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New offers options to American consumers who need an effective debt reduction plan. We have settled over 150 million dollars worth of unsecured, credit card debt while saving clients thousands of dollars. AmeriGuard believes it is important to make an informed decision especially when it affects your financial health. Understanding your options can be overwhelming; that’s why we offer experienced, knowledgeable guidance along the way. provides the information you need to participate in creating a better future..

Friday, July 31, 2009

How to Get Rid of a Defaulted Student Loan Without Paying Anything

If you accepted U.S. federal student loans to attend an institution of higher education and failed to repay them as required, your loans are in default status. It is difficult, but not impossible, to discharge or cancel a federal student loan. Under limited circumstances, you may qualify for one of the cancellation reasons or for a discharge in a federal bankruptcy proceeding.

Instructions

Bankruptcy

    1

    File a petition for bankruptcy protection in the appropriate federal bankruptcy court. To request an entire discharge, you must file a chapter 7 bankruptcy. File in the state where you are domiciled at the time of the filing.

    2

    Include, with the bankruptcy petition, a complaint to determine dischargeability of a student loan. You must explain why repayment of the loan qualifies as an "undue hardship" for you in the complaint. Individual jurisdictions determine what qualifies as an "undue hardship".

    3

    Appear at the hearing scheduled on the complaint in the bankruptcy court. Most courts will set the matter for a hearing to determine whether or not to allow the student loan to be discharged. Provide the court with evidence to support your claim of undue hardship, such as income verification, monthly expenses and medical records if a medical condition contributes to your inability to pay.

Other Reasons for Cancellation

    4

    Select the appropriate reason for which you qualify for cancellation. This includes situations where the school closed while you were attending, false certification, identity theft, unauthorized signature and total and permanent disability. A teacher loan forgiveness program is also available.

    5

    Complete the form in its entirety. Ensure you read the instructions carefully. Some forms, such as the total and permanent disability form, require a confirmation signature. Additional documents supporting your claim may also be necessary.

    6

    Mail the form to your loan holder. If you are unsure who currently holds your loan, you may locate the information through the National Student Loan Data System, or NSLDS.

How to Negotiate a Credit Card Balance Settlement

How to Negotiate a Credit Card Balance Settlement

Credit card companies extend credit to customers the company considers good risks. While most customers begin their relationships with credit card companies fully intending to handle credit responsibly, they may run into trouble if they don't understand how credit works, how to keep their balances low or if they experience financial problems. Credit card companies are willing to work with customers who have run up large balances they are unable to pay--they would often rather get some money rather than none, so it benefits both customer and credit card company to work together.

Instructions

    1

    Read your credit card statements and write down the most recent balance. Look at the current minimum payment due. If it is more than you can comfortably pay, you have some choices to make. Ideally, you want to negotiate about 50 percent of your current balance, according to CreditCardDebt.com.

    2

    Look over your checking and savings account balances and your current monthly budget. Be clear about where you currently are financially and where you were when you applied for your credit card. Decide where you want to be when you settle your debt, according to CreditCardDebt.com. Decide whether you want to offer a lump-sum settlement, make a workout arrangement or work with a debt management company. A workout arrangement is an agreement between you and the credit card company which either lowers or eliminates your interest rate and stops adding punitive fees to your balance. CNN Money defines a workout arrangement as "an informal repayment or loan forgiveness arrangement between a borrower and creditors."

    3

    Call the credit card company and let them know you want to negotiate the debt you owe. Paint a picture for them of where you are financially, letting them know that while you want to pay the full amount, you can't do that. Offer to negotiate with the company so you pay a part, ensuring they get some money rather than none, according to ConsumerReports.org.

    4

    Discuss your options with the credit card company. These include making a lump-sum payment for less than the full balance or agreeing on a workout arrangement, according to Consumer Reports.org.

    5

    Negotiate a settlement with the credit card company that allows you to pay at least half of the balance owed, according to Consumer Reports.org. This option is better for you than trying to work with a debt management company that is more interested in taking your money than settling your debt.

    6

    Prepare to pay the IRS if the amount the credit card company forgives is more than $600. This is considered income, which you have to pay taxes on, according to Consumer Reports.org.

How to Establish Credit for a Teenager

How to Establish Credit for a Teenager

Being financially responsible at a young age and building credit as a teenager can help you acquire mortgage loans and other types of financing in the future. Lenders carefully consider an applicant's credit history when deciding whether to approval a loan request. And individuals with a short credit history tend to pay higher rates. By establishing credit as a teenager, you'll create a credit file at an early age and build a solid rating.

Instructions

    1

    Maintain a bank account. Start managing and saving your money with a checking or savings account. Open an account with your local bank branch or credit union.

    2

    Apply for a credit card with your bank. Complete an application for a secured credit card with your personal bank. Provide a cash deposit to secure the credit card (between $300 and $500). Banks issue these types of credit cards to applicants with no credit history and bad credit.

    3

    Complete an application for a Federal student loan. Begin establishing credit as a teenager by applying for a student loan for college. You can obtain loans with no credit check.

    4

    Request a student credit card. Browse the halls of your college or university and pick up an application for a student credit card. These cards help students establish a credit history, and they tend to feature lower credit limits.

    5

    Apply for in-store credit. Retailers and department stores offer easy credit approvals, and these cards are easier to obtain than major credit cards like Discover, American Express, VISA and MasterCard. Submit an in-store application for a charge card.

    6

    Recognize good credit habits. Getting credit is only the first step. Establish a good history by paying your bills on time (on or before the due date). Only charge what you can afford to pay, and don't skip payments.

    7

    Become an authorized user. You can add your name and social security number to your parent's credit card and begin establishing credit. Ask your parents to call their credit card company and include your name on the account. You'll receive a card in your name, and your credit score increases each time they make an on-time payment.

How to Survive a Financial Meltdown

How to Survive a Financial Meltdown

It's not easy to put the breaks on the runaway spending that landed you in a financial wasteland. You're mourning your former solvency and are likely to work through anger, grief and denial until you reach acceptance. If the experience has taught you anything it's to making a promise that this won't happen again.

Instructions

    1

    Assess your current financial situation. List assets like your home, stocks, bonds, furniture and jewelry. Be brutally honest when reviewing these possessions. If you can sell something or several things to get out of debt, seriously consider this route.

    2

    Talley up your regular expenses and the not-so-regular ones. Write down everything you spent for the past six months. Make list of things you can't live without. Mortgage payment, food, utilities, car payment, kid's tuition and medical coverage are all essentials.

    3

    Treat your credit card debt as you would a diagnosis of a fatal disease. Commit to doing whatever it takes to survive. Ask VISA, Discover, AmEx and other creditors to charge off your account if you're willing to compromise your credit rating in the name of peace of mind. This action is equivalent to declaring bankruptcy and will remain on your credit report for the next seven years.

    4

    Learn to live on cash alone. Whether or not you declare bankruptcy or submit to settling credit card debt for pennies on the dollar, cut up your cards. If things aren't that desperate and you think you can dig your way out in a year or so, transfer all of your debt into a one-year, interest-free credit card. Do not do this if you have the slightest hesitation about paying off the balance by the due date.

    5

    Establish a formal debt-elimination system. Pay the smallest debts first to winnow down your list. Start settling big accounts according to the highest interest charges. Pay the minimum on other accounts and as much as possible on the target account. If at any time you believe you won't ever get out from under, you may wish to consider bankruptcy.

    6

    Keep your head above water by being innovative. Take a second job. Refinance your home to get a lower rate or see if you qualify for a mortgage modification.

How to Qualify for a Student Loan Deferment if I Live in Another Country

If you accepted a federal student loan to help you pay for your college education, you must begin repayment on the loan after you have been out of school for six months unless you qualify for a deferment or forbearance. If your request for a deferment is approved, you will not be required to make your monthly student loan payments for the duration of the deferment. Unlike a forbearance, during a deferment, interest does not accrue on your loans. Living outside the United States does not affect your eligibility for a deferment as long as you meet the other requirements.

Instructions

    1

    Locate your student loans through the National Student Loan Data System (NSLDS). Before you request a deferment you should know how many loans you need to defer, and their amounts. The NSLDS can provide information for all your student loans. You will need your PIN. If you do not remember your PIN, or never had one, you can retrieve it or apply for one through the PIN website.

    2

    Navigate to the Federal Student Aid deferment forms website. Read the list of deferment options to find the one that best fits your situation.

    3

    Select the deferment form that best reflects your reason for requesting a deferment. There are a number of reasons for which a deferment may be granted. Common reasons, and corresponding forms, include being enrolled in school at least half-time, being unemployed or suffering an economic hardship.

    4

    Download the appropriate form and complete it. Read the instructions carefully, as all deferments require supporting documents when submitted. The documents you must submit will depend on the type of deferment you are requesting; however, in all cases the form will tell you which forms you need to submit.

