October 2012 ~ Credit And Debt Management

Wednesday, October 31, 2012

Who Pays a Mortgage When Someone Dies?

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When someone dies, you may be worried about who pays the mortgage while the estate is being settled. The answer depends on whose name is on the loan and who owns the home. The executor of the estate will be responsible for paying the bills from the estate until the estate is officially settled. The money should come out of the estate.

If there is more than one signer on the mortgage, when one signer dies, the other signers become legally responsible for paying off the loan. For example, if you and your spouse signed the loan documents together, and your spouse passes away, you would become solely responsible for the loan. If you cosigned to help your child qualify for a mortgage and the child dies, you become responsible for paying off the mortgage and making up any difference in what is owed after the sale of the home.

The estate becomes responsible for paying the mortgage if the loan has no other signers. The mortgage should be paid out of money that belongs to the estate and not out the executor's pockets. If the home is owned solely by the deceased, it will need to be sold to settle the estate. If the deceased and others own the home, the home must be sold and the money divided among the owners, with the deceased person's portion going to the estate. Another owner can buy out the estate by paying the portion that was owed to the estate.

If the spouse of the deceased still lives in the home, she may choose to pay off the mortgage to keep the home. However, the estate must stand good for all outstanding debts. If the estate cannot cover all debts and if the deed of the mortgage is not in her name, she may have no legal right to the home. Instead she must pay off all outstanding debts of her spouse to keep her home. She can use life insurance money or her own assets to do this.

If the estate does not have adequate assets to settle the debs in the estate, the assets must be sold to stand for the debts. If there is any remaining debt, the executor should send a letter stating that all assets have been applied toward debt and the remaining debts must be forgiven. Because the mortgage is attached to the house, any proceeds from the sale of the home should be applied to the mortgage before any other debts. If the deceased owes more than the home is worth, the remainder of the debt should be forgiven.

Advantages & Disadvantages of Owning a Credit Card

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Owning a credit card can come with many benefits. Unfortunately, it has drawbacks as well. Understanding the advantages and disadvantages of owning a credit card can help you make an informed decision about whether or not to have one. If you do choose to own a credit card, managing your finances so you can pay off your card balances in full each month allows you to enjoy the advantages of owning a credit card without suffering any of the disadvantages.

Credit cards come with liability protection against unauthorized charges, and most have other benefits ranging from rental car insurance to points for air travel and free hotel stays.

With a credit card you have an extra monthly bill to remember. Failure to pay the bill on time results in late charges. If you choose to pay your bill by writing a check, this also means adding another stamp and check to your monthly billing responsibilities.

Paying your credit card off monthly builds your credit score, which allows you to qualify for better interest rates for loans and mortgages. Neglecting to pay off your monthly balance causes you to accrue finance charges, and the resulting high balance can lower your credit score.

Most businesses worldwide accept credit cards, so they are easy for you to use, especially when traveling. However, this feature can tempt you to splurge on impulse purchases that you may not be able to afford.

Credit cards come with different fees that you may need to pay. In addition to finance fees and late fees, your credit card may also come with annual fees, balance transfer fees, over-limit fees and cash advance fees.

Can Collections Take Your Bank Account?

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If you have an account in collections, it typically means you are seriously delinquent in terms of making payments. By the time you are in collections, you may be getting threatening phone calls and letters constantly, imploring you to pay and threatening drastic financial actions against you. While the good news is that most creditors cannot physically take your money without winning a lawsuit first, the bad news is that some of them can.

For most creditors, the path to your bank account begins with a lawsuit. If you legitimately owe the debt, the court will most likely rule against you and award a judgment to your creditor. With a judgment in hand, your creditor is empowered to send the sheriff after your money. Typically, a creditor with a judgment will have your employer garnish your wages.

Wage garnishment forces you to pay your creditor, even if you think payment is beyond your means. In most states, a judgment creditor can garnish up to 25 percent of your wages. Additionally, your creditor may be able to levy your bank account. A bank levy is a severe action that allows a creditor to take enough money out of a debtor's bank account to satisfy a debt, with certain exceptions.

Even a creditor with a judgment cannot take everything you have. Federal law prohibits wage garnishment of the first $217.50 of your weekly pay, which represents 30 times the federal minimum wage as of 2009. Additionally, a creditor with a levy cannot seize any bank funds that reflect Social Security payments. However, upon receipt of a bank levy your bank may freeze the assets in your account until you can demonstrate that your funds should be exempt under federal law.

In some scenarios, even a creditor without a judgment may seize your bank account. If you have a checking or savings account at a bank to which you also owe money, the bank may seize some or all of your funds to pay off your debt. This process is known as a bank setoff. The bank has the right to do this because you effectively become the bank's creditor when you make a checking or savings deposit. If you refuse to pay back the money you owe the bank, it can refuse to pay you back the money it owes that you deposited.

Do it Yourself Credit Card Debt Elimination Using Contract Law

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Consumers who are overwhelmed by credit card debt turn to a variety of methods to eliminate that liability. Some have found relief by negotiating directly with credit card providers to change their agreements. The common term used in contract law regarding debt elimination is "novation," which involves substituting an old contract with a new one, effectively canceling the original debt.

Novation can work only if each of the parties involved agree to changes in the original contract. Contact your creditors and see if they will discuss changing your terms. Depending on your situation, a creditor might agree to reduce your overall debt, your interest payments or both.

If you reach an agreement with your creditor, ask them to remove any negative information they may have included on your credit report. Request that your account be listed as "paid in full" instead of "paid in settlement"; the latter will reflect that you settled your debt for less, a warning flag to other creditors when it comes to lending to you.

If you decide to seek help with debt relief, verify that the service is allowable by law, no matter what the person promising you relief may claim. When it comes to debt-elimination services, the old adage "if it sounds too good to be true, it probably is" should be applied in most situations.

What Does HC Mean on a Credit Report?

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It is important to monitor your credit reports regularly to ensure that they are accurate. However, you might notice abbreviations on your credit reports, such as "HC," that you do not recognize.

HC stands for "high credit" on a credit report and refers to the spending limit you have on each of your credit accounts.

Your high credit limit is used to determine your debt-to-limit ratio, which is how much debt you are carrying in relation to how much debt you are permitted to carry.

Your debt-to-limit ratio has a substantial impact on your credit score. The FICO credit scoring formula factors in your debt-to-limit ratio when determining your overall credit score. If your debt is too high in relation to your limit, it will hurt your credit score. That in turn will hurt your ability to get credit on favorable terms.

You may call your creditors at any time and request a higher credit limit. If you are approved, the "high credit" notation on your credit report will update to reflect the new limit.

Going over your credit limit will leave you with a high debt-to-limit ratio and damage your credit score. It is also likely to result in fees from your creditor.

Can SSI Be Garnished for Back Child Support in Texas?

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Trying to collect child support can be a challenge. Some parents try to evade their obligations, but federal law makes it hard for them to do so. Child support enforcement laws provide practical ways for a child support recipient to make the other parent pay. Unfortunately, the laws don't cover every situation, and support can be harder to collect in some circumstances than others.

The Family Support Act of 1988 requires states to withhold child support from the payer's wages and send it to the payee. A judge may elect not to include immediate wage withholding in the support order if certain exceptions apply. In Texas, the support order must include a provision for income withholding to begin if the payer falls behind in child support payments. Texas law spells out the employer's rights and duties upon receiving a wage withholding order, but it does not discuss treatment of SSI income.

