt-collection companies are often willing to settle accounts for less than what's owed if they can get a lump-sum payment. You should require the company to send you a settlement agreement in writing before you pay, and you should consider seeking an attorney's advice to avoid further problems.

Statute of Limitations on Debt in Illinois

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The Illinois statute of limitations mandates how long debt collectors have to sue for a debt. Illinois residents can use the statute to avoid debt lawsuits and have those lawsuits abandoned.

Debt collectors still passed the statute of limitations.

Even after debts have passed the statute of limitations mark, debt holders still sue. However, Illinois residents can use the statue of limitations law to petition the court to throw out the lawsuit. The statute of limitations does not mean the debt is forgiven; it is still owed.

Illinois residents can use the statute of limitations after so many years.

The statute of limitations for Illinois debts is four years for breach of contract, five years for open accounts or unwritten contract and 20 years for domestic lawsuits.

Debt collectors work around the statute of limitations in collection efforts. The statute of limitations is "reset" by making a payment on an old debt. New activity on the account, such as even a promise to pay, resets the statute of limitations.

How to Start Paying a Judgment

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Creditors and lenders may seek payment, but if you're unresponsive, they can file a lawsuit against you. A judge can place a judgment on your record for non-payment. Taking steps to start paying a judgment can help fix your credit problems. Judgments on your credit report indicate past payment issues. For this reason, don't ignore a judgment. Review your finances and make plans to satisfy the debt.

Instructions

Satisfy a judgment through the court system. Visit the court clerk where the judgment occurred and complete the form, Request to Pay Judgment in Court. Submit your payment to satisfy the judgment, along with any additional fees. After receiving your payment, the court updates your record and notifies the creditor of your payment.

Write a check or get a money order for the full amount to satisfy the judgment, and then send the payment directly to your creditor. Do not send cash. If you don't have the total amount to satisfy the judgment, discuss an installment plan with your creditor or the court clerk.

Retain proof of your payment. Make a photocopy of the check before mailing, and once the check clears your bank, print a copy to keep for your records.

Submit your request to acknowledge that you paid the debt. Your creditor should submit a form acknowledging that you satisfied a debt after receiving your payment. If the creditor does not submit this form, visit the court clerk and complete the form titled Declaration of Judgment Debtor Regarding Satisfaction of Judgment. Bring a copy of the check that cleared your bank as proof of payment. The court clerk will file the paperwork and update your record.

Do I Have to Pay My Dead Mother's Debts?

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When a loved one dies and leaves behind unsecured debts, such as credit card debts and hospital bills, its isn't uncommon for family members to eventually hear from debt collectors concerning the unpaid balances. In most circumstances, however, your deceased mother's debts aren't your responsibility.

Unless you signed for the original account, you aren't legally liable for any debts your mother leaves behind. The New York Times notes, however, that your lack of legal responsibility for the debt will not prevent debt collectors from contacting you about the unpaid account balance. If you cannot afford to pay off your mother's debts after her death, the Fair Debt Collection Practices Act gives you the right to forbid debt collectors from contacting you by putting your request in writing and mailing it to the company that is contacting you about the debt.

If you shared a joint account with your mother, the entire balance owed on the account becomes your responsibility after her death -- even if she was the one that incurred the debt in question. Joint credit card balances are a common example of this scenario. After the death of one account holder, full liability for the outstanding balance transfers to the surviving account holder.

If your mother's credit card company officially recognized your right to use her credit cards, but you didn't originally apply for the original account with your mother, you are an authorized user. Authorized users are the reverse of joint account holders, as they can incur debt but are not liable for the charges. Many individuals confuse joint account holders with authorized users.

After your mother's death, her estate goes into probate. State laws differ concerning the distribution of assets, but her creditors must file a claim with the probate court to receive payment from her estate. Even if you don't notify your mother's creditors of her estate, many creditors utilize computer programs that routinely scan court records for estates against which the creditor can levy a claim. Although you don't have to pay the debts yourself, creditors' claims against your mother's estate can reduce your inheritance.

Not everyone leaves behind assets. If your mother dies insolvent or does not leave behind enough assets to cover her total debt load, her creditors have little choice but to write off her debts as a tax loss. The Internal Revenue Service allows creditors to claim uncollectible debts as a business tax deductions.

When Can a Debt Collection Agency Garnish Your Wages?

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Wage garnishment serves as a voluntary payment alternative for creditors who must recover unpaid debts. Both original creditors and third-party creditors, such as debt collection agencies, have the right to pursue the debt you owe via a court-ordered wage garnishment. Once your employer receives notice of the garnishment, it re-directs a portion of each paycheck to your creditor until you pay off the debt.

A debt collection agency does not have the option to merely request that the court issue it a wage garnishment order. To earn the right to seize your wages, the company must sue you. After winning the lawsuit, it presents its court judgment to the court clerk as proof that you owe the debt in question. The court clerk then issues a writ of garnishment that the company serves upon your employer.

Federal wage garnishment laws protect consumers from losing the bulk of their income to a creditor's garnishment order. Title III of the Consumer Credit Protection Act, however, grants each state the right to further restrict creditors seeking payment through wage garnishment. Some states, such as Texas and South Carolina, prohibit the practice altogether. A debt collection agency can only garnish your wages if your state laws grant it the right to do so.

Federal law requires that garnishing creditors seize the lesser or either 25 percent of your disposal income or any amount you earn that exceeds 30 times the minimum wage. If you have a previous garnishment order against you, that garnishment likely seizes the maximum amount allowed by law. Thus, a debt collection agency can only seize the debt via wage garnishment if unhindered by previous garnishments.

Community property states differ from other states in that their laws consider married parties to jointly own all assets. In some community property states, such as California, this provision applies to debt as well.

If you live in a community property state and your spouse incurs a debt after your marriage that ends up with a debt collection agency, the company has the right to garnish your wages for your spouse's unpaid debt -- even if you had no knowledge of the debt's existence.

A debt collection agency can garnish your wages from any employer, provided your income is traditional employment income -- pay for work you performed. Unless the debt collection agency is collecting a debt on behalf of the federal government, however, it cannot garnish non-employment income, such as child support you receive, retirement benefits, unemployment or Social Security benefits.

Do You Need a Title to Qualify for an Auto Loan?