    5

    Submit the forms and supporting documents to the Direct Loan Servicing Center at the address indicated on the form.

Thursday, July 30, 2009

The Most Important Bills to Pay to Protect Your Credit

The Most Important Bills to Pay to Protect Your Credit

When cash is scarce and you want to protect your credit rating, prioritization is crucial. Late or missed payments on certain bills will have a bigger negative impact on your credit rating than others.

Installment Loans

    Auto loans are examples of installment loans.
    Auto loans are examples of installment loans.

    Installment loans--fixed loans with equal payments made for a pre-determined amount of time--affect your credit rating. Loans for cars, household furnishings, appliances and bill consolidation loans are examples of installment loans. These accounts are usually reported to credit bureaus, and late payments can have a negative effect, so make these payments on time.

Revolving Credit

    Revolving credit--an open line of credit of which you can borrow all or part of the total amount and make varying payments depending on what you've borrowed--is another important payment to make. Credit cards and home equity loans are examples of revolving credit and are usually reported to credit bureaus.

Mortgage Loans

    Not only do mortgage loan payments show up on your credit report and affect your credit rating, getting too far behind can leave you homeless. Many lenders take particular notice of your history on your mortgage payment when deciding whether or not to extend credit to you.

Should I Consolidate My Credit Card?

If you have at least one credit card balance that you carry from one month to another, you have a few options for ways to consolidate the debt. When you consolidate, you take out a new loan and use it to pay off the credit card debt. Each consolidation method comes with advantages and disadvantages that you need to weigh in light of your specific situation.

Balance Transfer

    Perhaps the simplest way to consolidate credit card debt is to transfer it to a different credit card with a lower interest rate. This saves you money because more of your monthly payment can go toward paying down the balance you owe. You can also consolidate multiple balances onto just one card to simplify the process of paying bills. One downside is that you often have to pay a fee to transfer balances. Plus, if you transfer the balance to a new card with a promotional interest rate, this low rate does not last forever. In addition, if you are late on a payment, the interest rate will increase to a high penalty rate. However, if you can be disciplined with making payments, a balance transfer can save you money while you pay off your credit card.

Home Equity Borrowing

    If you own a home, you could consolidate your credit card debt by taking out a home equity loan or line of credit and using that money to pay off the card balance. Home equity borrowing typically comes with a much lower interest rate than credit cards, and the rate does not expire like a promotional balance transfer rate would. The major downside of home equity borrowing is that it puts your home at risk because the lender can foreclose if you miss payments. Therefore, you should not consolidate with a home equity loan unless you are very confident you will be able to afford the payments.

Retirement Account

    If you have a 401k account through your employer, you might be able to borrow from your account to pay off credit cards. You then have up to five years to pay yourself back with interest, all of which goes into your account. This is a low cost way to consolidate your debt. However, if you lose your job, you have to pay back the loan immediately or pay early withdrawal penalties. Plus, if your credit card debt is unmanageable and you are considering filing bankruptcy, withdrawing from your retirement account is a bad idea because the account is protected in bankruptcy

General Considerations

    Before using consolidation as a solution for your credit card debt, consider how you accumulated the debt in the first place. If the debt results from patterns of overspending and not having a balanced household budget, consolidating will not address the root problem. You will likely find yourself needing to use the credit cards to continue supporting your spending habits, all the while accumulating more debt and increasing your monthly payments. If you consolidate, use this as a chance to create a balanced budget that includes your monthly debt payments and does not require the continued use of a credit card to make ends meet.

Debt Consolidation 101

When you have a large amount of debt spread out over several different accounts, combining the debt into a single package can be very appealing. Debt consolidation is a process that many use to work with a single account instead of multiple accounts. This process can help you reduce interest rates and simplify things, but it can also lead to some issues.

How Debt Consolidation Works

    The basic idea behind debt consolidation is that you get all of your debts into a single account. One of the most common ways of doing this is to take out a loan and then use the proceeds from this loan to pay off the various accounts that you have. At that point, you only have one monthly payment to worry about. In some cases, people will combine multiple credit card balances onto a single credit card with a low interest rate.

Home-Equity Consolidation

    One approach that you could use is to take out a home-equity loan and use that money to consolidate your debt. If you have paid on your mortgage for several years, you may have some equity built up that you can access through an equity loan. By doing this, you can take advantage of the major tax break. The interest that you pay on a home-equity loan is tax deductible. This means that your debt could give you a discount when you pay your taxes.

Credit Card Consolidation

    Some consumers will use credit cards to consolidate their debt. With this strategy, you open an account with a 0 percent introductory interest rate. Then you use balance transfers to move all of the balances from your old credit cards onto the new card. When you do this, you may have somewhere between 12 and 18 months to pay off your debts without interest. While this can save you some interest in the short term, if you do not get the balance paid off, it can end up costing you significant interest when the introductory period is over.

Considerations

    One of the primary goals of consolidating debt is to get a cheaper interest rate. Having a single account is also much easier to deal with instead of having to keep up with several due dates every month. While these benefits are attractive, you also have to be careful when consolidating debt. When you consolidate debts, you open up several different accounts that could be used. Unless you stop using your other credit accounts, you could end up in worse shape than when you began the process.

Wednesday, July 29, 2009

How to Consolidate Bills Without Taking Out a Second Mortgage

How to Consolidate Bills Without Taking Out a Second Mortgage

There are numerous ways to consolidate bills and simplify your finances. Homeowners typically consider a second mortgage or home equity loan to pay off debts and improve their credit rating. Unfortunately, not everyone qualifies for a second mortgage. Obtaining one involves having adequate equity and being a homeowner. If you don't qualify, consider other methods of bill consolidation.

Instructions

    1

    Transfer balances. Apply for a low-rate credit card and move your existing credit card balances to the new card. Combining your debts at a lower interest rate saves money and helps you pay down debt sooner.

    2

    Consider a debt consolidation loan. If you own your vehicle outright, consider a secured debt consolidation loan and use your car title as collateral for the loan. Lenders allow other types of collateral such as electronics and jewelry.

    3

    Refinance your mortgage. Speak with a mortgage lender and discuss refinancing your mortgage and borrowing cash from your equity. Use the cash taken from your equity to pay debts.

    4

    Work with an agency. Use a non-profit debt consolidation agency to obtain a lower interest rate on credit cards and combine all your bills into one low monthly payment.

How Can I Achieve Student Loan Forgiveness?

How Can I Achieve Student Loan Forgiveness?

Eliminate your nondefaulted student loans that were made or consolidated under the William D. Ford Direct Loan Program by working for any federal, state, or local government, as well as any charitable nonprofit organizations as part of the federal Public Service Loan Forgiveness (PSLF) program. Make the required 120 payments on your student loan while you perform any kind of full-time job in the public sector for ten years and the remainder of your loan will be forgiven. You can also benefit from reduced monthly payments based on your income during the mandatory 10-year service period.

Instructions

    1

    Work at least 30 hours per week for one or more eligible employers, such as a government agencies, charities or private educational institutions that are not-for-profit entities and tax-exempt as part of the PSLF Program. You can also volunteer for the Peace Corps or AmeriCorps full time as PSLF-eligible service while benefiting from a temporary forbearance.

    2

    Make 120 separate, monthly payments in full by the scheduled due date while you work for an eligible public service organization. Request income-based payments or forbearance if needed as the payments do not have to be consecutive, according to the Federal Student Aid. Pay one lump sum with your Peace Corps transition payment or AmeriCorps Segal Education Award upon completion of your volunteer service and continue the rest of your PSLF requirements with a full-time job in the public sector.

    3

    Document your full-time employment by a public service organization (or by a combination of public service organizations) with concurrent receipts for the required 120 loan payments to prove your PSLF eligibility until an official application form becomes available.

Tuesday, July 28, 2009

Can SSI Back Pay Be Garnished?

Creditors have a variety of means of getting paid what they are owed by debtors. A creditor is allowed to sue a debtor in civil court -- as long as the statute of limitations in the state for debt has not expired -- and, if the creditor wins, he will often be allowed to seek a garnishment order for the debtor's wages. However, certain kinds of income are off limits to private debt collectors -- a debt collector that is not party of the government -- including Supplemental Security Income.

Garnishment

    A creditor is only allowed to garnish wages if he has first received a court order from a judge who has rendered a decision in a civil judgment filed by the creditor. In some states, garnishment for private debts is not allowed. In addition, federal law, as well as some state laws, protect low-income individuals from garnishment. In addition, only some types of income can be garnished.

SSI

    Supplemental Security Income, also called SSI, is a form of Social Security benefit provided to low-income people with disabilities. When a person first receives benefits, he will often receive benefits that are retroactive to the day he filed his application. This is known as SSI back pay. A private debt collector will not be able to receive an order of garnishment for SSI income because a judge is not allowed to authorize it, nor would the Social Security Administration honor it.

