October 2009 ~ Credit And Debt Management

Saturday, October 31, 2009

Can Debtors Put a Lien on Your 401(k)?

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Setting money aside in a 401(k) helps you plan ahead for your retirement years but the possibility of losing that money along the way can be intimidating. If you rack up a large amount of debt, you may be concerned about having a lien placed on your accounts. When dealing with a 401(k), your money is usually not risk.

When you owe money, the creditor could file a lawsuit against you and get a judgment, which can be used to file a lien on your property. A lien is a legal claim on property that prevents the owner from selling a property without paying the creditor. Liens can be placed on items such as a house or a car. Liens cannot be placed on bank or retirement accounts.

Once money is in a 401(k), it cannot be touched by creditors in any way. The money in the account is not subject to judgments or claims of any kind by normal creditors. This is even true when you file for bankruptcy. Once you file for bankruptcy, the court will not use the assets in your 401(k), as they are exempt.

A possible exception to this is tax debt. The Internal Revenue Service can take money out of your 401(k), although will go after other assets first in most cases. In this scenario, the IRS can attach a lien to a 401(k) or to another type of retirement account that you may have.

If you have a significant amount of debt, it may be to your advantage to file for bankruptcy instead of accessing your 401(k). By filing for Chapter 7 bankruptcy, you keep the money in your retirement account and get rid of your debts. The downside to this is that it damages your credit score.

Can an Employer Keep My Paycheck If I've Been Fired?

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A person can be fired for many reasons, from doing his job improperly to simply being the victim of structural layoffs. However, in no case can an employer keep the wages of a person who has been fired for work that has already been performed. While the employer may be allowed some deductions, he cannot keep the person's paycheck just because he fired them.

When a person is fired, it means that the employment contract that he previously held with the employer has been severed. Essentially, a person will not be allowed to work for the employer anymore and the employer will not be obligated to pay him. However, this termination is not retroactive. Regardless of why the person was fired, the employer must pay the person for the work that he has performed according to the terms of his contract.

The last paycheck is no different than the paycheck that came before it. If the employer is paying an hourly wage, then the employee is entitled the amount of money that he earned based on the number of hours that he worked. Similarly, if the wage was provided as a salary, the person is entitled to his total salary, prorated to the date he was terminated.

An employer is allowed to make certain deductions from the final paycheck. For example, if an employee owes the employer money or has not returned company property, then the employer is allowed to deduct these costs from the person's final paycheck. However, the employee must be first given a chance to pay these costs. An employer must also explain why a person's paycheck is being held back.

If an employer refuses to provide a person with his last paycheck, the individual can take several courses of action. First, if he can afford it, he can consult an employment lawyer. The employment lawyer will assess his case and provide him with legal options. If this is prohibitively expensive, then the person may wish to consult the Department of Labor, where he can file a complaint against the employer.

Credit Reporting Resource Guide

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Having a good credit score can benefit you by getting a good interest rate and terms on a loan when purchasing a vehicle or home. The Fair Credit Reporting Act states that under federal law, a person is entitled to receive one free credit report annually by each of the three main reporting agencies, but you must make contact and request this information. Your credit reports can contain errors or account mistakes that can cost you valuable points on your FICO credit score.

There are three major credit bureaus: Experian, Equifax, and TransUnion. You may call, e-mail or write snail-mail to request a free copy of your credit report annually. The information you will receive will only pertain to your personal credit report. It will not usually include your FICO credit score. The FICO score is offered for an additional payment of around $10.
Make sure when requesting these reports that all of your personal information (current and past) is correct. Wrong addresses and employers can cost you unnecessary points on your FICO score. These are easy things to correct. If you see any mistakes, you are required to write a letter of dispute to the credit bureau explaining what errors need to be corrected.

Experian
www.experian.com
P.O. Box 9595
Allen, TX 75013-9595
1-888-397-3742

Equifax
www.equifax.com
P.O. Box 740241
Atlanta, GA 30374-0241
1-800-685-1111

TransUnion
www.transunion.com
P.O. Box 1000
Chester, PA 19022
1-800-888-4213

Several books are available to help you understand the way credit works and aid you on the road to repairing your credit score. One is "Debt Cures" by Kevin Trudeau. This book not only tells you how to repair your credit in 30 days, but informs you of other ways to improve your credit by educating you on how the credit system works. It also provides several pages of other resources and helpful information regarding credit and debt management.
Other resources on the web offer free credit reports such as FreeCreditReport.com. One site, Freetriplescore.com, offers all three credit reports in one request. These two sites, however, require you to sign up for paid services to get the free reports.

Can Unsecured Creditors Garnish Wages?

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While secured debts are easier for creditors to satisfy, unsecured creditors still have legal recourses when it comes to collecting on their debts. They can garnish your wages, but not without going through the proper channels first.

Before creditors can start garnishing your wages, they must first file a lawsuit against you. This will typically take place several months after you have avoided repaying the debt. When the creditor files a lawsuit, you will receive a summons to appear in court. At the court appearance, you will verify that you did accumulate the debt, unless you can prove that the debt is not yours and there is some sort of mistake.

When an unsecured creditor takes you to court, the creditor has to get a judgment against you to pursue a garnishment. As long as there are no extenuating circumstances that would get you out of paying the debt, like a fraudulent use of a credit card, you will have to repay the debt. The court will issue a judgment against you and this gives the creditor the right to seek payment from you.

Once the creditor has a judgment against you, it can get a writ of execution which allows the creditor to enforce the judgment through a wage garnishment. The lender can then talk to your employer directly to set up the garnishment. Once this process is completed, your employer will provide a certain amount of money to the creditor before you receive it in your paycheck. Your employer cannot fire you as a result of having to process a wage garnishment.

Each state has specific rules regarding wage garnishment. Every state has a maximum amount of money that can be taken out of your paycheck. For example, the creditor might only be able to take out a maximum of 25 percent of your gross pay. Creditors also cannot garnish Social Security benefits, disability benefits or public assistance benefits.

Government Debt Programs

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The Federal Trade Commission recommends that people seeking relief from debt focus on credit counseling, realistic budgeting, debt consolidation or bankruptcy. However, only one of the options--bankruptcy--is akin to a government program for debt. The government does not offer bailouts for personal debt as of 2011. People struggling with excessive credit card or other debt must solve their problems on their own or ask for the government's help through bankruptcy.

The filing fee for Chapter 7 bankruptcy is $299, as of 2011. Many people who feel overwhelmed by debt problems choose Chapter 7 because of its speed. Chapter 7 eliminates unsecured debt such as credit cards in a few months. That makes it the most efficient government-related option for resolving debt. The biggest drawback to Chapter 7 is its income eligibility requirement. Guidelines are established by the states, but usually only those with low incomes or unemployment for more than six months qualify. Most people hire an attorney to assist with filing for all forms of bankruptcy. The cost varies depending on the attorney but starts at several hundred dollars for simple cases.

Chapter 13 requires a filing fee of $274 and is much more complicated than Chapter 7. Chapter 13 requires a payment plan of three to five years, with household spending tightly controlled by the bankruptcy court the entire time. Some people filing for Chapter 13 drop out of the program because of its length. Tight control over the debtor's spending is necessary to pay as much money as possible to creditors through the payment plan. That means participants in Chapter 13 give up the freedom to spend their money as they please--a challenge that some find too difficult.

The government endorses some nonprofit credit counselors but does not directly offer debt counseling. The U.S. Department of Housing and Urban Development offers official certification for counselors who qualify as credit and housing specialists. Initial visits with counselors are free. The counselors can provide information on legal and ethical solutions for resolving debt, including frank discussions about bankruptcy and its effect on credit. Bankruptcy remains on your credit report for 10 years.

The Federal Trade Commission recommends debt management plans offered by counseling agencies. However, these plans also restrict household spending, with participants sending lump sum payments to the counseling agency each month for four or five years. The agency uses the lump sum payments to make individual payments to the participant's unsecured creditors. The counseling agencies claim they have the respect of credit card companies and other creditors, and as a result can negotiate affordable payment plans for debtors. Participation in debt management plans requires a monthly management fee for the agency.

Does Credit Consolidation Work?

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The success of debt consolidation depends on the recipient of the loan. When the right loan is used correctly, debt consolidation may help individuals to pay off their debt faster and for less money. However, for those who aren't in control of their spending, consolidation leads to a further spiraling of debt.

