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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..

Monday, April 30, 2012

The Theory of Debt Management

The Theory of Debt Management

Debt management is the act of getting your monthly obligations under control and living within your means. Consumers that are looking to get into a debt management program, whether it is something they do on their own or something they hire a financial professional for, should understand the theory behind debt management. Understanding why you need a debt management plan will help you to stay dedicated to its success.

Scheduling

    When you set up a budget, the payment schedule is based on the due dates of your various bills. Paying your bills on time helps you financially because it prevents you from having to pay late fees, penalties and the additional interest that is involved in not making your monthly payments on time. Another added benefit of paying your bills on time is that it improves your credit score, according to credit expert Pat Curry writing on the Bankrate website.

Expenses

    One of the helpful theories behind debt management is that it allows you to analyze your monthly expenses and find ways that you can reduce how much money you spend each month. Your monthly expenses include food, entertainment, gas for the car, money into a savings account and repairs to the home. By monitoring your spending through a monthly budget, you can see how much you would save each month if you brought your lunch to work as opposed to always eating out. That extra money you save can be funneled into your savings account for a rainy day.

Debt Payment

    A debt management system allows you to see all of your debt on one spreadsheet. You can add your account payment information, including the interest rate you are paying on your credit cards, and then create a plan to pay down your debt. This is the part of a debt management plan that helps you to get your outstanding accounts under control by applying extra money to paying off existing debt.

Control Spending

    Credit card spending can be one of the activities that creates substantial financial debt. By monitoring your credit card spending through your debt management program, you can improve your credit score and create the ability to finance large purchases in the future such as a home or a car. You should not close out old credit accounts, according to Pat Curry writing on the Bankrate website. Spend on your cards, but avoid running up balances that meet the maximum limits. Using your cards, but managing your spending through your debt management program, will help you to increase your credit score and learn responsible spending.

What Is the Length of Time a Foreclosure Stays on Your Credit Record?

A foreclosure could damage your credit for years, making it difficult or impossible to get competitive rates on credit cards and loans. However, the impact of the foreclosure on your credit will lessen over time, according to the Federal Trade Commission.

Time Frame

    Foreclosure information can be reported on your credit report for seven years, according to the Federal Trade Commission. The FTC reports that the information cannot be removed sooner, despite the claims of credit repair firms. Foreclosure information can be removed from a credit report only it is incorrect or has become outdated, the FTC reports.

Effects

    A foreclosure could cause a dramatic drop in your credit score, according to Bankrate. The site reports that your credit score could drop by more than 100 points if you had good credit before the foreclosure.

Considerations

    Foreclosure also makes it difficult to qualify for a new mortgage. CNN reported in 2010 that people who file for foreclosure likely will not qualify for a new mortgage for two to five years -- and that's if their foreclosure was caused by joblessness, illness or similar crisis. Those with good finances who simply walk away in a so-called "strategic default" may have to wait up to seven or eight years for a new mortgage, according to CNN. Strategic defaults became popular after many houses dramatically lost value during a U.S. housing bust and recession starting around 2007. Some people walked away rather than continue paying for a house that was worth less than the balance on the loan.

Expert Insight

    Foreclosure can be devastating, but you can survive it and get on with your life, according to the Federal Home Loan Mortgage Corporation, also known as Freddie Mac. The agency says people going through foreclosure likely will have many options for finding a place to rent, even with damaged credit scores. Freddie Mac reported in 2010 that in some instances it was possible to remain in a home after foreclosure by entering into a lease agreement with the lender.

Prevention/Solution

    Avoid having a foreclosure placed on your credit report by making your mortgage payments on time -- or by selling or leasing the property before you start falling behind on payments.

What Are the Consequences of Credit Card Default?

What Are the Consequences of Credit Card Default?

Credit card debt is one of the safest forms of debt to default on. This is because it is unsecured. In most cases, it's extraordinarily difficult for credit card companies to successfully collect on debts. If the amount defaulted on is substantial and the individual has major assets or income that the credit card company can seize, the company may collect at least part of the debt once it receives a judgment in its favor. Otherwise, the main consequence of default is major damage to the defaulter's credit rating.

Potential Judgment

    The worst possible consequence of credit card default could be a conviction for credit card fraud. This very rarely happens, as the card company must be able to prove that you took out the debt with the intention of not paying it or of deceiving the company. In most cases, the next worst possibility is for the company to win a judgment against you to pay back all or part of the debt owed. Usually, as long as you show up for all court dates, you can avoid this eventuality. If the debt owed is more than $5,000, you can expect the company to pursue you for payment, especially if you have sufficient assets or income to support payments.

Credit Rating Damage

    Defaulting on a credit card has severe consequences for your credit rating. It may lead banks and other lenders to raise your interest rates. You may be turned down for future loans as long as the default remains on your credit report. The default will remain on your credit report for seven years, after which it's removed, according to the Fair Credit Reporting Act.

Collection Attempts

    Once you default on a credit card, the company will usually sell it to a collections agency. That agency will repeatedly contact you by telephone or mail and try to get you to pay the debt. The company may even sue to try to collect on it. This process can go on for years until either the agency gives up, sells the debt to someone else or settles with you.

How to Look for Help With Delinquent Debts

How to Look for Help With Delinquent Debts

Dealing with debt is a time-consuming and stressful task. If you have large amounts of delinquent debts and are being pursued by collection agencies or similar entities, it may be advisable to seek the assistance of a professional. The most important thing to remember when dealing with delinquent debt is that many others who have been in your position and have repaired their credit through commitment and responsibility.

Instructions

    1

    Run a quick search on the Internet for debt-assistance programs. There are many companies that provide help with delinquent debts and may be able to advise you on your best first steps. Be sure to read up on any companies you discover as some "debt assistance" programs are designed to prey on those seeking help.

    2

    Contact a local attorney. If you are considering bankruptcy or are concerned about the legal ramifications of your debts, speaking with someone who is well-versed in the law will be a great help. This is also a good plan of action if debt collectors are threatening legal action.

    3

    Look to friends and family for advice. Debt is a common concern for many individuals, and your close friends and family may have similar experiences or valuable contacts that can help inform your decisions. When you're trying to find someone to represent your interests, it is nice to work with a person who has been vetted by someone you trust.

    4

    Speak with a representative at a bank regarding savings accounts and their benefits. The absolute best way to deal with most delinquent debts is to pay them off (either in full or by negotiating), and the easiest way to get this done is to create a savings account with the intent of storing money for debts. There are tons of savings plans available, so check with a few banks for the best deal.

How to Report a Stolen ID to Credit Bureaus

Identity theft happens when someone gets access to your personal information and uses it for fraudulent purposes. In some cases, identity thieves can open new credit accounts, make purchases or drain your bank account before you realize what has happened. Fortunately, the three credit bureaus --- Experian, Equifax and TransUnion --- have a fraud alert system that can protect you against many of the problems caused by identity theft.

Instructions

    1

    Visit your local police station and complete an identity theft report. This is similar to a police report, but includes details that are helpful to the credit bureaus, according to the Federal Trade Commission. Provide the police with as much information as possible about the identity theft, including when and where the thief used your identity to open credit accounts or purchase items.

    2

    Mail a copy of your identity theft report to the three credit bureaus (see Resources) and any other companies involved in the identity theft (e.g., a credit card issuer). Send each identity theft report by certified mail with a return receipt, and keep careful records of all correspondence with these companies.

    3

    Respond promptly to any request for more information from the companies involved, or the credit bureaus. According to the Federal Trade Commission, the companies that receive your report have 15 days to request additional information.

    4

    Contact TransUnion (see Resources) and ask them to place a fraud alert on your credit file. You can ask for an initial fraud alert or an extended fraud alert. An initial fraud alert will remain on file for 90 days, while an extended fraud alert will remain on file for seven years. TransUnion will notify Equifax and Experian of the fraud alert on your behalf.

    5

    Ask TransUnion to place a credit freeze on your credit file, if necessary. This will prevent any new companies from accessing your credit report. (Note: Some states do not allow credit freezes.)

    6

    Order a copy of your credit report from each of the three bureaus. Review the report for any fraudulent information. Send a copy of your identity theft report by certified mail to any companies that report fraudulent information on your credit reports, and ask them to remove these entries. Always request a letter stating that the company has removed the incorrect information and discharged any fraudulent debt associated with it.