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You do not need a title to a car to apply for a standard auto loan, such as when purchasing a car on credit. However, the title is necessary when you are seeking a loan using your car as collateral. Some banks and credit unions offer long-term installment loans backed by the car and title serving as collateral. The lender keeps the title until you make all payments as agreed.

Banks and credit unions may offer competitive rates on personal loans backed by the title to a car. However, other lenders offer so-called car title loans, which usually are short-term loans lasting about 30 days. These loans are very controversial and feature interest rates that exceed 300 percent.

The process for receiving car title loans is simple. The borrower drives the car to the office of a lender offering car title loans and offers to surrender the title on the spot in exchange for an immediate loan worth a portion of the car's value. Usually, the loans are for just a few hundred dollars, although loans for several thousand dollars are available from some car title loan lenders, depending on the value of the vehicle.

Federal government agencies warn people to stay away from short-term car title loans. Consumer Action's Federal Citizen Information Center reports that lenders can make a copy of the keys to your car -- in addition to taking possession of the title -- when making a car title loan. Also, in some states, lenders can repossess your car without notice after a missed payment. Some of the lenders even plan on the repossession in advance by installing a GPS tracking system in your car before approving a loan. At the time of publication, there are no federal laws governing car title loans.

Borrowing from family or friends is usually better than taking short-term car title loans. People needing short-term loans may find suitable options at their banks or credit unions, including loans that do not require collateral of any kind.

How to Repair a Credit Report With a Judgment Removed

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Judgments on credit reports are orders from a court to pay obligations. They mean that a creditor brought a suit against you in court and won. These are seriously damaging to your credit. If you've paid a judgment, it doesn't necessarily mean that your credit will immediately improve. It could remain on your report for up to seven years. There are steps to take, however, to improve your credit after you've satisfied a judgment.

Instructions

Make several photocopies of the paid-in-full letter from the creditor owning the judgment. You'll need this to prove to the credit bureaus that the obligation is satisfied. Send this letter to any credit report reporting the unpaid judgment. Visit AnnualCreditReport.com to get free copies of your report. See Resources for the contact information for all credit bureaus.

Review the rest of your credit report. Look for other negative items, like accounts in default, accounts over their credit limit, liens, accounts in collections and excessive inquiries (more than six in a six-month period). These are a top priority as you begin repairing your credit.

Pay delinquent accounts so that they are current. Get payoff statements for all collection accounts and liens. Schedule a new repayment on these accounts or pay them in a lump sum, if possible. Halt all borrowing on over-limit and high-limit credit cards.

Draft a goodwill letter. This is a plea to remove certain items from a credit report. It is entirely up to the credit bureaus whether they comply with your request. In the letter, include your name, Social Security number, address, contact information and account numbers. Also include the paid-in-full letter for the satisfied judgment. Reference any positive elements on your credit that may help your argument--good pay history on other accounts, reduced debt or reduced inquiries. (See Resources for a sample goodwill letter.)

Send the letter to all credit bureaus reporting the paid judgment. Credit bureaus must respond to the inquiry within 30 days of receiving the letter. They then must take action (or deny the request) after an additional 90 days.

How to Avoid Getting Trapped in Debt

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A financial plan can position you to avoid substantial amounts of debt. Your ability to buy items that you can afford, while deferring the purchase of non-essential goods will help keep you on track. Your hard-earned money should be used toward goals, such as debt consolidation, college tuition or retirement savings. Steering clear of promotions that offer introductory credit cards and interest-free financing can help you avoid getting trapped in debt. Your determination to avoid debt may allow you to contribute toward your investment goals.

Instructions

Prepare a budget that reflects your monthly income and expenses. Knowing your amount of disposable income can help you avoid overspending and becoming trapped in debt.

Make a plan for purchasing big-ticket items such as a house, automobile or expensive electronic items. Review your gross monthly income to determine thirty-six percent of your earnings. Avoid purchases that will cause your monthly debt ratio to exceed thirty-six percent.

Use a debit card or pay cash for discretionary items to avoid getting trapped in debt. Deciding to pay-as-you-go for items that are quickly consumed, such as fast food, gasoline or weekend outings, will help eliminate long-term debt. You will also save money on finance charges and interest expenses, when compared to buying similar items with a credit card.

Avoid impulse shopping that is driven by advertising circulars. Retailers create compelling offers, which appear to be items that you must have; however, to avoid excessive debt, you must focus on buying items that you need.

Save a percentage of your earnings to create an emergency reserve fund. Place your savings in a bank account on a regular basis, such as every 2 weeks or once a month. Fund your account until you accumulate enough money to pay your bills and living expenses for at least 3 months. Your savings can help pay for unexpected dental costs, auto repairs or other emergencies. A financial cushion can provide a safeguard against debt.

How Safe Are Debt Settlement Companies?

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If you are considering using a debt settlement company to help reduce your debts, proceed with caution. The methods some debt settlement companies use to lower balances are unethical and not safe for either your credit score or your wallet.

The most common method a debt settlement company will use is to request that rather than making regular payments to your creditors, you make regular payments to a settlement counselor who then will allocate the appropriate payments to your creditors.

Debt settlement companies will sometimes withhold payments from your creditors to attempt to negotiate a better settlement deal. The resulting late payment notations on your credit report can devastate your credit score.

The problem with debt settlement company practices has become so significant that the Federal Trade Commission has released a formal statement of warning that urges consumers to opt for licensed credit counseling services instead.

Debt settlement companies often charge high fees for their services, with no guarantee of success. The result is that you could potentially end up deeper in debt after signing up for debt settlement than you were originally.

You can attempt to negotiate a settlement agreement with your creditors on your own. A third-party representative is not necessary to help you settle your debts.

Some so-called debt settlement companies are not legitimate companies at all and will take your payments and vanish. Get all agreements in writing and request proof of the company's state business license before signing a contract.

Explanation for a Bankruptcy

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Bankruptcy allows you, the debtor, the opportunity to repay your debt, or eliminate it altogether with the protection of the bankruptcy court. A bankruptcy basically allows a consumer or wage earner to liquidate or reorganize debt.

Chapter Seven, Nine, 11, 12, 13 and 15 are the types of bankruptcies available. Each chapter has its own rules. For instance, filing Chapter 13 allows you to keep your property and repay your debts over a period of time.

In order to qualify for any type of bankruptcy, you must take the means test. This test identifies your eligibility for filing bankruptcy.

The benefits of bankruptcy are to restore your personal or your business's credit. Filing bankruptcy generally stops creditors from harassing you, garnishing your wages and filing liens against your property.