Government Debts

    Only the government can garnish SSI. The government will only garnish a person's money if he owes money to it. Therefore, if a person defaults on his student loan payments or owed back taxes, the government could garnish his SSI. However, the person would receive many chances to pay the money back before having his income garnished. Only after the person refused to bring his payments up to date would the government proceed with garnishment.

Considerations

    Not only is SSI income protected from garnishment orders, but a creditor cannot seize the money when it has been deposited in a bank account. Federal law protects most forms of government benefits, including SSI, from seizure by creditors even after it has been disbursed to the individuals. If a creditor wrongfully seizes SSI funds from the debtor's bank account, they must be returned to the debtor.

Am I Liable for My Parents' Medical Bills When They Die?

Am I Liable for My Parents' Medical Bills When They Die?

The high cost of health care services is a common concern among consumers. Elderly individuals typically require more medical care than younger individuals. Although programs such as Medicare provide insurance coverage for the elderly, these programs do not always cover 100 percent of the cost of services---leaving the patient responsible for paying the balance. Should the individual die, collectors may contact the patient's family members and request payment.

Personal Liability

    You are not personally liable for your parents' medical bills. The hospital can request payment from you but there are no legal consequences should you decline to pay off any remaining health care debt your parents left behind. The hospital can claim a tax loss on any medical bills that your parents' insurance company refuses to pay.

Probate Court

    If your parents lacked insurance, the hospital will file a claim against your parents' estate with the probate court rather than with the insurance company. The probate court pays off debts your parents left behind with their remaining assets before turning over any remaining assets to you and your siblings as inheritance. Thus, although you are not legally liable for your parent's medical debts, these debts could reduce the inheritance you receive after they pass away.

Collection Activity

    If your parents did not leave behind an estate or the hospital did not file a timely claim, your parents' medical bills will go unpaid after their death. This often results in the health care provider turning your parents' unpaid account balance over to a collection agency. Because the collection agency cannot collect the debt from your parents, debt collectors will demand payment from the deceased's next of kin---you.

    No matter what a debt collector tells you, you do not have to pay off your parents' bills. The Fair Debt Collection Practices Act makes it illegal for any debt collector to threaten to sue you, garnish your wages or report your parents' debts on your credit report should you refuse to pay. A collection agency must stop contacting you if you put your request to the company in writing.

Considerations

    Just because you aren't legally required to pay off your parents' medical debts does not mean you cannot do so if you wish. You have the right to contact the hospital or doctor's office and either negotiate a settlement or pay the debt in full.

    If you have a surviving parent, your state's laws may render that person legally responsible for the debt your deceased parent left behind. Should this occur, the health care provider has the option to pursue your surviving parent for payment rather than negotiate with you.

Credit Counseling Alternatives

Credit counseling teaches you to manage your debts on your own or gets you into a formal payment plan, depending on your specific needs. Many credit counseling firms are nonprofit and offer free or affordable services. You have other alternatives if you do not wish to work with a credit counselor, ranging from self-help to bankruptcy, according to the Federal Trade Commission.

Self-Help

    You can get out of debt with a self-created repayment plan if your financial problems are not too severe. Cut back on unnecessary expenses, like restaurant meals, movies and expensive vacations, and put all the money you save on your bills. Focus first on the accounts with the highest interest rates, so more of your funds get applied to the owed balance rather than just the interest charges. This approach preserves your credit rating because the on-time payments and reduced debt amounts both help your credit score.

Temporary Arrangements

    Creditors will sometimes work out temporary arrangements with your payments to get you through a rough spot. For example, banks sometimes lower your car payment or extend the payback time frame, Cars Direct explains. Mortgage companies sometimes give you a holiday of a month or more, although Jane Baker of LoveMoney.com warns that you still accrue interest on that amount. Call your creditors as soon as you start having problems, because some will not help you if the loan is seriously delinquent.

Debt Settlement

    Your creditors may be willing to work with you on debt settlements for less than you actually owe. Contact your credit card issuers and other lenders and explain your financial situation. These companies often accept a reduced amount rather than face the prospect of getting no payment at all if you default or file bankruptcy. Debts settlement companies ofter to do the negotiation process for you, but many exaggerate their success rates and do little or nothing to earn their fee, "USA Today" Your Money columnist Sandra Block warns. Settlement hurts your credit rating because credit bureau files show that you did not pay the full owed balance, which counts as a negative entry. This information falls off your report automatically in seven years.

Bankruptcy

    Bankruptcy gets you out of paying some or all of your bills, but you may have to sell off most of your assets and your credit reports show the bankruptcy for 10 years, the FTC explains. A Chapter 7 filing relieves you of most debts and forces sale of much of your property, while Chapter 13 makes a repayment plan and lets you keep the majority of your possession. Federal law forces you to go through one pre-bankruptcy counseling session and one financial management class before your case gets discharged.

Monday, July 27, 2009

Debt Settlement Laws in Kentucky

Debt Settlement Laws in Kentucky

Debt settlement laws in Kentucky set rules for how companies can interact with residents with regards to debt. They are intended to both protect the residents from fraudulent business practices and provide a framework for how businesses can properly assist customers. These laws are important to anyone seeking debt settlement advice.

Overview of Debt Settlement

    Debt settlement is different from debt negotiation (in which a person's debts are set to agreed-upon levels and paid to creditors) or debt consolidation (in which a person's debts are aggregated and paid to one debt consolidation service). Debt settlement is a for-profit business (usually) in which a person pays a company in installments up to a level at which the company agrees to complete the payments to creditors itself at a lower rate. Because these are for-profit businesses, there are risks for fraudulent activities.

Unlawful Business Practices

    Debt settlement companies are required by law to register with the Kentucky Attorney General's Office. The companies are limited as to how much they can charge customers for services: initial set-up fee is a maximum of $75, annual consultant fee is $50 and periodic fee is no greater than 8.5 percent or $30. Debt settlement companies sometimes make outrageous, unsubstantiated claims about their capabilities, charge high fees and require payments in advance. They also may make false claims about how the service will improve one's credit score. All of these activities are illegal, though punishments are rarely enforced.

Consumer Debt Settlement Rights

    The maximum interest rate debt settlement and collection companies can charge under the Fair Debt Collections Practices Act (FDCPA) is 8 percent. Also, consumers have wage protection in Kentucky of 75 percent of disposable weekly earnings, or 30 times federal hourly minimum wage. Debt settlement companies are not authorized to directly take money from a person's account without the person's approval. Also, there are statutes of limitations on different debts that do not need to be settled at all. These include: oral agreements, five years; written contracts, 15 years; promissory notes, 15 years; and open accounts (credit cards), five years.

Government Debt Settlement

    For debts owed to the Kentucky government or an entity that has called on the government to force someone to pay, there is an option for residents called the "offer for settlement." If a resident owes taxes to the state or the other party, the offer for settlement can be applied for to reach an agreement. A person applying for the offer must file all required income tax returns from past years, must not be in bankruptcy proceedings and must submit all necessary papers to the government. There are only two valid categories for the offer: doubt as to collectability (the person owes, but cannot pay) or doubt as to liability (the person may not owe).

Define Debt Forgiveness

Define Debt Forgiveness

Debt forgiveness can relieve financial hardship by eliminating your liability for a portion of oustanding debts.

Description

    Debt forgiveness occurs when a lender forgives or cancels part or all of an outstanding debt.

Qualifying Debts

    Unsecured debts--such as credit cards, personal loans, and medical debts--may be forgiven. Mortgage loans may be forgiven if the situation meets specific criteria.

Exclusions

    Student loans, auto loans and Internal Revenue Service (IRS) debt generally cannot be forgiven.

Methods of Forgiveness

    Debt may be forgiven through debt settlement, bankruptcy, loan modification, foreclosure,or short sale.

Benefits

    Debt forgiveness relieves the burden of outstanding debts by allowing you to settle the debt for less than you owe or erase the debt completely.

Drawbacks

    Forgiven debt must be declared as taxable income unless the debt was forgiven as part of a bankruptcy or foreclosure proceediing or you were insolvent at the time it was forgiven. Debt forgiveness will also impact your credit negatively.

How to Opt Out of Credit Card Rates

According to CreditInfoCenter.com, the new Credit Card Act passed by the United States Congress went into effect on August 20, 2009. Part of the new law stipulates that banks must give a 45-day written notice that they will be raising interest rates, and customers must be given the option to opt out of the rate increase. You should have received an amended credit card agreement that discusses how your bank handles the opt-out option. The account is not automatically closed, and, if you use the card more than 14 days after opting out, the bank has the option to apply the new higher rate to your existing balance. Understanding how to opt out of a credit card rate increase is important to avoiding higher interest rates.

