June 2009 ~ Credit And Debt Management

Tuesday, June 30, 2009

Methods of Reducing Debt

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Should you sell all your stuff and knock out your debt in one go, or take a slow-but-steady approach? The bottom line, when it comes to reducing debt, is that no single method is better than another. Your own situation and financial habits will help you determine what might work best for you. Regardless of the approach you take, your mountain of debt will soon look more like a small, manageable hill.

Write out all of your debts and rank them from smallest to largest. Pay off your smallest debt first by putting as much money into that account as you possibly can. Meanwhile, pay only the minimum on your other balances. Once you've paid off your smallest debt, move on to the next one. The idea is that this method will inspire you to keep up with your debt, because each small victory "snowballs" into finally conquering your largest debt.

If you have multiple debts with varying interest rates, the avalanche method could really help you save money over time. Though it doesn't provide that feeling of instant gratification that the snowball method creates, it may be a smarter move if you're paying high interest on a few of your debts. Start by paying off your debt which has the highest interest rate first, while paying the minimum on your other balances. Once your debt with the highest interest is paid off, move down to the next-highest and focus on paying it off.

If you're struggling to manage your debts and you would benefit from expert advice, a credit counseling agency may be your ticket to debt reduction. The FTC recommends choosing a credit counselor that will meet you face-to-face: this way you can ensure that the agency isn't fraudulent. Your credit counselor will help you develop a workable budget and offer solutions for reducing your debt. The agency may suggest you enroll in a debt management plan (DMP), a strategy in which you pay the agency a set amount of money each month and it distributes part of the money to each of your lenders.

Before you start throwing the big bucks at your debt, ask your lenders for an interest rate reduction. If your credit's in good standing, you may get just what you wanted --- and you'll save money in the long-run. CNN Money suggests taking advantage of promotional offers on other credit cards (like 0 percent introductory rates or low-fee balance transfers). Transfer part of your balance over to a new card, pay that balance off and then transfer more. If you're not afraid of drastic measures, consider selling your car, downsizing your home or selling other high-ticket items. Some people may acquire enough money to pay down debt by taking on a second job for awhile. For a gentler approach, keep track of your weekly expenses. Then, the following week, cut down on those expenses. Apply the money you saved towards your debt (MSN Money calls this the "snowflake" method).

How to Get My Student Loan or Loans Out of Default Status

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Student loans are considered to be in default if you have not made payments in 270 days if you make monthly payments or 330 days if you are on a payment schedule that includes less-frequent payments. In either case, default is a serious situation that will affect your credit score and demands immediate attention.

Instructions

If you've received a notice that your loan is in default, contact the agency or lender that sent the notice. Explain why you haven't been making payments. Ask what repayment options are available.

You have several options for getting your loan out of default. The first is to pay off your loan in full. But, of course, if you're in default it's unlikely you have the resources to do so. You can discuss a repayment plan with your lender.

Many lenders will consider one of several potential repayment plans, according to the Federal Student Aid ombudsman. These include making fixed monthly payments; graduated monthly payments that start low and gradually increase; extended repayment, which reduces the monthly payment but increases the term of the loan; income-sensitive payments that are calculated based on a percentage of your monthly income.

Other options include rehabilitating your loan or consolidating your defaulted loan. Rehabilitating your loan involves setting a new, 10-month payment plan. Consolidating your loan involves creating a new loan that pays outstanding balances on more than one loan and sets a new single loan with a fixed interest rate and new terms.

Talk to your lender to see if you qualify for payment relief. Payment relief takes several forms. Deferment temporarily suspends loan payments in certain situations, such as unemployment. Forbearance is a temporary reduction or postponement of payments when you experience financial difficulty.

How to Manage My Checking Account Online

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Managing a checking account online gives you 24-hour access to information about your account. Virtually all banks and credit unions offer online banking, allowing you to easily view deposits, debits, credits and other transactions, such as money transfers. Some banks even offer immediate online help from a live customer service representative during certain hours. People with online checking accounts can also perform important online functions related to their account, such as ordering a stop payment on a check.

Instructions

Enroll in online banking with your bank or credit union. Call the customer service number on the back of your debit card. Ask for customer support online banking. Explain to the representative that you wish to enroll in online banking and need information on how to begin. Get the web address and brief instructions from the representative. Then visit the online banking site to enroll. Otherwise, visit the bank to open an account and learn about online banking.

Use your checkbook register to make paper notes of transactions such as checks you write or debit card charges. Keeping a list allows you to compare use of your checking account against information shown online. For example, online banking will not show outstanding checks. But your paper register will serve as a reminder.

Review the online account to view your current balance, verify withdrawals and view images of paid checks. Also activate options for receiving free email alerts, such as when a specific check is paid or your balance drops below a certain level.

Track your spending by activating features for managing your budget online. Features vary depending on the bank or credit union. Typically, online checking accounts allow the user to track spending in categories such as groceries, gas and utilities. Many online checking accounts also allow for paying bills, such as credit cards and utilities, electronically.

What to Do When a Builder Goes Bankrupt?

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As the economy declines, the risk of homebuilders going bankrupt leaves many buyers stuck with unfinished homes that they cannot occupy for months. For future homeowners, checking a builder's financial history, performance and projects remains their best option. Other ways include the addition of escrow accounts or "springing" clauses to strengthen homeowners' contractual rights. Contractors and subcontractors can accomplish the same goal by asserting a lien against the property to recoup their own losses.

Neumann Homes' 2007 collapse shows how homeowners suffer when builders go bankrupt. When Neumann Homes sought Chapter 11 bankruptcy protection, the company owed about $286.9 million. In this situation, secured creditors with the right to foreclose on property get paid before homeowners -- who are classified as unsecured creditors. However, unless Neumann's properties sold spectacularly well, the homeowners likely would get nothing and find themselves stuck with an abandoned or incomplete home.

When homebuilders go bankrupt, the homes stay empty until another contractor completes them. This leaves buyers unable to move in, waiting for months -- or even years -- to get their deposits back. Homeowners struggling to fix problems like leaking roofs can seek the new contractor's help, if one emerges to complete the project. If the new contractor's decision is negative, the homeowner must foot the bill himself.

Depending on their state's law, contractors and subcontractors can assert lien rights against bankrupt homebuilders. Variously known as artisan's, construction, materialmen's or mechanic's liens, the amount depends on the value of goods or services provided. This allows contractors to press repayment claims against the property, as long as they satisfy their state's laws. In states like Washington, homeowners can be held liable for these costs -- even if they have paid the homebuilder in full.

Prospective homeowners can seek two contractual provisions to protect their rights. One method is putting the money in a third-party escrow account, which allows the deal to end if a bankruptcy occurs. Without that language, homeowners slip to unsecured creditor status. Homeowners can also request a "springing provision" in their contracts. This language allows them to walk away if the homebuilder files for bankruptcy.

The collapse of Neumann Homes underscores the need for intensely vetting builders before any money changes hands. By the time it filed for bankruptcy, Neumann Homes had pledged 22 projects to eight major lenders -- creating a debt load too crushing to overcome, "Bloomberg Businessweek" reported. Homeowners should visit building sites before signing a contract. If a building company is public, an online search can determine how well they are doing in different markets.

Texas Bill Collection Statute of Limitations

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A statute of limitations in civil cases sets a deadline by which a lawsuit must be filed. If a creditor or bill collector's lawsuit is filed beyond the deadline, the debtor is entitled to defend himself by asserting the statute in court. The time period for the statute of limitations in Texas depends on the type of lawsuit that is filed; however, for debts resulting in bill collection cases the limitation period is usually four years.

Texas collection lawsuits based on bills for goods or services are governed by the statute of limitations set forth in the Texas Civil Practice and Remedies Code Section 16.004. The limitation period begins to run four years from the date a "cause of action" accrues -- which is generally defined as when the debt is declared in default. The four-year statute of limitation applies to any debt payable in cash regardless of whether the debt is based on a written or oral contract, or from an open-end account, such as a credit card.

A collection lawsuit that is timely filed and made into a judgment effectively resets the statute of limitations on the debt. As a rule, a Texas judgment is valid for 10 years from the date it was made. Within that 10-year period, the judgment creditor can obtain a writ of execution from the court to use such collection methods as wage garnishment and bank account levies. From the date the writ of execution was issues by the court, the judgment debtor has another 10 year to collect on the judgment. A judgment creditor can effectively keep the judgment valid indefinitely by obtaining a new writ before 10 years expired on an old writ. However, if no writ is issue in a 10-year period of time, the judgment is considered dormant.