Although federal law does not permit civil creditors to garnish SSI, the federal government does permit child support recipients to garnish SSI. A child support order issued in Texas must allow income withholding when there is a support arrearage. Therefore, a Texas child support recipient can garnish the SSI benefits of an obligor who is behind on his child support.

Under certain circumstances, federal law protects some SSI funds from child support garnishment. If the obligor owes money to the federal government, has taxes withheld from SSI, or has health insurance premiums deducted from SSI, those sums are not subject to garnishment.

The Child Support Division in the office of the Texas Attorney General enforces Texas child support orders. The AG's Office represents the state of Texas, not either parent. Child support enforcement employees promote the state's interest in involving both parents in a child's upbringing and in encouraging parental responsibility. If a child support recipient requests the AG's assistance, the AG's office will decide whether to garnish the payer's SSI benefits.

How to Enforce a Promissory Note in Wisconsin

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Promissory notes are binding legal agreements between two parties, where one party (the promisor) agrees to pay a debt to the other party (the promisee). Since promissory notes are binding, if the promisor defaults on the debt, the promisee can turn to the courts to collect the balance. In Wisconsin, promissory notes can be enforced through the civil courts. The amount of the debt determines which court the case should be filed with.

Instructions

Check the terms of the promissory note. The note should specify what happens in a default situation, including whether you can include your legal fees in any collection attempt and how long you have to wait before you can turn to the courts to enforce the agreement. You must abide by the terms of the agreement.

Send a registered letter demanding payment. Your letter should make clear that it is a final demand and how the long the promisor has to settle the promissory note before you file a claim in court. State the full outstanding amount, including any interest, that needs to be paid and where payment should be sent.

File a court claim to collect on the note by visiting the county courthouse. If the note is not satisfied by the deadline specified in your letter, file a claim for the outstanding money. In Wisconsin, if your claim is for $5,000 or less, you should file the case in the small claims court. You can file the case either in the county in which the promisor lives or in the county where the promissory note was signed. For amounts over $5,000, you will file in the same courthouse, but the case will be a civil case rather than a small claims case. You are not obligated to hire a lawyer, but you certainly can do so. Generally, people represent themselves in small claims cases, but hire a lawyer to help them in cases involving larger sums of money.

Smart Debt Information

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If you're losing sleep over debt, you're not alone. The Federal Trade Commission notes that at some point in their lives, many people experience financial difficulties that lead to collection notices and fears of losing a home or car. The good news is that you have options. With good planning and discipline, you can get smart about your debt and look forward to a prosperous future.

The first step toward managing debt is to create a realistic budget to track income and spending. Begin by totaling your monthly income from all sources, including salary, alimony, child support and pensions. Next, add up your fixed expenses -- the ones that stay the same from month to month, like your mortgage or rent, utilities, loan and credit card payments and insurance. Include gas and groceries in this category. Finally, list your elective spending: clothing, entertainment and dining out. Chances are, you're spending more electively than you realized. Make it a priority to redirect some of that money to paying down your debt.

Contact your creditors if you're having trouble keeping up with your payments. Some creditors restructure struggling customers' accounts in order to reduce their minimum payments. The best time to make such a request is before your account is in collection. This is especially true in the case of secured debt like mortgage and car loans, as the lenders can take the assets if you fail to pay. In the case of a mortgage loan, this means foreclosure. For a car loan, it means repossession.

If you're unable to reduce your payments or direct more elective spending toward paying down debt, contact a credit counseling agency for help. Look for one affiliated with the National Foundation for Credit Counseling that employs certified consumer credit counselors. The counselor will analyze your debt and income, help you make a budget, and, if necessary, work with your creditors to develop a debt management plan to help you repay your debt. If you enroll in a debt management plan, you'll make one payment to the credit counselor each month. The counselor will disburse the money to your creditors. Your creditors might reduce your minimum monthly payments, cut your interest rate and even waive some fees in exchange for your agreement to pay off your balance within the agreed-to period.

Debt consolidation loans are home equity loans or home equity lines of credit that allow homeowners to tap into their equity to pay down higher interest debt. Debt consolidation loans incur fees, but they're often less than fees credit card companies charge for repeated late payments. In addition, the debt consolidation loan interest and fees may be tax deductible. Even if not, however, the much lower interest rate you're likely to pay can make consolidation a smart alternative to carrying unsecured debt. On the downside, your consolidation loan is a second mortgage. Failure to repay it could cost you your home.

Debt settlement is an agreement by which a creditor accepts a lump sum payment of less than the borrower owes. Debt settlement companies facilitate these agreements for a fee -- oftentimes, an exorbitant fee. Settlement isn't a perfect solution. It damages the borrower's credit. It's also risky, as neither the federal government nor most state governments regulate debt settlement companies. The companies often advise customers to stop paying their bills in order to amass enough cash to pay the lump sum payment. If the company fails to negotiate an adequate settlement agreement, the borrower can find himself in even worse trouble. However, settlement is, for some, a viable and preferable alternative to Chapter 13 bankruptcy.

The two types of bankruptcy available to consumers are Chapter 7 and Chapter 13. Chapter 7 eliminates a consumer's unsecured debt -- credit cards and most loans other than mortgage and auto. Chapter 7 is highly damaging to one's credit report, but it gives consumers a fresh start and allows them to begin rebuilding their credit immediately. For this reason, it's often preferable to debt settlement for consumers who qualify. On the other hand, Chapter 7 bankruptcy exposes all of the consumer's assets to liquidation, including homes. Chapter 13 bankruptcy restructures, rather than eliminates, unsecured debt. A trustee works with the consumer to create a budget that includes repayment of as much debt as the consumer can afford over a period of several years. A Chapter 13 bankruptcy safeguards a consumer's home and cars. In addition, it acclimates the consumer to living according to a tight budget, which may help her avoid financial problems in the future.

Federal Assistance for Credit Card Debt

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Federal assistance is readily available for handling credit card debt through government-sponsored counseling and debt-elimination programs. The U.S. Trustee Program, a division of the U.S. Department of Justice, maintains a list of government-approved credit counseling agencies offering a variety of options for handling credit card debt. Initial consultations with counselors are free.

As of 2011 the federal government does not provide direct payments, tax breaks or grants for credit card debt. People with credit card debt are personally responsible for the accounts. However, the government offers valuable assistance, including the Fair Debt Collection Practices Act, a federal law which regulates what bill collectors can and cannot do as they attempt to collect. It is illegal for debt collectors to intimidate or threaten debtors, and the law makes it possible for people not to receive phone calls from debt collectors if they choose. The federal law is supported by state guidelines, including state statute of limitation laws which limit the number of years debt collectors have to win court cases for credit card debt.

Federal government-approved credit counselors are located across the country. The counselors are experts in resolving issues related to credit card debt. They are an excellent source of legal, ethical advice on reducing credit card debt. They specialize in debt management programs, which combine a person's multiple credit card payments into one monthly payment. The debtor mails a check to the counseling agency each month, and it makes direct payments to individual card companies. Counselors take over management of the credit card accounts, including all conversations with the card companies and debt collectors. The counselors establish a plan for paying off the cards within about five years. The plans require a monthly management fee from the debtor.

The Federal Trade Commission recommends self-directed debt settlement as a solution for credit card debt. The endorsement is another way the government helps with credit card debt. Government-certified counselors offer free counseling sessions instructing people how to settle credit card debt. Credit card balances are sometimes paid for as little as 20 percent of the balance through debt settlement, although settlements of around half are more common.