Instructions

How to opt out of credit card rates.

    1

    Review your amended credit card agreement to find out how your credit card company handles the opt-out option. In some cases you can opt out online, or you can opt out by checking a box on your monthly statement and returning that with your regular payment.

    2

    Make your selection to opt out, and keep any records that pertain to your opt-out selection including a copy of the last statement you received and a printout of the opt out page if you had to opt out online.

    3

    Contact the bank and ask them what your monthly minimum payment will be after the 14-day waiting period is over for the opt-out option.

    4

    Cut up the credit card so you cannot use it again. According to CreditInfoCenter.com, if you use a card that you have opted out on after the 14-day waiting period, the bank can apply the new rate to your entire balance due.

    5

    Stay alert for future rate increase warnings and opt out of every rate increase for that card until you pay it off. According to Bankrate.com, the banks have to warn you 45 days prior to each rate increase and you have to opt out of each one to avoid the possibility of it affecting your current interest rate.

How to Get Out of Debt with Dave Ramsey

How to Get Out of Debt with Dave Ramsey

Dave Ramsey is a popular author and radio show host who gives practical advice on getting out of debt. He has his own system of "baby steps" for getting out of debt and . Read on to learn more about the portion of Dave Ramsey's system that deals with getting out of debt.

Instructions

    1

    Take stock of where you are.

    The first part of Dave Ramsey's system involves gathering information about all of your debts and taking stock of where you are.

    2

    Place debts in order.

    Ramsey recommends placing debts in order from smallest to largest and approaching the payoff that way.

    3

    Begin attacking.

    Start by "attacking" the first debt and throwing everything you can at it.

    4

    Create a debt snowball.

    Once the first debt is paid off, take the payment amount from it and add it to the payment amount of the next debt. Then begin attacking that debt. This technique is called a "debt snowball."

    5

    Continue until complete.

    Continue the debt snowball until all non-mortgage debts have been paid off. Then you're ready to move on with the rest of Dave Ramsey's plan.

What to Do When You're in Debt?

Excessive debt can be a crushing financial situation, and there are simple (but not easy) methods to get out of it.

Budget to Pay Off Your Debt

    There's only one way to get out of debt: Spend less money than you make, and apply those savings to your debt load. Unfortunately, this is as difficult as the maxim to "eat less and lose weight." Your debt represents a period of time when--for whatever reason--you spent more than you made. The interest on your debt means that you're still paying charges on those past excesses; the only way to bring your debt under control is to reduce your expenditures and use your newly excess income to pay off your old debt.

    The advantage of doing this: Once you have paid off your debt, you'll be accustomed to living within your income. Stick with that financial plan, and you'll never be in debt again.

    You should pay your debt off as quickly as you can; focus on higher-interest debt first, as this costs you more money every time those charges are applied. At the same time, however, don't try to radically reduce your circumstances to a spartan lifestyle unless you are forced to do so--the easier you make this transition, the easier it will be to maintain it. The budgeting book "Your Money or Your Life" by Joe Dominguez and Vicki Robin has tips on how to do this.

Negotiate with Your Creditors

    Your creditors are the people you owe money to--such as issuers of your credit cards, or banks that provided you loans. Call them and find out if you can negotiate a lower rate of interest, or a payment arrangement that reduces your principal. Your principal is the amount you owe; sometimes you can make an offer to reduce this total amount.

    Do not mistake these for an offer to lower your monthly payments--this makes it easier on your bottom line, but leaves more debt for a longer period of time, during which it continues to earn interest charges. These "offers" are really opportunities for your creditors to leave you deeply in debt, and to have you pay more interest to them in the long run.

Consult a Credit Management Nonprofit

    Many nonprofits offer to help you create a budget, or work with your creditors to reduce your interest or principal. If your debt situation is truly untenable, they can work with you to determine whether declaring bankruptcy is a good way to get out of debt. If your financial situation is overwhelming you to the extent that you can't get started without help, begin by calling one of these agencies and getting their assistance and support.

Advice on Debt Consolidation & Management

Debt consolidation is a common type of strategy for dealing with debts that borrowers are having trouble paying off. The goal of debt consolidation and similar types of debt management is not to get rid of the debt through cancellation or forgiveness, but to find a way to pay off the debt fully and make debt problems more simplistic, easier to manage and budget for. Debt consolidation also can help improve credit and keep borrowers from resorting to bankruptcy.

Debt Consolidation

    Debt consolidation seeks to replace old debts with a new debt. Sometimes consolidation creates a new loan in order to pay off one very large old loan, like a mortgage. At other times, consolidation uses new debt to pay off many different old liabilities, such as credit cards, auto loans and other smaller debts, which is how debt is "consolidated." The debt is not removed, but it is transferred to a new loan and allows borrowers to pay off problematic debts. Borrowers should consider this option when they have too many different kinds of debt, when debts are creating too much interest in their current form to be paid off easily, or when old debts have late payments that might lead to legal action.

Consolidation Sources

    There are several different sources for debt consolidation. Some companies make a business of offering consolidation loans solely for replacing older debts. These private consolidation loans can come with high interest rates, so borrowers should investigate them carefully. Refinancing a mortgage or taking out a second mortgage also are common methods of raising funds for consolidation, although borrowers need good credit to use their home equity for this purpose. Fortunately, state and federal programs offer assistance for borrowers trying to refinance in order to consolidate.

Consolidation Goals

    In the best circumstances, a debt consolidation does not only replace old loans and keep borrowers from having to default or face skyrocketing interest rates, but it also reduces overall debt. Borrowers should always seek a consolidation loan with a low interest rate. If the rate is lower than the combined effects of the old rates, then the debt will generate less interest, lowering monthly payments from their previous levels. Counseling services can help borrowers determine what rates will result in lower debt payments.

Other Debt Management Options

    There are several options similar to consolidation, although they do not actually create new debt. These are typically referred to as debt negotiation or renegotiation and are effective methods of preventing foreclosure and dealing with debts that are currently too large to pay off. Borrowers with problematic debt should begin by talking with the organizations that hold the loans. Lenders may be willing to give borrowers space to reach better income levels or lower rates to make monthly payments easier to manage.

Sunday, July 26, 2009

Organizations That Help With Hospital Bills

Organizations That Help With Hospital Bills

According to Health.com, a major online source of medical information, high medical bills lead to more than 60 percent of the bankruptcies filed in the United States. It's no wonder that this is a growing problem as the costs of medical care continues to grow faster than people's ability to pay for them. If you are facing financial disaster as a result of mounting medical expense, understand that there are ways to cut medical costs by availing yourself of programs sponsored by nonprofits, hospitals and companies.

HealthWell Foundation

    If medical insurance premiums, prescription drug costs and other expenses are more than you can afford, the HealthWell Foundation is poised to help you. This nonprofit organization was founded in 2003 and it is committed to helping individuals for up to one year with their health care costs if they cannot afford them. And should you need additional help after one year, you can always reapply.

    The HealthWell Foundation
    P.O. Box 4133
    Gaithersburg, MD 20878
    800-675-8416
    healthwellfoundation.org

Patient Advocate Foundation

    If the co-payments on prescription drugs are more than you can handle, the Patient Advocate Foundation may be able to help. Now located in Hampton, Virginia, this organization uses call counselors who will guide you through the process of enrollment. If you have cancer, rheumatoid arthritis, diabetes or osteoporosis and take medication for those illnesses, you may qualify for help from this nonprofit organization.

    Patient Advocate Foundation
    421 Butler Farm Road
    Hampton, Virginia 23666
    800-532-5274
    patientadvocate.org

UnitedHealthcare Children's Foundation

    If you have children and your private insurer and its plan have high deductibles that you find difficult to pay, this foundation may be able to help. Many health care plans, for example, do not pay for the cost of hearing aids or for speech therapy , but UnitedHealthcare Children's Foundation might be able to help with those expenses.

    UnitedHealthcare Children's Foundation
    MN012-S286
    PO BOX 41
    Minneapolis, MN 55440-0041
    952 992-4459
    uhccf.org

Chronic Disease Fund

    If you have accumulated bills as a result of having cancer or any other chronic disease, this fund will help you if you qualify. Each year, the average patient can receive $2,500 to $8,000 to help defray part of the expenses, including prescription drugs. Pick a pharmacy that is on the fund's approved list, and you will not even have to file for a reimbursement.

    Chronic Disease Fund
    6900 N. Dallas Parkway
    Suite 200
    Plano, TX 75024
    972-608-7141
    cdfund.org

How to Default on a Mortgage

Defaulting on a mortgage is never an easy decision. The detrimental credit record alone is enough to deter some homeowners, while others are more concerned about the legal and financial ramifications or, worse, the looming prospect of homelessness. Nonetheless, homeowners do go into default, and this article will explore the best--and, hopefully, the least painful--way to engage in this process.