The type of bankruptcy you file determines the time frame in which your bankruptcy is discharged. For instance, a Chapter Seven bankruptcy generally takes three to six months to discharge.

Filing bankruptcy does not mean you can start running up your credit again. To keep individuals from abusing bankruptcy, the government limits your ability to file again.

Foreclosures Due to Job Loss

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Banks and other mortgage lenders can foreclose on homes when homeowners fall behind on their payments or stop paying altogether. Foreclosure is a way for lenders to recover their investments, since they can sell a foreclosed property to satisfy the mortgage owed. Unfortunately, foreclosure is often due to financial hardship beyond homeowners' control, such as job loss. If you've recently lost your job and are falling behind on your mortgage, there are steps you can take to prevent foreclosure.

Unless they have a good financial cushion, such as a working spouse or hefty retirement account, people who lose their jobs are likely to fall behind on their mortgages. A CNN article from 2008, when many Americans were unemployed, reported that nearly half of the mortgage delinquencies reported by mortgage giant Freddie Mac were due to job loss. By the end of 2009, one in about 23 homes across the country were in foreclosure, according to Bankrate. Fortunately, by 2011, the national unemployment rate had improved somewhat, noted the National Conference of State Legislatures' website, although foreclosures were still historically high.

According to the NCSL, various states were considering legislation as of April 2011 to help stem the tide of foreclosures due to job loss. A whopping 40 states and the District of Columbia had introduced such legislation. Some would delay the auction of foreclosure properties, while others would require lenders to give homeowners the right to mediation before foreclosure occurs. Previous federal legislation, the Home Affordable Foreclosure Alternatives Act, makes it easier for struggling homeowners to short-sale their homes and encourages lenders to work with struggling homeowners to provide loan modifications. However, banks routinely came under media pressure for approving just a small number of modifications.

Homeowners who find themselves facing foreclosure due to job loss should reach out to their lenders as soon as possible to explain the situation. A financial hardship letter, as well as proof of the financial hardship, may help consumers secure some leeway. Lenders may allow struggling homeowners to make partial mortgage payments temporarily, or they may lower the interest rate to make monthly payments smaller. However, homeowners may find themselves mired in paperwork and confusion on the part of bank employees. This quickly became a common complaint following the passage of the Home Affordable legislation.

The longer homeowners wait to reach out for help, the harder it will be to get it. That's because the lender will have already spent money on the foreclosure process. If you expect a job loss to last a while, contact the lender even before you fall behind to give it a heads up on your financial situation. Alternately, if you expect the joblessness to be fleeting, consider borrowing money from a pension or retirement account, or from a close family member, to stay current on your mortgage.

Help for a Student to Get out of Debt

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Students who have gotten themselves into a large amount of debt may be looking for a way out of debt. The only way to get out of debt without severely damaging your credit is to pay it off. This can be difficult when you are on a limited income like most students are. Through hard work, and a by following a strict budget, it is possible to take care of your debt.

Set up a debt payment plan to help you focus any extra money you can find to pay off your debt. List your debts in order of highest interest rate to the lowest. Apply any extra money you have to the first debt on your list until it is paid off. You should continue making minimum payments while you are doing this, when the first debt is paid off move onto the next debt on your list. A budget is essential to making this payment plan work, otherwise you will keep adding to your debt, and be unable to make any progress on it.

If you have debt you may be required to work while in college. Although you may be able to find a job on campus, you may want to look off campus for jobs as well. If you have already chosen a major working in the field you are going into can give you valuable experience, besides providing the extra money you need to pay off your debt.

If you are having a difficult time making your payments, you can contact your creditors and see if they are willing to reduce your interest rate or monthly payments while you look for a job. A creditor can increase your interest rate or charge you fees for late or missed payments. Some creditors will waive this fee if you contact them; it is worth at least trying. They may close your account, and work out a reduced payment plan to help you out as well.

Student loans can help cover the costs of school, but you will need to pay them back when you graduate. Most student loans do not require any payment while you are in school, which means you do not need to worry about the payments like you would a credit card. Setting up an annual budget to cover all costs associated with school, and your monthly living expenses should help you to limit the amount you need to borrow while in school.

How to Offer a Settlement to a Debtor

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Some debtors will settle their debt if they are given the opportunity. Whenever you offer a settlement to a debtor, the right conditions must exist. Once you decide to offer a settlement you may have to negotiate the amount that you are willing to accept. Debt collectors many times purchase delinquent debt for pennies on the dollar, so just about any amount collected represents a profit. You have leeway to make the offer enticing to the debtor and make a profit at the same time.

Instructions

Determine if the right conditions for a settlement exist. If you want to offer a debtor a settlement, they must be at least 90 days past due. You must also determine what their financial status is. You may have to ask questions to see if the debtor is working, or if they are facing some type of hardship such as loss of job, foreclosure, death in family or excessive medical bills. Ask the debtor if they have any money in savings and what are their other financial resources.

Make the offer. You should make the settlement offer to the debtor. According to MSN MoneyCentral, most creditors offer settlements in the range of 20% to 75% of the balance. Make a settlement offer which is near the high extreme, such as 65 percent. There is a good chance that the debtor may counter your offer or reject your offer. This gives you an opportunity to lower your settlement offer. Make another offer in the area of 40% to 45% of the balance. This can represent a substantial savings to the debtor. Many debtors will try to secure the funds from their available resources in order to pay the settlement.

Wait for the cash. When a date is set for the funds to be received, its just a matter of waiting. You may want to send written confirmation to the debtor a couple of days after the offer is made. The letter should reiterate the amount of debt that is going to be forgiven. This helps a debtor see in writing how much they are going to save. If the total debt is $7,000 and you offer to settle for $4,000, the amount of debt forgiven is $3,000. This will serve as a reminder. Your offer should have a deadline for the funds to be received. This helps to establish a sense of urgency with the debtor. They may fear that you will rescind the offer if they do not pay by a certain date.

What Happens if You Fail to Show in Court for Credit Card Debt?

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Failing to show up in court for a credit card lawsuit has severe consequences. The judge will automatically award the credit card company a so-called default judgment. The judgment requires you to pay a specific amount of money. By failing to appear, you waived your right to defend yourself against the allegations in the lawsuit.