Sunday, April 29, 2012

How to Figure Debt Ratio

Your debt ratio, which is often referred to as "debt-to-income ratio," is a measurement of how much you owe in relation to how much money you make. This measurement is important in terms of credit. If your debt ratio is too high, potential lenders may not approve you for a loan. The general rule is that your debt ratio should be 36 to 38 percent or less. Having a lower debt ratio shows that you probably are a good candidate for a loan or credit card because you currently make enough money pay back the loan for which you are applying. You can perform a few simple calculations to determine your debt ratio.

Instructions

    1

    Figure out exactly how much your monthly debt is. For instance, if you currently pay $400 for a car payment and $100 for a student loan, your monthly amount for debt would be $500.

    2

    Figure out your gross monthly income. This means how much money you have coming in before taxes or any deductions. For this example, you could say that your monthly income is $3000.

    3

    Divide your debt by your income. In this example you would perform the following equation:
    500 / 3000 = .166666

    4

    Round the figure to two digits. Therefore .166666 would be rounded to .17.

    5

    Multiply the number from step 4 by 100 in order to find your debt ratio. For instance, .17 multiplied by 100 would be 17. Your debt ratio in this example would be 17 percent.

Is Debt Consolidation Better Than Paying Off Credit Cards One by One?

When you have several credit cards with various payments and interest rates, it may be to your advantage to consolidate them. A consolidation loan may provide you with more favorable terms and conditions. There are a number of factors to consider.

Significance

    If you can consolidate your credit cards and get a lower rate of interest, you can save a substantial amount of money, depending on your balances and the interest rate you receive.

Effects

    A consolidation loan will help you save money on a monthly basis. Many times your payment is lower when all of your credit cards are combined into one.

Features

    When you pay off credit cards one by one, your focus is divided. You have to pay attention to several credit cards instead of one. Having one loan allows you to pay more money and cut down on your balances faster, especially when you have better terms.

Warning

    You can use consolidation as a useful tool. Once the process is complete, resist the urge to use the credit cards again. If you run the balances up on the credit cards after you have completed the consolidation loan, you will be in a worse financial situation. You will have to make credit card payments and payments for the loan.

Benefits

    When you are ready to consolidate, always look for the method that provides you with the best terms and conditions. One method is doing a balance transfer, which allows you to combine all your debt into one. Sometimes you can get a zero percent promotional rate for six or 12 months.

Debt Settlement Information

Every year, more consumers become overwhelmed with debt. Some are looking for a way to substantially reduce their debt. One way to achieve this is with a debt settlement. There are several procedures you can use if you want to settle your debt. Your credit report will be affected negatively after a debt settlement and your credit score could be lowered. If you decide that a settlement is best for you, contact your creditors.

Creditor Contact

    If you want to settle your debts you should contact the creditor you want to settle with and let them know your situation. If you can afford to make your payments and don't feel any type of financial strain on your budget then settlement is not the right option. If you are unemployed or your income has been substantially reduced, a debt collector will be more willing to settle your debt. They feel it is better to receive something than nothing at all. How much you settle for will depend on your negotiating skills. You might be able to settle for as little as 40 percent to 50 percent of your outstanding balance.

Debt Relief Programs

    Debt relief programs will help you settle your debts for less than what you owe. They contact your creditors and work out a settlement agreement. Sometimes the agreement is in the form of a lump sum payment and sometimes you make monthly payments on the settled debt. Contact several companies to see which one has the terms and conditions that satisfy your needs.

Consumer Credit Counseling

    If you contact Consumer Credit Counseling, you will be able to speak with a trained counselor who will be able to set up a spending program for you. They can refer you to a debt-management program, which is part of the service they provide, to get your debts settled. While you are in this program, you might want to refrain from using your credit cards. This will ensure that the program works effectively and efficiently and keeps you from accumulating more debt.

Written Agreement

    Collection agencies are third party debt collectors who handle the bad debt accounts for creditors. If your account has been turned over to a debt collector, they will be more than happy to settle your account. When you reach a settlement agreement, make sure you get written documentation from the creditor before you send any money. This will be your proof, and serve as a paper trail, that you had a legitimate settlement. In the past, some debt collectors have tried to collect the balance on accounts that have been paid by settlement.

Classification

    A debt settlement will be classified as such on your credit report. This information could prevent you from obtaining credit in the future. As part of your settlement agreement, you might be able to convince a creditor to leave this information off of your credit file. If you are successful, make sure this is in writing as well.

Saturday, April 28, 2012

Grounds for Legitimately Removing Blemishes From a Credit Report

Bad credit makes it difficult, if not impossible, to purchase a home, buy a car or secure a credit card with an acceptable interest rate. Inaccurate information on your credit report not only impacts borrowing power, but it can also adversely affect your search for a job, renting an apartment or getting insurance for yourself, your vehicle or your home.

Credit Reports

    The three national credit bureaus, Equifax, Experian and TransUnion, keep records that closely track your creditworthiness. The nation's Fair Credit Reporting Act requires these credit reporting agencies to provide you with a free copy of your credit report once every 12 months upon request (see Resources). Because problems can occur with the reporting process affecting any or all these agencies, you should request reports from all three credit reporting agencies each year. You can also obtain a free credit report if a company takes adverse action against you as a result of information provided by a credit reporting agency.

Incorrect Information

    Erroneous or incorrect information that you can correct may include an omission, such as an open account with an excellent payment history that is not a part of your credit report. You may have been the victim of an incorrect posting that translated to a late mark on your credit card bill. If so, you can have the information corrected. If a credit card account or loan appears on your credit report and you have no knowledge of the transaction, you can request its removal. You can also petition for corrections concerning loan or credit card balances that are significantly more than your records indicate. Keep in mind that to effect any changes, you must provide documentation to back up your assertions.

Correcting Errors

    The FCRA guarantees you access to creditors who provide information to the credit reporting agencies and the credit reporting agencies themselves. The FCRA also requires that the creditor that reports the data and the agency that assimilates it assume responsibility for correcting or deleting erroneous or incomplete information that appears in your credit report. Results of the investigation generally take 30 days.

    Contact, in writing, the credit reporting agency and the creditor who provided the information. Supply copies of all supporting documents. If the information on your report is deemed incorrect, the creditor is barred by law from reporting it again. If you do not hear from either party within 30 days, recheck your credit report. If the information has not been deleted, contact the credit reporting agency for an update on your complaint.

    If the information is determined accurate, it takes seven years for negative information to fall off your credit report, unless the negative report is a bankruptcy, which stays on your credit report for 10 years.

Credit Repair Services

    If you would rather use a credit-repair service, give a wide berth to any company that asks for payment up front. Under the Credit Repair Organizations Act, companies that provide these services may not ask for payment in advance. Do not do business with any firm that refuses to advise you of your rights or tells you that you cannot talk directly to TransUnion, Equifax or Experian. Other tactics employed by questionable credit repair organizations include asking you to create a different identity by applying for an employer identification number to use in place of your Social Security number and telling you to question every entry in your credit report, no matter its legitimacy.

Can Your Bank Account or Salary Be Garnished for Hospital Bills?

A hospital stay can be a stressful event for you and your family -- you may need to take time off work not only for your time in the hospital, but also for recovery after you return home. It can also create stress when you receive bills for hospital expenses not covered by your health insurance policy. Even worse, if you do not pay your hospital bills, you may be subject to collection activity such as bank and wage garnishments.

Legal Authorization

    Unlike government entities, hospitals typically cannot pursue wage garnishment without legal authorization. The hospital must file and win a lawsuit against you for your unpaid hospital bills, usually in a county magistrate or municipal court. When a hospital wins a lawsuit for unpaid bills, the court issues a judgment against you for the debt. The hospital may then obtain a writ of garnishment, allowing it to order your employer or bank to forward funds to the court for repayment of the debt.

Wage Garnishment Limits

    Both federal and state law limit the amount of money a hospital can take from your earnings as a judgment creditor. All states must provide exemptions at least equal to those provided under federal law, which limits garnishment to a maximum of 25 percent of your disposable income. As of the time of publication, federal law also provides a complete exemption if you earn less than $217.50 per week. Only statutory deductions such as federal and state taxes reduce your earnings for the purpose of determining disposable income -- health insurance and 401k contributions do not count. Some states provide larger exemptions than federal law. For example, Delaware allows a judgment creditor to take a maximum of 15 percent of your disposable income.

Bank Garnishment Limits

    Federal law does not provide specific exemptions for bank account garnishments. However, your state's laws may protect a certain amount of funds in your account from garnishment. For example, Ohio allows a $400 exemption of bank account funds, which prevents a judgment creditor from completely draining your bank account.