Debt consolidation is successful for those who are committed to paying off debt and keeping it paid off. To use debt consolidation successfully, you must make a conscious effort not to spend on the credit that has been wiped out by the loan. To do so, you need to create a budget that allocates money toward your needs (rent, utilities, food, gasoline), your debt and your savings so that there's no reason for you to use one of your consolidated accounts at any point in time.

The reason debt consolidation often fails is because people aren't determined to pay off their debt and keep it paid off. For many people, obtaining a consolidation loan is only treating the symptom, not the problem. By sweeping up the debt and putting it in one place, many consumers feel a sense of relief and falsely believe that they have handled the problem. In reality, the root of the problem is overspending, which needs to be addressed with the creation of a budget.

While debt consolidation loans are often advertised at low interest rates, not everyone who applies for them actually receives those interest rates. In fact, unless you have excellent credit, it's likely that you will not qualify for the rates advertised by lenders. You may be able to get rates equal or lower to what you could get for a consolidation loan simply by requesting lower rates through your creditors. By doing so, you have less risk of accumulating more debt and you won't have to create a negative impact on your credit score by applying for more credit.

Many financial experts advise against consolidation loans. Jenny McCune's Bankrate article cites credit union manager Chris Viale as stating that 70 percent of those who use consolidation loans end up with the same or more debt within two years. To avoid becoming part of that majority, you may benefit from working with a reputable credit counseling organization listed on the National Foundation for Credit Counseling website.

How to Check Your Child's Credit Report

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Armed with your child's name and Social Security number, identity thieves may attempt to open credit accounts. Children are often targeted because parents do not routinely check their child's credit report, so theft could go years without being identified and reported to law enforcement. When you suspect your child's identity was stolen, contact all three of the credit bureaus to determine whether your child has a credit report. If he has one, file a police report. All three credit reporting agencies accept inquiries by mail. TransUnion also offers an online form for checking your child's credit report status.

Instructions

Draft a letter stating you suspect someone opened credit under your minor child's name and Social Security number. Indicate you want a copy of your child's credit report, if she has one.

Attach a copy of your government-issued ID card, a copy of your child's social security card, a copy of your child's birth certificate and a proof of address, such as an utility bill.

Make three copies of the letter and supporting documentation. Mail your letters to the Fraud Department of all three of the credit reporting agencies: Experian, Equifax and TransUnion. Each agency notifies you by mail whether it has found a credit report for your child.

TransUnion LLC
P.O. Box 6790
Fullerton, CA 92834

Experians National Consumer Assistance
P.O. Box 2104
Allen, TX 75013

Equifax Consumer Fraud Division
P.O. Box 740241
Atlanta, GA 30374-0241

Open the Child Identity Theft Inquiry form on TransUnion's website.

Enter your personal information in the fields providing including your name, address and email address.

Provide your child's information including his name, address, Social Security number and date of birth.

Verify the information you entered is correct and submit the inquiry to TransUnion. TransUnion notifies you by email and mail whether it has found a credit report for your child.

How to Answer a Credit Card Suit

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If you receive notice that you are being sued for unpaid credit card debt, answering the lawsuit will preserve your rights under the law. If you do not respond, the court could grant the credit card company or bill collector a judgment for the full amount. That could lead to garnishment of your bank account or wages. "The New York Times" reported in 2009 that credit card companies were increasingly turning to lawsuits to collect debts, and that many people failed to even show up for their court date or to respond to the initial notice of a suit.

Instructions

Read the summons you received and the attached complaint. A summons is a legal document informing you that a lawsuit has been filed against you. The complaint is the actual lawsuit, and explains why you are being sued. A summons can be hand-delivered or sent by certified mail, depending on your state. In some states, a summons requires you to appear in court by a certain date. In other states, a summons requires you to file a written answer to the lawsuit by a certain date.

Gather documents needed for your defense. Financial problems and joblessness are not legal defenses, according to Illinois Legal Aid. One example of a legal defense is identity theft--the debt is not yours and is the result of fraud. Gather police statements and any other documents needed to prove your case.

Appear in court at the time and date specified in the summons. Tell your story to the judge. If no court date has been set, file a written response to the summons by the date specified in the summons. The response is called an "Answer" and must be filed in person at the court, with a copy mailed to the company filing the suit. The answer must include short, numbered statements addressing each allegation in the complaint. You can deny that the allegation is true, admit that it is true or indicate that you do not have enough information to admit or deny it. The answer should be typed on 8-1/2" x 11" paper, according to Community Legal Services of Mid-Florida (see Resources). A court hearing will be set after your answer is filed with the court.

Credit Repair Criteria

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Credit repair is the process of improving your credit score and cleaning up your credit report. You can hire a firm to help you with credit repair, but the potential for credit repair scams make do-it-yourself credit repair a better choice, according to the Federal Trade Commission website. Create a set of credit repair criteria that you will use to help improve your credit score and strengthen your financial future.

Your credit repair criteria needs to include a review of your credit reports. You are allowed to order one free credit report every 12 months from the three major credit reporting bureaus, according to the Federal Trade Commission website. Review your reports to determine if your personal information, such as previous addresses and Social Security number, is correct. Analyze your credit accounts to ensure the old accounts reflect an accurate status and that current accounts list the right available credit and payment history. Use the dispute process outlined on each report to make corrections. When you are repairing your credit you will need to review your credit reports regularly. Getting your reports for free at first can help you get started, but using a monthly subscription plan to see your reports any time you need to will help you monitor your credit score properly.

Some creditors such as department store cards or gasoline cards may not report your credit activity to the credit bureaus, according to Dani Arthur, writing on the Bankrate website. Contact your creditors that do not currently report your activity and ask them to submit your information to the credit reporting bureaus. It helps to have as many accounts in good standing as possible when trying to repair credit. Older accounts with a good payment history that are not listed on your credit report should be added to improve your score.

Your credit score will benefit from the sensible use of your current credit accounts, according to Liz Weston, writing on the MSN Money website. Do not allow your credit card limits to become maximized, but do not be afraid to use your cards either. If you can maintain a balance that is between 10 and 30 percent of your card limit, that activity will benefit your credit score. Ongoing credit maintenance is important to repairing your damaged credit.

The process of credit repair requires collecting credit reports, sending correspondence to creditors and reporting bureaus and the detailed examination of credit statements. In the course of disputing or repairing something on your credit report, you may be asked to produce a copy of a letter or form you submitted previously. Your credit repair criteria needs to include a record-keeping portion that files important papers in a safe place and makes them available when needed.

Finance Problems Help

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If you are having financial problems, it is important to get help with your finances before it is too late. Missing payments on loans, credit cards and mortgages can affect your ability to obtain credit when you need it.

Numerous websites by non-profit organizations such as Better Budgeting and Financial Planning offer tips on how to manage finances and save money. Tips focus on how to cut unnecessary expenses and how to budget yourself for your expenses.

Consumer credit counseling services exist to provide help in dealing with your creditors to reduce your monthly payments. With this service, you will make one monthly payment to the credit counseling service and in return it disburses payments to your creditors. Generally, you can only place unsecured creditors under consumer credit counseling.

Talk to a financial counselor for free. Financial counselors can review your credit report with you and help you develop a budget based on your needs. Advice from a financial counselor can be provided for free under some non-profit organizations such as Money Management International.

Kentucky Contract Law Regarding Balances Due on Credit Card Debt

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If you fail to make payment on an outstanding credit card balance, the original creditor may consider your account uncollectable and refer it to a collection agency. Either the original creditor or the collection agency may file a lawsuit against you in an effort to remedy the deficiency.

Kentucky Revised Statute 413.120 establishes the statute of limitations on credit card debt as five years. This is the amount of time a creditor has to sue you for the unpaid debt. After the statute of limitations has expired, the lender may continue to attempt to collect the debt, but may no longer pursue legal action.

In Kentucky, the statute of limitations takes effect based on the date of last activity on the account. If a collection agency purchases your account from the original creditor, it must retain the original last activity date. If you make a partial payment or acknowledge the debt in writing to the creditor, this is considered account activity and may reset the statute of limitations.

Federal law prescribes how long derogatory credit items may appear on your credit report. The Fair Debt Collection Practices Act allows creditors to report a negative item on your credit report for seven years after the last account activity.