Federal bankruptcy courts help people whose credit card and other debt is out of control. Chapter 7 bankruptcy, the simplest form of bankruptcy, eliminates credit card debt in just months. The government waives filing fees for people who qualify and also allows people to file without the assistance of an attorney. That means it is possible file for Chapter 7 bankruptcy and eliminate credit card debt for free. There are income restrictions on qualifying for Chapter 7, which vary by state. People with long-term unemployment or low salaries are the best candidates for Chapter 7.

Chapter 13 is similar to Chapter 7 but takes three to five years to complete because of a court-ordered payment plan. A participant in Chapter 13 may pay some or all of his credit card debt during the three to five years. It all depends on how much money remains after the court allows for reasonable living expenses. Money left over is paid to credit card companies and other unsecured lenders. If nothing is left over they receive nothing and the debt is eliminated at the end of the bankruptcy.

How to Keep Your Credit Card Balances Low

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Although credit cards are a convenient way to pay for online and offline purchases and can provide funds for financial emergencies, maintaining high credit card balances can negatively impact your finances. Interest paid on credit card balances takes away from your financial ability to save for retirement, education and other expenses. Simple strategies can help you keep your credit card balances low and avoid spending a significant portion of your income on interest payments.

Instructions

Use your bank's debit card as your primary card for everyday purchases, such as groceries, gas and restaurant meals. Most stores that accept credit cards also accept bank debit cards--because a debit purchase deducts money you already have in your account, it prevents you from having to pay interest on your purchases later.

Pay for purchases with cash whenever possible. Paying with cash not only eliminates the risk of racking up high credit card balances; it can also help you evaluate potential purchases more closely. You might decide you don't really need an item--skipping a purchase leaves more of your income for savings or paying down your credit card debt.

Leave all but one of your credit cards at home when you head out on vacation or a shopping trip. Paired with a bank debit card, a single credit card will give you the purchasing power you need for a trip without increasing the temptation to indulge in impulse purchases.

Consolidate your credit card balances on a low-interest card or line of credit. This reduces the amount of interest you pay and allows you to make only one unsecured debt payment per month, allowing you to pay more toward your debt.

Review your budget each month to make sure you can make your credit card payments on time. If your budget becomes tight, you may need to reduce discretionary spending to meet your payment obligations. If you miss a credit card payment, the lender can charge you late fees and raise your interest rate, which can elevate your account balance.

Tips on How to Get Rid of Credit Card Debt

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Credit card debt looks harmless at first, but can quickly add up and turn into a seemingly bottomless pit. Using credit cards correctly takes wisdom and getting rid of debt takes perseverance and serious commitment. The task of getting rid of credit card debt looks intimidating, but you can do it once you get the ball rolling and stay in control.

List the total amounts you owe on each card, the monthly minimum payments due and interest. Then, add up all the credit card debt you have. Seeing the big picture can give you a big goal to strive for (the total amount) and little goals to tackle first (the amount due on each card).

A budget can help you stay on track. Divide your expenses from the last three months into categories such as rent/mortgage, savings, groceries, utilities, cell phone, child care, clothes, hygiene products, fast food/restaurants, credit cards, gas, auto loan, entertainment and so on. Doing this will give you a good idea about where your money is going and where you can cut back on your spending. For example, if you see that you are spending $2 on coffee every day before work, make coffee at home and use the money you save to pay your credit card bills.

Instead of trying to pay off the largest amount you owe first, focus on the smallest amounts. Financial expert Dave Ramsey states the smallest credit card debts are the easiest to pay and get out of the way. Therefore, you should tackle those first. Once you do, you will have extra money to use toward paying off your larger credit card debts.

Stop spending money you do not have. It is harder to get rid of credit card debt when you keep using the cards to pay for items because you are just digging the debt hole deeper. Cut up your cards, place them in a safe or cancel your accounts -- do what it takes to stop using credit cards and pay for everything with cash.

Earning more money will give you more money to get rid of credit card debt. If you have a full-time job, consider babysitting in the evenings or weekends occasionally for your neighbors or friends, sell items you no longer use or perform odd jobs for some extra cash.

Can Debt Collectors & Creditors Garnish My Wages?

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Debt collection agencies, such as those collecting for medical bills and personal loans, and creditors, such as credit card companies and banks, typically send you notices via mail when attempting to collect a debt you owe. If you ignore the notices, they may resort to more stringent tactics, such as a wage garnishment.

Each state has its own regulations regarding which properties debt collectors and creditors can seize and which properties are protected from garnishment. Consequently, debt collectors and creditors can garnish your wages if state law allows it. Most states set limits on the amount of wages that can be garnished within a single pay period. However, states such as Texas do not allow wage garnishments at all; therefore, 100 percent of a debtor's wages is exempt from ordinary wage garnishments. The exemption does not apply, however, to federal or state debts. Wage garnishments for federal student loan and child support are enforceable, even if you live in a state such as Texas. Debt collectors and creditors must obtain a court-ordered judgment to garnish wages.

Title III of the Consumer Credit Protection Act is the federal regulation that limits the amount an employer can withhold for a wage garnishment in a single pay period. Employers may withhold up to 25 percent of your disposable earnings or the total by which your disposable earnings exceed 30 times the federal minimum wage -- whichever is smaller. This limit applies to ordinary wage garnishments, such as those a debt collector or creditor initiates. Your employer subtracts legally required deductions, such as payroll taxes, from your gross wages to arrive at your disposable earnings. The state may set a different limit. In this case, your employer uses the one that gives you the greater benefit, such as whichever has the lowest deduction amount.

Your employer typically processes wage garnishments in the order received. However, garnishments ordered by a higher jurisdiction court, such as a tax levy or child support withholding order, take precedence over all other wage garnishments, including student loans. Your employer can withhold more than one wage garnishment simultaneously from your wages, provided that the total amount does not exceed the federal or state limit.

Title III forbids your employer from firing you because it received one wage garnishment against you. The protection does not apply, however, if your employer receives more than one wage garnishment against you. Your state may provide additional protection against discharge. If a debt collector or creditor files a lawsuit against you, the court sends you notification of the suit. If you object to any aspects of the garnishment, check the garnishment notice for instructions on how to file your answer, or response to the lawsuit. File your answer within the time frame stated on the paperwork. If the garnishment is causing you hardship, contact the issuing court for its procedures on filing a hardship claim or claim of exemption.

I Need Help Paying Off My Credit Cards

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Getting ourselves into debt is such an easy thing to do that we assume that we can get ourselves out of debt just as easily. However, this is just not the case. Getting out of debt requires a complete overhaul of your financial life. It's OK if you decide you need help paying off your credit cards.

Examine your credit card statements each month. Avoiding them is not going to make them disappear. Statements show how long it will take you to pay off your debt if you only make the minimum payment. Seeing this might be all it takes to get you to take action now instead of later.

Don't see your credit card companies as some evil conglomerate. They want their money, so they will likely be willing to work with you to get it. They may cut your interest rates or create payment plans to help you pay down the balance on your cards. If they do, find out whether the changes are permanent or whether the company is only extending the courtesy for a certain period of time.

Seek credit counseling. Credit counselors often provide a debt management program, which reduces interest rates to help you get out of debt within five years. The down side to credit counseling is that you will likely have to close your credit accounts, which can cause financial strain as you adjust to a life without credit. If you choose to go this route, be sure to seek an accredited nonprofit credit counseling company to ensure that your payments will go to the creditors and not to the pockets of an unscrupulous company.

Avoid debt settlement. It can help you get out of debt for less than you owe on your cards, providing short-term relief, but the long-term price is high. If you save for a debt settlement payment instead of making your monthly statement payments, you'll destroy your credit rating. In addition, you'll owe taxes on anything you settle, and your credit report will indicate that your accounts were settled outside of the initial terms, which can have as negative an effect on your credit as bankruptcy.