A unique aspect of Texas law is the possibility of reviving a dormant judgment after 10 years lapse without a writ of execution being issued or the judgment otherwise satisfied. From the date the judgment became dormant, the judgment creditor has two years to file an action with the court requesting that the judgment be revived. If the court grants the judgment creditor's request, a new 10-year limitation period will begin.

Texas law also imposes a special statute of limitations on debts incurred by a person prior to becoming a Texas resident. Texas Civil Practice and Remedies Code Section 16.067 prohibits a creditor or bill collector from suing a Texas resident for a debt that was incurred in another state and is barred by that state's statute of limitations. For example, some states impose a two-year statute of limitations on oral contracts and credit card debts. Even though such a debt may not be expired under the four-year statute in Texas, no lawsuit can be pursued on the debt in Texas if the two-year statute already expired.

Will Credit Card Companies Settle for Less Without Hurting My Credit?

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When a person owes a significant amount of money to a credit card company and becomes late in paying the debt back, he has several options. First, he can pay back the money he owes. Second, he can allow the debt to remain delinquent and face the potential of legal action from the creditor. Or, third, he can attempt to settle the debt with the company. In the event of a debt settlement, his credit score will likely suffer severe harm.

When a person settles a debt for less than the full amount owed on the debt, this settlement is usually reported to one or more credit reporting agencies. These agencies use information about a person's history of lending to give him a credit score. If the original loan was reported to a credit reporting agency, then the disposition of that loan will also be recorded on the report. Settlements are noted in these reports under each individual debt.

The settlement of a debt, although it will generally save the borrower money, is considered a negative event by credit reporting agencies, as the lenders who issued the settled debts were not paid back in full. When a person fails to pay back a loan in full, even if it is with the consent of the lender, credit reporting agencies view the borrower as at greater risk of defaulting, leading them to downgrade his score.

When a settlement is noted on a credit report, the debt that has been settled is labeled with a notation like "partial payment accepted" or "settlement." However, this notation will only appear if the credit card company that settled the debt reports the debt as settled to the credit reporting agency. Technically, a credit card company has no obligation to report the debt as "settled" to the credit reporting agency; instead, it could report the disposition of the debt in a way that is more favorable to the borrower's credit rating.

When negotiating a settlement with a credit card company, a borrower may make one of the conditions of the settlement that the company report the debt as "paid in full" to the credit reporting agency. When a delinquent debt is reported as "paid in full" instead of "settled," much less harm is done to the individual's credit score. While some credit card companies will be willing to do this, others will not.

Debt Consolidation Tips

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If you are in a great deal of debt, then you know the frustration that comes with trying to climb your way out. Aside from debt being harmful to your financial and personal life, debt itself actually costs you more money in the form of interest rates. Debt can be tough on people mentally, causing undue stress and anxiety. Debt consolidation starts with budgeting and better spending practices and is completed by leveraging your assets and credit transfers to interest-free opportunities to attain a more comfortable financial situation.

Budgeting includes tracking your income and expenses, spacing out lump sums of money over time and looking into the future to predict what income you will need.

To start a basic budget, you can either use a pen and grid paper or spreadsheet software such as Microsoft Office Excel. Write in the months of the year in cells across the top of the page from left to right. Down the left-most column, type in your expenses such as your car payment, utilities bill and rent.

Begin tracking your income and expenses by looking at bank records (if you make purchases on your debit card) or by saving receipts for everything you purchase and adding them into your budget at the end of each day.

Using a budget will give you an objective view of your finances, with the idea that you should have extra money left at the end of each month that can be redirected toward your debt.

Using your home to take out a debt-consolidation loan is one way to consolidate your debt. Discuss this with a bank loan officer. A list of things you need before talking to a loan officer include: three months of pay stubs, tax returns from the previous two years, proof of homeowners insurance, bank information such as your monthly bank balance and checking account number and other information about your home such as the square footage.

Your loan officer can help you simultaneously refinance your home and add all or some of your credit card debt into the new home loan. This effort can lower your monthly payments and help you pay less interest overall.

Credit transfers can be helpful if you are aware of some pitfalls in doing this. A credit transfer is the moving of debt from high-interest credit cards to low-interest or zero percent interest credit cards. To transfer a credit balance, simply talk to your personal bank or apply online to one of many available credit card companies such as Chase, Discover Card or Citibank. View the details of the credit offers and make sure you can transfer credit card balances interest-free for at least the first six months and without a transfer fee. If your application is approved, you will be able to transfer your credit balances and lower your overall monthly payment.

There is a warning associated with credit transfers. While a zero percent offer seems wonderful, you have to make all of your minimum payments on time or your new credit card company reserves the right to increase your interest rate, and you could find yourself right back where you started, or worse.

How to Negotiate Charge Offs With a Collection Agency

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If a creditor is unable to collect a debt from a consumer, the creditor may label the account as a charge-off. When a consumer becomes seriously delinquent on a debt, the creditor may send the past due account to a collection agency--and the collection agency will attempt to collect the debt. If you currently have a charged-off account with a collection agency, you should try to pay off your balance as soon as possible. Learn the proper way to negotiate charge-offs with a collection agency.

Instructions

Contact the collection agency to discuss your options. Be honest with the collection agency about your current financial situation. The collection agency may allow you to settle your charged-off balance for a fraction of what you owe; or you may be able to negotiate a reasonable payment plan with the agency. Be sure to find out if the collection agency will delete your delinquent account information from your credit report when your balance is paid in full.

Ask the collection agency for a confirmation letter. Once you have agreed to a settlement offer or payment plan, be sure to ask the collection agency representative to send you a letter stating the terms and conditions of the agreement. The letter should confirm your current balance, payment due dates and specific details about the payment arrangement.

Submit your payments in a timely manner. It is important that you follow the payment schedule and submit all of your payments by the appropriate due dates. Contact the collection agency if you are going to be late with a payment.

Make the final payment on your account. Once you submit your last scheduled payment to the collection agency, the agency will consider your account paid in full. Ask the collection agency to send you a letter confirming that you met the terms of the agreement and that you made all the required payments on your charged-off account.

Verify your account information with the credit bureaus. Give the collection agency at least 30 days to submit your payment details to the credit bureaus. You can obtain a free copy of your credit report from the three major credit bureaus (TransUnion, Experian and Equifax) by visiting AnnualCreditReport.com. Review your credit reports and make sure that your charged-off account information has been deleted or updated to Paid as agreed or Account closed, paid as agreed.

The ABCs of Avoiding Bankruptcy

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Filing bankruptcy is one way to deal with your overwhelming debts. By means of a bankruptcy, a court may decide that you're no longer liable for your debts. Bankruptcy can help stop harassing creditor phone calls and provide you with a fresh start. However, bankruptcies have severe consequences, and you should file only as a last resort. Know your options for avoiding bankruptcy before contacting an attorney.

Filing bankruptcy has a major impact on your credit score. According to the Consumer Credit Counseling Services, a bankruptcy can knock 100 or more points off credit scores. And with bankruptcies staying on credit reports for 10 years, filing for protection can negatively impact approvals for mortgages, auto loans and other types of loans. Some lenders will reject an applicant's request if he has a bankruptcy in his recent past, or charge a higher interest rate on the loan.

Settling your present debts with your creditors or lenders is one way to avoid a bankruptcy. This process works by contacting your creditors and mentioning your plans to file bankruptcy. If you file bankruptcy, the creditor or lender may never recoup the money you owe. Thus, some are more ready to negotiate a settlement -- something is better than nothing. Offer an amount to settle your debt. Your lender or creditor can either accept your offer or present a counteroffer. Reaching an agreement means your creditor or lender will accept an amount that's less than the balance owed to satisfy the debt.

Bankruptcy is an immediate solution to high debts. But rather than eliminate debt and ruin your credit in the process, review your debts and create a plan to eliminate debt without filing bankruptcy. Yes, this method of elimination may take longer and require self-control. But instead of harming your credit, you'll pay off debts as agreed and increase your credit score along the way. Look at your budget to see how much you have left over after paying bills. If there isn't any income, look into part-time employment opportunities to bring in additional funds. An extra $300 a month can pay off a $10,000 credit card balance in approximately 30 months or less than three years.