If a creditor attempts to sue you in Kentucky after the five-year statute of limitations has expired, you should immediately file an answer to the lawsuit. The answer should provide documentary evidence and clearly indicate that the statute of limitations has expired. Both KRS 413.120 and the FDCPA prevent the creditor from pursuing further legal action against you.

Although KRS 413.120 establishes a five-year period in which the creditor may pursue legal action, and the FDCPA establishes a seven-year reporting period, the debt will survive until it is paid or discharged in bankruptcy. The creditor may continue to request payment via telephone, letter, or other communication.

Where Can I Get Full Details of a Chapter 7 Bankruptcy?

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Bankruptcy is the legal process of liquidating or reorganizing the assets of a debtor in order to satisfy obligations to creditors. Bankruptcy filers can be individuals or businesses, and the court can either sell off the assets entirely---or nearly all of them in the case of individual bankruptcies. They can also work out a reorganization, in which the debtor pays off at least some of the debt over time. Chapter 7 of the U.S. Bankruptcy Code deals with liquidation bankruptcies for both businesses and individuals.

The best and most reliable source of information on Chapter 7 bankruptcies is an experienced bankruptcy attorney licensed to practice in your state. Bankruptcy is a very specific area of legal practice, and has its own federal court system specifically dedicated to it. You can also visit the U.S. Bankruptcy Court web page (see Resources) or legal consumer websites.

Chapter 7 bankruptcy may be appropriate when the debt load is so severe and beyond the capacity of the debtor to repay even a portion of the proceeds. Under a Chapter 7 bankruptcy, businesses shut their doors and cease operations entirely. All assets are stripped and sold off under court supervision. Individuals may have to sell off some assets, although there are a number of exemptions under state law. The proceeds from the sale go to pay off creditors. Debts that cannot be paid off through the liquidation of assets is discharged, or written off.

Not all debts are dischargeable in bankruptcy. Tax debts less than three years old, court-supervised alimony and child support payments and federally guaranteed student loans cannot be discharged in bankruptcy. Neither can fines or criminal penalties arising from malicious damage you do to other people or their property. This includes judgments for damages you inflict while driving under the influence. You also cannot discharge debt you deliberately ran up while filing for bankruptcy.

While businesses can be fully liquidated in bankruptcy, the courts understand you cannot fully liquidate a person. State laws vary in specifics, but individuals are generally allowed to keep a limited number of assets. Typically, they may keep a few thousand dollars in cash or less, a very modest car, tools and books related to a trade, and a few thousand dollars worth of clothing, furniture and personal items.

How to Track a Spouse's Credit Card Debt

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If you're worried about how much debt your spouse is accumulating and you want to carefully monitor how much is being spent there are several tools you can use, some of the best ways utilize modern technology. Regardless of how you track your spouses debt, without some measure of trust the tracking may prove useless. Working together a family can monitor all of the spending.

Instructions

Set up a credit card account together. Being on the same account will allow you easier to access to see what the other user is doing. If you want to set limits on your spouses account you can make her an authorized user rather than a joint account holder.

Ask for receipts. Tracking receipts is one way to keep track of all credit card transaction. It's a little old fashioned but it helps prevent electronic mistakes and provides a good record.

Go online and look at the account. Most credit card providers have a website where you can log on and see what purchases are being made, when and where they are made, and which card was used.

Read through your bills every month. Reading through the bill thoroughly should allow you to see any transactions that you might not have otherwise noticed.

Set up credit monitoring. You can set up credit monitoring for you and your spouse. Credit monitoring can alert you when new accounts are opened and when balances increase on a credit card.

How to Use Low APR Credit Cards to Reduce Your Debt

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The interest you pay on loans and credit cards is a part of your overall debt. If your interest rates are high, then you may want to consider using low APR credit cards to reduce debt as a whole. Transferring high interest debt to low APR credit cards effectively reduces the total amount you owe as well as the monthly payments. These reductions can help you achieve your personal financial goals of getting out of debt sooner.

Instructions

Call your high interest debt accounts. You have to get your payoff balances on your accounts so you know exactly how much you owe. This also gives you an idea of how much credit you need when applying for new low APR credit cards.

Assess interest rates. If you have current debt with a 29% interest rate, then a 15% interest rate will seem low to you. Generally, when using low APR credit cards to reduce debt, you need cards with an interest rate of 10% or less.

Apply for at least two low APR credit cards. You need to know how much credit the low APR credit card companies are willing to extend to you. The credit card companies won't give you a credit limit until they approve your application. Applying for two low APR cards allows you to spread your high interest debt between the two cards while staying below the credit limits for each card.

Transfer you high interest debt. Many credit applications include an option for transferring debt from another high interest credit card to the new low interest card for which you are applying. Check the box and provide all the necessary information requested.

Call your high interest creditors. If during the application for the low interest credit card there was not a transfer option, call your high interest creditor and pay off the debt with your new low interest credit card.

What Is a Judgment Debtor Exam?

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Courts award civil judgments to creditors after they win debt collection lawsuits against consumers. After the court finalizes the judgment -- a process which can take up to 30 days, depending on the state -- the creditor and debtor become the "judgment creditor" and "judgment debtor," respectively. If the judgment debtor does not make payment arrangements with the creditor or the court, some states allow judgment creditors to request a judgment debtor examination.

When a creditor files a judgment debtor exam, it sends the debtor a summons notifying him that he must appear in court and disclose financial information related to his income and assets. Doing so provides the creditor with information it needs to file the correct court paperwork to collect its debt via garnishment or property liens.

A judgment debtor examination is a formal court process. Because of this, the creditor must send the debtor a summons requiring his appearance in court. Should the debtor ignore the summons and not appear at the judgment debtor examination, he is in contempt of court and can be arrested.

Although major creditors, such as credit card companies and collection agencies, sometimes file requests for post-judgment interrogations, these examinations most often occur in cases where the judgment creditor and judgment debtor reside in the same area. This is because the judgment creditor or its legal representation must also appear in court to conduct the examination. If a creditor has no knowledge of a debtor's assets, travel costs and filing fees may prove cost-prohibitive.

The phrase "judgment-proof debtor" is misleading to some consumers. A creditor can sue and obtain a judgment against any debtor. A judgment-proof debtor, however, has no assets with which to pay the debt or that the creditor can legally seize. An example of a judgment-proof debtor is an individual who rents her home, owns no car and lives solely on Social Security payments. The creditor cannot place liens on the consumer's home or vehicle because she owns neither. The creditor also cannot garnish Social Security payments from the Social Security Administration or the debtor's bank account, as government benefits are exempt from commercial creditors.

While a creditor can win a civil judgment against a judgment-proof debtor, it cannot enforce the judgment. Judgment-proof debtors, for this reason, have little to fear from judgment debtor examinations.

While creditors cannot harass an individual's friends and family members about his debt, a judgment creditor can use information obtained through a third-party during the judgment recovery process. Because of this, judgment creditors often employ methods such as skip-tracing and public records searches following a lawsuit. This allows the company to uncover the information it needs without filing for a judgment debtor exam.

Debt Settlement Problems

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Anyone with a substantial amount of credit card debt may be looking for a way to relieve their debt load. One way to achieve debt reduction is through the process of debt settlement. When you settle your debts you can run into several problems. Before you settle your debts contact your creditors and try to make a deal or negotiate regarding the situations that you deem to be problems. If you can resolve these issues you will save yourself time and frustration.

When you settle your debts you may be able to get this done with the help of a debt relief company. These companies are able to help you settle your debt, sometimes as little as 50 percent of your outstanding payments. The primary problems you encounter with debt relief companies are the fees. Some of the fees they charge consumers are substantial. Your fees could be based on 15 percent of your total outstanding debt. Fees can be based on the number of creditors you bring into the program. Each company appears to have its own way of charging fees. To get a breakdown on the fees you must submit all of your credit information beforehand.

When you settle your credit card debt you may be required to pay taxes on the forgiven debt. If you have a balance with a credit card company in the amount of $8,000 and you settle for $5,000 you may be required to report $3,000 as taxable income when you file your taxes. When your debt is settled you may receive a 1099-C, which is a debt cancellation form, to be filed when your taxes are prepared. If you receive this form contact a tax professional or tax attorney for advice.