Questions & Answers on Credit Cards

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Credit cards are convenient method of payment that can be used for just about any purpose. Despite the fact that most people have one, there is still much that is misunderstood about credit cards and how they affect your total financial picture. Understanding some of the more frequently asked questions -- and the corresponding answers -- about credit cards can set the course for more responsible use of them.

There are several key factors to consider when choosing a credit card. When you choose a card, find out whether or not there is an annual fee, what your interest rate is and whether or not it is fixed or variable, what kinds of terms are associated with the card and how flexible they are, what the card company's late payment policies are and the grace period for your monthly payment.

Legally, you can have as many credit cards as you are approved for. However, more cards do not always equal better. In fact, in most instances, the more open credit card accounts you have, the more negatively it can impact your credit history. According to Bankrate, it is better to have fewer cards with higher limits than numerous cards with lower limits.

If you have numerous credit cards with the same interest rates, it is not necessary to consolidate cards. However, if you have one card with a lower interest rate than the rest, it might be worth it to consider a balance transfer to that card to make it easier to get your debt down faster. This is also beneficial if you need to free up some credit on one of your credit cards.

Obviously, if you have bad credit, your card options are limited. However, avoid credit cards with high interest rates and numerous miscellaneous fees at all costs. Instead, sign up with a reputable credit company for a secured card. While the amount of available credit only equals your deposit, you have a chance to rebuild by making on-time payments and qualifying for credit increases as you continue to show the company you are creditworthy.

Alternative Bankruptcy Concepts

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When people experience severe financial problems, they might wonder if bankruptcy is their only option. What many people do not realize that several options to alleviate financial strain exist to aid them. These bankruptcy alternatives increase in intensity, starting with simple do-it-yourself budgeting to working with professional agencies to act as the middleman between you and your creditors to get you out of debt.

Two different types of bankruptcy alternatives exist: self-led options and the professionally managed route. The self-led options start with radically changing your income and/or spending habits to live well within your means and eliminate your debt without filing for bankruptcy. Pick up a second job or freelance on the side to earn extra income to put toward your debt. Eliminating nonessentials from your monthly budget, such as cable television, weekly manicures, "retail therapy" and other excessive spending also frees up more money to pay off your debts.

Negotiating with your creditors is an additional option, usually done in conjunction with radically changing your lifestyle and budget. Many creditors are more willing to negotiate with their debtors for reduced payments or even a stay on payments for a few months in severe cases like unemployment.

Professionals are available to assist you in avoiding bankruptcy. Credit counseling provides a counselor to review your finances and help you draft a budget, a plan to pay off your debt and support for when you have questions. For more intensive help, you can sign up for a debt management plan (DMP) with either a credit counseling firm or a reputable debt management company. It also works with you to create a budget and debt payment plan. However, with a DMP, you pay your monthly alloted debt payment to the company managing your DMP, and it pays your creditors. Finally, for the most severe cases, consider credit consolidation, which is when you take on a loan at a lower interest rate than your current debt, use the principal to pay off your credit card debt and pay the one consolidation loan payment each month.

If you follow through with any of these plans, they can get you out of debt and sometimes faster than if you had filed for bankruptcy. The do-it-yourself alternatives to bankruptcy will not further damage your credit score. In fact, it typically improves within a year or two of starting the plan since you are lowering your debt ratio and total percentage of available credit used. Any of the plans will improve your credit score long-term if you stick with it and stay out of debt. From a purely psychological standpoint, paying off your debt alleviates what Americans report as the No. 1 stress in their lives, according to Psychology Today.

The core of these alternative bankruptcy concepts is an effective way to get out of debt without destroying your credit score, but also to change the habits that got you into debt in the first place. While getting out of debt is important, changing habits is vital. Professional services like credit counseling and debt management will help you with resources and advice to better manage your money to keep you living within your means and out of consumer debt.

Avoiding bankruptcy is ideal if it is at all possible. Financial problems are psychologically draining and worsen everything from relationship satisfaction to work performance according to Psychology Today. Bankruptcy, while an option to alleviate financial struggles, is a very stressful experience ranked among the most stressful situations a person can go through according to the Holmes-Rahe Stress Scale. If bankruptcy can be avoided, it is best to do so for your financial and psychological health.

How to Analyze Renter Credit Worthiness

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When you are renting out your property, whether it's a small apartment, a three-bedroom home or large commercial space, chances are you are concerned about renting to responsible tenants. Not only do you want someone who is going to care for the property, but you want to feel secure that you're going to get your rent payments on time and in full each month. One way to predict whether a tenant will be financially responsible is to analyze her credit report. While credit reports are not 100 percent accurate, a report will give you a good idea of whether a tenant can handle the monthly rent payments.

Instructions

Confirm that the information on the report matches the information on the application. Credit reports reveal previous addresses and names. If the information on the report varies significantly from that on the application, the applicant may be hiding something, and you need to ask more questions.

Calculate the renter's debt-to-income ratio. Add all of the applicant's monthly debt payments together, including the rent you charge, multiply by 100 and divide the result by her annual income. In general, monthly debt payments -- credit cards, loans and rent -- should not be more than 36 percent of monthly income.

Track the applicant's payment history. Credit reports generally include the monthly payment history for at least the previous year. Look for payments 90 days late, or longer. If the applicant has a pattern of late payments, or several accounts not current, she may be a risk.

Review any accounts that are in collections. Collection accounts are not necessarily an indication of poor credit. For example, a hospital may send a large medical bill to collections even when the patient is making regular payments. Instead, look for an overall pattern of collections activity, and ask for an explanation of any items that seem out of place.

Assess the renter's overall debt amount. Look for credit accounts that are at or near the limit, a high number of recently opened accounts or other signs that the applicant may be living beyond her means.

How to Get Proof From a Collection Agency of Proof of Payment

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Proof of payment is your only method of defense if a negative remark on your credit report stops you from getting approved for a loan. You can present this proof of payment to the loan processor and request they reassess your standings as a creditworthy individual. Mortgage lenders often require that all collection accounts be settled before they will approve you for a mortgage loan.

Instructions

Educate yourself about your rights before you even start negotiating. Read publications from the Federal Trade Commission, and read the Fair Debt Collection Practices Act.

Seek debt validation to show you that the debt collection agency has the right to collect this debt. Request written confirmation from the credit collection agency within 30 days of receiving a collection call. Start a file to keep these records in.

Check with the Better Business Bureau and Chamber of Commerce to verify that the collection agency is a licensed and legit company. You also want to see if there have been previous complaints about them receiving payment and not being cooperative with sending proof of payment.

Negotiate your payment with the debt collection agency. In the book, "The Complete Book of Dirty Little Secrets" Jason Rich advises caution about the promises a debt collection agency makes. They can't make settlement deals with you unless they have purchased the debt in full. Otherwise they have to get permission from the original creditor.

Before you make a payment, request that they put the terms of the payment agreement in writing before you submit any payments.

Discuss the method that they will provide proof of payment. Some of the agencies will fax you proof of payment. Others will only mail it to you. A few will fax you a copy of what they will send to you in the mail.

Wait for that letter before you give them credit card information or a check. Check for a signature from the representative.

Make payments with a money order so that you will have a receipt of your own. You also may not want to release your checking account information to a credit collection agency.

Send the payment through certified mail so that you have a receipt of the collection agencies receipt of your payment. Signature confirmation will give you the name of the person who accepted your mail.