Avoiding bankruptcy and paying off credit cards, medical bills and other debts may call for drastic measures. If bill collectors or creditors constantly call your home or threaten legal action, consider simplifying your life to create additional income and eliminate debt. Having ample equity in your home can present an opportunity to tackle debt and avoid bankruptcy. This involves selling your home and using the proceeds from the sale to satisfy your debts. You can then purchase a home with a cheaper mortgage or find a rental home.

How to Report Tradeline Accounts to Credit Agencies

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Companies report trade line accounts to the credit reporting agencies on a regular basis. A trade line will list all of a debtor's account information such as balance, date last paid and high credit. If you want to report such items to the agencies you have to meet certain requirements and qualifications. A representative from the credit reporting agency may have to visit your business and perform a physical inspection to make sure you have designated office space. You should be a member of the credit reporting agency you want to report to.

Instructions

Fill out a membership application and a data transmitter form and return them to the credit reporting agencies you would like to report to. The credit reporting agencies will have these on hand.

Convert your data to Metro 2 format. Contact a credit report servicing company such as Data Linx if you need help with this process. They will take you through the steps. Credit reporting agencies generally use the Metro 2 system to receive data.

Submit all of your data to the credit reporting agencies of your choice, and they will download it and review it. Your data will be submitted through a secure https connection. Data is normally submitted on the last day of the month.

Call the credit reporting agency to see if they received your data.

Once the data is received, the credit reporting agency will now be able to view all of your data on their system.

The Need for Debt Management

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The need for debt management is underscored by its avoidance of out-of-control costs and prudent addressing of existing debt concerns. Debt management plans that use credit-counseling services often lead to negotiation of lower interest rates and debt repayment schedules. The need for debt management is premised on advantages of financial health such as improved budget allocations, peace of mind and enhanced financial planning.

Debt levels are measured using the debt-to-income ratio and debt ratio. The debt-to-income ratio is used in debt management by dividing total debt by total income. Similarly, the debt ratio measures debt by dividing debt by asset value. For example, if an individual has $100,000 in debt and owns $45,000 worth of assets, the debt ratio is 2.22. Smaller debt-to-income ratios and debt ratios indicate stronger debt management and lower risk to lenders.

Debt management techniques help address the need for debt management by identifying and tackling financial issues caused by debt. For example, Consumer Credit Counseling Services offers a free online financial health quiz, household budget calculator and debt-to-income calculator to help debtors determine their debt situation. Once a debt profile has been determined using tools like these, a debt management program can be implemented.

Budgets with low debt allow for greater investment potential.

Financial planning with strong debt management often requires a good budget. If a budget does not provide for good asset allocations, this may indicate a need for debt management. For example, if too much monthly income is being used to pay off debt, that debt may be restructured for a lower cost. Budgets that incorporate debt management improve the probability of higher savings that can in turn be invested for more potential income.

Revolving credit is also a form of debt, and failure to pay this type of debt and other debt can negatively affect your credit score. When this happens, the need for debt management increases because the consequences of falling further behind on debt can cause further damage to a credit report. Sound debt management can help improve credit score by paying down credit debt, increasing credit limits and making use of credit opportunities such as lower rate credit incentives.

Bankruptcy involves thorough documentation of debt.

In the case of Chapter 7 and Chapter 13 bankruptcies, the need for debt management is legally required. According to the U.S. Federal Trade Commission, pre-bankruptcy credit counseling and debtor education are obligatory in bankruptcy proceedings. Bankruptcy itself is a form of debt management most often used as a last resort, or when all other attempts to manage debt do not render a debtor able to adequately pay off arrears.

How to Stop Zombie Debt

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Zombie debt can come back to haunt you. It's a debt that you may or may not have defaulted on in the distant past. Debt collection companies buy these old debts for pennies on the dollar and then harass you, trying to make you pay--raising this debt from the dead. In many cases, though, you are no longer required to pay this debt--it may have been debt due to identity theft, have been cleared through a bankruptcy or have passed the statute of limitations. Take care when dealing with zombie debt collectors, as working with them could potentially harm your credit score.

Instructions

Ask for the debt collector's address. You shouldn't try to negotiate with zombie debt collectors on the phone. If you get a collector calling about a debt that you don't remember or a debt that you're not sure you really owe, simply ask the caller for the company's physical address. You want to deal with them in writing.

Send a verification request. In order to be valid, the debt collector must send you information to verify that the debt is yours, including information about when you incurred the debt and where the debt came from. Do this through registered mail, so that you can verify that the company received your request. In this letter, do not acknowledge that you owe the debt.

Check the statute of limitations. While it varies by state, the statute of limitations for most states is seven years. If the collector is trying to collect a debt older than this, paying even a part of it is not in your best interest because it will show up on your credit report.

Negotiate with the company if the debt is legitimate. If the debt is indeed yours and the statute of limitations has not yet passed, you may want to negotiate with the company to pay less than the amount owed. If you feel nervous about this, you can get a lawyer involved in the negotiation process.

Send the collection agency a cease and desist letter. If the company is harassing you about debt that is not yours, send the company a letter requesting them to stop contacting you. Do this with registered mail. If they contact you again after you've sent this letter, you can take legal action against them.

Debt Management FAQ

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When you decide to start managing your debt, you develop some questions about what you should do and how different events affect your credit. It is important to have the answers to all of your questions before you start any debt management program.

According to the Wall Street Journal, when you pay your credit card bills has a significant effect on your credit score. Paying your bills on time ranks just slightly higher than making sure you pay at least your entire monthly minimum. To pay your credit bills on time you may want to consider signing up for your creditors' automatic billing service. This service will deduct your payment from your checking account automatically each month on your due date. If you know you will be making your payment late, then contact your creditor and let them know exactly when you will be making your payment. If you are up front with your creditors they may decide to not report your payment as late. If you are habitually paying late, then that will show up on your credit report.

Yes. Include your children as early as possible in the process of paying bills to make them familiar with it as they get older. You do not need to give your children your specific numbers if you would prefer not to, but giving your kids the numbers can help them to appreciate the way that money can be spent on bills. The more children are exposed to the intricacies of bill-paying at a younger age, the better the chances are that they will respect the responsibility of paying bills when they get older.

It is possible to negotiate a lower interest rate on your credit cards without having it affect your credit score. One effective way of winning this negotiation is to tell your creditor that you are going to transfer your balance to a card with a lower interest rate if they do not help you out. It does not hurt your credit to ask for a lower interest rate, and you can save a lot of money on credit debt by having your creditors lower your interest obligation.

In many cases a creditor will not close an account unless you ask them to do so. Wait at least 30 days after you make your pay-off to see if you may have left a small balance behind. Once you have completely satisfied your balance, send the creditor a standard mail letter requesting that your account be closed. Include your account number and address in the letter and keep a copy of the letter for your records. Until you have an account closed, the credit limit available will continue to count against your credit score. Closing the account removes it completely from your credit report and can help to raise your credit score.

There are two ways you can consolidate debt. You can secure a personal loan and pay off your debt with that loan. You can also use the equity in your home to get a home equity loan and use that to pay off your debt. When you consolidate debt without the assistance of a debt consolidation agency, then it will have a positive effect on your credit. When you use a debt consolidation agency, there is a note put on your credit report that you are going through debt consolidation and your credit score drops while you are in consolidation. If you can deal with your debt on your own, then that is the best method. If your debt is taking over your life and you cannot get financing to consolidate it on your own, then a debt consolidation company is a legitimate option.

How to Remove Your Name From a Cosigned Automobile

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Co-signing on an automobile is a risky proposition. Many parents co-sign for adult children buying their first new car after college. Some people even co-sign for friends or co-workers. The result can be disastrous because lenders fully expect the co-signer to pay the full balance on the loan if the primary borrower defaults. Options for removing your name as a co-signer on an auto loan are extremely limited.

Instructions

Monitor the payments on the loan. This does not remove your name as a co-signer but could alert you to possible financial trouble for the co-signer. Or you may discover that the co-signer seems to be doing fine financially and there is no hurry to have your name removed from the loan. Contact the bank to ask how you can receive updates on the loan as the co-signer.

Convince the co-signer to refinance the loan into his name only. This is the only way the bank is going to let you out of the loan. The bank has no incentive to remove you as a co-signer unless the primary borrower is capable of qualifying for a refinancing on his own.

File for bankruptcy. This is obviously an extreme measure and should be avoided unless you have other pressing financial problems as well. Filing for bankruptcy will strip away your obligation as co-signer on all debts.