Creditors will report settled debts on your credit file as a "paid settlement." Other creditors will be hesitant about extending you credit because they will know you experienced a financial hardship in the past. If you are able to get approved for credit you will be charged the highest interest rate possible based on your credit history. Some creditors will add a substantial number of fees when you apply for a credit card account. Debts that are settled remain on your credit file for seven years.

After settling your debts you may have to apply for a secured credit card. This type of credit card is secured with a bank account. You need to open a bank account with a deposit of $300 to $500. Your credit limit is based on your deposit. When payments are late the past due amount is pulled from your bank account. Some secured credit cards don't appear on your credit report, which prevents you from reestablishing credit.

When you settle your debts with a collection agency it's a good idea to get everything in writing. Some debt collectors have tried to collect on debts that have been settled. A written agreement is your proof that you have paid the balance according to the agreed-upon terms and agreements.

Legal Help to Stop Garnishments

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When a consumer fails to repay his debts, or "defaults," his creditors may, as a last resort, have his wages garnished. Also referred to as attachment, wage garnishment requires your employer to withhold a portion of your wages and forward them to your creditors for repayment of the debt. This situation is not only embarrassing, but can create serious financial hardship. Consumers should seek legal help to prevent, end or reduce wage garnishment.

If a consumer falls behind on repayment of a debt such as a credit card or medical bills, the creditor will typically attempt to collect the debt by sending notices and telephoning the customer. If this fails to resolve the problem, the creditor or a collection agency may file a lawsuit requesting a wage garnishment. Generally, the creditor will have to establish the validity of the debt and demonstrate that other collection efforts have been made and failed.

The best way for a consumer to prevent garnishment is to contact the creditor when he falls behind and try to work out a payment arrangement. You can get legal help through an attorney or from a credit-counseling service to negotiate with your creditors. This way you can stop garnishment before it begins.

An attorney can assist in preparing a legal case to argue that the wage garnishment puts undue strain on the debtor or his family, or is unlawful. He may also be able to negotiate with the creditors to have the court order lifted. Creditors are unlikely to agree to ending the garnishment because they are assured of recovering money through the court order. Federal law does, however, limit the amount of your wages that can be confiscated under court order.

While ending wage garnishment may be difficult, it is possible to have the amount of money withheld reduced. An attorney can petition the court that issued the attachment order requesting that the garnishment amount be reduced. This can help lessen the financial burden created by the reduction in wages.

When seeking an attorney to assist in ending or reducing wage garnishment, consumers should consult lawyers and firms that specialize in financial and consumer law. Internet searches can find local firms and client reviews to find an attorney that meets the needs of the consumer.

Can a Foreclosure Judgment Be Settled?

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A foreclosure judgment is a court-ordered decision that permits a mortgage lender to pursue collection of unrecovered funds after foreclosing on your home. After a lender obtains a judgment, it can typically use aggressive tactics to collect from you, including garnishing your wages, taking funds from your bank accounts and liquidating your personal property. Depending on the lender's rules, you may be able to settle a foreclosure judgment to avoid these types of collection.

A lender typically uses a foreclosure judgment to establish a deficiency, which is the amount still owed by the borrower after the lender has completed foreclosure proceedings and sold your home. Depending on your state's laws, the lender may sell your home at a public auction or through a real estate agent or broker. The sale amount of the home may not be enough to cover the balance of your mortgage loan and foreclosure-related costs such as attorney and auction fees. The lender will hold you responsible for paying the deficiency.

The lender may give you the opportunity to voluntarily pay a deficiency balance after foreclosure. However, if you cannot or do not pay the deficiency amount, the lender may file a lawsuit against you in civil or district court. Depending on your state's laws, you may have the chance to respond in writing or by appearing at a court hearing. If you cannot convince the court to dismiss the lawsuit, the court will enter a judgment in favor of the lender for the deficiency balance, plus interest and costs associated with filing the lawsuit.

A settlement involves paying less than you owe for a debt; however, in this arrangement, the creditor considers the debt paid in full. Your mortgage lender may prefer to settle your deficiency rather than pursue a legal judgment, which is expensive for the lender. After the lender obtains a judgment, though, it may be less likely to consider a settlement because it has access to methods of collecting the full balance from you, such as wage garnishment and bank levies. Contact the lender and ask whether it will consider a settlement in which you would pay part of the judgment amount to satisfy the debt in full. If the lender refuses, hiring an attorney to represent you may increase your chances of negotiating a settlement.

When you or your attorney negotiate a foreclosure judgment settlement with a lender, you will typically have to pay the agreed-upon portion of the deficiency in a lump sum. If the lender has foreclosed on your home, it is likely that you do not have the financial resources to pay a settlement amount in a single payment. Also, the lender may report the deficiency as settled for less than the full balance on your credit reports. This notation may add to the credit damage caused by foreclosure and judgment entries.

When Is a Debt Uncollectible?

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If given enough time, almost all debts are uncollectible. When a company believes it has no reasonable chance of collecting debt, it becomes uncollectible, but this does not go without consequence for the customer.

Each state has its own laws on when a lender can no longer go after a debt. The time span ranges from two to 15 years, according to the BCSAlliance.com. After the statute of limitations passes, the lender cannot go after the borrower in court.

A company must write off a debt for it to become uncollectible, according to CardReport.com. Usually, companies write off debt after six continuous months of nonpayment. As soon as a debt is written off, the time limit on the statute of limitations begins.

A written-off debt remains on a credit report for seven years and is one of the worst red flags you can have. Also, debt collectors and the lender can still sue you until the statute of limitations passes.

How do I Figure Payoff Time Knowing the Interest, Principal & Monthly Payment?

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It pays to know how to calculate loan payoffs. Knowing the terms and conditions you can calculate the payoff for a mortgage loan, automobile loan, credit card, home equity line of credit or personal loan. A payoff figure can change from day to day depending on the terms. Finance charges accrue daily, and a high interest rate will increase your payoff total faster than a lower rate.

Instructions

Locate all of the terms and conditions of your loan. For example, if you have a five-year loan in the amount of $10,000 with an interest rate of 6 percent and monthly payments of $193.33, you can calculate a payoff.

Calculate the amount of interest that accrues when the first payment is made. Suppose a payment of $193.33 is made on May 1. Determine the breakdown of principal and interest. Take the balance of $10,000 and multiply it times the interest rate of 0.06. Your result will be $600 which should be divided by 12 months to get $50. This is the interest for the first month.

Subtract the interest of $50 from the payment of $193.33. The result is $143.33, which represents your principal payment. Now subtract $143.33 from the balance of $10,000. The new balance is $9,856.67.

Determine when the loan will be paid off. If you want your loan to be paid off on June 10 you need to figure out how much interest accrues from May 1 to June 10. This time frame represents 40 days.

Calculate a payoff figure for June 10. Take the interest rate of 0.06 and divide by 360 days, (assuming each month has 30 days for simplicity), and multiply your result by 40 days, (time since the last payment was made to the payoff date), and you will get 0.006664. Multiply your current balance of $9,856.67 times 0.006664. This calculation provides you with the amount of interest that accrues for 40 days which is $65.68. Add the interest to the balance of $9,856.67 to get the payoff of $9,922.35.

Figure out the per diem. Divide the interest figure of $65.68 by 40 to get 1.642. Interest accrues in the amount of $1.642 daily based on the current balance. For each day that the payoff arrives after June 10 add an additional $1.642 to the payoff balance.

Will Bankruptcy Filing Remove a Hold on a Checking Account?

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A hold on your checking account resulting from bank garnishment for most bad debts will be lifted after you file for bankruptcy. Bank garnishment, which must be approved by a judge, allows a credit card company or debt collector to freeze your checking account while it takes money from the account to satisfy an unpaid debt.

Bank garnishment is one of the most powerful tools available to a debt collector. Garnishment is possible after a creditor or debt collector files a lawsuit against you for an unpaid debt. Illinois Legal Aid reports that the creditors and debt collectors almost always win in court if they can prove that you owe the debt and defaulted by not making payments. The judgment allows for the debt collector to ask the court for formal permission to garnish your wages.

The Neighborhood Economic Development Advocacy Project, a nonprofit consumer assistance agency, reports that bank accounts are commonly frozen through garnishment because of debts, such as credit cards, bank loans and medical bills. The organization reports that banks must comply with garnishment orders issued by a judge and are under no obligation to notify you that the account is being frozen. While the account is frozen, you are allowed to deposit money but cannot make withdrawals, cash a check or make purchases with your debit card.