Instructions

Default on a Mortgage

    1

    Contact your lender. While many financial institutions, especially larger banks, can have a reputation as heartless, many lenders are willing to work with their borrowers in times of crisis. Each default and subsequent foreclosure costs the bank thousands of dollars in processing costs and legal fees, not to mention the likelihood of a loss on the sale of the foreclosed home. All of these factors mean that many banks will work with troubled borrowers, and service representatives trained to assist with these situations can be reached at the telephone number found on the mortgage statement. Explain the financial situation to the representative and inquire about bank programs to help troubled borrowers.

    2

    Contact credit counseling services. If the bank is unwilling to help by modifying or postponing some mortgage payments, a credit counseling service may be able to negotiate a lower payment with the bank. Contact a credit counseling service (see resources below) and explain your situation to the representative. Credit counselors may ask you to close some accounts and stop using your credit cards. Negative credit ratings can result from some credit counseling techniques.

    3

    Contact a bankruptcy attorney. As a last resort before defaulting on a mortgage, consider contacting a bankruptcy attorney. In many cases, an attorney can craft a bankruptcy filing that allows a debtor to remain in his home while liquidating other property to repay debts. In some cases, a Chapter 13 bankruptcy filing may even allow the debtor to keep all of his property, including real estate, while under a court-structured repayment plan.

    4

    Stop making mortgage payments. If insufficient funds to make a mortgage payment are available, and no other options are viable, stop making monthly mortgage payments. The lender will make several attempts to contact you and may be more willing to help restructure your debt. After two missed payments, the bank may file a "notice of default." This notice serves as warning that the mortgage has officially entered a default state. The bank may complete foreclosure actions in as little as four months after the notice of default is filed.

Debt Consolidation vs. Credit Card Payment

Debt consolidation is a common method of dealing with credit card payments that borrowers can be struggling with; however, people with credit card problems should carefully consider their options before deciding on a particular debt consolidation strategy. Sometimes paying off credit cards using other methods is a preferable than trying and consolidate debt that does not need to be changed. Both methods offer their own advantages, depending on the financial situation.

Making the Payments

    The first option for debt holders is to simply pay off the balance on the credit card. This is useful because it is fast: most credit cards are attached to online accounts so users can make immediate payments. Debt consolidation strategies can take time, during which balances can skyrocket because of higher interest rates that kick in as debt is left unpaid. Of course, making credit card payments can be a challenge, and card holders may need to carefully plan their budgets and seek counseling services to reserve enough income for this option.

Debt Consolidation

    Debt consolidation is very similar to making normal credit card payments, except instead of paying with cash from income or other common sources, debt consolidation uses other sources of debt to pay off the cards. A user can use a lower rate credit card to pay off a higher rate card, for instance, saving on the interest the higher card would have incurred. Other debtors can take out loans such as refinances to raise enough cash to pay off balances they are struggling with and stop using particular cards.

Effects on Credit

    In general, unless payments are late and interest is rising higher than debtors can deal with, normal credit card payments are more advantageous for credit. Debt consolidation requires moving the debt from one area to another. The new debt may have better terms, but it is still a new debt, which is not as beneficial for quickly raising credit scores. Also, consolidation may not help debtors that are trying to pay off cards and lower their total monthly payments permanently.

Payment Agencies

    Debt payment agencies offer a service for debtors that takes care of credit card payments automatically. The card holder pays the debt payment agency, and the agency in turn pays all the credit card companies as required. This can be a useful compromise for debtors that want to make regular payments but do not want to deal with the payment schedules themselves. These payment companies may make things easier, but they also tend to charge fees for the service.

How to Build Corporate Credit Without a Personal Guarantee

When starting a business, it is important to keep your business credit separate from your personal credit so that your personal credit score does not drop due to the sudden surge in credit checks and other issues brought on by the new business. By building corporate credit without using a personal guarantee, you can start a business credit profile that reflects your financial success in the business world without affecting your personal situation. In order to build up your corporate credit in this fashion, follow these steps.

Instructions

    1

    Incorporate your business. First, you must incorporate your business as a corporation or a limited liability company (LLC) to keep you personally insulated financially. The corporation or LLC will have their own Employee Identification Number (EIN) which is used to run credit checks, just as a person's social security number is used for personal credit. You can apply for an EIN on the IRS website (see References).

    2

    Create a business plan and budget. In order to build corporate credit, you must start out on the right foot. Write a business plan that shows your goals and five-year projections, as well as the amount of start-up capital needed. List your financial resources including a personal loan to the company or bank loan. Set a budget that allows you to achieve your projected goals while staying within the company's projected means.

    3

    Register your company with Dunn & Bradstreet. As the major business credit bureau, any prospective lender will check your company's credit profile with Dunn & Bradstreet (D&B). (See References for link.) To gain your D&B number and start your credit profile, you must register and pay a fee. Although a fee of $300 to $400 in 2009 may seem like a significant expense for a small new business, it is essential to register in order to be taken seriously when applying for business loans.

    4

    Show that your company is legitimate. Be sure to abide by what credit markets require and show lenders that your company is true and blue. Publish your contact information in the yellow pages, lease an office with a phone and fax line, open checking accounts, and keep detailed financial records. Also be sure to have all permits and licenses necessary to operate your business and keep your business status current with your state's division of corporations.

    5

    Be smart with your credit. Just as you can take certain steps to ensure your personal credit remains at a good level, take action to raise your business credit. Request a higher credit line on credit cards, pay down your credit card balances or credit line, make sure to pay all bills on time, and prevent debt from creeping up on you due to mere inattention to your company's finances. To find out more about what factors affect your credit rating, visit MyFICO (see Resources).

    6

    Report credit experiences to the Business Credit Bureaus. D&B, along with the other business credit bureaus Experian and Equifax keep track of your business credit experiences, but they don't do so in a timely manner and they can miss important positive actions regarding your credit. When you take out a credit line or loan and make timely payments, this is newsworthy for your credit profile, so be sure to report these actions to the business credit bureaus. (See Resources for links to bureaus.)

Saturday, July 25, 2009

How to Protect Your Money in a Bank From Garnishment

When a creditor sues a debtor and obtains a judgment for the amount of money due, the creditor must then collect on the judgment. State laws differ regarding what post-judgment collection remedies are available to a judgment creditor, but in most cases the holder of a judgment may request the court to order the garnishment of any funds held in the debtor's name by a financial institution. Both federal and state laws may protect funds held in a financial institution from garnishment.

Instructions

    1

    Identify the source of the funds held in the bank. Many federal and state laws protect specific funds from garnishment. For this reason, determining where the funds came from may be critical to protecting them from garnishment. Federal law prohibits the garnishment of Social Security payments, public assistance, unemployment, retirement payments, veterans benefits, worker's compensation and black lung benefit payments. Federal law also protects income up to a certain amount ($154.50 as of 2011) per week. State laws may protect additional income or sources of income.

    2

    Read the paperwork that was served carefully. In order for a bank account to be garnished, the creditor must obtain a court order first in most jurisdictions. The request for the order must be served on you and the bank. You will have a limited amount of time to reply to the request or appear in court. Make sure that you respond within the allotted time frame or that you appear in court at the designated date and time. Failure to respond will allow the garnishment to proceed.

    3

    Research your state laws as they apply to bank garnishment. If the funds in your bank account are not protected by one of the federal exemptions, then a state exemption is your only option. State laws can be found online, at a local library or law library. You can also try contacting your local legal aid society for direction or advice on state law.

    4

    Prepare your response to the garnishment. Again, procedures may vary by jurisdiction, but in most cases you will be required to file a response to the request for the garnishment. Contact the court and ask if there are forms you may use. If not, the important thing is that you respond in some manner. A letter may suffice as long as it explains why you feel the funds in your bank are exempt from garnishment.

    5

    Contact your bank. Although a court response is usually required, you may also want to communicate with your bank. In some states you may be able to fill out and sign an affidavit with the bank that will lift the freeze and/or prevent further attempts at garnishment.

How to Sign Your Company Up With Business Credit Reporting Bureau

How to Sign Your Company Up With Business Credit Reporting Bureau

Owning a small business can be a rewarding way to earn a living. However, for your business to grow and continue to be successful, you'll need to ensure the financial health of that business. To do this you'll need to establish and maintain business credit. This will allow consumers and prospective lenders to check on your business's health. The first step is to sign up with a reporting agency.

Instructions

    1

    Obtain a federal tax ID number, otherwise known as an employer ID number. This is critical. A social security number is for individuals only, and you do not want to risk using your own credit for business credit. This opens yourself up to liability.