Can I File Bankruptcy on My Repossessed Mobile Home?

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It is possible to file for bankruptcy due to debt from mobile home repossession. A mobile home is a secured debt, with the mobile home itself serving as collateral for the loan. The lender has the right to repossess the mobile home if you stop making payments. However, the problems often don't end there. The lender will sell the mobile home at auction or through a private sale and hold you responsible for the balance if the mobile home sells for less than the balance on the loan.

The lender may pursue a court action called a "deficiency judgment" if a balance remains after the sale of the mobile home. The process requires filing of a civil lawsuit, which the lender is virtually guaranteed to win in court. After hearing the case the judge will issue a deficiency judgment requiring you to pay a specific amount of money to the lender. With the collateral for the loan stripped away the remaining balance becomes an unsecured debt --- the same as a credit card balance.

If you fail to pay the judgment the lender may seek garnishment of your bank account or wages. Bank account garnishment freezes your account while the lender or debt collector withdraws money to satisfy the judgment. Wage garnishment forces your employer to send a percentage of your paycheck to the lender each payday. Usually lenders or debt collectors are open to payment plans or a settlement of the deficiency judgment. Garnishment is the next step if you fail to work out payment arrangements.

People facing judgments and garnishment often file for bankruptcy as a result. A provision in bankruptcy called "the automatic stay" provides immediate relief from all debt collection, including garnishment. The judge signs the order upon receipt of your bankruptcy application, and that immediately enacts the stay.

Chapter 7 bankruptcy is the simplest form of bankruptcy and eliminates deficiency judgments and other unsecured debts in about three or four months. Generally, only people with low incomes are eligible for Chapter 7 due to income restrictions that vary by the state. Chapter 13 bankruptcy, which is also an individual form of bankruptcy, is open to all debtors regardless of income. The disadvantage to Chapter 13 is that it is not a quick process. Chapter 13 participants must complete a payment plan lasting three to five years. During the period they may pay all of their unsecured debt, a percentage, or nothing at all depending on their income and the bankruptcy agreement.

If I Default on an Internet Payday Loan, Can I Make Arrangements?

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Internet payday loans operate similarly to brick and mortar payday loan operations and follow the same laws. If you took out a payday loan over the Internet, then on a prearranged day, usually your payday, the lender will take the money to cover the loan directly from your bank account. If the money is not in your account, you are considered in default. Since payday loans can have an annual percentage rate of over 300 percent, the interest can accumulate quickly once you default.

Research the laws in your state concerning payday loans. Even though the lender may be located in a different state, it must follow the consumer protection laws of your state. Some states have interest rate caps on payday loans. If the annual percentage rate for the loan is more than the cap amount, the loan is unenforceable. Some states require that payday lenders make payment arrangements with you if specific circumstances are met. Both the caps and the payment arrangement requirements vary from state to state.

Just because the loan was with a particular lender does not mean that lender has the right to collect the debt. The debt may have been sold to a collection agency, or a collection agency might be attempting to collect the debt on behalf of the lender. Determining who holds the debt and who has the right to collect it lets you know with whom you should make payment arrangements. You do not want to pay the wrong entity. Once you determine who holds the debt, call the creditor and ask about payment arrangements. The creditor might say no, but asking does not hurt.

In the worst case scenario, the payday lender or a collection agency will sue you. If it can prove that you owe the money, it will be granted a judgment against you. Depending upon the laws of your state, this allows the lender or agency to garnish your wages and levy your bank account. Fortunately, courts will usually allow you to make payment arrangements as long as the payment amounts are reasonable. If you receive notice of a hearing, go to court at the appointed time. Attempt to negotiate payment arrangements with the lender's attorney and have the judge approve any agreements.

You should always pay your debts if you can. Not paying them results in a lower credit score, which hurts your ability to borrow more money and possibly secure employment. However, do not enter into any payment arrangements that you know you cannot afford to make. Lenders have a limited time to sue you for the debt. The time period varies between states but is normally between two to five years. If you acknowledge, either in writing, a recorded phone conversation or by making a payment, that you owe the debt, the time for the lender to sue resets. If the lender runs out of time before filing a lawsuit against you, it cannot collect on the debt.

When Does a Credit Card Charge Off Debt?

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If you haven't made a payment on your credit card in a long time, eventually the credit card company will charge off your account. A charge-off can have significant long-term consequences for your financial health.

Some people think that charged-off debts are somehow eliminated and that they don't have to pay them. This is untrue. "Charge-off" is an accounting term that describes a debt that the creditor doesn't think is going to get paid. The creditor can still try to collect the debt, however, or it may decide to sell or assign the debt to a collection agency.

Charge-offs on your credit report can hurt your chances of getting credit and can seriously damage your credit score. You may also be liable for paying taxes on any charged-off credit card debt--your credit card company may report the charge-off as a loss, and issue you a 1099-C form, which you then must report to the IRS as taxable income.

Credit card companies generally charge off accounts six months after the account was last current. A charge-off can remain on your credit report for seven years.

Should I Buy a New Car or Pay Down a Line of Credit?

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Balancing your debt responsibilities isn't always easy to do, especially when you're considering a new purchase. If you have debts, such as a line of credit, and are considering a new car, you need to carefully evaluate your finances before deciding on what to do. Talk to a financial adviser if you need help planning out your finances to determine if you can afford a new car.

When you're deciding whether or not to make any new purchase -- be it a car, house or any other significant expense -- you should judge the potential purchase in light of your current financial situation. If you plan on buying a new car with a car loan, for example, you need to take into consideration all your other obligations as well, such as your mortgage payments or rent, credit card payments and any other obligations you have.

A good way to evaluate how much you can afford to pay for a car is to calculate how much money you earn versus how much money you pay on your debts, known as a debt-to-income ratio, or DTI. To determine your DTI, you need to determine your gross monthly income and compare it to how much you pay in debt each month. For example, if you earn $4,000 a month and pay $800 in total debt payments, your DTI is 20 percent. According to LendingTree, lenders prefer that you keep your DTI to 36 percent or less.

Another factor you should consider when determining if you should buy a new car or pay off a line of credit is the depreciation involved in a new car purchase. According to Bankrate, a new car typically loses much of its value as soon as you buy it, known as depreciation. While cars generally lose about 15 to 20 percent of their value each year, buying a new car and driving it off the lot can cost you more than 20 percent of the car's value.

You may need a car regardless of your financial obligations. For example, if your current car breaks down, you may need to replace it to keep your job or meet other needs. In these situations, you need to evaluate your financial needs versus the cost of any car you're considering. In many situations, purchasing a used car is usually a better financial option than purchasing a new car as it can cost much less yet still meet your needs.

Loan Benefits for Vietnam Veterans

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Vietnam veterans, like all veterans of the U.S. armed forces, are entitled to certain medical and financial benefits. The government department in charge of dispensing those benefits is the Office of Veterans Affairs, or VA. All veterans should contact their local VA office to ensure they are taking full advantage of the services offered.

The Department of Veterans Affairs is not a direct lender. Instead, the government joins with approved lenders to offer qualified veterans government-sponsored loans. Such lenders must pass rigorous standards of lending before they are qualified to lend under the VA banner.

In order to take advantage of a VA home loan, veterans must fill out VA Form 26-1880, or a Request for a Certificate of Eligibility for Home Loan Benefits, and send it in to the Winston Salem Eligibility Center. While veterans can receive such benefits without completing this process, confirming your eligibility with this form expedites the process.

Most veterans are qualified for one home loan per property. For example, if you are a veteran and wish to buy a home, you would fill out your eligibility form, send it in, and complete a VA mortgage loan with an approved lender. If, in the future, you decided to sell that property and move elsewhere, it is possible to get your VA Home Loan Eligibility reactivated so you can once again take advantage of the government-sponsored programs.

Surviving spouses of military personnel who died while on active duty are entitled to the same benefits as other veterans. While the paperwork is more complicated, surviving spouses should contact their local VA office to arrange for VA loans and other benefits.

If you are a veteran with a VA loan on your property and you loan is foreclosed on, you won't be eligible for another VA loan. There is generally no appeal for these, but they can be reviewed case by case. It's important to remain in good standing with your lender because it is a direct arm of the federal government and the Department of Veterans Affairs.

How Much Does a Judgment Hurt Your Credit Score?