Avoiding Garnishment

    Communicating with the hospital's accounts receivable department can help you avoid a judgment that can lead to wage and bank account garnishment. Although the hospital prefers that you pay your bills all at once, the accounts receivable department can typically set up a payment plan to help you pay off your hospital expenses over time. As long as you make your payments as agreed, the hospital typically will not pursue garnishment of your bank accounts or earnings.

Friday, April 27, 2012

Can Someone Put a Lien on My House if I Am Paying My Debt?

Whether a creditor can place a lien on the house of a debtor who is "paying his debt" depends primarily on whether the payments made by the debtor are in accordance with the repayment schedule established by the contract he executed with the creditor. Regardless of whether the debtor has breached the repayment terms of the contract, the creditor would first have to obtain a judgment for money damages against the debtor before he placed a lien on the debtor's house.

Breach Of Contract

    An obligation to repay debt arises out of the existence of a legally binding contract between a creditor and debtor. A debtor who fails to make monthly or other periodic payments in accordance with the repayment provisions of the agreement is in breach of the contract and the creditor has the legal right to sue the debtor for damages. The fact that the debtor is making indeterminate payments is immaterial on the issue of whether he has breached the contract.

Obtaining A Judgment

    If the payments made by a debtor are either below the amount required by the repayment terms of the contract or are past the due date, the creditor could file a complaint against the debtor for breach of contract. As a practical matter, in the case of most consumer debt such as credit cards, the creditor will not sue until the debtor has been delinquent for 120-180 days. In the absence of a legitimate defense to repayment, the creditor will usually be awarded a judgment in an amount of the default balance plus accrued interest.

Executing On The Judgment

    Once a court issues judgment, the creditor can place a lien on the debtor's real property in the amount of the judgment. One of the reasons creditors obtain liens, even in cases where a delinquent debtor is making payments of some kind, is that it is an effective means of ensuring that the full balance owed will be paid in the future. Since the lien acts as a cloud on the title, the debtor would not be able to sell or transfer the house until he first pays off the creditor.

Considerations

    For creditors, litigation is usually the last resort in the collections process, reserved only for the most recalcitrant debtors. For most retail consumer accounts, creditors are primarily interested in receiving periodic payments on the outstanding default balance in an amount consistent with the financial ability of the delinquent debtor. However, if a debtor defaults on his repayment obligations, a creditor has the right to sue, even though the debtor is making good faith nominal payments. Whether the creditor files suit will depend on the age of the delinquent account, the willingness and consistency of the debtor in making reasonable payments and the costs of litigation.

What Happens After You Pay Off Your Credit Card?

What Happens After You Pay Off Your Credit Card?

In most cases, paying off a credit card will have a positive financial impact. Unless you're settling the debt instead of paying it in full, your credit score will likely improve. You'll also have more money to apply to other debt, start an investment program or put money away for retirement or your kid's college education.

Credit Report Status

    When you pay off a credit card, the status of the account will also be updated on your credit report. If the account had been past due, paying off the card will change the status to current, and the report will indicate "current was x days past due." If you were never late on a previous payment, the account will continue to read "current never late." Your outstanding balance will also show as zero, which is a favorable indicator to other potential creditors.

Continuing Debt Reduction

    A benefit of paying off a card is that you've now freed up the money you were using to pay off the card, which you can now apply to other debt if you choose. One option is to use the "snowball" method of debt reduction where you apply as much money as you can to your largest debt while paying the minimum balance on the others. When you retire the largest debt, apply that payment to your second-largest debt, and so on until you are completely debt free.

Canceling the Card

    When you finally pay off a credit card, you may be tempted to cancel the account to avoid future debt problems. However, this is not always a wise choice. Canceling an account lowers your credit utilization rate, an important factor in determining your credit score. The utilization rate compares the amount of credit you actually use to the amount of your total available credit. The lower the ratio of used credit to available credit, the more positive the impact on your credit. Instead of canceling the account, cut up the card or put it somewhere that is difficult to get to.

Debt Settlement Ramifications

    It is possible that paying off an old credit card debt can have a negative impact on your ability to obtain future credit. If the account is delinquent and you settle with the card issuer for an amount that is less than what you owe, the account may show as "settled" on your credit report, which can be a red flag to future creditors. If you do choose to settle with the credit card company, ask the company to note the account as "paid in full" instead of "settled" on your credit report as part of the settlement negotiation process.

Thursday, April 26, 2012

How to Get Rid of Credit Card Debt Legally

How to Get Rid of Credit Card Debt Legally

Large credit card debts are stressful. Paying off credit card debt requires creating a plan. You must also focus on changing behaviors that may have played a role in accruing the debt. Taking steps now, such as creating a budget, cutting costs and working directly with creditors to arrange payment plans will help you get rid of credit card debt legally.

Instructions

    1

    Create a realistic budget. List all current income in one column. In the other column, list all monthly expenses. Any money left over should be allocated to paying down credit card debt.

    2

    Look for ways to cut costs. Evaluate your monthly budget. Look for categories that can be reduced. For example, if you're spending a lot of money on transportation, consider carpooling or public transportation. Use the money saved to pay down credit card debt more quickly.

    3

    Talk with your creditors. Accounts that are in default status should be taken care of right away. Ask the creditor to arrange a repayment plan to make the debt more manageable. Also look for credit cards with lower interest rates. Transferring credit cards to low-interest balance-transfer offers allows you to pay more towards the outstanding principle. Many card issuers will lower your interest rate at least temporarily if asked.

    4

    Evaluate behaviors that contributed to credit card debt. For example, if you struggle with impulse purchases, keep your credit cards at home. Freezing your credit cards is another way to avoid impulse purchases.

    5

    Contact a credit counseling program if you can't seem to get credit card debt under control. These programs are available at credit unions, housing authorities and universities. A credit counselor can help you create a realistic plan to get out of debt for good.

Wednesday, April 25, 2012

Alternative Credit Card Solutions

Alternative Credit Card Solutions

Credit card debt can be crippling. When confronted with a massive amount of debt, some people might wonder if filing for bankruptcy is the answer. While that may be an option, there are other avenues available to help get out of credit card debt, ranging from getting lower interest rates to setting up emergency savings accounts.

Stop Spending

    The first step that needs to be taken is basic. Stop using credit cards. Use cash whenever possible. If you can't afford a purchase, money should be set aside until the item can be bought. When leaving the house, do not bring credit cards. Instead, have some cash to be used in case of emergency. Make sure that the emergency is a genuine emergency and does not entail buying a pair of shoes that are on sale.

Debt Consolidation

    Debt consolidation is an option to explore. All the credit card bills are rolled into one bill, which is paid monthly. The benefit to this is that rather than dealing with a dozen or so small bills, a person only deals with one monthly bill. The trade off, however, is that it takes longer to pay off the bills and the interest being charged is relatively high.

Debt Settlement

    Debt settlement companies claim that they can have their clients only pay pennies on the dollar when it comes to credit card debt. They are right but there are certain conditions that need to be understood. The client sets up a savings account and puts money into it every month. When enough money (at least half the debt) has been saved, the debt settlement company contacts the credit card company and negotiates a settlement. However, each month, the debt settlement company takes a percentage of the money being put into the account. A disciplined person could also set up a savings account and do exactly what the debt settlement company does. When half or more of the debt is saved, the person can call the credit card company and negotiate a settlement.

Snowball Effect

    Another alternative to getting out of credit card debt is the "snowball effect." A person adds up the minimum monthly payment needed for all the credit cards. In addition to that amount, a large sum of money is also set aside. Each month, the minimum balance is paid except for the credit card with the highest interest rate. The extra money is used to pay that bill until it has been cleared. This is repeated with the next highest interest rate card, and so on, until all bills have been paid.

Emergencies

    Set up an emergency fund. Put some money in it each week or month. This fund is to be used in case of emergency. It is designed to keep people away from reaching for their credit cards. It is important to remember that the fund is for emergency use only, such as a medical emergency or repairing a car.

Tuesday, April 24, 2012

Can I Consolidate If I'm in Debt Settlement?

The Federal Trade Commission suggests debt settlement as an excellent solution for resolving unsecured debt such as credit cards. However, participation in a debt settlement program ruins credit for a while, as missed payments are necessary for debt settlement offers from credit card companies. Missed payments and other debt settlement activity usually makes it impossible to qualify for debt consolidation at the same time as settlement.

Comparisons

    Debt settlement eliminates debts as the debtor pays off balances for less than the full amount owed. Savings of 20 to 70 percent are possible, according to SmartMoney. Debt consolidation combines several debts into one monthly payment. The Federal Trade Commission does not recommend debt consolidation as a sound strategy for debt management because there is no way to eliminate debt by borrowing more money. Also, the FTC explicitly warns against taking out home equity loans for debt consolidation because missing payments on the loan could lead to foreclosure.