"The New York Times" reports that some bank accounts are frozen after people fail to show up for court hearings. Missing a court date for a debt lawsuit automatically results in a so-called "default judgment" for the debt collector, and bank garnishment can follow. The Times reports that some people don't even realize that their bank account has been frozen until they attempt to use their debit card and the transaction is denied because of insufficient funds.

Your account may show a huge negative balance once funds are being held. A hold is placed on your account for the total amount due in the judgment, and the negative balance will remain until the garnishment is lifted or the judgment is paid. The creditor or debt collector will be allowed to make regular withdrawals from the account to satisfy the debt.

Holds or freezes on bank accounts can be lifted following a bankruptcy filing through a legal motion known as an "automatic stay." Legal website Nolo.com reports that an automatic stay immediately halts most debt collection efforts and forces banks to release frozen bank accounts. However, the automatic stay will not resolve issues with your bank account if the money is being held for child support or for the Internal Revenue Service.

Statute of Limitations on Debt From Judgments

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Judgments give creditors options for property seizure, financial levies and property liens. Judgments can also negatively affect a consumer's credit standing for up to 25 years, depending on their state of residence. The statute of limitations on debt from judgments has two considerations. One is the statute of limitations on debt before a judgment; the other reflects the lifespan of the judgment's validity.

A judgment is a legal recourse offered to creditors against debtors who owe them money. Judgments must be obtained through a court order in the county where the debtor resides. Judgments give creditors the power to seize property and levy financial accounts as a way to satisfy the judgment. A statute of limitations is the length of time available to creditors to petition the court for a judgment. Statute of limitations may also refer to the length of time a judgment is valid, after the court ruling. Each state has different laws regarding judgments and statutes of limitations on debt.

Creditors have a set period of time during which they may initiate a lawsuit against a debtor to obtain a judgment. This time frame varies by state law, ranging from three to 10 years for credit card (open contract) debt. If creditors file a judgment lawsuit after the statute of limitations has run out, the debtor must use the statute of limitations as a defense. If a debtor ignores the court proceeding, assuming that the judge knows the debt is out of statute, the debtor may receive a judgment by default. Default judgments occur when one party to the lawsuit does not appear at the hearing.

Once a debt judgment is issued, the length of time it is valid also varies by state. Some states allow judgments to be renewed; others consider the judgment satisfied after the statute of limitations expires. The minimum length of time that a judgment is valid in any state is three years. The maximum time limit is 25 years in Connecticut, but this is an exception; a typical maximum time limit for judgments is 20 years.

Judgments stay on a consumer credit report for at least seven years or until the state judgment statute of limitations runs out, whichever is longer. For example, if the statute of limitations on debt from judgments in your state is 10 years, the judgment can appear in the public information section of your credit report for 10 years. If the statute of limitation is five years, the judgment will continue to be listed for seven years.

Are Unemployment Benefits Protected From a Judgment Under Federal Law?

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Unemployment benefits are reserved exclusively for individuals who have recently lost their jobs and are trying to find other employment. These benefits are designed to provide them with temporary financial support while they seek other employment. However, sometimes people receiving benefits will find themselves deep in debt. In most cases, creditors won't be allowed to seize these benefits, even if they've received a judgment from a court awarding them damages for the debt.

Commonly, a creditor who is owed money by a borrower will cease notifying the debtor of his obligation to pay back the debt and simply sue the individual in civil court for breaking the contract that he agreed to when he took out the debt. If the collector wins, he will be awarded what is known as a legal judgment, which entitled him to the amount of money specified by the judge.

A legal judgment is much like a regular debt. For both a regular debt and a legal judgment, the debtor is legally required to pay the full amount to the creditor. However, a creditor has more options in regard to the collection of a legal judgment. In many cases, the creditor is allowed to garnish the person's wages or even remove money directly from his bank account.

Unemployment benefits are a form of income, although they are not provided for the performance of a specific task. This means that they cannot be counted as wages. Under federal law, most types of government benefits, including unemployment benefits, cannot be forcible seized by private creditors through garnishment or other means, even if the creditor has received a legal judgment from a civil court.

The only exception to the federal law is if the creditor is a government agency. The federal law that prohibits seizure of money stemming from a civil judgment applies only to private creditors. In many cases, a government agency that has earned a civil judgment against a debtor will be able to take money from a person's account even if this money comes from unemployment benefits, or garnish these benefits.

Why Consolidate Private Student Loans at a Fixed Rate?

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Student loans can be a heavy burden for those who have recently graduated and still have low incomes. Some students have taken out loans from a variety of sources in order to make it through college--and these loans virtually always come with interest rates, some of which can be cripplingly high. Loan consolidation at a fixed rate can help combine these loans and save on payments.

Consolidation is the practice of combining different loans into one loan. This does not mean borrowers can join student loans together. Instead, they take out a new loan, such as a second mortgage, and pay off the student loans with this new loan. Various lenders, including many which offer student loans, offer these consolidation loans to help students who have too many types of loans.

Loans can be either adjustable or fixed. A fixed rate loan is desirable because its monthly payments will never change, while an adjustable rate will go up throughout the life of the loan, increasing the payment amount. With a steady rate, borrowers can easily compute how much their monthly payments will be. The new rate may be a better deal than the collective rates and amounts of the student loans, saving the borrower money.

Private loans typically have higher interest rates than federal student loans. This actually makes private loans easier to consolidate, since there is more of a chance that the new loan will have a lower rate and lower payments.

Consolidation also combines all student loan payments to one payment. This simplification can be very beneficial to borrowers, who may be in a better position to make only one payment instead of several. It also helps new borrowers arrange their finances and budget out money more easily, leading to consistent, dependable payments that build up good credit. This works best with fixed-rate loans, which are unchanging and do not lead to unpleasant surprises.

Consolidation does come with a price. Creating a new loan can come with hefty origination fees. Also, a new loan comes with a new term, which means it will usually last longer than the student loans left as they are, even if it does lower monthly payments. Fixed rate loans depend on market conditions, and the rates offered for such loans may at times be too high to make consolidation worthwhile.

How Can I Report a Loan That I Have Been Paying on to the Credit Bureau?

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All the information reported to the three credit bureaus Equifax, Experian and Transunion affects your credit either negatively or positively. If you have poor credit or no credit at all, you want every on-time payment you make to be reported to all of the credit bureaus as this will increase your credit score. But, not all creditors report to every agency and some creditors forget to report on-time bill or loan payments. Revise your credit report and clear up any missing information on timely loan payments to get your credit score to increase.

Every American is entitled to an annual free credit report from each of the credit reporting agencies. Get your free copy at the Annual Credit Report Website or at any of the three reporting agencies.

Review all three reports to see if the loan you are paying on is being reported to one or two of the agencies but not to the other. Make sure all the payment information is correct. Contact the credit bureau and the reporting creditor if the report contains misinformation or accounts that you did not open.

Contact both the creditor and credit bureau who is not reporting the payments by phone and explain the situation. The contact information will be on the credit report and should also be available on your payment statements. Ask for the loan payment to be reported to all three agencies and not just to one. Find out why the loan is not being reported to any of the agencies if it does not appear on any of the credit report documentation. Some banks do not report to credit agencies. Find out what their loan policy is when it comes to reporting this information.

Follow up on the phone conversation with a letter explaining your need to have the loan payments reported to all three credit bureaus. Allow another payment cycle to pass before checking to see if any action has been taken.

Obtain another copy of your credit report from the three credit reporting agencies a few weeks after making the following monthly loan payment. Review the reports to see if the payments are now being reported. In most cases they will be. Contact the lender again if the information is not being reported.

Is a Promissory Note a Binding Agreement?

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When you attempt to borrow money from another party, whether it is a close friend or an organization, be prepared to sign a promissory note. The promissory note is a protection for the lender. Before you agree to sign a promissory note and accept a loan from another party, make sure you understand all about binding agreements.

A promissory note outlines a promise between a promissor or borrower and a promissee or lender. The promissor agrees to repay the money he's received on loan within a set period of time. The promissory note also includes the interest rate, monthly payment amounts, terms of defaulting on the loan and any security put down as collateral for the loan.

When an agreement is binding it means that it is enforceable by law. The parties of the agreement have the right to pursue legal action if necessary pertaining to the terms of the agreement. If not in court, the two parties can also engage in binding arbitration to resolve the matter. The specific rules of law regarding binding agreements vary by state.