"The New York Times" reports that some debtors fail to show for court hearings because they are unaware of the lawsuits. Couriers usually hand-deliver lawsuits to debtors at their residences, places of employment or other public places, but some states allow delivery by certified mail or allow the courier to leave the legal papers at the debtor's last known address.

The court assumes proper delivery of the lawsuit based on information from couriers and other court officials. That allows the court hearing to proceed as scheduled. Without the defendant in the courtroom, the judge has no choice but to grant a default judgment for the credit card company. That can lead to garnishment of the debtor's bank account or wages. Bank garnishment allows the credit card company to freeze the debtor's account and withdraw the full amount of the debt in a lump sum of installments. Wage garnishment forces employers to send the debt collector a percentage of the debtor's paycheck each pay period.

Debtors who fail to show for a court hearing can file a motion to vacate the judgment. This process exists for people who really were honestly unaware of a court hearing or had legitimate reasons for not showing up for the hearing. A judge reviews the request and schedule a new hearing if he grants the motion. Debtors battling a default judgment should seek help from a consumer affairs attorney, if possible. The attorney can file the paperwork for vacating the default judgment and also contact the attorney for the credit card company to discuss a settlement.

Settlement is just one option for resolving a judgment. Usually, debt settlement leads to an agreement for the debtor to pay less than the full balance on the debt. However, a creditor holding a valid judgment may insist on receiving the full amount. Some debtors facing multiple judgments and garnishments elect to file for bankruptcy. Bankruptcy immediately stops enforcement on judgments and stops all garnishment.

How to Write a Payment Plan Request

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Many people deal with unexpected or overwhelming expenses on a regular basis. Sometimes these expenses come in the form of medical bills, taxes and credit or loan payments. When faced with a bill that is too large to handle, many people avoid paying altogether. This strategy will leave you with a lowered credit score, non-stop creditor calls and potential legal or financial penalties. Before you decide not to pay a bill because it is simply not in your budget, consider sending a payment plan request to make larger bills more manageable.

Instructions

Start your letter with a professional heading. While you may write a letter by hand, typing will ensure that your request is easy to read and understand by the recipient. Type your name and address in the upper left-hand corner of your page. Skip a line and type the date. Skip another line and type the letter recipient's name and address.

Create two lined spaces between your heading and the point at which you type your greeting. Your greeting ideally should say "Dear, (recipient's name)". If you are sending your request to a specific company and do not know who handles payment plan requests, place a call to the company and ask. If you are sending a letter to a credit card company, a state or local tax collection bureau or the IRS, you may state your greeting as "To Whom It May Concern", "Dear Tax Agent", or "Dear Account Representative."

Skip one line after your greeting before starting the body of your letter. If you have an account number or employer identification number, it should be stated before beginning your first paragraph so that the recipient is immediately aware of the account that the letter is referencing. This may be stated as "Re: Account No.: 1234-567."

Write a paragraph or two explaining that you understand that a pay is due (or overdue) and that you intend to pay the full amount. Let them know your situation and directly ask that someone from the company or agency contact you to set up a payment plan because you are unable to pay your bill in full at the present time. Provide a phone number, physical address or e-mail address where you wish to be contacted.

Line of Credit Statute of Limitations

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A line of credit works similar to a credit card, according to the credit reporting agency Experian. Lines of credit can be used to purchase goods or withdraw cash up to a pre-set credit limit.

If you pay your line of credit account on time and eventually close it, your positive payment history will be reflected on your credit reports for 10 years from the date of account closure, according to Experian. But if you fail to pay the bills on time, the federal statute of limitations on resulting negative credit reporting lasts for seven years from the date of the missed payment.

A line of credit lender can indeed sue you if you don't pay the bills as promised, warns the book "How to File for Chapter 7 Bankruptcy." But under your state's statute of limitations, a lender can only legally sue you for a finite amount of time, notes Fair Debt Collection.

If you live in Kansas and don't pay your line of credit on time, the lender can only legally sue you for five years, according to Fair Debt Collection. But if you live in Montana, then state law 27-2-202 allows the creditor eight years to sue you.

Statute of Limitations for Debt in California

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California laws create a statute of limitations on consumer debt by placing a time frame on how long creditors have to file a lawsuit against alleged debtors. One purpose of the statute of limitations is to prevent creditors from bogging down the court system with extremely old cases. It also prevents debtors from a surprising lawsuit when they thought a debt was over with years before.

Some alleged debts are verbal agreements between you and an individual or company that provides a product or services, such as hiring a maid service or repair man. Agreements with credit card companies, mortgage holders and other loans or promissory notes are written contracts and subject to a different statute of limitations than verbal agreements.

The statute of limitations for verbal agreements for payment is two years in California. Written contracts, which include arrangements with a person or company that provides you with a statement or invoice for the amount due, are subject to a statute of limitations of four years in California.

The statute of limitations for a verbal agreement commences on the date of completion for the service the creditor provided, or on the due date for payment on a product the creditor supplied. The statute of limitations for a written contract in California commences on the date of the last invoice/statement sent to you in which the creditor claims you made no subsequent payment.

The court may find that there are exceptions to the commencement of the statute of limitations. For example, if you are in prison when the statute of limitations would normally begin, the court may determine that you were unable to make payments on the debt at that time and rule that the statute of limitations did not begin until you your release from jail.

If a creditor seeks a judgment against you in court to collect on the debt you allegedly owe through wage garnishment or bank account, it has to show that the statute of limitations has not expired. You must provide documentation that shows the true date the statute of limitations commenced was earlier than the creditor reported, or that you paid the debt in full and the creditor did not apply your payment.

What Do Banks Charge to Lend Money to Consumers?

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Effective debt management is key to the success of any financial plan. Through solid debt management, you can make timely bill payments, save on interest and even leverage credit to purchase assets that generate additional wealth. As part of wealth creation, it is critical that you first think of money as a product.

In exchange for offering consumer loans, a bank collects interest income on its investment. As with any investment, the bank expects interest payments, or returns, in accordance to risk. You are likely to pay higher interest rates if your credit is less than stellar. To negotiate lower interest rates, you may agree to secure your loan with collateral. A home mortgage is an example of a secured loan. After mortgage default, the bank can auction off your home for cash to make good on the missed payments and the balance. A bank will evaluate the strength of your personal finances before setting your interest rate. The bank offers the lowest interest rates to consumers who demonstrate the ability to pay bills on time and build savings.