    2

    Choose a credit reporting company. The three main credit reporting agencies--TransUnion, Experian and Equifax--will report your credit standing once you've established business credit. However, you should choose a larger reporting institution, like Dun & Bradstreet, Standard and Poor's or Moody's. These institutions will lend more credibility to your company, as they suggest you take accounting, credit standing and risk seriously.

    3

    Compare membership costs at each company. For example, to become a business reporting member at Dun & Bradstreet, you must pay an initial fee of $229. This service will give your company a unique credit profile and greater legitimacy. The prices for Standard and Poor's and Moody's are unlisted. You must first schedule an initial consultation with an analyst to review products and services.

    4

    Choose a reporting company and pay the required membership fee. Provide the company with your EIN and any business records such as balance sheets, profitability reports, payroll sheets and tax returns. This will help the reporting company create a thorough, accurate and comprehensive reporting file.

    5

    Pay all business loans on time to maintain excellent business credit. Continue to borrow against your EIN and invest in your company to keep it growing. Contact your reporting company whenever there is a major change in the financial makeup of your company, like a change in salaries or profits.

How to Repay a Mortgage Faster

When you bought your house, you took on a mortgage you thought at the time was much more than you could afford. That was a few years ago, and now you would like to begin paying your mortgage off faster. There are several ways that can be done. Your individual circumstances will dictate which one makes the most sense for you.

Instructions

    1

    Simply add to each of your monthly payments on your mortgage. Not only will you pay off your mortgage faster, you will pay far less interest on it than if you paid only what was due.

    2

    Make half payments every two weeks. At the end of the year, you will have made 13 payments on your mortgage instead of 12. Believe it or not, but you will pay off your 30-year mortgage in less than 20 years by doing this. This is especially helpful for those people who are paid bi-weekly.

    3

    Make one extra payment on your mortgage each year. This is a painless way to pay off your mortgage early if you receive a year-end bonus because you will hardly miss it.

    4

    Make a lump-sum payment on your mortgage to reduce its maturity. This can be done painlessly if you receive a inheritance or your bonus from work is especially healthy.

    5

    Refinance your mortgage for 15 years instead of the traditional 30 years. This is a particularly good way if interest rates are less than they were when you took out your mortgage. Furthermore, the interest rate is less for a 15-year mortgage. If you lack the discipline to do any of the methods above, you will find that this will force you to make increased payments. If you choose to do this, try working with your current lender to keep the refinancing costs to a minimum.

    6

    Rent your home rather than sell it. If you have decided that you need a house with more room, this may be an alternative you should explore, particularly if you have the down payment to purchase a larger home. This method works particularly well if your tenant pays rent in excess of your monthly mortgage payment because you will be able to pay your mortgage off faster with the increased payments.

Friday, July 24, 2009

Debt Recovery & Collection

Debt Recovery & Collection

The use of credit is a way of life for consumers and an income source for businesses. The credit card companies set credit limits, charge fees, offering consumers a way to obtain items. Loss of a job, a decrease in income, puts a strain on consumers to meet monthly obligations. Payments are delinquent and debt collectors insist on payments. The Federal Trade Commission has enacted the Fair Debt Collection Act offering consumers and collectors rights and responsibilities of debt recovery and collection.

identification

    Debt recovery and collection consists of obtaining the funds to settle debts. The delinquent debts a consumer has not been able to pay. Debt collection agencies will purchase debts of significant amounts from the original business. Debts may be six months to four years past due and no payment attempts made. Debt recovery and debt collection is used interchangeably, both referring to the settling of a unpaid debt.

Facts

    Credit Card use
    Credit Card use

    Each state has a time limit that debts are collectible, when the time is up the debt is no longer collectible. However, debt collection agencies may research credit records without permission. Debts not paid can become the property of the collection agency. Now you owe the collection agency and the time starts over. Collection companies are in the business to earn a profit, interest rates may be applied to the debt.

Function

    The primary purpose of debt recovery and collections is to settle debt. The means and ways are varied and include litigation. Courts set a judgment against you, garnish wages, consolidate valuables and agree on payment arrangements. However, debt recovery and collections cannot include taking what you need to live on. Collection agencies can take you to court, levy your accounts, settle your debt by collecting real property. Real property includes house, car, boat, trailer, motor home and jewelry with a value determined by the residence of jurisdiction.

Considerations

    The Fair Debt Collection Act covers debts of credit cards, home and auto debts. Collectors are not allowed to harass, threaten you with jail or bodily harm, curse, lie or continue to call you when requested in writing to stop. As a consumer you have a right to privacy and to be treated fairly. A collection agency must contact you in regards to the amount of the debt, means of collections, offering you the opportunity to respond. Collection agencies may contact your friends, family, coworkers or employer for a current mailing address.

Suggestions

    As a consumer you have the right to dispute debts, be treated fairly and with respect. Keep a record of all communication, including copies of correspondence, phone call dates and times, receipts for correspondence. Always send your correspondence with proof of mailing, a return receipt, keep this on file. Collection agencies must provide you with a record of your debt, proof that the debtor owns the debt. Use caution when using a debt consolidation organization, check the company out before you hire it to help. Most consolidation companies charge exorbitant fees and many do not help to manage the debt.

Thursday, July 23, 2009

Government Grants for Credit Card Debt

Many Americans find themselves under a mountain of increasing credit card debt. Looking for relief from the financial burden, consumers have turned to debt-relief companies and even the federal government.

Misconceptions

    There is no shortage of websites that claim individuals can apply for a federal grant to relieve them of their credit card debt by going to Grants.gov. On the front page of this website is the statement: Grants.gov does not provide personal financial assistance.

Credit Counselors

    As reported by ABCs Mellody Hobson, credit counselors such as the National Foundation for Credit Counseling do receive government grants in part to fund their services.

Caution

    Advertisements abound for companies claiming to eliminate credit card debt with federal money. According to Hobson, many people are unaware that some credit counseling companies activities can actually harm a persons credit score.

Applying

    Each credit counseling service has its own set of applications and information that must be filled out in order to apply for a grant. Make sure you know up front what is required from each agency before choosing one.

Full Disclosure

    In order to fully help with the application process, credit counseling agencies will need to know your whole financial situation. It is important that you choose a company you feel comfortable disclosing the information to.

Why Everyone Should Have at Least One Credit Card

Why Everyone Should Have at Least One Credit Card

Credit cards will create a lot of problems in the wrong hands, and when consumer debt gets out of hand, things can get ugly in a hurry. Unfortunately, credit cards do not come with instructions for optimal use. Instead, lenders offer you terms and conditions infused with language guaranteed to confound and confuse, and written in print so small that even a magnifying glass is not much help. Still, as our world leans away from the use of checks and currency, credit cards play an increasingly significant role in day-to-day life.

Credit History

    Perhaps the most compelling reason that you need a credit card is so that you can establish and improve your credit. It sounds like some kind of Orwellian double-speak, but good credit improves your life by making things more affordable. Credit card accounts represent a class of credit, just as a home mortgage and an auto loan represent other classes of credit, and managing these various types of accounts well demonstrates that you are a responsible borrower. If the logic escapes you, it is all part of the complex formula credit bureaus use to derive a credit score, a necessary item required when you want to make a large purchase such as a home.

Convenience

    Most people use credit cards for the wrong reason. Rather than thinking of your line of credit as found money, you should consider your credit card as an extension of your bank account; a way of buying time for a purchase you can pay in full when your next bill comes. It is much easier to carry one card than a wallet full of cash, and when you use your credit card for common purchases, at the end of the month, you will have a comprehensive record of where the money went. Use the information on your credit card statement with money management software to track your spending habits and better manage your money.

Theft Protection

    Consider the ways that you can pay for purchases: cash, check, money order, debit card or credit card. When someone taps into your checking account, your money is gone and the burden is on you to convince the bank to pay you back. If you lose cash, or someone steals it from you, you are just out of luck. Credit card companies want your business because it is a competitive market, and one of their services involves protecting you from fraudulent charges on your account. They have established procedures for working out disputes that go beyond the coverage offered with your basic checking account services.

Rewards and Benefits

    Not every credit card offers a rewards program, and for those who are struggling to rebuild their credit, just having a card and the opportunity to rebuild their credit is a reward in itself. Still, if you are in a position to shop around for the best credit card account, consider perks such as cash back, airline mileage points, gift certificates or points for merchandise. Such things as extended warranty plans, warranty tracking on appliances and electronics, theft protection on items purchased with the card, are just a few of the perks that may be offered with certain accounts.

How to Check Account Liability

Liability refers to things for which you are responsible. In the business world, account liability refers to the outstanding debts that you owe to others. Most everybody has some sort of account liability at one point or another, whether it is an outstanding liability on a car loan, home loan or outstanding credit card balance. Keeping current on your liability payments is essential to maintaining good credit. Regardless of what type of account you hold a liability on, you can easily check your account liability.