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Judgments may have a profoundly negative impact on your credit score, as they will not only lower it but will stay on your credit report for a number of years. Avoiding judgments is thus one of many ways to obtain good credit. There are a number of ways to remove or dispute credit scores on your credit report.

A judgment is a decision made by a court regarding debts owed to a creditor. It is a way of legally enforcing a debt. After the debt has gone to a collection agency, you have 30 days to object to the judgment. The suing party must give you 30 days notice in order to comply with the Fair Debt Collection Practices Act.

Up to 35 percent of your credit score is affected by your payment history. Aspects that lower your credit score based on credit history may include late payments, liens, bankruptcies and collections as well as judgments. Credit scores are calculated differently depending on the credit rating agency. However, the bigger the judgment, the more the credit score will decrease. The statute of limitations on judgments varies by state, however they can last up to 20 years. Furthermore they may be renewed at anytime, and therefore may stay on your credit file for life. It is important to avoid judgments at all costs, as it may potentially impact your credit score negatively for a long time.

A judgment may be removed from your credit report by means of settling the debt with the creditor. This is known as "dismiss via settlement." If the debt is valid and within the statute of limitations, then you may repay the debt in full or negotiate a percentage of repayment with the creditor. Any repayment terms with the creditor should ideally be put in writing, which should in turn be signed and dated with the judgment creditor. If your credit rating remains the same after settlement, this document may be used as proof. Your credit rating should change within 45 days.

A "motion to vacate" is used when the debtor believes that any judgment is either filed in error. This may include debts that have never been incurred, or judgments that have been served in violation of the Fair Debt Collections Practices Act. A lawyer is usually needed when removing a judgment via motion to vacate. Not only will the judgment be removed from your credit report but you will not have to pay back any of the debt.

The Downsides of Credit Cards

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People seldom pay with cash anymore. Stores, both online and offline, post the logos of the credit card brands they accept, and these days, you are surprised when a store does not accept your preferred card. Credit cards allow people to make purchases by sliding a card or typing in information. Although credit cards are convenient, there are downsides to using them. They are a little too convenient, and this convenience comes at a price.

If you go out to the store and you have a pocket full of cash to spend, you know that when your pocket is empty, you are out of money. When you use a credit card, you cannot physically count the money you are spending in your hands. This makes it more difficult to keep track of the money you are spending. As a result, people are often inclined to spend more money with credit cards than with cash.

Credit cards allow you to borrow -- that is, buy now, pay later. If you pay with a debit card, you know that you have a set amount of money in your bank account. You put those funds into that account. Those funds are your hard-earned dollars, and you are more inclined to spend those plastic dollars wisely. Credit cards provide you with the ability to make purchases you could not afford without credit, and you can make payments on those purchases. Some people abuse this ability and get themselves into financial trouble.

The interest on credit cards is incredibly high. A major credit card company advertises a card with a variable APR (annual percentage rate) of between 13.99 and 22.9 percent as of publication. This rate is higher than an average student loan, bank loan or auto loan. Many consumers pay only the minimum payments on their credit card. The Bankrate.com website examines minimum payment situations and, in one example situation, the consumer had a $3,000 balance, a $72.50 minimum payment and a 17 percent APR. In this situation, it would take that consumer 220 months to pay that balance off, and he would pay $3,690.85 in interest charges if he paid only the minimum payment. The only way to avoid high interest charges is to pay the balance on the card at the end of each month. Many credit cards also attach annual fees and late payment fees.

When you use a credit card, you are placing yourself in debt to the credit card company. Debt should only be taken on when absolutely necessary, and no one should take on debt frivolously. When a consumer takes on more debt than he can handle, he stops paying his bills on time. This leads to a poor credit rating. With a poor credit rating, the consumer cannot receive additional credit for a home loan, an automobile loan or a bank loan.

Can I Get My Credit Report More Than Once in a Year?

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Each consumer has the right to receive one free credit report from each of the three credit reporting bureaus every year. You can check your credit report with a particular bureau more than once each year, but you will have to pay a fee. Regardless, multiple checks are a smart way to protect yourself from identity theft and other fraudulent activity that can harm your credit rating.

Free credit reports are available from the Annual Credit Report website. This authorized agency gives consumers quick access to all three of their personal credit reports. According to the Federal Trade Commission, Annual Credit Report is the only website authorized to issue free reports to consumers. Those who take advantage of this free service can make one free request of each of the three bureaus in a 12-month period. In effect, this gives you access to three free credit reports each year.

Annual Credit Report operates online to give consumers instant access to their credit histories. But this isn't the only way to acquire a free credit report. Consumers may submit a written request after downloading the credit report request form (see Resources) and mailing it to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-528. A third option is calling the agency at 877-322-8228 to request a report.

The fact that Annual Credit Report only accepts one free credit report request a year doesn't mean consumers may check their reports only once per year. The three credit reporting bureaus -- TransUnion, Experian and Equifax -- provide credit reports to consumers for a fee. Consumers can check their own reports without it affecting their credit scores. Knowing the contents of your report is essential when buying a house or automobile. Visit the website of each bureau and complete a request for a credit report.

Be leery of any company or agency that claims to issue free credit reports. Annual Credit Report is the only federally authorized agency for free annual reports. Other companies or agencies may issue a free report only after you pay to enroll in a credit monitoring service.

How to Properly Handle Identity Theft

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Addressing identity theft the moment you realize a problem is key to removing fraudulent activity from your credit report. Identity theft involves another person stealing information such as your Social Security number and acquiring new credit accounts in your name. In the aftermath, identity theft can lower your credit score and stop credit and loan approvals.

Instructions

Write the three reporting agencies. Experian, TransUnion and Equifax are the three major credit bureaus (see Resources). Contact each bureau by telephone or in writing and make them aware of the situation. Request that each bureau place a fraud alert on your personal credit file. With this alert, any creditor or loan company must contact you before opening an account in your name.

Review your credit card statements to check for fraudulent charges. If your find one, contact your creditors to dispute the charge and ask them to cancel your present card and issue a new one.

File on online complaint with the Federal Trade Commission. The FTC keeps records of identity theft cases. Go to the agency's website and complete an online complaint (see Resources).

Monitor your reports to prevent future problems. Sign up for credit report monitoring to avert other occurrences of identity theft. With monitoring, these services send immediate emails if anyone (including yourself) opens an account in your name or if changes occur on your credit report.

How to Use Payday Loans to Improve Credit

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Payday loans can be a good way to help out during a financial crisis or some type of emergency that you need fast cash. Payday loans are short-term loans meant to help borrowers get through until their next paycheck and are generally easy to be approved for. Not only are they helpful for bills and extra spending money, payday loans can actually help improve your credit score.

Instructions

Take out a payday loan that you can easily afford to pay back on time. This will look good to the credit companies that handle your rating. When you are approved, your personal credit report will reflect that you have more credit, which should increase the credit to debit ratio.

Pay the loan back before you have to. Many payday loan companies allow you to come in any time and repay the loan, which can help improve your credit. Some companies even waive the fee if you re-pay your loan within a certain time period, such as two or three days.

Apply for a payday loan to pay off other debt, such as credit cards or utility bills. Most times, the interest rate on a credit card is higher than that of a payday loan, so it makes sense to use a loan to pay it off. You can also use a payday loan to catch up on other bills that can cause your credit score to decrease.

Take advantage of the fact that a payday lender does not typically check your credit score to give you a loan. You can get the money that you need fast to pay off the bills that do affect your credit so that your credit improves.

Apply for a payday loan instead of a bank loan to improve your credit score. If you have trouble paying back what you borrowed to a lender, they may work with you to extend your loan, with no backlash on your credit. With a traditional bank loan, you won't have as much leeway. However, if the payday lender does not extend your loan and you miss a payment, they can charge you a rather large late fee as well.

Take out a payday loan and use the money to open a secured credit card. These credit cards require that you apply your own money to them, and then you use your own balance to make purchases. You can then build your credit by making sure you pay on the credit card each month. This is an excellent way for someone who has no credit to get started. Just be sure to pay at least the minimum balance on the credit card to avoid hefty late fees.

Tips to Raise the Beacon Score

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The BEACON score was created by Equifax and Fair Isaac to evaluate the chance that a consumer will become seriously delinquent in his credit accounts in the next two years. An algorithm analyzes a consumer's credit report to determine how large a credit risk he is, and then returns a score number that represents that level of risk. The BEACON score is fluid -- it's based on exactly the information that's in the credit report at the time the score is requested. You can raise your BEACON score in the same ways you'd raise your FICO and other credit scores: by using and managing your credit wisely.