The federal funds rate is a benchmark for interest rates on all consumer loans. Banks make overnight loans to each other at the federal funds rate so that each bank can meet its Federal Reserve requirements. For their consumer loans, banks charge rates above the federal funds rate. The premium compensates banks for the increased default risks that arise from dealing with consumers instead of other large financial institutions. In recession, the Federal Reserve cuts interest rates to encourage people to take out loans, spend money, and make investments. When the economy recovers, the Fed favors higher interest rates to guard a growing economy against inflation.

Loans are categorized into fixed- and variable-rate loans. With a fixed-rate loan, you lock in the same interest rate until you pay off the debt at maturity. A fixed-rate loan is ideal if you are a conservative borrower, who prefers to plan his budget around regular debt payments. Alternatively, a variable-rate loan charges different interest rates throughout its term, according to the prevailing interest rate environment. You may consider a variable rate loan if you expect future interest rates to decline.

For larger loans, you are likely to owe closing costs. Closing costs help the bank process your application, hire lawyers to organize paperwork, and appraise loan collateral value. According to The Federal Reserve Board, you may owe 3 percent of your mortgage loan principal in closing costs.

How to Garnish Wages in New York

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If you have made a loan to a New York resident, and the debtor fails to make loan payments as agreed, you should make reasonable attempts to resolve the delinquency, such as mailing the debtor late notices and calling or emailing the debtor. However, if these efforts do not result in repayment of the debtor's delinquency, you may garnish his wages as long as you follow proper procedures required by New York and federal law.

Instructions

Gather evidence showing that the debt is valid, such as a copy of the contract signed by you or a representative of your company and the debtor. Also, gather evidence that the debtor is in default on the debt, such as a history of the debtor's payments and copies of late notices you have sent.

Hire an attorney to file a civil suit against the debtor through the civil court in the New York county where the debtor resides. Include evidence of the debt's validity and the debtor's default. Although you may legally file a suit without the assistance of a lawyer, you may find it difficult to navigate the complexities of filing a valid suit without an attorney.

Have your attorney direct her process server to serve the debtor with the summons and complaint. In New York, the process server must make three attempts to serve the debtor personally, or to leave the summons and complaint with another member of the household. If the process server delivers notice to a person other than the debtor, she must also mail a copy of the summons and complaint to the last known address.

Appear at the court hearing on the date stated in the summons to obtain a judgment from the court. If the debtor does not appear in court or cannot provide a valid defense to have the lawsuit dismissed, the court will issue a judgment in your favor.

Send a wage garnishment notice to a marshal with authority over the debtor's location. The marshal will send notice of the garnishment to the debtor. If the debtor does not respond within 20 days, the marshal will serve the debtor's employer with a garnishment order. The employer must begin withholding part of the debtor's earnings and sending the funds to the marshal for payment to you.

What Happens If I Don't Answer a Judgment for a Credit Card Lawsuit?

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Failing to answer---or respond to---a summons in a credit card lawsuit typically leads to a judgment against the defendant. A judgment, which is also known as a monetary judgment, is the result of a lawsuit. A lawsuit in a credit card case alleges that you failed to make payment as agreed. Judgments require payment of the card balance plus court costs and attorney's fees.

Not answering or responding to a summons waives important legal rights. A small claims court may recognize a "motion to vacate," which---if approved---annuls a judgment awarded when a defendant fails to appear. Some people miss court dates for valid reasons, and the motion allows for a new trial date. That gives the defendant time to prepare a defense or pursue an out-of-court settlement. If you are named as a defendant in a credit card lawsuit and you fail to appear, the judgment by default favors the plaintiff.

Not answering the summons also forfeits rights, at least initially, to work out a payment plan. Explaining your financial situation to the judge could lead to a monthly payment plan that you can afford. Not appearing in court to plead your case may indicate that you are not serious about managing your debts, ending any chance of receiving sympathy and help from the judge.

Failing to answer also allows the credit card or debt collector to request garnishment of your wages or bank account. The request is made through the judge issuing the judgment, with approval virtually a certainty. In her review of the case while considering the garnishment request the judge will note that you failed to answer the summons. Wage garnishment forces employers to send a percentage of your paycheck to the debt collector or card company each payday. Bank garnishment allows the debt collector to freely withdraw money from your checking account until the debt is paid.

People facing credit card lawsuits should hire an experienced consumer affairs attorney. Granted, finding a few hundred dollars to pay an attorney is often challenging. However, adequate legal advice is important even if paying for it means selling some household goods or borrowing from friends and family. At a minimum a good attorney can offer advice on avoiding garnishment---or on settling cases out of court and completely avoiding judgments. An attorney may also represent you entirely in the case, including showing up for court hearings and speaking on your behalf.

Credit Card Relief Vs. Credit Counseling

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If you have thousands of dollars in credit card debt, then you may be looking at ways to help reduce your burden, perhaps sooner rather than later. There are two ways besides opting for personal bankruptcy that you can use to improve your financial situation: implementing a do-it-yourself credit card relief strategy or by seeking outside assistance in the form of credit counseling.

You may be able to handle some if not all of your credit card problems yourself. For starters, decide not to use these cards again. Or, if you absolutely must have a credit card to cover certain monthly expenses, such as car insurance or cable service, then choose one that you will pay off every month.

You can also contact your credit card providers to ask about having your interest rate lowered. Many consumers find that they have trouble paying off their credit card debt because their interest charges are excessive. If your provider won't lower your rate, then seek out a card that will accept balance transfers and move your outstanding balance to the new card.

Look for a new card with no transfer fees. Bonus: choose a credit card offering a zero percent balance on transfers for six- or 12-months. Work on paying off all of your balances as soon as possible, beginning with the largest balance first.

Perhaps you've tried everything in your quest to seek credit card relief. If your problem hasn't improved or has worsened, then the services of a professional credit counselor may be needed.

Some states require credit counselors to be licensed while others have no such restrictions. When looking for help, you'll want to find someone who has a background in credit counseling whether they call themselves a certified public accountant, financial planner or similar professional. Ask for references and contact them for information.

A credit counselor may charge you fees or, if operating under the authority of a nonprofit organization or staterun department, you may be able to find help at no cost. In other situations you may be charged according to your ability to pay. Ask for a fee schedule, review all contracts, and don't sign up with anyone who promises to wipe out all debt for a fee. Your credit score can suffer tremendously if a credit counselor damages your credit while promising to repair the same.