Instructions

    1

    Login to your online account, and look for your account balance, which should be listed somewhere on your account dashboard. Your outstanding account balance indicates your account liability still to be paid.

    2

    Locate your most recent paper account statement, and find where your account balance is listed on the paper. This step is for if you do not access your account online or do not have access to the Internet at the time you wish to check your account liability.

    3

    Call the customer service number for your account's organization. Follow the prompts within the automated menu to reach a customer service representative, and then inquire as to what your account balance is.

What Is Amortization and Depreciation?

Amortization and deprecation are two different methods of handling an asset deduction when you are using accrual accounting for your business. Amortization is used for intangible expenses, while deprecation is used for tangible expenses. Accrual accounting does not deduct an asset immediately when you buy it. The cost of assets are spread over the functional lifetime of the asset itself to provide a more complete view of a business' cash flow and profit.

Amortization

    Amortization is the deduction method used for intangible products that don't have a specific lifetime of usefulness. An example of a business expense that is an intangible expense is a patent or trademark for one of your products. The length of time that the intangible asset can be spread over is based on the estimated useful lifetime of the asset. This information is included on the company's cash flow statement.

Depreciation

    Depreciation is comparable to amortization, but it is used for tangible expenses that have a definite lifetime. The cost of the tangible asset is spread for the entirety of its useful life, so that the upfront costs of the asset can be spread throughout its life. Depreciation comes in several different types, such as straight-line depreciation and activity depreciation. Straight-line depreciation spreads the cost of the asset evenly throughout its life, while activity depreciation adjusts the deduction based on how often the asset is actually in use.

Accrual Accounting

    Both amortization and depreciation are used in accrual accounting, an accounting method used by businesses that do not want to use cash accounting, or do not qualify to use the cash accounting method. Accrual accounting tracks income and expenses as each transaction is made. Unlike cash accounting, accrual accounting does not wait until the money is taken out or paid.

Filing

    Both amortization and depreciation use the same Internal Revenue Service tax form to be properly claimed on taxes. This form is Form 4562 and it covers many different potential deduction situations. This form covers varying years of depreciation, special depreciation cases, vehicle depreciation and asset amortization. All deductions must be included on this form to be counted for your tax liability deductions.

Wednesday, July 22, 2009

Is a Background Check Needed for a Line of Credit?

Background checks such as character references and criminal history checks are usually not needed for approval on lines of credit. There could be exceptions to this if the bank is extending an unusually large credit line. However, in nearly all cases the bank or lender makes only a standard credit check.

Permission

    The lender will seek your written authorization before conducting a formal background check -- if one is required. Background checks are more common in employment situations during the hiring process as companies check references, driving records, criminal records and more.

Credit Reports

    It's more likely that the creditor will order a credit report from one of the major credit bureaus: TransUnion, Equifax or Experian. Approval will be determined by information on your application, such as your salary and employment, along with information from your credit report including your credit score. Credit scores are three-digit numbers ranging from 350 to 850, and scores of 720 to 750 or higher are considered outstanding. Creditors establish their own lending standards, so it is possible to be approved with scores in the 500s. However, a 620 score is generally considered the cutoff for "good" credit.

Accuracy

    It's important to truthfully fill out the credit application. Information on the credit application should be the same as information listed on your credit report. Inconsistencies could lead to delays in processing your application while representatives contact you for follow-up questions.

Loan Officers

    Contact the lender and ask about the loan approval process if you are really concerned about background checks. Simply ask the representative to explain the bank's credit review process and standard expectations when approving lines of credit.

How to Sell a Car With a Personal Judgment

A personal judgment enables your court adversary with the right to place a lien on your car that prevents you from selling the car without paying the judgment. Liens give the holder a financial interest in your property and court lienholders are no different from the lienholder you acquire when you finance a vehicle. If the judgment owner does not place a lien on your automobile, sell the car without repercussion. If the judgment holder requests a garnishment of your bank account and you deposit the money in that account, the owner of the judgment can get the proceeds from the sale.

Instructions

    1

    Look at your court papers to determine how much you must pay to remove the lien. The judgment may require you to pay the amount of the lawsuit, interest and recovery costs incurred by the person who sued you.

    2

    Pay the lien before you sell the car. If you are able, paying the lien before you sell the car can prevent any issues when you transfer the title to the car buyer.

    3

    Use an escrow service to facilitate the transaction. These services accept the money from the buyer, the title from the seller and work with the lienholder to complete the purchase. After the escrow service pays the judgment, it works with the lienholder to release the title to the buyer (see Resources).

    4

    Sign the title authorizing the transfer and collect any money remaining from the sale after paying the lien.

Advantages & Disadvantages of Using Consumer Credit

Advantages & Disadvantages of Using Consumer Credit

According the U.S. Census Bureau, in 2006 there were more than 173 million credit card holders in the United States. This was predicted to grow to 181 million by 2010, representing nearly 92% of all households. Although credit can be helpful, if used wisely, it can also cause financial stress if misused.

Charge Cards vs. Credit Cards

    Although many people carry them, some do not understand that charge cards are different than credit cards. Charge cards do not allow holders to carry a balance and require payment in full each month. American Express Cards are the best example of a charge card.

Misconceptions

    Credit card issuers are not required to provide a grace period on purchases. While most credit cards allow a grace period to pay off purchases with no accrued interest, this period varies for every financial institution and should be verified to avoid interest charges.

Warning

    Interest and late fees can add significant cost to credit card purchases and quickly erase any savings or discounts provided at the point of purchase.

Benefits

    Having easy access to a reasonable amount of consumer credit can provide a safety net in the event of emergencies. This availability can help consumers avoid using money set aside for monthly expenses or tapping into savings or retirement funds.

Considerations

    Although having access to a ready line of consumer credit can be advantageous, large, unused credit limits can negatively impact your credit score. For most middle-income consumers, access to a few thousand dollars will typically provide a sufficient cushion for most unforeseen expenses.

Prevention/Solution

    Credit and personal finance education, starting at an early age, can significantly improve the handling of consumer credit by young adults. A secured credit card, available through most financial institutions, is a great way to teach financial responsibility while limiting potential loss.

Affordable Debt Help

Affordable Debt Help

Debt management or consolidation services can be a lifeline to those in desperate need of reworked finances. Unfortunately, these services often don't come cheaply and scam artists are everywhere. Luckily, affordable -- even free -- help is available. If you're ready to do some legwork yourself, you may be able to eliminate fees and lower interest rates on your own. If not, finding a reputable debt management company is of paramount importance.

Do It Yourself

    Make a list of the debts with which you'd like help. Include the balance, interest rate, minimum payment and telephone number for each account. Call each creditor and explain your situation briefly, then ask if they are able to lower your interest rate or change the term on your loan (this will work for unsecured debt only, such as a credit card). Customer service agents are often authorized to adjust rates over the phone, especially if you've been a good customer in the past.

    If the interest rate is lowered, try to maintain your payments. Although it will not immediately improve your cash flow, more of your payment will be applied to the principal balance and your debt will be paid down faster. There are several free applications on the Web that you can use to track your progress (see Resources).

Debt Management

    The National Foundation for Credit Counseling is the nation's longest-running nonprofit debt relief agency. Their counselors undergo a rigorous training process, are certified and offer free one-hour consultations. The foundation will review your budget and make suggestions. If necessary, the counselor will enroll you in a debt-management program that can lower interest rates and payments and eliminate fees.

    One hundred percent of payments made through NFCC member organizations are applied to creditor accounts. There are no counseling or setup fees, but debt management plan fees vary by state. Plans can last as long as five years and, in exchange for reduced interest rates, accounts are closed. Credit bureaus may also be notified that you are participating in a debt management program.

Negotiating Debts

    Negotiating or settling your accounts for an amount less than what is owed is a legal way to get debt relief. It is neither easy nor affordable and scams abound. Your credit rating also will plummet, a factor to consider if you will be applying for a loan in the near future (two to three years).

    If you already are significantly late on your payments -- three to six months -- a debt negotiator will settle on your behalf with the creditor. Often, settlements will be half of the principal balance. You should be prepared to pay in full to get the best deal. Depending on how much you owe, you should also be prepared to pay thousands of dollars in fees.

Consolidation Loan Alternatives

    If you have not yet damaged your credit but are about to fall behind on your bills, a consolidation loan is a possibility. Home equity loans often have low initiation fees, interest rates and tax-deductible payments. Use caution and review your spending habits carefully. If you're in debt because of uncontrollable spending habits, this is not the solution for you. If your debt is the result of a job loss or medical expenses but your financial habits are sound, home equity loans offer a great, inexpensive alternative, especially when potential tax benefits are considered.