Wait thirty days for proof of payment. If you have not received it, contact the representative and demand that he honor the agreement. Request that he fax you a copy within the next 24 hours since he agreed to the terms of repayment.

Call the agency representative and let them know that you are aware that they received your payment. Ask them when you can expect to receive the proof of payment.

Hire a lawyer if you have not received a letter from the debt collection agency or the mark has not been updated on your credit report within 90 days. Sometimes a call from a lawyer is all you need to light the fire under a collection agency to do what they promised.

How to Refinance My Home With Bad Credit & a Low Income

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In tough financial times, many people are faced with making decisions about their homes and other personal debts. Unemployment and underemployment can lead them to refinance their mortgages to reduce monthly payments, but months of job-seeking or juggling debts might have hurt their credit ratings. Many banks have now new, stricter requirements for refinancing mortgage loans. But some initiatives through the Department of Veterans Affairs and the Federal Housing Administration offer refinancing options to people who qualify.

Instructions

Set a goal for the total monthly payment you can afford in your current financial circumstances. Calculate your net income and budget in items such as transportation, credit card repayments, student loan repayments, food, clothing and other essential monthly expenses to determine your disposable income for mortgage payments.

Check your credit reports from the three major credit bureaus: TransUnion, Experian and Equifax. Look for reports of judgments, slow payments, delinquencies and charge-offs (accounts abandoned by the creditor because you appeared unable to repay), because these incidents influence lenders' decisions about refinancing.

Search for a suitable refinancing lender who is willing to be flexible with income and credit-rating requirements. The Department of Veterans Affairs and the Federal Housing Administration both offer programs to assist people who can't secure refinancing elsewhere. Check their websites for eligibility requirements.

Gather financial documents needed to begin the application process. Most lending institutions will require past tax filings, W-2 forms, pay stubs or other proof of income, and copies of your bank account statements. Be prepared to explain any unfavorable items in your credit history.

Obtain the payoff information for your current mortgage. This information is crucial for the application process, as you will need to know how much you are refinancing. In addition, the lender will want to know what your house is worth now.

Submit an application for refinancing. Once you've identified potential lenders, obtain an application and provide the required documents.

Await the decision of the financial institution. If approved, be certain to understand all terms of the refinanced mortgage, including whether the monthly payment includes any fees and service charges, and whether the monthly amounts can increase over the life of the refinanced mortgage.

How to Finance Notebook Computers for Bad Credit

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Having bad credit will make it harder to finance a notebook computer. However, it is not impossible to purchase the computer of your choice even if you do not have enough cash to pay for it. Consumers who are concerned about their sub-par credit have the opportunity to buy without their actual credit being pulled to complete the transaction. If you locate companies who specialize in these types of situations, you can check your e-mail, surf the Internet, and create documents using your new notebook computer.

Instructions

Buy a notebook computer with the assistance of an online computer club. Locate computer club websites online which cater to computer buyers who have bad credit. Understand that while your credit will not be looked at by the company, you will need to be employed and earn a certain amount of money each month in order to qualify for these programs. Be sure to have proof of income available before you contact the computer club so they can verify your salary. Pick a club which has a low sum of money that needs to be put down to finance the transaction, low monthly payment plans, and has the ability to report your good payment status to the credit bureaus so you can improve your credit.

Borrow money from a friend or family member. Create a written agreement which states when the loan will be paid back, the exact amount which will be paid monthly, and the length of the loan agreement. Treat this loan as you would a loan which has been issued by a major financial institution, and do not default on your payment obligations.

Apply for a credit card at a store which sells computers. Travel to a business which has computers for sale. Ask them if they offer credit which is specific to their store because you want to buy a notebook computer. Keep in mind that stores which offer credit in this manner charge high rates of interest, and these types of credit cards can only be used in the stores where they are issued.

Does a Closed Account Negatively Affect a FICO Score?

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Some credit card users mistakenly believe that the less credit they hold, the better their credit scores will be. This thinking moves some to cancel their credit cards in an attempt to better their FICO credit scores. Regrettably, closing an account can have the opposite effect and may actually reduce a FICO credit score.

If aiming to improve your credit score, understand the relationship between the length of your credit history and your credit score. According to Myfico.com, the length of your credit history influences your score by 15 percent. This number is small in comparison to other factors that influence your score, such as timeliness (35 percent) and the amount owed (30 percent). However, having a short credit history typically results in a lower FICO credit score. But as time moves forward and as your credit history grows, so will your personal rating.

Closing a credit account can have a negative affect on credit scores because this seemingly simple move can lessen the length of your credit history. For example, let's say you have two credit card accounts -- one account that's 10 years old and another account that's only five years old. Closing your oldest account can reduce the length of your credit history by five years. This drop in history can shave points off your FICO credit score. Closing accounts also decrease how much you have in available credit and may increase debt utilization (percentage of current balance in relation to your available credit limit). This factor also influences scoring.

An effective way to protect your credit score involves keeping credit card accounts open, regardless of how often you use the credit card. Due to the potentially damaging effects of closing accounts, it's wiser to keep these accounts active, and then keep the credit cards in a safe deposit box or other protected area. This alleviates anyone taking the cards without your permission, and this can also lessen the temptation to charge purchases to these accounts.

Despite the danger associated with cancelling or closing accounts, you may want fewer credit accounts to decrease the amount of credit in your name. If you feel compelled to close a few credit accounts, always start with the last account you opened. This is the youngest of all your credit accounts, and closing this account is less likely to decrease the length of your credit history. Satisfy the balance, and then contact the creditor to cancel the account.

How to Build Your Credit for High School Kids

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Building credit is the foundation to establishing a secure financial future, for all teens and young adults. Starting early is not only wise, but also essential, if you want to to have a good, solid credit history, ensuring that you'll get the lowest interest rates, which will save you thousands of dollars in the long run when you're ready to make those large investments, such as buying a home or getting a business loan. There's no greater time than now, while you're still living at home with your parents, to build credit and guarantee future success in the financial market.

Instructions

Find a job or a consistent source of income. This is crucial. You can't learn proper money management or financial responsibility without having your own source of income. Consider getting a part time job or find some other constructive means to produce a cash flow.

Ask your parents to add you to their credit account as an "authorized user." This will help raise your credit score almost instantly, without you having to actually climb the credit ladder yourself, all while reaping the benefits of your parents' excellent credit history. When you reach the age of 18, you will be able to obtain a credit card, under your own name, with good credit history already established.

Open a secured credit card account, with a reputable financial institution. A secured account is a savings account with a bank or credit union that allows the account holder to obtain a credit card, while the bank holds the funds for security. The card limit is equal to the amount of your account balance. For instance, if you have $500 in your account, your credit limit will be for that same amount. Once financial responsibility has been proved, by making timely payments, usually within 12 months, the bank will convert your account to unsecured, return the deposit and in some cases raise your credit limit.

Prepaid Debit Card Information

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A prepaid debit card is identical to a regular debit card in terms of how it works. The spending limit, however, is restricted to the amount of funds in the card owner's account. When funds fall below a certain limit, the card owner must deposit more funds into the account. The debit card is useful for students, people on fixed incomes and even businesses attempting to better control travel and entertainment expenses.

It is impossble to go into debt with a prepaid debit card.

Prepaid debit cards are offered by both Visa and MasterCard and carry the logo of one or the other on the card face. Consequently, they are accepted at ATM machines and to purchase goods and services wherever Visa and MasterCard are accepted. Since card use is not a credit transaction, users do not incur interest charges on purchases. The cards are easily acquired because they do not require a credit check, making them well suited for people with credit issues. It is impossible to go into debt with a prepaid debit card because card use is limited to the amount of funds in the card owner's account.