While personal bankruptcy may offer you some relief from your credit card debt, choosing that avenue will also ruin your credit, perhaps for many years to come. Bankruptcy should be a means of last resort, used only after all other steps have been exhausted.

How to Reduce Debt With Creditors

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With the economy in the state that it is in, many individuals have run up thousands, if not tens of thousands, of dollars in credit card debt. A solid plan and discipline are needed, along with an acceptance of how you got into debt in the first place. Once you have these things in place, you can begin the work of reducing your debt.

Instructions

First and foremost, you need to find out what got you into debt. Download your credit card and loan statements into your budgeting software program. If you do not have budgeting software, look through your checking account statements and list all of your expenses into categories. Next, look at your credit card and loan statements and list all of your debts on another sheet of paper.

Look at your expenses and see if there is any way to reduce the spending in any area. Can you reduce subscription services like the gym, cable, magazine subscriptions or the Internet? Are you spending too much on one area, like eating out or shopping for clothes? Make a solid budget based upon lessened spending in those areas.

Call each and every credit card, loan company and subscription service that you have. See if any of the subscription services are willing to reduce your monthly fees to a promotional rate to keep your business. In addition, call each credit card and loan company and ask for an interest rate reduction.

Re-adjust your budget to reflect the lower monthly payments on the subscription services. Now, take the extra money that you have saved with your streamlined budget and lower monthly payments and put it towards extra payments on one monthly debt. Picking the smallest debt will give you the quickest reward for all of your hard work.

Pay the additional amount each month on the smallest debt until the debt is paid in full. Now, snowball the payment to the next debt. Take the amount you were spending on paying the first debt and add it to the second debt's payment. Before you know it, you will have paid that one off as well. Now, snowball all of that payment to the next debt, and so on until you are debt free.

Debt Repayment Strategy

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When you get into any kind of debt, particularly serious debt, it can seem quite overwhelming. You may have trouble knowing where to start dealing with your debt, or even have difficulty thinking about your debt. However, the first step to getting your financial situation under control is to develop strategies for repaying your outstanding debts. By understanding the basic starting points for debt repayment, you can develop workable repayment plans and greatly relieve your stress and anxiety over debt problems.

An important part of developing a personalized debt repayment strategy is understanding your financial situation. The Federal Trade Commission suggests looking at both your income sources and your mandatory expenses to gain an accurate picture of your finances. Mandatory expenses can include rent or mortgage payments, car payments, insurance payments and utility bills.

There may be areas where you can cut spending. The first step to developing a debt repayment strategy is to figure out how much you can reliably afford to use to pay down your debt on a monthly basis. Getting rid of expensive cable services, making coffee at home and eating at home instead of eating out are all areas where most people can cut expenses, says Bankrate.com.

Negotiating with your creditors regarding your debt can sometimes help you get better terms, making repayment easier. Some possibilities could include requesting a lower settlement amount on the debt, forgiveness of fees and penalties on the debt in exchange for full payment, or a reduced interest rate for the duration of an agreed upon repayment plan.

Consolidation loans are available as both secured or unsecured loans. For example, loans based on equity in your home or other collateral are secured loans, while credit cards are unsecured loans. Consolidation loans can be a way to simplify your debt repayment plan by reducing the number of creditors, interest rates and payment dates you need to keep track of. However, Bankrate.com suggests you consider loan terms carefully before choosing the consolidation option. One consideration could include whether consolidating your debts will lower the overall interest rate, making your debt repayment plan cheaper in the long run.

The Federal Trade Commission warns consumers to be cautious of companies designed to take advantage of individuals with credit problems. Promises to negotiate with your creditors, improve your credit report or even erase your debts can be accompanied by hidden fees and practices that will only deepen your financial woes. Checking with the Better Business Bureau and state attorney general's office to ensure any agency or credit counselor you work with is reputable can help you get the best advice possible in assessing your debt management plan.

Selling Personal Assets to Pay Bills

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Ask any financial planner, paying your bills on time each and every month is one of the most important things you can do to help you secure your financial future. However, many people find themselves in a pickle when it comes to paying those bills each month, and they struggle with coming up with a viable solution to eliminating debt. One of the easiest ways to generate some extra cash is to sell off some of your assets.

Instructions

Decide what you're going to sell. You need to evaluate your debt load in order to determine what you need to sell. You also need to evaluate what you have to sell. Compare prices online and determine what's the best price for your item depending on its condition. Naturally, the more valuable and the better condition your items are, the more you can ask for them. The one thing to keep in mind is that since your items are used, you will not get the full retail value for your items, so you will need to plan accordingly.

Open an eBay account. One of the easiest and most effective ways of selling your assets is to list them on eBay. Signing up for an eBay account is simple and free. Of course, selling on eBay isn't completely free. You will be required to pay a listing fee as well as a percentage of your sales price, but eBay offers one of the largest selling platforms available. Be aware that you will be expected to arrange for shipping if you sell on Ebay, so you should also factor in this cost as well.

To sign up for an Ebay account, go to http:///www.ebay.com and click on the "Register" button located to the right of the eBay banner. Complete the form and click submit. This will be your user account. To list your items for sale, click on the "Sell" button located on the upper right-hand side and follow the prompts.

If a more local, direct selling method is your preference, you can choose to sell your assets on Craigslist. Setting up your account and selling on Craigslist is completely free, which keeps more of the money that you earn in your pocket. In most cases, you won't be expected to ship your items, so this avenue may make more sense if your assets are larger.

To sell an item on Craigslist, you must first create a user account. To do ao, click on "My Account" located on the left-hand side of the screen, and then click on "Sign Up For An Account". Complete the registration form and click submit. You can create a entry by signing into your account and choosing "Post New Ad in" located in the upper right-hand corner of the My Account screen.

Take good quality pictures. Regardless of which method you choose to sell your assets, you need to offer your buyers a good look at what you are selling. Attaching quality pictures to your listings will go a long way in getting your items sold. Make sure that your item is centered in the picture and that there is no blurring, and take multiple pictures of the item to get every angle. Also, take pictures in strong lighting, but avoid glare.

How to Settle Unsecured Debt

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Unsecured debt is debt that is not secured by collateral. Some examples are bank credit cards, medical bills, student loans, personal loans and department store cards. This type of debt does not require that you put up any security for the debt, such as a home or a vehicle. In 2004, statistics show that one third of all adults have some form of unsecured debt. These numbers may have increased since then.