Scams

    Be certain to check with the Better Business Bureau to verify the legitimacy of the organization with which you're planning to work. The BBB site is easy to use (see Resources). Debt negotiators (or settlers) in particular have a difficult reputation. Fees are often front-loaded. This means you pay thousands of dollars before a cent goes toward your debts. State Attorney General offices are overloaded with complaints about companies that stole debt settlement money from consumers who needed the most help. In short, do your homework and you won't be disappointed.

How to Work With a Small Claims Court Mediator in Texas

Mediation is a process in which a neutral third party sits down with persons involved in a dispute and facilitates negotiations between them. Many judges prefer mediation to the trial process, especially for small claims matters, according to the Journal for Consumer and Commercial Law. In Texas, the judge must order mediation before litigants can engage in it.

Instructions

    1

    Request that the judge handling your case assign a mediator. Texas law requires that the judge order mediation if he sees it as a viable alternative to the trial process; if he does not order mediation on his own, you or your attorney can suggest it.

    2

    Attend the mediation meeting on the appointed date and time. Answer the mediator's questions honestly so that he can hear your side of the dispute.

    3

    Listen to the mediator's explanations of your legal options. Do not get upset or stop listening if you think an option would not be good for you. Discuss the issue calmly with the mediator and the other person involved in the dispute.

    4

    Agree to an option only if you think it is right for you. If you are not comfortable with any of the options, tell the mediator honestly. Discuss the issue further and see if you can come to an agreement. If this is not possible, the mediator will tell the judge only that you and the other person reached an impasse and the trial will continue.

    5

    Read over written agreements prior to signing them. Ask questions if you don't understand something or need clarification. Sign the written agreement once you understand it fully and agree to all terms. The mediator will submit it to the judge for approval. Once it is approved, your case ends.

Cards for Credit Problems

Cards for Credit Problems

It's tough for people with credit problems to get credit cards that don't come with high interest rates. However, people who don't rack up big balances and pay their card issuers' bills on time use high-interest cards to improve their credit ratings. They may eventually qualify for other credit cards with better terms, but in the meantime can explore cards for credit problems.

Secured Credit Cards

    Secured credit cards offer people with credit problems the opportunity to build a better credit history. Secured card issuers usually require applicants to make a deposit to a savings account that serves as collateral for the credit account. The amount of the deposit usually establishes the cardholder's credit line as well. For example, someone who deposits $1,000 receives a $1,000 credit line. People who make on-time monthly payments to their card issuers can eventually improve their credit ratings.

Orchard Bank

    Orchard Bank (orchardbank.com) promotes three regular credit cards and a secured card to people who have credit problems. The bank determines which card applicants receive after their credit histories are reviewed. CNN Money includes the Orchard cards on its 2011 list of the best cards for people with bad credit. People who have better credit histories usually pay lower fees and lower interest rates. Orchard's unsecured cards have annual fees that range from $39 to $59, and interest rates are as high as 19.9 percent. Still, CNN Money notes that some unsecured cards for people with bad credit come with interest rates of nearly 30 percent.

Capital One

    The Capital One (capitalone.com) secured MasterCard also is on the CNN Money list partly because the annual fee charged for the card is just $29. Furthermore, applicants can get a $200 credit line even if they only submit a $49 security deposit to open an account. People who deposit $100 or more can get credit lines as high as $3,000. However, CNN Money says cardholders should avoid carrying a balance from month to month because the interest rate on the card is just shy of 23 percent.

Considerations

    The U.S. Federal Reserve Board warns consumers to find out if secured card issuers charge application fees or other fees before they apply for a card. The FRB says consumers also should find out if those fees are refunded if an application isn't approved. Some credit repair companies offer credit cards to people with bad credit as they try to sell their credit repair services. These companies claim they can clean up people's bad credit histories. However, the FRB notes that only legitimate errors can be removed from credit reports. Good credit management is what improves people's credit ratings over time.

Tuesday, July 21, 2009

How to Account for Debt Forgiveness

Forgiven debt is when a credit card company allows you to pay less that your outstanding balance as a settlement. The portion of debt not paid is called forgiven debt. In other situations a creditor will determine that they cannot collect a balance and they will consider it forgiven debt. When you have debt forgiven, there are several things you have to consider and account for. Some of these things can affect your credit and other can create another type of liability. Before you have debt forgiven determine if it will benefit you. See if the pros out weigh the cons.

Instructions

    1

    Make a list of all the things that are affected when you have debt forgiven. Forgiven debt takes a strain off your budget. When you don't have to pay debt, it can take pressure off making payments to a particular creditor on a monthly basis. Once you have a list of all the things impacted by forgiven debt, see how they affect your finances or your credit history. Review each item individually to see if it will be worth the effort to have forgiven debt.

    2

    Determine how your credit is affected. According to creditcards.com a credit score of 780 can be reduced anywhere from 105 to 125 points due to a debt settlement. This is a tremendous hit on your credit score. When your score is lowered credit card companies will charge you higher rates of interest for their products. A mortgage company will also charge higher interest rates. This information will remain on your credit file for seven years.

    3

    Review other aspects of forgiven debt. When debt is forgiven, you may have to report it as taxable income on Line 21 of your 1040. The creditor will send you a 1099-C debt cancellation form. You should seek the advice of your tax professional when this form is received. There could be some exceptions to this rule. If you have a debt in the amount of $5,000 and you settle for $3,000 the forgiven debt of $2,000 may have to be reported as taxable income. This rule is in effect if the forgiven debt is $600 or greater.

    4

    Compare all of the forgiven debt changes and see if it will be cost effective for you. Speak to your accountant and tax person and get their perspective on the different changes. See if it will be worth your while to pursue a strategy that leads to forgiven debt.

How to Avoid Paid But Not in Full

Collection accounts and old debts don't disappear. Even if a creditor stops collection attempts, these delinquent accounts stay on your credit report for seven years. But you can resolve these debts sooner and clean up your report. If you can't afford to pay a debt in full, you can negotiate a debt settlement. A debt settlement offers a practical solution to debt because you can pay off the balance for less than you owe. However, your creditor may report "paid, but not in full," or "settled" on your report, which can do further credit damage.

Instructions

    1

    Figure out what you can afford to send a collection agency or creditor to settle a debt. Rarely will collection agencies or creditors accept installment payments with a debt settlement. They typically ask for one lump sum payment.

    2

    Call the creditor that owns the debt to discuss a settlement. State your plans to satisfy a balance, and then offer your settlement amount. Offer less than what you can afford because the collection agency or creditor will likely negotiate a higher settlement.

    3

    Address how the creditor will report the pay off. Some creditors and collection agencies report debt settlements as "paid, but not in full" on credit reports. Settling a debt can have an impact on future loans and lenders may reject your application because you didn't fulfill your past obligations. Ask the creditor to report the account as "paid as agreed," "or "paid in full." Some creditors will grant your request in order to recover funds owed.

    4

    Mail your debt settlement payment once you receive the agreement in writing. If your creditor agrees to report the payment as "paid in full," get written confirmation before paying off the debt.

How to Choose Debt Counseling

For consumers who have a hard time paying their bills, a credit counseling service can offer guidance and solutions. This type of service often offers money management courses, budget counseling and debt relief. While most credit counseling services are reliable, there are some that overcharge and do not offer the type of services they should. If you find a reliable debt counselor, he will not only teach you about personal finances, but will also help consolidate all your debt into an affordable monthly payment if that is the best solution for your debt issue.

Instructions

    1

    Shop around for a credit counselor and ask what the services involve and what the prices are from the very start. Just as with other products and services, you want to compare services and prices. When you compare different debt counseling services, you will find a service that does not charge you several hundred dollars a month. Avoid companies that charge large fees and promise to return part or all of the fee when the program is finished.

    2

    Select three or four debt counseling companies you might be interested in working with. Contact them either online or by phone. Ask direct questions about fees and services. Look for straightforward answers and a willingness to disclose every service and charge from the very beginning. Ask about other services besides debt consolidation. Many reliable debt counseling services offer other services, like a free budgeting session or other personal finance workshops and information.

    3

    Check for accreditation from third party associations like the National Foundation for Credit Counseling or Association of Independent Consumer Credit Counseling Agencies. Check for counselor certifications and training.

    4

    Listen to what the counselors have to say over the phone or online. Pay attention to the time they are willing to spend with you and the information they offer. Avoid debt counselors that immediately suggest a debt management plan without getting all the facts.

    5

    Treat nonprofit debt counseling services cautiously. Find out how the agency is funded and ask about prices. Just because an debt counseling service is registered as nonprofit does not mean their fees are reasonable; some charge higher fees than a for-profit credit counseling agency.

    6

    Check the reputation and reliability of the companies you may be interested in working with. Call the Better Business Bureau and see if there are any complaints against any of the companies you are considering.

    7

    Choose the debt counseling service that offers the services that best fit with your needs and where you think you will learn the most.