Considerations

    Some people in debt settlement may consider debt consolidation after becoming frustrated by the debt settlement process. Debt settlement requires individual negotiations with unsecured creditors, and there is no guarantee that any of them will agree to settlement, although most will. However, creditors will not discuss settlement until the account is past-due by two or three months. They have no reason to settle while accounts are paid as agreed. Better settlement offers with increased savings are possible as the card company considers listing the account as charged-off after about six months. Missing consecutive missed payments on a variety of accounts causes credit scores to plummet, making it impossible in most cases to qualify for debt consolidation.

Credit Reports

    Debt settlement activity appears on credit reports in several ways. This allows potential creditors for debt consolidation loans to easily determine that the prospective borrower is having severe financial problems. The missed payments are listed on credit reports, along with charge-offs, collection accounts and debts that are settled. A charge-off is an account that is closed because of nonpayment. It is an internal accounting term and does not end responsibility for the debt. A collection account is an account that is charged off and sent to a debt collection agency. Settled debts are listed as "settled for less than the full amount owed." All of the statuses are considered very harmful to credit and would likely lead to a declined debt consolidation loan application.

Strategy

    People opting for debt settlement are better doing it themselves, according to the FTC. The agency notes that many consumers complain that for-profit debt settlement firms fail to perform as promised while offering poor customer service. Some credit card companies refuse to negotiate with for-profit firms, and lawsuits are possible for credit card debts that are charged off. Although debt consolidation is not a perfect solution, some people are better off considering that option first and then debt settlement if they are unable to gain approval or consolidate all of their debts.

Is it Better to Settle Debt or Not Pay at All?

You can decide to settle your debts or not pay at all depending on your situation and what you are trying to accomplish. Some debts will fall from your credit report after a certain period of time.

Features

    If you decide to settle your debt you will be able to pay less than the full balance. When you decide not to pay all your creditors or collection agencies can still come after you for the debt. They can start legal action and garnish your wages or bank account.

Function

    When you settle a debt the forgiven portion may have to be reported as taxable income if it's greater than $600, on line 21 of form 1040. For example, if you owe $6,000 on a credit card and settle for $4,000 you may have to report $2,000 as taxable income.

Time Frame

    A debt that has been on your credit file for seven years will fall from your credit report. You may not want to pay or settle the debt if it is close to expiration.

Significance

    If the statue of limitations has passed, a creditor or collection agency will not be able to win a judgment against you in court. They can sue you but they cannot win if you show up in court on the date of the trial and show proof that the statue of limitations has passed. This statue will vary from state to state.

Warning

    If you decide not to pay or settle a debt, your credit report will be negatively affected.

Things Collection Agencies Don't Want You to Know

Things Collection Agencies Don't Want You to Know

Collection agencies are known for calling and harassing people in debt. They use fear, manipulation, bullying and repeated calling to wear you down. It gets to the point that some people fear answering the phone in their own home. In order to stand strong against the big, bad debt collector, educate yourself on a few tips they don't want you to know.

Collectors Earn Commission

    Debt collectors earn commission from the down payment you send the company, which is why they make it seem as if you have to send them a sizable sum before being permitted to make regularly scheduled payments. Because they're hoping to increase the size of their paycheck, they tell you the down payment is being requested by their "manager" who won't accept anything less. Don't fall for it. Pay what you can, and do not let them bully you into paying a penny more.

They Don't Need Your Personal Information

    Debt collectors often ask for your financial records and other personal information, such as social security number, the address of your employer, bank account number and references, claiming they need the info to verify your income and justify your timely payment amount. Don't give it to them. According to Tenant.net, that information will be used to track you down in case you miss or cease payments.

They're All Bark and No Bite

    Debt collectors will threaten you in all sorts of ways to get your money. Their number one threat is "we'll ruin your credit report." Don't worry about that. Chances are, if you're already being harassed by creditors, your credit report isn't that great anyway. They also threaten to seize your personal property, but it rarely happens. In some states, it's even illegal. Collection agencies can garnish your wages, but they can't touch your pension, social security or more than 25 percent of your paycheck. If taking 25 percent of your wages would cause your family extreme hardship, you can request to be exempt from garnishment.

You Can Fix Your Credit Report

    Bad credit reports can be the result of creditor mistakes. You can ask (in writing) that all the companies on your credit report verify the fact that you really owe this debt. If they don't respond in a timely fashion, their information must be removed.

You Can Make Them Stop Calling

    Collections agencies don't want you to know that you can stop their harassing phone calls. If you send your request in writing, they have to stop calling you. If they don't desist, you are within your rights to file a lawsuit.

Your Debt Can't Follow You

    If you move out of state, debt collectors may still call you. However, if they've won a judgment against you and you work and bank out of state, it's likely they won't attempt to collect. To do so, they would have to transfer the judgment to the state you live in, which is costly and takes a long time.

Louisiana Laws on Appealing Wage Garnishment

Garnishment occurs when a court orders that a part of your wages be immediately deducted from your check to pay off outstanding debts. You will rightly be alarmed if you get a garnishment order. However, if you live in the state of Louisiana and have a garnishment order you have options for appeal.

Reasons for Appeal

    There are very specific reasons that you would be allowed to appeal your wage garnishment in Louisiana. This is if the garnishment is making it so that you cannot pay basic necessities, such as food, shelter and medical costs. While there are limits to what a Louisiana court can garnish --- 25 percent of all after tax income -- this might still put some people in a financial hardship. If this describes your situation, do not hesitate to pursue appeal.

How to File

    To file an appeal or a request for an exemption, you will have to petition the same court that entered in the garnishment order against you. The necessary forms for filing can be found at courts throughout the state of Louisiana. Once you file these papers, a hearing will be scheduled, in which you can present your case for an exemption.

Presenting Your Case

    To win your appeal you will have to present evidence that the garnishment order is causing you a financial hardship. Evidence of this will include statements of your earnings, as well as copies of things like your rent bill, receipts of money spent on food and health-care expenses. If the court accepts your case the original garnishment is set aside and a new order of garnishment is issued in its place.

Other Options

    Appeal isn't the only option that you have to get rid of a garnishment order. Declaring bankruptcy is a last resort, however, it stops garnishments immediately. You can also stop a garnishment in Louisiana by paying off the outstanding debt within ten days of the garnishment order. Speaking to representatives from your creditors is another option for reducing the amount that your wages are being garnished.

Places to Fix Your Credit

Places to Fix Your Credit

In today's economic climate, almost everyone is experiencing some kind of credit dilemma. The average amount of per household credit card debt in America is over $16,000. If you are one of the individuals struggling to repair your credit, there are a multitude of options for you to pursue.

Go to Your Creditors

    If you have fallen behind on your credit card, loan, car or mortgage payments, chances are you have instinctively been dodging the calls of your creditors. Don't do it. Creditors are looking for one thing: to get their money. Talk frankly with the creditors to explain your current financial situation. Many will be willing to defer or lower your monthly payments. This is critical because it helps you avoid future negative write ups on your credit report, and because it helps you to pay down your debts in a way that you can manage. This helps to fix your credit in the long run.

Go to the National Foundation for Credit Counseling

    The National Foundation for Credit Counseling (NFCC) is a non-profit credit counseling organization. The provide a variety of resources on how to improve your credit score and eliminate debt. They also provide hotlines you an call with counselors available to give you personalized instruction on how to bring up your credit score. Utilizing their services is a great way to help get your finances back on track because they are able to give you a personalized strategy for financial health. There are also various state and city credit counselors available, but the NFCC has the widest array of resources and contacts at their disposal.

Go Get a Secured Credit Card

    Orchard Bank markets their credit cards as cards to improve your credit score. They are able to pre-qualify you for low credit limit cards in order to give you an opportunity to rebuild your credit. Credit, unfortunately, tends to work as a catch-22. You can't get a credit card with bad credit, typically, and you can't improve your credit score without having a certain amount of credit to your name. Orchard Bank helps to alleviate this problem by giving you the opportunity for credit that you might not be able to get elsewhere, and reporting to local credit bureaus on a monthly basis to demonstrate financial responsibility on your part. This is not a guaranteed approval, but it can help. There are other banks that offer similar cards, but Orchard is the most widely used and respected. Regardless, you should do your own research to make sure you are opening the best credit account for you.

How Does Consumer Credit Counseling Work?