A promissory note, no matter if it is a fully detailed contract with many sections and clauses or a handwritten agreement with just a few lines, is binding in most cases. The person who draws up the agreement (the lender) has the right to sue the other person to collect the money owed if he defaults. The lender can present a copy of the promissory note as a part of her evidence to prove the debt.

One situation where a court of law might not deem a promissory note binding is if the agreement asks the borrower to agree to illegal terms, such as a usurious (too high according to state laws) interest rate. Also, a minor (usually under 18) cannot sign a promissory agreement without the consent of a parent. If the person isn't mentally competent to sign, that could also nullify the contract. In any binding contract, one party must exchange something of value with the other party --- this is also called consideration. In the case of a promissory note, the lender exchanges cash for the promise of repaying the note, sometimes with interest.

What to Do When a Credit Card Bill Is Turned Over to a Lawyer

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Once a lawyer is involved in the collection of a credit card debt against you, many of the payment options you might have once had evaporate. You will need to negotiate or face the legal consequences.

Once the notice that your credit card debt is now in the hands of a collection law firm arrives, you should first review your situation. Banks and other financial institutions make mistakes like everyone else, so you should first make sure that the debt is real. If it is not and/or you can prove fraud, then you should immediately contact the lawyer with your proof.

Contact the collection lawyer about your financial situation. Keep in mind that under the Fair Debt Collections Act everything you tell the collectors or the lawyer can be used against you to collect the debt. That means that if you send a bank statement to show you have no money, the collectors can now use that information to see if they can levy, or seize, the funds in the bank and any other accounts you might have at that bank. If you send a pay stub, then they know you are working and can levy (or garnish) your wages--up to 25% of your take-home pay in most state--when they get a judgment.

The lawyer will still be suing you as you try to negotiate, and unless you have money to fight the lawsuit you will have to let that go on. Cut the best deal you can for the balance owed and try to get onto a manageable payment schedule and stick to it. The judgment will stay with the lawyer, and the firm will hold it in case you falter in the repayment plan. If you do, you risk having your bank account levied and your wages garnished.

How to Convert RUB to USD

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The official currency of Russia is Russian rubles, or RUB. If you have some Russian rubles left over from a trip, you may want to exchange them for United States dollars, or USD. Typically when exchanging foreign currency, you can only exchange the paper bills. You can convert your RUB foreign currency to U.S. dollars by visiting a local bank or by using a currency exchange specialist.

Instructions

Look up the current RUB to USD exchange rate on a currency conversion website to get an idea of how many U.S. dollars you can get for your Russian rubles. The rate you get is only an estimate because there will be a fee when you do the actual currency conversion.

Go to an international bank branch to exchange your foreign currency.

Visit a currency exchange specialist to exchange your RUB for USD. You can also sometimes find currency exchange counters in local shopping malls and typically in airports.

If you are staying at hotel, inquire about exchanging your currency. Hotels typically offer a foreign currency exchange service, but usually charge a higher fee than a currency exchange specialist. Some travel agencies also offer currency exchange.

Divorce & FICO Scores

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No consumer is prevented from acquiring credit solely based on marital status. The Equal Opportunity Credit Act outlaws discrimination of all forms to provide consumers with equal access to credit resources. If you recently experienced a divorce, however, your credit score may be negatively impacted after you separate from your spouse.

Divorce can lead to foreclosure. Married couples often share homeownership; but after a divorce, financial obligations shift to accommodate the couple's new separate lifestyles. When the mortgage payments fall behind due to the remaining spouse's loss in income, foreclosure occurs. Foreclosures cause a significant decline in your FICO score. According to CNN Money, most homeowners incur an 85- to 160-point drop in their FICO scores following foreclosure. The foreclosure also remains on each homeowner's credit report for seven years following the loss of the home.

Emotional breakups can lead to declines in credit ratings when couples share debts. Divorce can stir a range of emotions in couples. According to Mediate.com, anger, resentment, insecurity, abandonment and hurt are common emotions felt amongst divorcees. Couples don't always act in the most rational manner when it comes to splitting debt responsibilities. For example, a spouse seeking revenge might allow debts to go unpaid in order to watch the other spouse suffer financially. When this occurs, the FICO score of both spouses is negatively affected.

Litigated divorce can be costly. Divorce attorneys generally charge an hourly fee or a retainer. When couples are unable to reach a settlement due to disagreements, litigation can stretch over months, leading couples without adequate savings into debt. A couple may be forced to borrow money to cover legal costs that they cannot afford. Borrowing money to cover legal fees is detrimental to the couple's FICO score if the debt goes unpaid. The lender sends the account to collections where an agency might file a judgment to recoup any unpaid balances.

Not all divorced couples split custody of their children. In cases where one parent is granted full custody, he can request that the noncustodial parent pay child support. If the noncustodial parent is unemployed, in many states, child support is still due. Noncustodial parents undergoing financial hardship can experience significant credit setbacks due to unpaid child support. Child support payments are reported as a public record on your credit report. The amount you owe and the date your payments began is reflected in your report.

What If I Default on My Payday Loan?

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Payday loans are a convenient way for some borrowers to obtain quick access to cash. Unfortunately, the average borrower does not repay his payday loan before the loan due date, which can result in hefty fees and a repeating cycle of debt. Going into default on your payday loan can mean increasing your debt substantially if you don't make a plan to repay the loan before it renews.

Once you miss the due date for your payday loan, your loan goes into default. Defaulting on a payday loan is not like defaulting on a credit card or mortgage payment. You can renew your loan if you are unable to pay. When you sign your loan paperwork, there is generally a clause explaining the terms of default that state your loan will be automatically renewed on your payday.

Loans that are in default are renewed to cover the past due balance. The lender usually has your bank information and will attempt to debit the loan balance multiple times before renewing your loan. Each pay period, a debit is attempted on your account to repay the payday loan.

Renewing your payday loan means paying interest and fees for each renewed loan. These fees can accumulate, rendering your new debt and original debt unaffordable. The average consumer renews her payday loan nine times, with fees and interest incurred with each flip. According to the Center for Responsible Lending, interest charges on payday loans average 400 percent.

In order to end your constantly renewing payday loan, you must pay the balance in full. Your debt renews unceasingly until you get the money to pay. When you get the money to repay your debt, put it in your account in advance of your payday so that you do not miss the automatic draft on your account and end up with a new loan balance.

Payday lenders are not lenient when it comes to past due balances. If your loan does not automatically renew, you may receive threatening calls and notices until your balance is paid. "Some lenders threaten criminal penalties for failing to make good on checks. In some states, lenders sue for multiple damages under civil bad check laws," explains the Consumer Federation of America.

Define Debt Retirement

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Debt financing purchases durable goods and provides for day-to-day expenses. Loans, however, do carry additional costs related to interest. A proper debt retirement strategy is necessary to save money and improve your bottom line.

Debt retirement refers to the process of paying off loans in full. Corporations retire bonds and commercial paper, while individuals may retire credit cards and mortgages. Debt is retired either with positive cash flow or by refinancing into new loans.

Debt retirement strategy is predicated upon interest rates. You should prioritize paying off high-interest rate debt first to save interest costs. Additionally, adjustable-rate loans may begin with low rates prior to adjusting upward. If possible, these loans should be retired before unfavorable rate increases take effect.

Debt may be leveraged for growth. Efficient leverage requires that loans be invested at higher rates of return than their associated interest rates. Leverage works best with low-interest rate debt that is paid off over the long term. For example, mortgages are leveraged to buy property.

Debt retirement saves interest expense on both current and future loans. Creditors reward borrowers with low interest rates in exchange for paying off debt aggressively.

Failure to effectively retire debt increases the risks of financial distress and default.

Can You File Bankruptcy on Funeral Expenses?

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A debtor can include funeral expenses in a bankruptcy -- if the debtor paid the funeral costs with a loan that still has a balance. Bankruptcy requires a listing of all debts, including promissory notes, installment loans or credit cards used for funeral expenses. Funeral expenses paid in full are a non-issue for bankruptcy. Some people incur extensive funeral debt through high-interest loans arranged by funeral homes.