Paying bills on time is the first tip Equifax recommends. Equifax and Fair Isaac, which issues the FICO score, both stress that late payments can lower your score significantly. Late payments also increase the chance that your accounts will go into collection. Creditors report collection activities. Collections have a more serious negative effect on your score than do late payments on accounts that haven't gone into collection, so it's best to nip the possibility of collection in the bud.

MSN Money stresses the importance of paying down your balances. This is especially true with revolving accounts, like credit cards, which have a stronger impact on your score than do installment accounts like student and car loans. Ideally, your credit-card balances always should stay below 30 percent of your credit limit. In this regard, it doesn't matter if you pay off your cards each month because the amounts considered in your credit scores is the highest balance. MSN Money recommends reducing the balance on the cards that are closest to their credit limits first.

According to Equifax, you should re-establish credit to overcome credit problems you've had in the past. It recommends making all your applications within a short period so that the inquiries on your account are interpreted as being for a single line of credit rather than a number of different lines. Use your new accounts wisely. It's fine to use them frequently, but keep your balances low all the time and pay your bills on or before the due date.

Contact Equifax (see Resources) to dispute negative information you believe to be inaccurate. Since negative information lowers your score, it stands to reason that removing these blemishes will increase it. Items MSN Money deems worth following up on include inaccurate records of late payments, collections and charge-offs; erroneous credit limit notations, if the limit is noted as being lower than it really is; accounts you paid as agreed but are marked as charged off or settled; and old negative items that should no longer be included, like bankruptcies older than 10 years and late payments and collections older than seven years.

What Affect Does Debt Negotiation Have on Your Credit Score?

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Negotiating a debt settlement with your creditor can allow you to settle an account for much less than you owe. Allowing a debt management company to negotiate with your creditors can also save you money in reduced interest rates and smaller monthly payments. Each avenue of credit negotiation has a different impact on your credit score.

Your enrollment in a debt management plan alone cannot hurt your credit score, according to Bankrate.com. Your creditor may make a note on your credit report informing each credit reporting bureau of your enrollment but this is for information purposes only. Your enrollment in a debt management plan may impact you negatively when you attempt to apply for a new line of credit, credit card or personal loan. A prospective lender reviewing your credit report can see the notations made by your existing creditors that you're participating in a debt management program. This may make you a bad risk for the new creditor.

Monitoring your debt management company is a key component in ensuring your participation in a debt management plan doesn't hurt your credit score. A debt management company that doesn't distribute your monthly payment to your creditors on time isn't acting in your best interests. Your creditors can still report late payments to credit reporting bureaus even if it isn't necessarily your fault that the payments are late. This is why it's important to keep close track of when your monthly payment in accordance with your debt management plan is distributed to your creditors.

A debt settlement is another form of debt negotiation where you settle a credit account for a portion of what you owe your creditor. A debt settlement can adversely affect your credit report because it your creditor is receiving less than what is owed on the account. A debt settlement also closes the account in question, which shrinks your available credit and further weakens your score. Once reported, a debt settlement can remain on your credit report for up to seven years.

It's important to get all the details in writing when negotiating a settlement or debt repayment plan with a creditor or debt management company. Without written communication between you and a company or creditor, you're essentially taking a representative's word that an agreement is valid. This can leave you open for continuing collection practices and further damage to your credit score if your creditor chooses to not abide by any verbal agreement because the person who offered you the settlement terms did not have the authority to make a deal.

What Happens to Unpaid Debt in a Divorce?

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When you file for divorce, you and your spouse must split up all the property either party owns, including any debts. Though the laws governing this process differ among states, you and your spouse must still pay for any unpaid debts in accordance with the terms under which you acquired them. Credit and debt issues in a divorce can be complicated, so talk to a lawyer if you need legal advice.

As long as you or your spouse has a debt, the court can take that debt into consideration when dividing the property in your divorce. For example, if you and your spouse have a joint credit card with a $4,000 balance, a court can order that you pay your spouse $2,000 to pay for your share of the debt. However, depending on which state you live in and how the debt was acquired, the court may also determine that you are not at all responsible or completely responsible.

While you can ask the court to divide marital debts, couples also have the power to do this themselves by coming to an agreement on all marital property. You and your spouse can agree to who becomes responsible for the debts, who pays money to the other to help pay off the debt or any terms you wish to agree to. Also, if you have a prenuptial agreement, often called a prenup, you can use the terms established in it to determine how the debt is divided.

When you enter into a debt, you come to an agreement with a creditor over terms, such as the amount of debt and the manner in which you must repay. You and your spouse can enter into debts individually or jointly. Individual debts are generally the responsibility of each spouse, and continue to be so after the divorce. Joint debts, on the other hand, are more complicated. Typically, one party assumes responsibility for the debt or the debt is repaid in full prior to finalizing the divorce.

The court's ruling only affects you and the common issues in your marriage. The court, for example, cannot force your creditor to change the terms of the credit agreement because the creditor is not a part of the case. So, when the court divides debts and orders one spouse to pay the other for a joint debt, the creditor can still pursue both spouses regardless of the court's order.

Is There Debt Relief for Child Support?

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Child support is considered a domestic support obligation. As such, it is treated differently than other types of debt when you seek a traditional form of debt relief such as bankruptcy. If you can't meet your child support obligation, you should obtain a child support modification or set up a payment plan.

While bankruptcy does not discharge your child support debt, it can help you tackle the debt. In a Chapter 7 bankruptcy, your assets are first used to pay off child support debt and other domestic support obligations. If your child support debt is too overwhelming on top of your other financial responsibilities, liquidation of your assets could help pay off much of the debt while discharging your unsecured debts.

If you owe more in back child support then you can currently repay, declaring Chapter 13 bankruptcy can help you avoid further legal action. Federal bankruptcy laws provide for you to restructure the back child support debt owed. Depending on the amount you owe, you can make monthly payments toward the debt for up to 60 months. While you make the monthly payments toward the back total owed, you must maintain your regular child support payments.

When your child support payment amount is initially set, it is based on your income at the time. Other factors such as the amount of time you will care for the child and the total number of children you support are also taken into account when determining your monthly contribution. If any one of these situations changes, you may be able to have the amount of your monthly child support payment modified. Because the court will not modify the amount you already owe in back child support, it is important to seek modification as soon as possible to prevent additional debts you cannot afford from accruing.

When you request modified payments, you need to be able to substantiate the reasons behind your request. For example, in Nevada a reduction of 20 percent or more in gross income is grounds for immediate modification. However, you must be able to prove the reduction. Your original child support order should state your gross income at the time that payment amount was determined. To prove your new income, you will need a W-2, 1099 or a series of pay stubs.

Debt Validation Requirements

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A debt collector is required under the Fair Debt Collection Practices Act (FDCPA) to notify a debtor in writing within five days after initial communication. This written communication is commonly referred to as a dunning letter. The dunning letter must state the name of the original creditor, account number and amount of the debt. The letter must contain a disclaimer that states that the letter is a communication from a debt collector, that it is an attempt to collect a debt, and that any information obtained will be used for that purpose. The letter must also state that the debtor has 30 days to dispute the validity of the debt and that the debt collector will assume the debt is valid if no response is received within the 30-day time frame.

According to the FDCPA, a debt collector must honor a debtors written request to cease all communication or to limit communication to U.S. postal mail. A debtor may demand an immediate cease of all calls to his place of employment or to family members. A collector who disregards this written request faces federal fines and civil legal action.

A debt collector must provide proof that a debt belongs to the debtor and not someone else. They must provide documentation showing the debt is on record under the debtors name, on file with the original creditor and under the correct current address and social security number. A debtor may also request detailed information regarding the amount of the debt, such as an explanation of how the original creditor arrived at the stated amount. Refusal to supply this information to the debtor constitutes a failure or refusal to prove the debt is valid.

A debtor can take the extra step of ensuring that the debt collector is a legitimate collector that is licensed to collect in the state where they reside by requesting license information. Many debtors take this extra precaution as a safeguard against scammers who pose as bill collectors in attempt to bilk unsuspecting people out of their money.