The prepaid debit card is different from the prepaid credit card. The latter, also referred to as a secured credit card, is a credit card that offers hardly any credit. Whatever credit is offered is secured by the card owner's money that is held by the card issuer as security. Since the secured card is a credit card, its use also incurs interest charges, monthly fees and over-limit fees. The fees and interest rates, however, are usually much higher than with regular credit cards. This is because secured credit cards are a form of sub-prime lending.

Secured credit cards can appeal to people who want to re-establish their credit. A better option may be a prepaid debit card with a credit-builder feature attached. The fees, if any, for a prepaid debit card will probably be less than the secured credit card.

You cannot reload the prepaid debit card at an ATM machine.

Money can be added to the card at the retail location where the card was purchased, at participating locations arranged by the card issuer, through employee direct deposit of wages and online using a credit card. It is not possible to reload a prepaid card at an automated teller machine, however. The only card that can be used for making deposits at an ATM machine is a bank-issued ATM card for use at bank-owned or participating ATM machines. The prepaid debit card can be used for withdrawals from an ATM machine, however. That is the only ATM transaction permitted.

Prepaid debit card issuers will have different fees for card use. One fee that deserves close scrutiny is the fee charged for ATM withdrawals. This fee can be excessively high depending on the card issuer. It is prudent to research different issuers' fees to get the best deal possible.

Card owner liability for fraudulent use will vary widely by issuer. Fraudulent use of any kind of debit card provides less protection for the card owner than fraudulent use of a credit card. The difference in liability between the two can be as much as $500 depending on when the card is reported lost or stolen. It is prudent to also compare the card owner liability declarations of different issuers.

Prepaid debit cards provide stored value. They are a safer alternative for stashing money for emergencies than under the mattress. For example, the need may arise to access a bank account for an immediate withdrawal of cash but the bank is closed, such as on the weekend or on a bank holiday.

The Statute of Limitations on Debt in Kentucky & Bill Collectors

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Bill collectors are companies and individuals who have special skills in the collection of unpaid debts. A bill collector may attempt to collect an unpaid bill or a debt stemming from another kind of transaction through a variety of means. However, most debt collection methods are only available to a debt collector after he has filed a lawsuit against you. In Kentucky, this lawsuit must be filed before the statute of limitations expires.

Technically, once a debt has been incurred, the debt is legally owed to the creditor until the debtor dies. However, the debt is only effectively collectible for as long as the bill collector or the party attempting to collect payment on the debt can sue. After the party has sued and won a judgment against the debtor, he can attempt more aggressive collection methods, such as garnishment and asset seizure.

The length of time that a debt collector has to sue for the recovery of an unpaid debt is set by the statute of limitations. Each state has its own statute of limitations. For example, in Kentucky, a debt stemming from an oral contract has a statute of limitations of 5 years. The statute of limitations starts the day that the debt went delinquent after which is was never paid up again.

In Kentucky, the precise statute of limitations on a debt will depend on the kind of debt. A debt stemming from an open account or from an oral contract has a statute of limitations of 5 years. However, a debt stemming from a written contract, a domestic judgment or a foreign judgment has a statute of 15 years. A debt from a sale of goods is 4 years and a debt from a promissory note is 6 years.

In some cases, particularly in the case of a legal judgment, the judge can order the statute of limitations for a particular case to be extended or renewed. In addition, the statute of limitations marks the time by which the case has to be filed, not the time by which the case has to have been won. So, sometimes, a bill collector will file a lawsuit just before the statute is set to expire.

Difference Between Debt Negotiation & Debt Counseling

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At first glance, debt negotiation and debt counseling seem similar, at least in name. Both are promoted as a way to help people deep in debt work their way out of financial difficulties, but they do it using different methods. Whichever method you use, you should research the process and company or counselor you are considering.

Debt counselors work with you to help establish a budget that will allow you to meet your expenses and pay your bills. This requires them to interview you about your financial situation. A debt counselor lists your income from all sources and your expenses for everything except debt repayment. Based on this information, the counselor determines how much money you have available to pay back your debts each month.

Debt counselors also may work with your creditors to establish repayment plans. They may contact your creditors and negotiate lower interest rates and possibly better terms for repayment. They work with your creditors based on the information they gleaned from helping you develop a budget. Many debt counselors collect the money from you each week that's needed to pay all your loan and credit card payments. They use these funds to make the monthly payments directly to your creditors on your behalf. When using a debt counselor for this purpose, you should verify the counselor is paying your bills on time each month.

Debt Negotiating companies, or debt settlement companies, collect your money and negotiate with creditors, but they take a different approach. A debt negotiator collects your payments and puts them into a savings account, after they deduct any fees due. The debt negotiator does not make regular payments to the creditors. When a debt negotiator has saved up enough money from your payments, he contacts one of your creditors and attempts to settle with them for a lower amount, possibly 50 percent of the balance or less.

Debt settlement is riskier than debt counseling. Creditors will continue to contact you about collections and may intensify their collections efforts as you become further behind. A creditor working with a debt counselor is not likely to sue the debtor as long as the payments are being made on time. Collectors may sue a debtor who is using a debt settlement company, according to MarketWatch. You also have no guarantee the creditor will settle the debt for less than you owe, and your debt and delinquency build if you do not make payments on time. Generally, you will do more damage to your credit report attempting to complete debt settlement than with debt counseling.

How to Avoid Medical Liens

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It can happen to anyone -- an unexpected medical emergency can deplete insurance and life savings, leaving patients and their families with mounting bills and no foreseeable way to pay. If you ignore medical bills, the provider may pursue reimbursement through legal channels, obtaining a judgment or "lien" in court against you or your property for a forced payment. While it can be tempting to stick your head in the sand and ignore bills and calls, facing the problem head-on is not only the best option, but one that should keep your credit intact.

Instructions

Open medical bills as soon as they arrive, rather than putting it off because of stress or fear. Check them carefully to make sure you are being charged for the correct dates and services before you begin calling the provider.

Negotiate the bill in question to have it reduced to a more manageable amount. Politely dispute anything that you feel is an overcharge, or a charge for a service you did not receive. Find out what an insurance company would owe for the services provided, and offer the medical provider this amount. If the provider will not go over the bill line-by-line to reduce costs, ask what the lowest amount is that the provider can accept for payment.

See if the provider -- such as a hospital -- has a program that assists those having trouble making medical payments. You may need to speak with several people before you are directed to someone who can discuss this with you; however, if the first person tells you that no program is in place, ask to speak to someone higher. Make sure that there is no program, and that you don't qualify, before you assume that option is off the table.

Set up a monthly payment plan to tackle the medical bills and avoid having the debt moved to a creditor, who could then obtain a medical lien against you. Be honest about what you can pay, and stick to it; most providers would prefer to deal with you than pay someone else to collect your money.

Contact the provider immediately if there is any reason why you will not be able to meet a payment plan obligation. If you are just skipping a month because of a financial hardship, the provider will probably be understanding -- especially if you notify the office right away to report the issue and make assurances to resolve it.

Call the health department in your state to find out if there is a program to assist you with the payment of medical bills. Some may be age-restrictive, such as only for the elderly or children. If the programs are available, however, find out the qualifications, process for application, and the turnaround time for an answer. This is information you can pass along to your medical provider to prove you are making an effort to resolve the situation.