Consumer Credit Counseling Services Offer Aid to U.S. Families

    As the U.S. goes further into debt as a nation, many families are finding it harder to pay the credit card bills established over the last decade. Rising costs of living are cutting into money set aside for unsecured debt payments. Making a late payment on a credit card can wind up costing hundreds of dollars in late fees and force a family to make some tough decisions. Consumer credit counseling service offices are now available in every major U.S. city to help families start a budget and get back on the right financial track. Credit counselors act as liaisons between creditors and struggling debtors, working out a payment plan to satisfy both parties.

Organizing Financial Paperwork for Credit Counseling

    The key to utilizing consumer credit counseling services is to enlist them before there is a need for bankruptcy. Waiting too long can lead to financial disaster. To know exactly where your family is financially, go through every bill coming into the home. Write down every payment going out monthly and all of the income for the family. It is best to have full awareness of the situation prior to the counseling appointment.

Setting Budgets and Repayment Plans Through Consumer Credit Counseling

    Make an appointment with a local consumer credit counseling office. Always choose a reputable local office if possible, they will be dealing with all of your personal financial information. A debtor will be required to bring identification, most recent pay stubs, and most recent outstanding bills. The counseling service will then set a monthly budget for you which will include a payment to every debtor. Home foreclosures usually require a separate agreement with the mortgage company and may require an attorney on your behalf. The Consumer Credit Counseling office will contact all credit card and unsecured debt holders to agree to the specified terms of repayment.

Completing a Consumer Debt Counseling Plan

    Most credit counseling budgets are set up to pay off unsecured outstanding debt in five to seven years. The key is to stick to the budget. Be completely honest with the credit counselor from the start and don't agree to a repayment plan that you can't live up to. There is usually a clause in the repayment contract that states the debtor may not open any new credit accounts during the repayment period. Doing so may nullify the repayment plan and allow the creditors to come after the debtor for full payment on outstanding balances including additional fees.

How Consumer Credit Counseling Affects Credit Rating

    Using a credit counseling service may save a family from bankruptcy, but it still reflects poorly on a credit report. Even if a person fulfills a repayment plan completely and timely it will most likely cost interest points on a major purchase such as home or auto loans. Still, the comparison is that a bankruptcy on a credit history can lead to a complete denial of credit for major purchases.

How Can I Get My Credit Report With a Tax ID Number?

How Can I Get My Credit Report With a Tax ID Number?

National credit reporting agencies maintain a credit file on you if you've ever applied for credit or insurance, according to the Federal Trade Commission. The three nationwide credit reporting companies are Equifax, Experian and TransUnion. You have a right to know what's in your credit report, as well as the right to dispute inaccuracies on the report. In order to access your credit file, you need to provide your taxpayer identification number, as well as other personal identifying information.

Free Access

    The Fair Credit Reporting Act entitles you to one free credit report a year from each of the three credit reporting companies. You have the option of requesting all three reports at once or staggering them over a 12-month period. The three credit reporting agencies created a joint website---annualcreditreport.com---specifically for consumers to access the free reports. You can also call (877) 322-8228 to request your free report.

Requested Information

    To access your free credit report, you need to provide your Social Security or tax identification number, as well as your name, address and date of birth, according to the Federal Trade Commission. When you request your free report, you may also be asked a question about one of your accounts, such as your car payment amount, in order to verify your identity for security purposes. If you request a report from two or more of the credit reporting companies, each company may ask you to verify different information for your security.

Features

    Your credit report contains personal information including your address, birth date, employer and spouse's name, if applicable. Upon request, credit reporting agencies may also provide creditors with additional information, such as your employment history and your income. Other details in your credit report include your payment history, credit limits on open accounts and account balances. Credit inquiries from potential creditors or employers over the past two years are also listed on your report. Credit reports may also include records of arrests, judgments, tax liens, foreclosures and bankruptcies, if applicable.

Considerations

    You're also entitled to a free credit report if you're denied employment, insurance or credit based on information in your credit file. Any company that denies your application based on your credit report is obligated to provide you with a notice identifying the contact information for the credit reporting agency that provided the report. In this case, you contact the credit reporting company directly to get a free copy of your credit report.

Can a Checking Account Be Seized by a Collection Agency?

A collection agency enforcing the payment of a debt can seize the checking account of the debtor once it obtains a court order. How much money can be taken depends on state laws, and the collection agency must follow the legal steps for seizure. A collection agency that fails to follow proper procedure can be fined and incur liability to the debtor.

Function

    The creditor must go to court and obtain a money judgment, or court award, against the debtor prior to account seizure. The creditor then assigns the debt to a collection agency. The agency applies to the court for the authority to seize assets of the debtor to enforce payment. The collection agency searches for the debtor's bank accounts, usually by issuing writs of execution on the banks near the debtor's work or home. A writ of execution is a court paper giving the creditor permission to take the debtor's assets for the amount due.

Effects

    Once the collection agency finds a checking account in the debtor's name -- joint checking accounts are also affected -- the order freezes the account. The debtor cannot withdraw money or access the account until the bank lifts the freeze at the direction of the creditor. All or some of the money in the account is taken, depending on the total debt, the amount of money in the account and area laws.

Considerations

    Some states have laws that prohibit a private creditor from taking money from an account than has less than a certain amount. The Exempt Income Protection Act, a New York law that went into effect in 2009, prohibits the seizure of bank accounts with less than $1,740, and both California and Connecticut have similar protections. Indiana exempts the first $100 of any funds from an account seizure.

    A bank that receives an order to seize an account can charge fees for items like checks that bounced because of the freeze, causing the account to have a negative balance. Bank fees to process the seizure paperwork are charged to the account.

Exemptions

    Federal law prohibits private creditors from taking exempt funds, such as Social Security and unemployment benefits, from a checking account. A collection agency that seizes a checking account with exempt funds must return the exempt money to the account holder once she provides proof to the agency the money is exempt, such as a deposit log.

Monday, April 23, 2012

How to Write a Proposal for Credit Cards

Credit cards offer consumers a way to purchase items without breaking the bank, but large balances combined with high interest rates can sometimes overwhelm credit card holders and threaten to do just that. The U.S. Census Bureau reports there are an estimated 180 million credit card holders in America in 2011. A percentage of that number will fall behind on payments or worse -- fall into collections. Before this happens, consumers should contact their credit card provider and propose an alternative, including a settlement, a lower interest rate or a smaller minimum balance.

Instructions

    1

    Gather your credit card statements and compare the minimum amount due (or full balance) to your monthly or yearly budget. Determine how much you can reasonably afford to pay each month until you can bring the account current. If you are unemployed or have another reason not to expect to be able to pay in the long term, decide how much of the total amount due you can pay in full. Make notes of this information.

    2

    Open a professional letter template using a word processing application such as Microsoft Word. Type the mailing address for the credit card company (use the address listed on your statement for general inquiries), date the letter and type your mailing address. Include your credit card account number in a reference line. Address it to "Account Manager." Begin your letter by again referencing your credit card number and stating how long you have owned the account. Include a brief (but detailed) description of the reason you are making a proposal. For example, state that you lost you job and fell behind on payments if that is the reason for your troubles.

    3

    Write a paragraph that clearly states what you are proposing. For example, if you wish to propose a settlement, write the amount you wish to pay and request that this amount be accepted for the account to be considered paid in full. State an amount lower than you can afford. Expect to receive a counter offer that is higher, which you can then counter with a lower offer until you reach your target. In your closing paragraph, include a statement that you wish to accept responsibility for your debt, but due to circumstances beyond your control, you are requesting assistance from your credit card provider. Ask to be contacted in writing if the company has an alternative solution, such as a credit-counseling program.

    4

    Save your document. Make a copy of your proposal for your records and send another through certified mail. Expect to amend or adjust your proposal letter if the company counters it. It can take numerous letters of negotiation until your account is either brought current or settled as paid in full.

Can a Payday Advance Company Garnish Your Wages in the State of Florida?

A payday advance provided by a private company is a form of payday loans. These loans are issued for only a short period of time, carry a high rate of interest and are typically secured by a bank account number of a post-dated check. When a person borrows money in this way, he is legally obligated to pay the debtor the principal of the payday loan, plus interest and fees. In Florida, lenders may eventually garnish a debtor's wages if he defaults.

Payday Advance

    A borrower who takes out a payday loans signs a contract in which she agrees to pay back the money she owes according to the terms that have been set by the payday lender. This money constitutes an advance on income that the person expects to receive in the near future. Given that this debt is recorded on a written contract, the lender has grounds to sue for breach of contract in court and collect damages.