Failure to respond to all or any part of a debtors request for debt validation immediately renders the debt invalid and relieves the debtor of any financial obligation. Some debt collectors will send the debtor a letter absolving him of all liability if they cannot properly validate a debt. Debt collectors may report a disputed debt to a credit reporting agency (CRA), however, reporting unvalidated debts could land them in hot water. Debtors can request CRAs to remove invalidated debts from their credit reports.

What Is Debt Analysis?

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Debt analysis can have slightly different meanings depending on context. When used to assess the financial health of an individual, it is basically a comparison of how much the person, or a household, makes versus how much he owes. Consumers usually owe money but typically are not owed much. However, businesses often are lenders as well as borrowers and can use debt analysis to asses their assets or liabilities.

When analyzing the debt of an individual, the primarily concern is the person's repayment ability. This capability to make good on debts helps determine how much the individual can borrow and the interest rate she must pay for new loans. As a general rule, the lower the debt-to-income ratio, the better the individual's financial health and future repayment ability. The better the person's, or the household's, financial health, the easier it is to obtain new loans and lower interest rates.

According to TransUnion, one of the three major credit bureaus in the United States, a debt-to-income ratio between 20 percent and 39 percent qualifies as good. If you make $1,500 per month, for instance, and your monthly debt payments are $450, your debt-to-income ratio stands at 0.3 or 30 percent. This puts you in the middle of the "good" range, as described by TransUnion. As your debt-to-income ratio rises, the probability that you will not be able to pay some of your loans also goes up. The less money you have left after paying for your debts, the less flexibility you have and the easier it is for an unforeseen expense to drive you into insolvency.

The nature of your debt, in addition to its quantity, also plays a critical role in determining your financial health. Therefore, a simple ratio can be misleading. If you are currently paying a loan on a second car and only need one, for example, you can usually sell the car and get rid of the loan. If you bought the car used, you may not lose much money during the resale while getting rid of a sizable payment. You do not have such flexibility with credit card bills, however. Therefore, a thorough analysis must consider the nature of the loan as well as its magnitude.

Businesses apply much the same principles when analyzing their debt burden. The amount of loan payments as a percentage of the company's income is a key determinant of its repayment ability. In addition, debt divided by total assets also provides important clues. However, businesses often are owed a large amount of money as well. The analysis of loans extended to customers can be referred to as "debt analysis." Such an investigation must consider the financial health of the borrowers, how far behind they are on payments, and the concentration of credit extended. The last metric is used to see whether most of the money is owed by a few borrowers. Such a situation is undesirable as the bankruptcy of one such big customer can result in serious trouble.

Will Canceling a Credit Card Lower My Credit Score?

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Any time you open a credit card, how you treat that line of credit will affect your credit score. If you decide to cancel a credit card, different factors come into play regarding whether your score is lowered. By educating yourself, you can make good decisions about how best to safeguard your credit score.

Your FICO credit score is what most creditors refer to when inquiring about your credit history and habits. Thirty-five percent of this score is composed of your credit history itself, and whether you show a record of paying your bills on time. Thirty percent comes from your debt-to-credit utilization ratio, or how much available credit you have vs. how much of it you're currently using. Fifteen percent comes from the length of your credit history. Ten percent comes from how many accounts you've opened recently, as well as how many recent inquiries about your credit history have been made. The final 10 percent comes from your total overall number of accounts, as well as what types of accounts are included. Car loans and mortgages are different from student loans or credit cards, and having a mix of types of credit is ideal for a good score.

According to Craig Watts, spokesman for Fair Isaac Corporation, the company that issues FICO scores, canceling credit cards or other accounts does not remove them completely from your credit history. Remember, the bulk of your credit score is determined by how faithfully you paid your bills every month. If you were consistently on time with your credit card payments, that's what matters for this portion of your score -- not whether the account is still open and active. Additionally, Watts advises that a canceled credit card's effect on the 15 percent of your score determined by credit history length is negligible, and won't appear until several years after the fact.

The area where you need to be careful is in your debt-to-credit utilization ratio. Say you currently have two credit cards with $1,000 balances. You pay the balance of one in full every month, but have a $500 balance on the other that you pay on time, but haven't yet paid in full. This means that you currently have a 25 percent debt-to-credit utilization ratio on those two cards. However, if you close the card that you carry a zero balance on, that ratio jumps to 50 percent. Such a steep jump can lower your score by a few points -- exactly how many will vary by situation.

According to Watts, anywhere from 700 points and above is considered a very good credit score. If your credit score is currently in this bracket and you opt to close a credit card that negatively affects your debt-to-credit utilization ratio, it will still cost you points. However, if your credit score is this good, a slight lowering will likely not hurt you in any practical way. If you have a lower credit score, the impact may be more significant, but is probably less so than you might think.

Can a Borrower Request Foreclosure?

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Borrowers typically don't request a foreclosure, but can accomplish the same goal through other requests made to their lenders. Most times, the borrower's objective is to stop paying the mortgage and to transfer ownership of a home that is either too expensive or no longer wanted. Some people simply walk away from their homes in what is known as a voluntary foreclosure or strategic default. However, those maneuvers can cause costly financial ramifications and are not recommended by lenders.

A homeowner considers strategic default after deciding a home is no longer worth keeping, This occurs for a number of reasons, including a sharp decline in property values. A home that was purchased at an inflated price can lose a third or even half its value during a housing bust or severe recession. A person who overpaid for her home and made minimal down payments can find herself severely "upside down" on the mortgage, meaning she owes considerably more on the loan than the home is worth. Rather than keep the declining asset, she may choose to voluntarily walk away from the home and the mortgage. The lender forecloses on the home and may file a lawsuit to collect any balance remaining on the mortgage after the home is sold at foreclosure. The possibility of a lawsuit is a key reason why you seek legal advice before voluntarily defaulting on a mortgage.

Short sales also allows a homeowner to walk away -- but with the permission of the lender. A short sale allows a home to be sold for less than the balance on the mortgage, with the lender usually absorbing the loss. Lenders sometimes view short sales as preferable to foreclosure because the short sale agreement and subsequent sale resolves the entire issue. The lender avoids the trouble of a foreclosure and auction, and possibly realizes as much money through the short sale as an auction would bring.

A deed in lieu of foreclosure allows you to turn over all rights to your home to the lender in exchange for being released from the mortgage. Of all the options available, the deed in lieu may be the most preferable for someone thinking of requesting a foreclosure. The biggest advantage is that there is no chance of a lawsuit after the property is transferred, and no buyer is needed for the property, as is the case in a short sale. However, the U.S. Department of Housing and Urban Development reports that a deed in lieu is unlikely to be approved if the lender determines that you have the ability to continue paying the mortgage.

Counselors certified by the U.S Department of Housing and Urban Development can discuss other alternatives to foreclosure. Possibilities include loan modification, which allows all terms of the loan to be changed to make the monthly payments more affordable. HUD-approved counselors, such as those affiliated with Consumer Credit Counseling Service, are available in communities across the country.

How Does One Become a Credit Counselor?

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While becoming a credit counselor does not require a certain degree or certification, agencies employing credit counselors have preferences when it comes to job candidate backgrounds. Prospective employers look for candidates who have previous experience in counseling including, peer counseling in college, education counseling or human resources. Credit counselors interested in becoming certified can do so at any time; however, gaining certification prior to looking for work can increase your chances of finding a job.

Obtain an undergraduate degree or associates degree in finance or business. Prospective employers are more likely to hire a credit counselor who has a related education background. Courses in microeconomics, accounting, personal finance, banking practices, counseling, negotiation skills and client relationships create a strong repository of knowledge that deepens student understanding of common issues clients face. Agencies will ask you about your financial knowledge when interviewed.

Visit the National Association of Certified Credit Counselors website at naccc.us to learn how to become a certified credit counselor. There are various certification courses and programs available, including both basic and senior credit counseling courses, and debt consolidation courses. Individuals interested in becoming a certified credit counselor can enroll online and complete the self-study courses offered online as well. Register on the NACCC web page for the exam; you will pay a fee to take the exam. Review the preparation materials and get prepared for the exam. Once you pass the exam, you will formally become an NACCC Certified Credit Counselors. Add this accomplishment to your resume.

Volunteer at local county community centers, churches and agencies that provide credit products, budgeting and debt advice to consumers. This step will help you gain experience working with people with credit issues, which can help you with your quest to obtain a paid position with a credit counseling agency. You will work with diverse groups of people throughout your career, from most financial and social backgrounds. Volunteering provides you with the experience needed to handle many different situations.