The Best Credit Card & Debt Consolidation

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Debt consolidation is only effective in 22 percent of all cases; the remaining 78 percent of the time, the borrower ends up having more debt, according to Dave Ramsey, a financial counselor. The problem, according to Ramsey, is that debt consolidation only treats the symptom, not the problem, of overspending. However, if you are ready to change your spending (and saving) habits, consolidating your debt can be a good way to reduce your monthly payments.

If you own your home, and have enough equity in it to cover your debts, you could consolidate your debts by taking a home equity loan, home equity line of credit or a cash-out equity refinancing and use the money you get to pay off your debts. This method of debt consolidation is risky in that you're gambling your home if you are unable to make your payments, but you are rewarded with an interest rate that is likely much lower than you are paying now. Further, your payments are spread over time so you enjoy lower monthly payments.

If the amount of debt you wish to consolidate is relatively low or you are able to make considerable payments each month, you could consolidate all your debt on to a low-APR credit card. Even if you only get that low (or 0 percent) APR for a short time, if you can manage to pay your debts off in that time frame, you could save a considerable amount in interest. Of course, to be able to use this debt consolidation option, you have to be able to secure a credit card with a high enough spending limit to allow you to consolidate.

If you are in a situation where new, adequate credit is not a possibility, you may opt to use the services of a debt management company or debt consolidation agency. This type of company can negotiate with your creditors to reduce your interest rate, develop a settlement amount, or have certain fees and penalties waived. On the downside, you do have to pay for these services. Moreover, for as many companies like this that are legitimate, there are just as many that are not, so be sure to do your research; the Better Business Bureau and your local Attorney General's office are places to start.

Alternatively, you may want to consider filing for bankruptcy. Under a Chapter 13 bankruptcy, you will still be able to keep your home, your vehicle and most of your assets while discharging most, if not all, of your nonexempt debts. The way it works is you pay a court-appointed trustee all your disposable income; you keep enough to cover court-approved living expenses. The money is then distributed to your creditors. Secured debt, like your home loan, is paid first; this is why you are able to keep your home. Any money left over goes toward your other debts. The payment plan is set up over three to five years. At the end of that time, any amount you still owe will be discharged so long as the debt is not exempt for discharge. Your credit score will take a hit, but filing bankruptcy can help you get back on your feet.

How to File Bankruptcy and Not Include My Wife

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Federal bankruptcy laws give a husband and wife the option of filing for bankruptcy jointly or individually. It is possible for just the husband to file while not including the wife. A husband filing as an individual protects the wife from the embarrassment of bankruptcy, including severe damage to her credit report. The bankruptcy will show on the husband's credit report for a minimum of ten years but will not show on the wife's credit report.

Instructions

Schedule consultations with bankruptcy attorneys and include your wife in the discussions. Many bankruptcy attorneys offer free initial consultations, and meeting with more than one attorney allows you to ask more questions about the overall bankruptcy process and the implications of filing without including your wife.

Compile a list of all debts that you believe you are solely responsible for, such as a credit card in your name only. Get a list of your debts from your credit report or from billing statements. Get free copies of your credit report from AnnualCreditReport.com. The Federal Trade Commission endorses the site as a source for free credit reports. Also, talk with your wife to make a list of debts in her name only, along with a list of debts you share as joint borrowers.

Review your debts to determine how a solo bankruptcy could help you and your wife. Federal bankruptcy laws will not allow you to include your wife's debts in the bankruptcy. Accounts in her name only will remain after your bankruptcy. Also, if the two of you are joint borrowers on a credit card, the bank can still hold her responsible for the entire balance on the card after your bankruptcy. However, a solo bankruptcy could be ideal if most of the household debt is in your name only.

Ask a bankruptcy attorney about special issues regarding debts if you live in a community property state such as California. Bankrate reports that in community property states creditors may have the right to sue your wife for debts that were in your name only, even if you file for bankruptcy.

Choose a type of bankruptcy. Most individuals select Chapter 7, which eliminates unsecured debts such as credit cards, in just a few months. Others who cannot qualify for Chapter 7 choose Chapter 13, which requires payment plans lasting three to five years. Chapter 7 has income restrictions that vary by state. A bankruptcy attorney can tell you about laws in your state and help you determine the best form of bankruptcy for your situation.

File for bankruptcy as an individual after carefully reviewing advice from attorneys, community property laws, if applicable, and an overall analysis of all debt owed by you and your spouse.

Outstanding Debt Help

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It can take a lot of planning and effort to pay off high outstanding debt. Debt is common if financing a home or automobile. However, high balances on a credit card or unnecessary installment loans can increase your debt load and lower your credit rating. Fortunately, help is available to help eradicate high balances.

Using a debt calculator to calculate how many months it will take to pay off outstanding balances helps with debt elimination. To begin, calculate your total debt by adding up the balances of each statement. Next, determine how much you have in disposable income each month by reviewing your personal budget. Based on disposable income, divide this figure by the calculated total of your debt. This provides information on how many months it will take to pay off your outstanding balances.

Disposable income can become an issue if you don't earn a lot of money, and lack of income can significantly slow down any efforts to pay off credit card balances. Consider ways to possibly increase your monthly income, even if it's only temporary, to provide extra cash to pay off debt. Possible solutions include asking your employer for additional hours or taking part-time work and using all extra income to pay off balances.

Gradual increases in monthly payments to creditors and lenders can shave months or years off outstanding balances. Credit card companies often request small monthly minimums. Although convenient and affordable, small monthly payments toward huge outstanding balances prolong debt and lead to higher interest payments during the life of the debt. Break the routine of paying only the minimum and always submit larger payments.

Getting a low-rate or zero percent interest on a credit card can quickly help drop your balances. With no interest payments or charges each month, all of your monthly payments goes to reducing the outstanding principal balance. There are several methods of acquiring a better interest rate, such as applying for a low-rate balance transfer credit card. Bankrate.com recommends calling up your present credit card companies and asking for a lower rate. An excellent credit history with no late payments helps you negotiate an interest rate reduction.

The Reasons People Get Into Debt

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Debt can be a cancerous presence in your life. It can eat up your resources, cause mental stress and strain your relationships. In 2007, the average American household possessed $9,480 in credit card debt. There are multiple factors that lead people to go into debt. Understanding these reasons for debt can help you to avoid getting yourself in a negative financial situation.

Situations that drastically alter people's situations in life can lead to debt. These situations include divorce, death of a spouse, loss of a job and long term disability. Many times individuals go into debt because they no longer have the financial means to pay their bills. Sometimes people don't adjust their spending habits even though their income has changed. This also leads to quick debt.

Debt can be the result of inattention to your finances. A budget can help you to track your expenses and evaluate whether you need to make adjustments. When you don't pay attention to your spending habits, you can easily over-spend, which can lead to debt.

Although many people would shy away from calling themselves greedy, the simple fact is that greed leads to debt. The age old problem of matching or exceeding your neighbors' wealth status still exists. People often see something they want and hastily purchase it rather than saving for the item over time and waiting to purchase it when they have enough funds (or refusing to purchase it all together if it is unnecessary).

Just because two people are married doesn't mean that they see eye-to-eye on money matters. Managing a budget for one person can be drastically different than trying to manage a family budget together. If one or both spouses don't communicate properly about what's been purchased or about financial plans for the future, the family's finances can quickly enter the realm of debt.

Saving money is one of the surest way to avoid debt. Unexpected events in life are bound to happen. Having money tucked away for these occasions (such as illness or car problems) can prevent you from paying for these services on credit. Some expenses are expected, such as college education or purchasing a vehicle. Using money from savings for these types of expenses will keep you from paying thousands of dollars in interest if you were to borrow the money. The problem with saving is that it requires discipline, which many people have not developed.