Lawsuits

    In Florida, as in other states, a lender has the right to sue a borrower for failure to pay back the money owed according to a written contract, so long as it is before the statute of limitations expires. In Florida, the statute of limitations for filing suing on a debt owed from a written contract is five years. Only after a judge has awarded damages to the payday lender can the lender attempt to garnish the borrower's wages.

Garnishment

    A lender is allowed to garnish a person's wages only if the judge grants him what in Florida is known as a "writ of garnishment." This writ will be presented to the borrower's employer and will mandate that the employer set aside a percentage of the borrower's paycheck and pass it on to the lender. A judge will typically grant this writ only if the borrower refuses to pay the damages after being ordered to do so.

Restrictions

    In Florida, several types of people are exempt from garnishment. For example, unless the head of household makes more than $500 per week, she is exempt from garnishment. Similarly, anybody who makes less than 30 times the hourly minimum wage per week is exempt. If a person is not declared exempt from garnishment, the lender still can claim only a maximum of 25 percent of his paycheck.

What Percentage of Net Should Your Mortgage Be?

A mortgage represents a significant debt for individuals and is often the largest monthly payment the borrowers must make. When people refer to a mortgage debt being a percentage of monthly income, they refer to either gross or net monthly cash flow, based on all the other expenses the borrower must deal with. This is an important calculation both before the mortgage is created and afterward, when borrowers are making short and long-term financial plans.

Net vs. Gross Income

    First borrowers should distinguish between net and gross income levels. Gross income is essentially income before taxes, as earned. When debt is compared to gross income, this is known as the front-end ratio, since it examines earnings at the very beginning, before other expenses are counted. Net income is generally income after taxes, or take-home pay after all taxes, insurance and retirement contributions have been paid. This is the income that the borrower can actually spend, which makes it more useful from a borrower's perspective. Both types of income are computed on the monthly level, since this is where most mortgage debt occurs.

Housing Expenses

    Housing expenses refer to all expenses connected with owning and paying for a house (or paying for a rental). This is includes property taxes, homeowners insurance or mortgage insurance and all other expenses connected to the property in addition to the mortgage debt itself. In general, housing expenses should take up about 30 percent to 35 percent of net monthly income. Since the mortgage is only part of these expenses, it should take a little less, preferably between 25 percent and 30 percent. Some suggest allowing housing expenses up to 40 percent of monthly net income, but this can be dangerous for those with lower incomes.

Considering Food and Other Expenses

    Needs vary from borrower to borrower. When computing the best percentage for housing expenses, homeowners should also carefully calculate expenses for food and transportation. Together the three expenses should not rise above 65 percent of net income and should fall well below that to make room for other necessary costs.

Lender Qualifications

    Borrowers should note that when lenders compute debt to income ratios, they almost always use the gross monthly income figure. When considering gross amount, lenders tend to give mortgages that cover 25 percent to 28 percent of income. For Federal Housing Administration (FHA) loans, the figure is set at 29 percent of gross income. When all other debts are added in, lenders want to see a total debt figure of 33 percent to 36 percent of gross monthly income.

Ratio of Revolving Account Balances to Revolving Credit Lines

Ratio of Revolving Account Balances to Revolving Credit Lines

Revolving accounts are accounts that allow you to spend up to a specified limit at any given time so long as you make regular payments, like a credit card or home equity line of credit. So, if you have $15,000 credit card limit and your account balance is $14,000, if you make a payment of $1,000, you end up with $2,000 of available credit not including interest.

Credit Utilization

    Your ratio of revolving account balances to revolving credit lines is also known as your credit utilization rate. This ratio is a prominent element in the calculation of your credit score, accounting for about 30 percent of your credit score. The lower your credit utilization ratio, the higher your credit score.

Total Balance

    When figuring the ratio of your account balances to your revolving credit lines, several calculations are made. First, the total of your accounts is added up. As such, transferring all or part of one account balance to another will not really make a difference unless you are close to maxing out an account.

Separate Credit Accounts

    In addition to being calculated in terms of the total balance of your revolving accounts compared to your total revolving credit line, your credit utilization rate is also calculated with regard to your separate accounts. If you are nearly maxed out on a credit card or have spent almost the entirety of a line of credit, your credit score will be lower than if your credit balance was spread over several accounts.

Number of Accounts

    The number of accounts you have figures prominently in your ratio of revolving account balances to revolving credit lines. For this reason, keeping unused credit cards open can be a good way to maintain a higher credit score. Were you to close those accounts, you would reduce the number of accounts you have and lower your average credit utilization. Moreover, if you are close to maxing out your credit cards, opening an additional account can improve your average credit utilization.

Sunday, April 22, 2012

What Can Happen When Someone Puts a Lien on Personal Property?

What Can Happen When Someone Puts a Lien on Personal Property?

Personal property liens prevent the sale of the property in question until the lien has been satisfied in full. They can also force the sale of the property to collect the debt. Liens are commonly placed on vehicles until the loan is paid off. In other cases, liens are created through a court process following a debtor's failure to pay a debt. Liens are filed in the county where the property is located.

Personal Property Defined

    Personal property includes any tangible property owned by the debtor. Examples of personal property include vehicles, boats, homes, land, books, tools, sports equipment, photography equipment and jewelry (except for a wedding ring).

How a Lien Is Placed

    Liens are placed through court action or voluntary action. For example, a man wants to borrow $50,000 from his cousin to start a new business. He offers to allow the cousin to place a lien on the man's home until the loan has been paid in full. This is a voluntary lien. A forced lien occurs when a debtor fails to pay a debt to a company, person or government entity. The creditor has the right to request a lien be placed on all personal property owned by the creditor. This is done after obtaining a judgment against the creditor in civil court.

Then What?

    Once a lien is placed, the property cannot be sold until the lien has been paid in full. This can be done at the time of a sale or can be done before a sale of the personal property. For example, a lien on a home for $50,000 can be paid off before the house is put on the market. If not, it can also be included in the purchase price, however, paying a lien and getting it removed is a cumbersome task that many potential buyers refuse to deal with, leading them to pass on buying the home.

Forced Sale

    A forced lien sale is also possible once a lien is placed on personal property. The sale of property to satisfy a lien must be court-ordered. The order will specify exactly what personal property is to be sold to satisfy the lien. There are several restrictions on such a sale, especially if the lien is on a home. In that case, a forced sale cannot be ordered if the creditor's spouse or underage children reside in the home, or if a disabled adult child lives there. Once the sale is complete, the lien is paid and if there is any money left, the money is sent to the creditor. If the property sells for less than is owed, the creditor can continue collection efforts to collect the balance due from debtor. If the property sells for more than is owed, the debtor typically receives the balance.

Saturday, April 21, 2012

How to Pay a HECS Debt

HECS stands for Higher Education Contribution Scheme and is administered by the Australian Government. As a HECS participant, you are responsible for a small portion of your student payments, and the rest is paid by the government. Once your income has reached a certain level, payments become required. These required payments are made through your income tax assessments or through wage garnishment. You can also make voluntary payments, which are made to the Tax Office.

Instructions

    1

    Go to the Australian Taxation Office website. (see Resources)

    2

    Look for the "Make a Payment" link under the "What do you want to do?" section of the menu on the left hand side.

    3

    Click the "How to Pay" link on the next page.

    4

    Choose the payment option that is right for you. You can pay from a checking or bank account through BPAY, pay by credit card, direct credit though the Reserve Bank of Australia, direct debit or pay by cash, EFTPOS or check at an Australian post office. Overseas options include only BPAY, direct credit through the Reserve Bank of Australia, or mail a payment.

    5

    Follow the instructions under the payment method that you chose.

    6

    Mail your payment if the above options do not work for you. Residents of WA, SA, NT, TAS and VIC and overseas debtors should send their payment to:

    Australian Taxation Office
    Locked Bag 1936
    Albury NSW 1936
    Australia

    Residents of NSW, ACT and QLD should mail their payment to:

    Australian Taxation Office
    Locked Bag 1793
    Penrith NSW 1793
    Australia

    Be sure to include your name, address, phone number and tax file number.

Electronic Cash Advantages

Electronic cash is transferred between accounts digitally, rather than paid in the form of paper money or a written agreement between parties, such as a traditional check. For example, debit cards, which authorize the wiring on money from one bank account to another, could be considered a form of electronic cash. The use of electronic cash is widespread, partly due to the fact that it holds a number of advantages over paper currency.

Replacement Costs

    A strong drawback of paper currency is that it wears out. Most paper currency becomes worn within several years, necessitating the printing of additional money by the currency's issuer. This printing, which is often extensive, will have to continue for as long as the currency exists. By contrast, electronic cash does not need replacement. While the machines that transfer the cash may break down, the cash itself will always remain in pristine digital condition.