Credit counselors work with both individuals and businesses or organizations to help them manage credit and debt. They also help people find the best loan for a specific financial situation, assist in budgeting, provide guidance for getting out of debt, offer bankruptcy advice and perform other general financial guidance tasks.

Do You Need a Credit Check for Line of Credit?

10:47 PM No comments

Credit checks are standard when applying for lines of credit such as signature loans and home equity loans. A neighborhood store or hotel casino could extend a line of credit without a credit check, but those are unique examples. Banks, credit unions and similar lending institutions will certainly require a review of your credit.

Credit scores range from 350 to 850, with a score of at least 620 usually needed for approval on lines of credit. Scores of 720 or higher are preferable and qualify you for lower interest rates and possibly higher credit limits. Credit scores are based on information on your credit report. People with the highest credit scores have very little negative information on their credit report such as late payments, charge-offs, collection accounts and judgments. They also pay their bills on time while keeping balances low.

Credit reports are available for free through AnnualCreditReport.com, which is managed by major credit bureaus Experian, TransUnion and Equifax. The Federal Trade Commission endorses the site as the only government-approved source for obtaining credit reports for free. Other sites offer free reports but also try to sell you services. After viewing and printing your report from the website, follow included instructions for ordering your credit score separately for a fee. Review the score to determine how your credit score matches of with general standards for credit line approvals.

Negative information usually cannot be removed from your credit report unless it is wrong or outdated. However, creditors and debt collectors have the authority to remove information that they place on reports. Occasionally, a credit card company will remove a late payment from the credit report of a longtime customer whose payment arrived a day late. Or a creditor may remove charge-off information in exchange for full payment on a defaulted account. Otherwise negative information that is accurate remains on reports for a minimum of seven years.

The Fair Credit Reporting Act allows you to challenge any information on your credit report. Do so by writing the credit bureau at its address on the credit report. Or call the customer service number or visit the website. Federal law requires credit bureaus to respond to your correspondence within about 30 days. You are making a formal inquiry called a dispute when you challenge information on your report and the credit bureau is required to investigate before providing a response.

What If I Don't Pay Alimony in Florida?

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Alimony awards require one spouse to pay the other spousal support maintenance for a defined period. Typically, the alimony payment obligations terminate upon the death of either spouse or when the recipient remarries or cohabits with a nonfamily member of the opposite sex. When a spouse ordered to pay alimony does not pay, courts can order garnishments or hold nonpaying spouses in contempt of court.

Florida courts have the discretion to award alimony on a temporary or permanent basis. Rehabilitative or durational alimony awards require one spouse to temporarily support the other spouse while seeking gainful employment or obtaining a degree. The alimony award is typically defined for a certain time limit or until the receiving spouse attains self-sufficiency. In Florida, permanent alimony continues until death or remarriage.

Spouses can request show cause or contempt orders against their former spouses who are delinquent in their alimony payments. Noncustodial parents can file a Motion for Civil Contempt and Enforcement by using the Supreme Court Form 12.960 to initiate a contempt proceeding against the nonpaying spouse. Once the custodial parent completes the form and files it with the clerk's office in a local circuit court with jurisdiction over the matter, he must serve the motion and accompanying summons on the defendant-nonpaying spouse through personal service by a process server or sheriff.

The circuit court may order a trial where the custodial parent has the burden of proving her spouse failed to comply with a valid alimony support order. Her former spouse must provide a valid reason as to why the court should not find him guilty of contempt. If the court finds her guilty of contempt, the court can order imprisonment, payment of compensatory fees and fines, and it can order immediate payment.

Under Florida law, courts can issue garnishments attaching personal property against spouses who fail to pay their monthly alimony payments. To obtain a garnishment, the recipient spouse must file an attachment or garnishment for past-due alimony in court and request service of the salary garnishment on the defendant and the defendant's employer. Once the employer receives the notice, then them employer must withhold portions of all future paychecks until the delinquency is settled. To prevent subsequent delinquencies, judges may require the spouse obligated to pay permanent alimony to purchase a security bond, provide a personal pledge or guarantee as a promise to continue paying future payments.

Since family laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your jurisdiction.

Debt Consolidation Analysis

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People who are considering consolidating their debts should weigh the costs before signing on to a debt consolidation agreement with a creditor or lender. The overall goal of consolidation should be to reduce monthly expenses and interest rates. A consumer can be left deeper in debt by not calculating the costs of consolidation.

Consider transferring credit card debt with high interest rates to a card with a lower rate instead of applying for a consolidation loan. Loan applicants usually face a longer approval process and pay several fees. However, credit card balance transfers have some drawbacks as well. A Bankrate article titled "Debt Consolidation: Cure or Continued Credit Problems?" says credit-card companies advertise low rates for balance transfers to entice consumers to move their accounts to a new card issuer, but only people with good credit ratings get the lowest rates. Furthermore, the low rates offered for balance transfers are usually temporary, so it's important to know how long a low rate will last and what the new rate will be when it expires.

People who want to consolidate several types of debts may qualify for a secured or unsecured personal loan at their bank or credit union. Unsecured loans are more difficult to get because their approval is based solely on a borrower's creditworthiness. Secured loans are backed by personal property that could be sold to recoup the loan amount if the borrower fails to repay it. A "SmartMoney" magazine article titled "Should You Consolidate Your Loans?" notes that homeowners may qualify for a home-equity loan to consolidate their debts. According to the article, the interest on home equity loans is usually tax deductible if the loan doesn't exceed the value of the property. Home equity is determined by a property's value minus the balance owed on the mortgage.

Ensure that your debt-consolidation plan will save you a significant amount of money to make consolidation worthwhile. Consumers who have low credit ratings may find that a debt consolidation loan or credit card balance transfer is more expensive than just paying their current debts. People who have low credit scores or who don't have property to secure a personal loan usually pay higher interest rates. "SmartMoney" magazine and other financial publications have consolidation calculators on their websites to help users determine how their consolidation plans will affect their overall interest rates and monthly costs.

Consumers who are in financial trouble and unable to qualify for an affordable debt consolidation loan or credit card balance transfer may be helped by a debt management plan. Some credit counseling agencies offer debt management plans at a low cost to help consumers consolidate and pay off their credit cards and other debts. Counselors also work with consumers' creditors to reduce their monthly payments. The U.S. Federal Trade Commission warns consumers to avoid counseling agencies that won't supply information on their services free of charge. The websites of the Association of Independent Consumer Credit Counseling Agencies and the National Foundation of Credit Counseling offer information on finding a local counselor.

Welcome to our website credit and debt managementr.

Tuesday, June 30, 2009

The Snowball

The Avalanche

Credit Counseling

Other Ideas

Instructions

Monday, June 29, 2009

Instructions

A Typical Case

Common Bankruptcy Outcomes

Construction Liens

Contractual Protections

Major Lessons

Friday, June 26, 2009

Bill Collection

Judgments

Reviving Judgments

Debts Incurred Prior to Texas Residency

Debt Settlement

Effects on Credit Score

Reporting Settlement

Solution

Thursday, June 25, 2009

Budgeting and Spending

Leveraging Your Assets and Credit Transfers

Instructions

Wednesday, June 24, 2009

Why Avoid Bankruptcy?

Debt Settlement

Pay Off Debt Slowly

Sell Your House

Instructions

Measurement

Techniques

Budget

Credit

Bankruptcy

Tuesday, June 23, 2009

Instructions

Can Late Payments Affect My Credit Rating?

Should I Include My Kids in My Budget Planning?

Can I Ask for a Lower Interest Rate on My Credit Card?

Should I Close Paid-off Accounts or Do They Close Automatically?

Can I Consolidate My Own Debt?

Instructions

Monday, June 22, 2009

Deficiency Judgment

Garnishment

The Automatic Stay

Bankruptcy Types

Sunday, June 21, 2009

State Law

Debt Holder

Lawsuits

Acknowledgment

Saturday, June 20, 2009

What "Charge-Off" Really Means

Consequences

Time Frame

Finances

Debt-to-Income Ratio

Depreciation

Other Considerations

Lending and the VA

Using VA Loans

Eligibility

Surviving Spouses

Foreclosure

Friday, June 19, 2009

Judgments

Judgments and Credit Scores

Removing Judgments by Settlement

Removing Judgments by Motion to Vacate

Intangibility

Credit

Interest and Fees

Debt

Thursday, June 18, 2009

Annual Credit Report