Instructions

Become aware of the risks. Most consumers are clueless when it comes to the risks associated with taking on an unsecured loan or credit card. A creditor may take you to small claims court to have your wages garnished if you fail to pay the debt. In some cases, companies have even sent law enforcement to recover items purchased with an unsecured credit card.

Try a debt management service. A debt management service will contact your creditors to get them to stop the harassing phone calls to your home and work. They will also get them to stop charging you late fees as well as over the limit fees and in most cases they even reduce your annual percentage rate (APR). They can even reduce your monthly payment while paying your unsecured debt off in much less time because your payments will mostly be applied towards the balance and not to the interest charges.

Offer a cash settlement. Call your creditor and explain your situation and offer to settle the debt for pennies on the dollar. Some companies would rather receive some payment rather than nothing. Most larger companies have bad debt written into their annual plan. They already figure ahead of time that there will be a certain amount of debt that will not be repaid. They take it as a loss and move on. They may take cash offers to settle debt as a way to ramp up their end-of-year revenue reports for their investors. You'll not only settle your debt, but save a lot of money in the process.

File personal bankruptcy. There are two types of personal bankruptcy, chapter 7 and chapter 13. Chapter 7 should only be used if you have nothing to lose such as a home or a car. To qualify, you most have no money left over each month after you pay your monthly expenses. Chapter 13 is recommended for those individuals who have fallen behind on their payments due to a job loss or illness and cannot get caught up. Bankruptcy laws very from state to state and will have a derogatory effect on your credit report.

Timing Tricks for the Best Way to Pay Down Debt

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Pay down your debt more smoothly by developing a strategy that times which bills you pay first and which you pay next. Follow a process of paying off each debt in an orderly fashion and, once one debt is paid, use the money that would have gone to that debt to build a bigger arsenal of money to hit the next debt. By using timing tricks like this, you can tackle your debt with little stress.

The debt snowball plan takes its name from the concept of forming a snowball: you start with a small snowball and gather snow around it until it's as big as you need it. In the debt snowball plan, you make minimum monthly payments on all debts except one, to which you dedicate as much money as you can spare. After you repay that debt, you focus your efforts on repaying the next debt on your list so that by the time you have one debt remaining, you have "snowballed" the money you saved by eliminating other debts to pay it off. Financial experts, including Dave Ramsey, advocate this plan though they disagree on the most effective way to order your list.

Though two loans may seem identical, their interest rates can make one loan cost more than the other. For a simple example, if you have two $3,500 loans, one with a 14 percent interest rate and the other with 5 percent interest, you can owe $490 in interest on the first and $175 on the second in a single year. For this reason, some financial advisers recommend paying off the debt with the highest interest first, regardless of its amount.

One benefit of paying off debt is lowering your monthly payments. So, you might order your debts by the amount of the monthly payment, starting with the largest payment first. For example, if you have three debts with monthly payments of $75, $225 and $180 respectively, put your snowballing efforts toward paying off the one that costs $225 a month first. After you pay it off, use the $225 you save every month to make larger payments on the debt with the $180 minimum due.

Though Ramsey agrees that it makes mathematical sense to pay off the debt with the highest interest first, he recommends starting with the smallest debt instead. He argues that since you can eliminate this debt more quickly than the others, it should be first on your list to encourage you to keep up the good work by tackling the others.

Which Liens Get Paid First in a Foreclosure & Why?

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When you purchase a home with a loan, the lender places a lien on the property. By way of the lien, the property becomes collateral for your mortgage. A property can hold several liens at once, and liens get paid first in a foreclosure based on the actual recording dates of each lien. With a few exceptions, the first-recorded lien (senior lien) on a property is given priority in a foreclosure sale.

A lien represents a claim to your property by the lender for the settlement of your mortgage loan. If you default on your loan, a lien gives a lender the legal right to foreclose and sell the property to satisfy your debt.

A voluntary lien against your property is one to which you have consented, such as a first or second mortgage. Involuntary liens can be attached to your property for an unpaid debt and can be done without your consent. Often times a senior lien on a property is the first mortgage, and a junior lien (subordinate to a senior lien) is any lien recorded after the senior lien, often the second mortgage or a home equity line of credit.

Regardless of the date of recording, when a lien is recorded against your home for the non-payment of state property taxes, there is only one rule: State property taxes take priority over every other lien filed against the property and are paid first from the proceeds of a foreclosure sale. Sometimes first-mortgage lenders pay the delinquent property taxes to remain in the senior lien holder position.

When the Internal Revenue Service places a tax lien on your property, the recording date is typically the most recent, so the IRS lien is a junior lien. In the case of an IRS tax lien being deleted due to lack of sufficient proceeds from the foreclosure sale, the IRS retains redemption rights to the property. Redemption rights allow the IRS to redeem the property from the new owner within 120 days following the foreclosure sale. The IRS then sells the property at a redemption sale to recover unpaid taxes.

Lenders must handle the recording of liens in accordance with the laws of the state where your property in located. The recording laws and systems exist to ensure potential lenders can determine outstanding liens on a property and the priority of each. Generally, the first lien recorded has priority, but in the event of a foreclosure, the recording statutes of your particular state become especially important. If the senior lien holder did not follow the recording statutes, the lien holder may no longer have the priority to which they would have otherwise been entitled.

Collection of Credit Card Debt in Texas

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If you are a debtor who has fallen behind your payments in Texas, you face an array of potential debt collection actions from your creditors. From simple phone calls to more complicated processes that involve lawsuits, debt collectors have different ways to collect the debt from you. Talk to a lawyer if you need legal advice about debt collections.

The simplest way a debt collector tries to collect an unpaid debt is by convincing the debtor to pay. They do this in a number of ways, but most often through phone calls and letters. Whenever a debt collector tries to collect a debt, it must comply with the Fair Debt Collections Practices Act, or FDCPA, a federal law that applies in all states. This law includes limits on collector actions, such as limiting their calls between the hours of 8:00 in the morning and 9:00 at night, according to the Federal Trade Commission.

Texas also has a state law that protects debtors from debt collectors. Whenever a credit card debt collector contacts you in Texas, the Texas Debt Collection Act prohibits the collector from trying to collect more than the actual amount of money you owe. You can also notify the debtor in writing that you dispute the debt. After receiving the dispute, the collector has to stop contacting you and has 30 days to investigate your claim to determine if it is true.