Forgery

    Another downside to paper currency is that it can be forged. While some currencies are more difficult to forge than others, a competent forger can create money that is good enough to pass off as the real thing, which causes a number of problems for an economy. The presence of fake money not only waters down the value of a real currency, but causes a lack of faith in the currency. By contract, electronic cash cannot be forged.

Exchange

    Electronic cash also greatly expedites the exchange of different currencies. With paper money, in order to pay for a product whose price is given in another currency, an individual must find a party willing to trade one currency for another. This slows the time and potentially raises the cost of the transaction. By contrast, with electronic cash, this conversion can be done instantly, facilitating trade between economies with different currencies.

Online Payments

    One of the downsides of paper currency is that is requires the physical delivery of pieces of paper. If you were to attempt to pay for an object with paper cash from a shipper that was not local, you would have to figure out a means of shipping the money. With electronic cash, you can conduct the transaction instantly. This ability to increase the speed of the transaction makes online sales possible.

What to Do When a Credit Card Debt Has Been Sent to a Collection Agency

Sometimes, if a person waits too long to pay an overdue credit card bill, the credit card company will decide to sell the debt to another party, such as a collection agency, or else hire an outside party to take over collection duties on the debt. When this happens, the debtor's situation will not change drastically. However, he may want to take measures to prevent himself from falling victim to various collection actions.

Repayment

    If possible, it is always a good idea for a person to repay his credit card bill. Unlike some types of loans, credit card loans often continue to snowball in size, accumulating interest penalties and punitive fees until they have reached many times the original size of the loan. In addition, the more deeply in debt a person becomes, the more his credit rating will suffer. Therefore, a person should, if he can, pay the collection agency the money owed.

Credit Reporting

    When a credit card debt is sent to a collection agency, the credit card company will report this action to a credit reporting bureau -- the company responsible for giving an individual a credit score. Upon being placed in collection, the company will downgrade an individual's credit score over this debt to the status of "in collection." The longer the debt remains listed as in collection, the longer a person's score will be in decline.

Lawsuits

    Once a debt is with a collection agency, the debtor must also worry about being the target of a breach of contract lawsuit. Collection agencies use many tactics to encourage people to pay the money they owe. Among them is suing the debt in court, alleging that the person has violated the terms of his credit card contract and consequently owes the collection agency damages. To prepare for this, the person may wish to contact an attorney.

Settlement

    If the debtor is found liable in a lawsuit, it can culminate in the forcible seizure of the debtor's assets, such as through wage garnishment or bank account freezing. The debtor may wish to contact the collection agency preemptively. The person may be able to work out a deal in which the agency either settles for partial payment of the debt or allows the debtor more time to pay by modifying the loan terms.

How Do I Get a Loan When I'm on Social Security Disability?

Social Security disability benefits are available to people who are unable to work because of a medical condition. Social Security officials determine the monthly benefit according to a formula that includes factors such as how many years the recipient worked. The payments are modest, usually starting at around a few hundred dollars a month. However, it is possible for people on Social Security disability payments to get a loan.

Challenges

    Although certain loans are available, many creditors are reluctant to loan money to people who have few assets and list Social Security disability as their only income. That's because federal bankruptcy laws protect Social Security disability payments, according to the financial website Bankrate. A federal bankruptcy court cannot force a debtor to use Social Security disability benefits to repay creditors in bankruptcy. Some lenders may feel that makes recipients of disability benefits a higher credit risk compared to people with other forms of regular income.

Considerations

    Proof of income is usually a requirement for a loan, and disability payments may not be enough to qualify an applicant for standard, long-term loans such as installment loans or an auto loan. However, someone receiving disability payments may have other regular income from sources such as real estate investments or retirement plans. The presence of other recurring income could make approval easy on some loans.

Collateral

    A person receiving Social Security disability payments could also qualify for a loan based on current deposits at a bank or credit union. Such loans are risk-fee for the bank, which will freeze the amount on deposit until repayment of the loan. For example, someone with $20,000 in cash retirement savings could possibly borrow the entire amount -- or nearly all of it -- despite limited income from Social Security disability benefits.

Alternatives

    Other types of loans are also available, but some are riskier than loans from banks and credit unions. Some high-risk lenders offer loans based on any type of regular income -- even Social Security disability benefits. The loans are often available without credit checks, and the lenders don't bother determining if the applicant can afford the loan based on income from disability benefits. Payday loan companies and car title lenders are among the lenders offering such loans. However, the loans often feature interest rates at more than 300 percent and can lead to excessive debt.

Friday, April 20, 2012

What Happens When Your Credit Card Debt Goes Into Collections?

Job loss, an unexpected tax bill or other financial emergencies can dramatically reduce your available cash and may make it difficult to meet your monthly payments to creditors. Before you allow your credit card debt to go into collections, experts at the Federal Trade Commission and the National Consumer Law Center advise you to learn your options. Researching the alternatives and the collections procedures will help you understand the negotiation process, protect your assets and buy some time before a creditor files a judgment against you.

Notification of Debt

    A collection agency may contact you in writing or by phone regarding delinquent payments on a credit card. Within five days of your first communication, the agency is required to send you a validation notice or a letter containing the following information: the creditor's name, the collection agency's name, address and phone number, the amount you owe and information on the dispute process. According to the Fair Debt Collections Practice Act (FDCPA), you can request in writing that the agency stop all contact with you at home and at work.

The Negotiation Process

    It is possible to negotiate the terms of your debt. Creditors may allow the agency to accept a lump sum settlement for a portion of what you owe or you can offer to make payments until the original debt is paid in full. The agency may not agree to such a settlement, though. If you do reach an agreement, confirm the new payment terms in writing and keep a copy of the letter. Agree to pay only what you can afford, because missed payments can cause the agency to cancel the agreement. Use cashier's checks or money orders for payment rather than a personal check to protect your account information.

Lawsuits and Judgments

    The collection agency and the creditor can file a lawsuit against you if you fail to negotiate acceptable payment terms for the debt. If you are going to file for bankruptcy or you are judgment-proof -- which means you have no assets or your primary income is Social Security or welfare -- the creditor may not pursue a judgment . If your assets or job earnings are substantial, the creditor will likely seek a judgment to garnish your wages, force the sale of property you own and empty your bank accounts.

Buy Some Time

    You can buy some time in the collection process by disputing all or a portion of the debt you owe. After receiving the validation notice for the debt, send the agency a written request within 30 days for the following information: name and address of the original creditor, verification and existence of the amount owed or the amount of the judgment of the debt claim. The collection process must stop until the debt is verified.

How to Figure Out the Finance Charge Refund for an Early Payoff

While paying off a loan early can lessen the finance charges you pay, you may still owe more than you think you should. This often happens because creditors typically set up your repayment plan where you pay larger monthly interest payments early in your loan using the "Rule of 78s" -- or the sum of the digits -- to calculate finance charges. Using this rule, the lender adds the number of payments in the repayment plan to determine how much interest the borrower pays each month. For example, a 12-month repayment plan divides the interest into 78 parts. The first month, your payment pays 12/78s of the loan's interest.

Instructions

    1

    Add the numerical values for all of the months in your repayment term. For example, if you have a 12-month loan, add 1+2+3+4+5+6+7+8+9+10+11+12 = 78.

    2

    Calculate the interest you will pay over the life of the loan using the formula I = R x T, where I = interest, R = rate and T = time. If you borrowed $10,000 at 4 percent interest for one year, replace the letters in the formula with the numbers from your loan. For example, 0.04 x 1 x $10,000 = $400. If you take 12 months to repay the loan, you will repay the lender $10,400 with 11 payments of $866.67 and 1 payment of $866.63.

    3

    Use the formula (U x (U+1)) / (T x (T + 1)) = X x F = rebate, where U is the unearned term periods, T is the term periods, X is the Rule of 78s decimal and F is the finance charge. For example, if you decide to pay your loan off in three months instead of 12, the formula is (9x(9+1)/(12(12+1) = 0.5786. Multiply 0.5786 by $400 to find your finance charge refund of $231.44

How to Deal With a Third-Party Debt Collector

How to Deal With a Third-Party Debt Collector

Any person who directly or indirectly collects debts is a third-party debt collector. When contacted by such an entity, individuals are responsible for knowing how to correspond with them and how to protect themselves. The Federal Trade Commission (FTC) and the states have laws protecting citizens from unscrupulous and illegal debt-collection activities. With some basic education about the law, your rights and responsibilities, you can navigate your way through an encounter with a debt collector.