A debtor could pay for a funeral on credit and eliminate the debt within several months through Chapter 7. However, filing for bankruptcy to wipe out debt from a funeral is not a wise strategy. The Federal Trade Commission reports that bankruptcy has a devastating effect on credit and is best avoided. Chapter 7 has income limits that are set by individual states. Usually, only people with low incomes qualify. Chapter 7 completely wipes out all unsecured debt.

Chapter 13 bankruptcy is also an option for debtors seeking relief from funeral debt and other debts. Chapter 13 requires a payment plan of three to five years, however, making it a much more difficult process than Chapter 7.

Regardless of the type of bankruptcy, the debtor can include only his own debt in the bankruptcy petition. That means, for example, that a family member with funeral debt cannot pass the debt on to a sibling who is about to file for bankruptcy. Attempts to transfer debt in that manner could lead to charges of bankruptcy fraud or a dismissal of the bankruptcy.

Debtors can seek alternatives to bankruptcy for unsecured funeral debt. Debt settlement is one option, with the debtor possibly settling the funeral debt for less than the full balance. SmartMoney reports that credit card companies often settle unsecured debt for 20 to 70 percent of the balance. Before filing for bankruptcy debtors should seek advice from a nonprofit credit counselor. Credit counselors, including those associated with Consumer Credit Counseling Service, offer debt management plans for dealing with excessive unsecured debt, including funeral debt. The counselors can contact individual creditors to establish affordable payment plans over four or five years. Bankruptcy attorneys also can offer advice through initial consultation sessions, which are usually free.

Can I Get a Mortgage if They Repossessed My Car but I Got it Back the Next Day?

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You may or may not get a mortgage approval because of your vehicle repossession. Mortgage providers rely on various personal and credit information to determine whether to approve your application. If you've re-established your credit since the repossession, you might obtain a mortgage approval if you meet other lender requirements.

Check your credit report to determine whether the lender reported your repossession to the credit bureaus. Your lender may not have reported the instance if you immediately paid to retrieve your car. A repossession on your credit report substantially decreases your credit score. If the repossession wasn't reported, you still might find that your score dropped significantly, as late payments are also reported to the credit bureaus. It is very unlikely that a lender would repossess a vehicle when a payment is only several days late, so if you were late by 30 days or more for your car payment, each instance remains on your credit report for at least seven years.

As time passes, your credit score improves if you continue to make timely payments on your loan account. The total effect of late payments or repossession on a credit score differ by individual, as mortgage providers consider other lines of credit besides an auto loan. If the repossession or late payments are the only negative information on your credit report and you've consistently made timely payments on other accounts, you might find obtaining a mortgage approval isn't difficult. If your credit report lists other issues of non-payment for loans, credit cards, medical bills, utility payments, judgments or tax liens, you'll have to improve your credit before applying for a mortgage.

Apply for a mortgage approval rather than guess if the repossession or other credit issues squander a mortgage opportunity. After reviewing your application, a mortgage lender will let you know if you need to pay past due items on your report or improve your credit before obtaining a mortgage approval. Other considerations for a mortgage include income, debt-to-income ratio and down payment amount. If you're applying with another person who has excellent credit, your repossession might not have a significant impact on your application.

If you can't secure a mortgage approval because of the repossession, improve your credit and apply again at a later date. Paying off your current auto loan on time will improve your credit score and decrease your lending risk. Also, continue to pay other credit accounts on time. Keep in mind that non-payment of utility bills or student loans also negatively affects your credit rating. As time passes, your repossession will have less of an impact on your score.

How to Dispute a Letter of Charges

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A letter of charges (most commonly referred to as a collections notice or letter of debt) is a statement of charges (debts) that is owed by a borrower to a creditor, usually through a collection agency or an attorney.

To dispute a letter of charges, you'll need to know the original creditor, have the charges (debts) verified and answer with a dispute letter.

Instructions

Find out the original creditor. In some cases, debts are sold by the original creditor to a collection agency and the debt is again sold to yet another collection agency--in these instances, the name of the original creditor may not appear on the letter of charges. Phone the agency that sent the letter of charges and ask for the name of the original creditor, but do not make any promises to pay during the phone conversation.

Write a dispute letter. Request proof of the charges by writing a dispute letter to the collection agency (see Resources). In the dispute letter, write your full name, address and phone number. Write the name of the agency that sent the letter of charges, along with its phone number and address--list any account number or reference number as well.

Request they provide written proof of what the charges are owed for, proof the agency is licensed and legally allowed to pursue collections in your state, an itemization of the charges, the dates associated with the charges and a copy of your agreement to pay the original creditor.

Dispute the charges with the credit bureaus. Visit the online dispute sections of each of the three credit reporting agencies and open a dispute directly with them regarding the charges (see Resources). The credit bureaus by law must verify the charges are legitimate or remove them from your credit report.

Four Advantages of Credit

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The dangers of credit are well-known -- improper use of credit can drive you deeply into debt, impair your credit score and even put you at risk of bankruptcy. However, proper management of credit can provide advantages that can improve your buying power and help you build a strong financial foundation. Four primary advantages make responsible use of credit an essential skill.

Building a positive credit history enables you to enhance your purchasing power, allowing you to obtain a mortgage for a home, automobile loans and lines of credit for obtaining personal property you might not be able to obtain through savings. Few consumers have the resources to purchase large items, such as a home or a vehicle, without credit. Responsible credit use also qualifies you for lower interest rates on these purchases, allowing you to minimize the amount of your earnings spent on interest payments. This can reduce the total cost of borrowing money.

Financial emergencies, such as property damage or injuries not covered by insurance, can easily erase your savings and leave you wondering how you will pay for these expenses. Responsible credit use can qualify you for credit cards or lines of credit to handle these financial emergencies without losing money in savings accounts or liquid investments.

Using credit can offer protection against unauthorized purchases. If someone steals your cash and uses it to make purchases, you have no immediate recourse available to recover the stolen funds. However, if you use credit, you can notify your credit card company if your card is stolen, or if a person makes unauthorized purchases using your card number. This can help prevent you from paying for purchases you did not make.

Positive use of credit can improve your ability to obtain a job; some employers check an applicant's credit history before deciding whether to make a job offer. A solid credit history shows responsibility, which may make an employer more interested in hiring you. Responsible use of credit can also help you obtain home, auto, life and health insurance at lower premium rates. Insurance companies view consumers with high credit scores as lower risks, which means they are more likely to offer you coverage for less money than they would charge an applicant with no credit history or a poor credit score.

Free Credit Card Counseling

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Credit card debt drives some consumers to bankruptcy, but the Federal Trade Commission (FTC) advises that credit counseling may help you avoid a drastic court action that puts a negative mark on your TransUnion, Equifax and Experian credit reports for 10 years. Counseling is not always free, and you may need additional paid services after talking to a counselor, but consulting with a professional shows you all your debt-management alternatives.

Credit card counseling means talking to a professional at a credit counseling firm when your credit card debt gets out of control. The counselor discusses your finances, including income, budget and bills, and offers suggestions for getting your accounts under control. Many credit counseling firms have non-profit status and offer free or very low-cost help. The FTC explains that they make their services accessible by working with you in an office, on the phone or the Internet and putting helpful materials on their website.

Some credit counseling companies charge fees for all their services, including credit card management advice, so the Better Business Bureau (BBB) recommends finding a free counselor through industry groups such as the Association of Independent Consumer Credit Counseling Agencies or National Foundation for Credit Counseling. Get a list of potential firms, then find out which ones are properly licensed in your state. Call each of them and ask about their counselors' qualifications and if there is a cost for any of their services. A legitimate firm might give free counseling but charge a monthly service fee if you get into a debt management plan to pay off the credit cards. It should be willing to disclose charges in writing.

Credit counselors offer various options for handling credit card debt, depending on how much you owe, whether you have a reliable income, your other financial obligations and other personal factors. Sometimes the counselor helps you create a new budget or refer you to money management classes. You may need to get into a debt management plan if you are unable to straighten things out on your own. The counselor works with your credit card issuers on a structured repayment plan that may include forgiveness of late payment fees and even re-aging the account to fix your credit reports if you pay as agreed. Most counseling firms impose a monthly fee on these plans.

You are forced to go through credit counseling if you want to file for bankruptcy to get rid of credit card debt or for any other reason, according to the FTC. The session shows you possible bankruptcy alternatives. There is a fee, but you get the counseling free if you cannot afford it. You must undergo more counseling if proceed with the bankruptcy before your case is completed. This additional counseling teaches you to manage credit cards and other financial matters to avoid future problems.