A creditor who is unable to collect on a credit card debt in Texas through persuasive efforts can file a lawsuit against the debtor. Like any lawsuit, the creditor has to notify you when he files the lawsuit. You then have a chance to defend yourself against the claim by taking such actions as filing a written response to the credit card company's claims or presenting your case before the court in a hearing.

The reason a credit card company sues you to collect on the debt is because it has no other way to get its money back. Credit cards are usually a form of unsecured debt and the creditor does not have the right to collect collateral. However, if the card company sues you and wins, it becomes a judgment creditor and is now a secured creditor. It can then use the judgment to collect the money through garnishments, bank levies or other methods.

How to Get Help to Pay Credit Card Debt When You Don't Have Any Money

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Whether you've lost your job or simply lost track of your spending, it's uncomfortable to find yourself with a credit card balance you can't afford to pay. Late or missed payments negatively affect your credit score, meaning they may cost you a credit card, auto or home loan in the future. To prevent this, take action as soon as you realize that you don't have money to pay your credit card bill.

Instructions

Call the credit card company and explain your situation. They may or may not be willing to defer your payment until the next billing cycle or waive a late fee, but you'll never know unless you ask.

Ask a friend or relative to loan you money to pay the bill, if it's still due. Only ask someone who is not struggling financially, since a friend or relative may be willing to help you even if they can't afford it.

Take out a payday loan, also called a cash advance, if you can't get a loan from a friend or relative. These loans comes with fees in addition to the amount you borrow, which accumulate if you don't repay the loan by the time you receive your next paycheck. Check your area for the company offering the lowest fees and borrow from them.

Borrow only as much as you need pay the credit card bill. Borrowing more than you need from a friend or relative may damage his trust in you. Borrowing too much from a payday lender can raise the amount you must repay in fees.

Pay the credit card bill as soon as possible. Doing so eliminates the temptation to spend the borrowed money on anything else.

Repay the loan as soon as you receive your next paycheck. This shows friends and relatives that you are trustworthy, and keeps you from having to pay added fees on a payday loan.

How to Rate Credit Counselors

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A reputable credit counselor can be invaluable in helping those who are struggling with their bills to become debt-free and more in control of their finances. The financial experts at Credit.com urge you not to rely on the results you see in your search engine when looking for a credit counselor--many of these agencies may be unscrupulous and care more about getting fees from you than solving your debt problems. Knowing just where to go and what questions to ask when you call for information can help you rate credit counselors before you agree to accept the agency's services.

Instructions

Select among one of the nonprofit credit counselors affiliated with the National Foundation for Credit Counseling. The NFCC provides services in more than 1,300 locations to around 2 million people annually, notes Credit.com. A member agency of the NFCC will also be accredited by a third-party entity, such as the Council on Accreditation, which ensures that there is adequate oversight of the credit counselor that in turn protects your interests. You can find a member agency of the NFCC by calling (800) 388-2227 or accessing its website, nfcc.org.

Ask the credit counseling service about its fee structure. The NFCC notes that there will likely be a one-time set-up fee of $50 or less and monthly service fees of $25. The set-up fee should not be pocketed by the credit counselor, but applied toward your debt. Be wary of credit counselors that operate on a "voluntary" fee basis or that pocket your set-up fee. The NFCC notes that if you cannot afford these fees, a reputable credit counseling service should offer to waive them. The NFCC notes that you may also want to request that the service provide you written proof that it is bonded or insured to protect you from fraud or the counseling service's own financial difficulties.

Inquire about the range of services and solutions that the credit counselor offers. The NFCC notes that in many cases, a debt management plan (DMP), in which consumers pay the credit counseling agency a set amount each month that is used to pay down their debt, may often be appropriate. But it shouldn't be the only solution to debt the agency offers. A reputable credit counselor should offer a variety of options, each appropriate to the consumer's specific financial situation.

Make sure the credit counselor will work with all of your creditors and not pick and choose, urges the NFCC. A reputable credit counselor will take a comprehensive approach to the consumer's total debt and find a way to address it in its entirety, rather than work only with creditors who are amenable. A top-rate credit counselor won't promise to clean up your credit, notes the NFCC, as this is impossible, if the negative information in your credit file is accurate. However, working with a credit counselor can help you slowly rebuild your credit over a period of time.

Ask how long your initial session will last. The NFCC states that most initial sessions with a credit counselor take at least 30 minutes, as any less time will result in a less-than-thorough assessment of your financial situation. The Federal Trade Commission also urges you to find a counselor who meets with you face-to-face rather than over the phone or online.

As a last measure, take the names of the credit counselors that meet the above criteria and find out what other consumers have said about them. If there are complaints lodged against the agency, they will be on file with your local Better Business Bureau or the attorney general's office in your state. The NFCC notes that it's important to find out how the credit counselor resolved the complaints before you decide to seek services.

Welcome to our website credit and debt managementr.

Tuesday, September 30, 2008

Debt Consolidation

Benefits

Drawbacks

Doing It Yourself

Monday, September 29, 2008

Debt Consolidation Loans

Dangers of Using a Second Mortgage for Debt Consolidation

Other Alternatives

Dangers of Debt Consolidation

Instructions

Sunday, September 28, 2008

Debt Collection

Collecting Funds

Debt on Books

Punitive Fees

Death Notification Responsibilities

Asset Identification Responsibilities

Debt Payment Responsibilities

Personal Liability

Instructions

Friday, September 26, 2008

Instructions

Garnishment

Exemptions

Bank Account Freezing

Considerations

Thursday, September 25, 2008

Collection Calls

State Statutes

Legal Advice

Considerations

Limitations

Length

Warnings

Wednesday, September 24, 2008

Instructions

Facts

Considerations

Misconceptions

Significance

Effects

Following a Judgment

Legality of Garnishment

Previous Garnishments

Community Property Law

Traditional Income

Tuesday, September 23, 2008

Considerations

Process

Warning

Alternatives

Instructions

Instructions

Facts

Time Frame

Significance

Considerations

Options

Warning

Types of Bankruptcies

Eiligibility

Benefits

Time Frame

Warning

Monday, September 22, 2008

Quantifying the Problem

Legislative Solutions

Individual Solutions

Other Considerations

Debt Payment Plan

Working in College

Working With Creditors

Using Student Loans Wisely

Instructions

Sunday, September 21, 2008

Considerations

Garnishment

Solutions