Instructions

    1

    Know your legal rights according to federal law. Request, if not provided, a "validation notice," which the FTC requires and which details the amount of the debt and the name of the original creditor.

    2

    Make all arrangements to pay in writing. Obtain a signature on all agreements from a debt collector. Send all paperwork by regular mail with return receipt requested.

    3

    Read your credit reports from all three major credit reporting companies -- Experian, TransUnion and Equifax. Use the only FTC-approved credit report source, Annual Credit Report. File a dispute with the credit-reporting companies for any unwarranted debts posted by third-party debt collectors. Provide copies of correspondence with these debt collectors.

    4

    Send the debt collector a letter stating that you don't owe any or all of the money, or ask for verification of the debt. Make such requests within 30 days after you receive the validation notice.

    5

    Contact your secretary of state. Verify that the debt collector has met all state requirements to operate in your state.

Thursday, April 19, 2012

The Consequences of Not Paying Credit Card Bills

The Consequences of Not Paying Credit Card Bills

If you're struggling financially, it's tempting to simply walk away from your credit card debt obligations. After all, it's unsecured debt, so the company can't take something away from you the way that your mortgage or auto lender could. Still, not paying your credit cards could have dire consequences for your future. It's always best to try to work out some arrangement rather than not paying at all.

Lower Credit Score

    When you make late payments or stop making payments, the credit card company will report this to the credit bureaus. They'll also report a charge-off. These actions can significantly lower your credit score. This will make it difficult to get loans in the future and the loans that you are able to get will have higher interest rates. Additionally, employers sometimes check credit scores before hiring a candidate or offering a promotion, and a bad credit score could prevent you from renting an apartment. Paying just the minimum amount on your credit card bills prevents this from happening.

Calls from Debt Collectors

    When you stop making payments on your credit cards, you'll start receiving phone calls from the company. This can get worse when the credit card company charges off the account and passes it on to a debt collector. Some debt collectors are very aggressive about getting the money that you owe and you may start to dread the sound of a ringing phone.

Increased Interest Rates

    Credit card companies may entice you with low introductory rates, but when you read the fine print, you'll see that a late payment increases your base interest rate. What was once a low interest rate card could now have a much higher rate -- even over 30 percent.

Wage Garnishment

    A credit card company or debt collection company may take you to court to receive the money that you owe. If this happens, the company is likely to win, since you do owe the money, and the court can order your wages garnished. In this case, a certain percentage of your wages will automatically go to the company. Additionally, your employer will now see that you have been financially irresponsible, which could affect your chances for promotion at work.

Can I Settle a Wage Garnishment Before it Goes to My Employer?

Having your wages garnished by a creditor not only reduces your income, but it can be a source of significant embarrassment. If you don't want your boss to learn about your financial problems, try and work things out with your creditor before the wage garnishment process begins.

Wage Garnishments

    In a wage garnishment, your creditor sends legal papers over to your employer requesting that it withhold money from your paychecks in order to pay off your debt. When a creditor garnishes your wages, not only do you lose part of your income, but your employer gets drawn into managing your personal finances.

Negotiate With Your Creditor

    Try to convince your creditor that it doesn't have to garnish your wages in order to get its money. If you can pay off the debt now, do so. If you can't pay the debt now but believe you can do so over time, offer to set up a payment arrangement outside of wage garnishment: Some creditors may be willing to bill your credit card or electronically withdraw funds from your checking account each month rather than demanding that your payments come directly from your paychecks.

Employment Rights

    While your employer probably won't be happy about initiating a wage garnishment, federal law protects you against losing your job because of a garnishment resulting from one debt. If your finances are particularly bad, however, and there is a risk that you may face garnishment from more than one creditor, federal law no longer protects your job.

File for Bankruptcy

    If you need to avoid wage garnishment at all costs, look into filing for bankruptcy. Bankruptcy's "automatic stay" protects you against wage garnishment as well as other collection efforts. While this is a drastic step that can have serious repercussions for your finances over a long period of time, it may be the only way to protect your job if you have more than one judgment creditor. Speak to a reputable bankruptcy attorney about this option and ask for information about alternatives. Your lawyer may be able to intervene on your behalf and get your creditor to back off a wage garnishment threat in exchange for a settlement or a payment agreement.

Can I Consolidate Payday Loans Through Debt Consolidation?

Can I Consolidate Payday Loans Through Debt Consolidation?

Payday loans are a very expensive way to borrow money. The annual interest rate on these loans can be in the hundreds, even thousands, of percent. With debt consolidation, the borrower takes out a single low-interest loan and uses that money to pay off several smaller, high-interest debts. While this may sound like an ideal option, if you are relying on payday loans to get you through to the end of the month, you probably do not have the credit score to qualify for an affordable debt consolidation loan.

Payday Loans

    Payday loans are small, high interest, short-term loans. Borrowers use them to make ends meet towards the end of the month, while waiting to get paid. The interest rates on these loans can be in the thousands of percent. In other words, a loan of $100 can actually cost you well over $1,000 to pay off. People who use these loans often don't have other options. Either their credit score is too low to get mainstream credit, or they may not have a credit history at all. Payday loans should only be used in extreme emergencies, such as when you need money to repair your car so you can get to work. Paying an extortionate interest rate on the loan is preferable to losing the job. In less extreme circumstances, borrowers should do whatever they can to avoid taking on this type of debt.

Debt Consolidation

    The concept of debt consolidation is simple. You take out a single, low-interest loan. You use that money to pay off high-interest debt, such as credit cards and personal loans. Instead of many high-interest payments, you are left with a single monthly payment. It's easier to keep track of one payment, so you are less likely to forget to make it. With the lower interest rate, you can be debt-free sooner.

Drawbacks of Debt Consolidation

    There are many downsides to debt consolidation plans. If you are in debt and are struggling to pay your bills each month, chances are that your credit history is less-than-perfect. That means that you will have a hard time getting the low-interest loan you need to consolidate your debt. Some people opt for secured loans, putting up their homes as collateral to get a lower interest rate. It's dangerous and unwise to convert unsecured debt into secured debt. The interest rate may be lower, but you could lose your home. Moreover, debt consolidation loans are sometimes less desirable than they seem. Even if the interest rate is acceptable, there may be many hidden feels that will make debt consolidation very expensive.

Payday Loans and Debt Consolidation

    The only times debt consolidation makes sense is if you can get a low-interest loan. If you are using payday loans, you probably do not have the credit score to qualify for such a loan. If you do have a decent score, you should not use payday loans at all. Instead, consider cheaper borrowing options, such as credit cards and personal loans from major banks. Pay off the payday loans as soon as you can.

How Long Does It Take for Collections to Garnish Wages?

How Long Does It Take for Collections to Garnish Wages?

Debt collectors put significant effort into collecting debts through voluntarily payment. Unfortunately, not all debtors have the means or the inclination to set up a voluntary payment plan. In this case, the collector may pursue more forceful collection methods that allow it to seize a debtor's assets. One such method, wage garnishment, gives the collector the ability to seize money the debtor's employer owes to him in wages before the debtor receives his paycheck.

The Lawsuit

    A collector cannot simply decide to seize your wages and then do so. It must seek out legal permission to garnish your paychecks in the form of a court judgment. Debt collectors obtain court judgments by suing debtors. After a successful debt collection lawsuit, the judge grants the debt collector a judgment in its favor.

    Depending on the collection agency's policies and your state laws, it could be years before a collector files a lawsuit against you. After filing the lawsuit, your district's case load determines how long the collection agency must wait for a court date to present its case and obtain the judgment that will allow it to garnish your wages.

Employment Information

    A collection agency cannot garnish your wages without knowing where you work. If you voluntarily provide the information or the collection agency already knows the name of your employer, it can apply for a wage garnishment order immediately after docketing its judgment. If it does not, it must spend time track down your employer---increasing the length of time the company must wait before collecting the debt.

Waiting Period

    The wage garnishment cannot commence immediately following the lawsuit. The collector must first wait for a certified copy of its judgment and file the judgment with the court clerk. This "dockets" the judgment---making it an official part of the county's public records. The court clerk can then issue a wage garnishment order.

    Some states, such as Connecticut, enforce a mandatory waiting period that begins as soon as an employer receives a wage garnishment order from a collector. The waiting period gives you the opportunity to contest the judgment or notify your employer of any garnishment exemptions you qualify for.

Employment

    Collectors cannot execute a wage garnishment against you unless you have a job. Your unemployment does not, however, strip a debt collector of its right to sue you. If a collection agency obtains a judgment against you, it can wait until you find employment to apply for a wage garnishment order with the court---even if it takes you several years to find a new job.