A Deceased Wife's Bills: Who Is Responsible to Pay Them?

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The death of a spouse can bring about great confusion surrounding financial responsibilities. The living husband may wonder who will pays the outstanding bills of his deceased wife and whether he could inherit debt. The laws regarding the passing of debt vary based on who incurred the debt, who agreed to pay the debt and whether the deceased's assets cover the bills. If your deceased wife incurred a debt alone, the debt can die with her so long as she has no assets that go through probate to be seized by creditors.

When you die, your estate is responsible for paying off your outstanding debts. If you are the administrator of your deceased wife's estate, you are required by law to examine your wife's remaining assets that are her's alone and determine in what order her bills should be paid. The remaining assets go to her heirs, as specified by her will if she had one. If there isn't any money left over to pay all the bills, you must notify the debtors that the estate is insolvent and the creditors must write off the debt. In most cases, creditors cannot require a family member to pay the bills. That doesn't mean they won't try to get you to pay, however. Also, certain assets, such as 401(k)s and life insurance don't go through probate and are not required to be used to pay off a deceased spouse's debts.

In cases where there is enough money left over to pay debts after your spouse's estate goes through probate, the Credit CARD Act of 2009 requires creditors to inform you of the amount owed quickly, and immediately stop assessing fees and late penalties while the estate is being settled. This law went into effect in 2010.

If you are named as a joint account holder on any of the bills that are outstanding when your loved one dies, you are liable to pay the debt. This also applies to business partners who may be on joint business credit accounts. Those who are merely authorized users are not required to pay the debt.

When a spouse passes away, experts at Bankrate.com suggest that you gather the bills that were solely hers and notify her creditors right away. Many will ask for copies of her death certificate and advise you to send them via certified mail. Experts also recommend keeping any notices or obituaries that are published in your local newspaper.

When working with your wife's creditors, it may be a benefit to you to take over the account if allowed. For example, if your credit is not as good as your wife's, you would have the luxury of an account in good standing provided you can keep up with the debt. If you can handle the payments or the creditor wants to give you different terms, experts recommend that you close the account.

The experts at AARP and Bankrate.com say that you should investigate all debts carefully when bill collectors start calling. You should find out the following: is the debt valid, is it still collectible based on the statute of limitations, and are you liable for the debt? AARP warns that you should not make a promises to pay any debt when speaking to a collector, and if you have any connection to the debt, demand proof the debt is valid. Debt collectors often use specially trained collectors to who use sympathy to manipulate relatives into paying bills owed by the dearly departed but for which you have no responsibility. You also do not have to speak to any collector; you can always refer them to the executor of her estate if there is one. You can report any problems, such as harassment by a collector, to your state attorney general and the Federal Trade Commission.

How Debts Are Handled Under Florida Estate Laws

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When a person passes away in Florida, if his estate is large enough then a formal probate court process must be opened so that his debts can be paid in full and titles to assets can be transferred legally into the name of an heir or beneficiary. A Florida decedent cannot pass on debts to family members or a spouse.

If a Florida decedent has property and retirement funds valued at $75,000 or more, then a formal probate court case must be opened upon her passing. Smaller estates and estates that do not contain any physical property assets may be eligible to go through a process known as "disposition without administration."

In the formal probate process, an estate executor is named to take care of the administrative issues for the estate. Some of the executor's duties include sending death notifications to creditors, posting notices in the newspaper and creating an inventory of all assets of the estate.

When a formal probate process is used in Florida, creditors have 90 days to respond with a valid debt claim on the estate. If a creditor does not stake a claim in the allotted time, he has no future recourse for debt repayment.

All creditors that have claimed a legitimate claim on the estate within the 90-day claim period are paid in full from the assets of the estate. Assets are liquidated as needed to pay debt claims, court administration costs and funeral expenses. If an estate does not have enough assets to cover outstanding debts due, unpaid remainders of debts must be written off by the creditors.

If assets remain after the debts are paid, the court or estate executor distributes all remaining assets according to the terms of the decedent's will. If no will is available, the state of Florida will distribute the assets according to law, which usually means giving them to the closest living relatives.

Steps for a Short Sale of a House

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Some people are intimidated by the idea of a short sale because it often involves a lot of communication between you, your lender and the potential buyer. It is a measure taken when a property is not worth at least as much as the current loan balance, the seller wants to leave and a buyer is willing to make the purchase. If you do decide to attempt a short sale of a house, keep in mind that the lender could still charge you the difference between the selling price and balance on the loan.

Instructions

Contact your lender as soon as you decide that you want to do a short sale to gather all of the information and paperwork you'll need to complete this process. In some cases the lender will only consider a short sale if you're seriously behind on payments or experiencing significant financial difficulties.

Hire a real estate agent who specializes in short sales. This person can help advise and guide you through this sometimes complicated process.

Gather information about your current mortgage balance and estimated payoff amount. You can find this information on your most recent bill or by calling your mortgage lender directly. You need this information to get an idea of how short you may be in paying off your mortgage when the property sells.

Price your home at or slightly above market value. Take the advice of your agent, as he is well versed in how to set a realistic price for a short sale to attract a serious buyer.

Accept the best offer from potential buyers as advised by your short sale agent. Submit the sale information to your lender as outlined in the short sale agreement or package you received in the first step.

Wait for approval of the short sale from the lender. Once approved, you'll be able to go to closing with the buyer and exchange ownership of the home.

Debt Consolidation Loans Vs. Credit Counseling

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When debt threatens your financial stability, it's important to take the time to consider your options. Credit counseling allows you to work with a professional who helps people untangle themselves from their financial burdens everyday. Debt consolidation may be one option your counselor recommends, or you may apply for consolidation on your own. Whatever route you choose, it's important to fully understand the pros and cons before applying.

When you begin to feel overwhelmed by your debt, visiting a reputable nonprofit credit counselor may be helpful in directing you on a better financial path. In credit counseling, you will create a realistic budget and take a hard look at your spending habits to diagnose how you got into such deep debt. Your counselor will provide you with options to reach financial freedom. Such options may include debt consolidation, debt settlement, debt management plans or bankruptcy, depending on your level of debt and the severity of your financial situation. You may also find that you have the ability to work out your debt solo by strategizing a plan to pay off your debt.

Debt consolidation loans are one method you may use to begin eliminating your debt. Other debt elimination methods, such as settlement and management plans, require that you've already defaulted on payments. Generally, creditors won't agree to such extreme measures unless you seem to be headed for bankruptcy. However, with consolidation loans you need to have fairly good credit to qualify. Consolidation loans are loans that cover all your current balances. For example, if you have five credit cards with a total of $10,000 debt, a consolidation loan would wipe out your balances and you would only make one monthly payment with one interest rate to the loan. You do not need to work with a credit counselor to use a debt consolidation loan; you may apply through a bank or credit union on your own.

Every debt payment option has its benefits and drawbacks. Pursuing debt settlement with a credit counselor may clear your debt for 20 to 75 percent of the amount you owe. However, to qualify for settlement, you must have already defaulted on your payments, damaging your credit score. Debt management plans don't damage your credit score directly, but future lenders may view one as a sign you cannot responsibly manage your finances, which may make it difficult to borrow. The primary benefit to debt consolidation is convenience -- you make one monthly payment with one interest rate, simplifying the bill payment process. However, it's vital to keep in mind that you're taking on more debt in an attempt to get out of debt. About 70 percent of those who use consolidation end up with the same or even more debt within a two years, said Massachusetts credit counselor Chris Viale, in the Bankrate.com article "Debt Consolidation: Cure or Continued Credit Problems?" Be prepared to pay off your debt for good if you decide to use a consolidation loan.

If you have trouble controlling your spending, debt consolidation might be dangerous for your financial situation. Instead, you may consider a self-help plan to pay down your debt. Financial expert Dave Ramsey suggests using the "debt snowball plan," where you pay off your smallest debt first to encourage you to get rid of debt completely. You then pay off the next smallest debt, then the next, until your debt is gone. If you can afford it, you might use the information on your credit card statement, which provides information on how much you need to pay each month to eliminate your debt within three years. Or, you may choose to pay off the card with the highest interest rate first, to avoid spending extra money by allowing a balance to sit over a long period of time. These solutions aren't one-size-fits-all; it's important to consider which will work best for you and your financial psychology.

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