How do I Work Out a Deal With Credit Card Companies to Get Out of Debt?

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When you realize your credit card debt has gotten out of control, it is important to know that you can negotiate with credit card companies to have your interest rate reduced. According to The New York Times, it may even be possible to negotiate a reduction of the principal amount you owe on your credit cards. Be aware that for this option to work, your credit history should show that any current delinquency is a one-time occurrence with a reasonable explanation, and not a habitual malady.

Instructions

Line up each of your credit cards with the most recent corresponding credit card statement. Familiarize yourself with each card's present interest rate, as well as any late fees or other penalties you may have incurred.

Call the customer service phone number located on the back of each credit card. Ask directly for an interest rate reduction. Ask politely to speak to a supervisor if the customer service representative you speak with is unable or unwilling to give you the help you want.

Explain your situation calmly and politely, despite how uncomfortable the customer service representatives may make you. Do not lose your temper, but instead explain that you have been a loyal customer to the company for X number of years and do not want to be forced to consider the offers of much lower interest rates you have received from competing credit card companies.

Ask for a principal reduction if your account is more than 90 days delinquent and your credit delinquency is rare and attributable to a reasonable cause, such as a recent job loss or medical impairment barring you from work. Explain how and why this situation came about, and that you want to make things right with your creditors. Escalate the situation to higher level supervisors and managers if necessary.

The Best Way to Consolidate Bills

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Whether you have a spending problem or financial hardships, it's easy to fall into debt. Unfortunately, getting out of debt isn't as simple, and you may spend a lot of nights lying in bed wondering how to pay off your creditors. Yet, there are ways to eliminate debt. Debt consolidation has helped millions pay off their debts and boost a low credit score.

Instructions

Refinance your mortgage loan. If you own a home and you have substantial equity in your home, consider a mortgage refinance. A refinance lets you apply for a new home loan. In turn, you can obtain a lower interest rate, better loan terms or take a cash-out option. The cash from a refinance can be used to consolidate debts. The borrowed money is wrapped into the new mortgage balance.

Get a home equity loan. Home equity loans and home equity lines of credit have lower rates than credit cards. Thus, you can apply for such loans and use the money to pay off your creditors. Because your home secures the loan or line of credit, you can get approved with less than perfect credit. Before applying for a loan, assess your finances and make sure you can afford a new monthly expense.

Apply for a secured personal loan. If you don't own a home and you want to consolidate your bills, talk with a bank to inquire about secured personal loans. You'll need a good credit history and collateral. Collateral can include a vehicle title, boat title, jewelry or electronics.

Transfer credit card balance to a low-rate card. Applying for a credit card that offers a low rate is another way to consolidate bills. Credit card companies regularly offer low introductory rates, in which you can pay 1 or 2 percent for six months or one year. Transferring your balances from a high rate to a low-rate credit card lets you save money and pay off the card quicker.

Call a debt consolidation agency. If you don't qualify for a refinance, home equity loan, personal loan or credit card, a debt consolidation agency can help. They'll contact your creditors to set up a new payment arrangement. In addition, agencies can negotiate better rates and terms, which lets you pay off debts within a set time period. Look for a non-profit debt consolidation agency because they don't charge a fee.

How Does HAMP Affect Your Credit Score?

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Accepting a mortgage loan modification under the Home Affordable Modification Program can have unexpected side effects. A HAMP modification can lower your credit score and affect your ability to obtain a loan or a new job. Your credit rating before enrolling in the program determines how a HAMP modification will affect your credit score.

According to the Connecticut Department of Banking, the main reason for the credit score dip is the fact that you pay less than your full mortgage payments during the HAMP trial period, which appears as intentionally late or partial payments when reported to credit bureaus. If you are a homeowner with up-to-date mortgage payments, you will experience the largest drop in credit rating following a HAMP modification. If you are already delinquent in your mortgage payments before HAMP, you will usually experience a milder credit score drop because previous late payments have already negatively affected your credit rating.

Credit reporting agencies only require lenders to report loan modifications following the completion of your HAMP trial period. According to the government-sponsored website Making Home Affordable.gov, lenders must identify modified loans as current and "modified under federal government plan" if you successfully complete the trial period, or delinquent and "modified under federal government plan" if you make any payments 30 days past the due date during the trial period. In some cases, if you receive the current and "modified under federal government plan" notation, this notation amends any negative credit reporting that took place due to lower payments during the trial period.

Not all HAMP participants experience lower credit ratings. However, according to Alan Zibel on The Huffington Post website, a HAMP modification can lower your credit score as much as 100 points if you are current on payments but are on the verge of default. If your credit score is in the range of 700 or above, your score should fall no lower than 600. A score lower than 600 indicates that you are a high risk to lenders and can affect your ability to obtain credit, suggests the Consumer Federation of America "Your Credit Scores" report.

Even if a HAMP modification can lower your credit rating, the alternative is more damaging. If you opt out of a HAMP modification, struggling with continuous late payments or losing your home to foreclosure can drop your credit score by at least 150 points according to Alan Zibel. If you experience a drop in your credit rating following a HAMP modification, you can soften the blow by using the extra money saved from lower mortgage payments to pay down other high interest debts.

When Is It Worth It to Refinance?

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The terms of a mortgage have a profound impact on the overall cost of home ownership. Refinancing is a process where a borrower is able to alter the terms of a loan by allowing a lender to pay off his current loan in exchange for a new one. Whether it is worth it to refinance will depend on your specific financial situation, but there are several scenarios where refinancing can be advantageous.

One of the primary reasons people refinance mortgages is to save money by taking advantage of low interest rates. If interest rates have fallen since you took out your original loan, you will likely be able to get a lower interest rate by refinancing. Seemingly small differences in interest rates can result in significant savings. For instance, if you have a $300,000 mortgage, shaving 1 percentage point off your interest rate can save you thousands of dollars each year.

Mortgages can have fixed or adjustable interest rates. Fixed-rate mortgages have interest rates that stay the same for the life of the mortgage. Adjustable-rate mortgages have rates that change over time based on current interest rates. If interest rates are low, it may be worth it to refinance an adjustable rate mortgage to a fixed rate mortgage to lock in at a low rate and avoid the possibility of rate hikes in the future.

Another situation where refinancing may benefit you is if you want to adjust your mortgage term. Mortgages usually have a term of 15 to 30 years. Shorter mortgages usually have lower interest rates but monthly payments are higher. If you wish to reduce your interest rate and build equity faster, you might benefit from refinancing from a 30-year loan to a 15-year loan. On the other hand, if you are having difficulty making payments on a 15-year loan, refinancing to a 30-year loan can make it easier to afford monthly payments.

When you refinance you can elect to borrow more than the amount of your current mortgage balance and receive cash for the additional amount borrowed. This is called "cash-out refinancing." This may allow you to pay for certain expenses that you would not be able to afford with your savings, such as unexpected medical expenses or a child's tuition.

Refinancing can be a costly process. The Federal Reserve Board states that refinancing costs can exceed 3 percent of the total value of a home. Refinancing is only worth it if the benefits you receive exceed the cost of refinancing fees.

Credit Card Summons & Consumers' Rights

12:31 PM No comments

A credit card summons is the notification of a lawsuit, usually delivered to your home or place of employment by a courier. You are "served" with the lawsuit when the courier gives it to you. The lawsuit itself, called a complaint, accompanies the summons. The official serving of the summons and complaint allows the case to go forward. In some states, the summons and complaint may come to you by certified mail or taken to your last known address. You have legal rights throughout the process.

Laws vary by the state, but the summons generally instructs you to appear before a judge in civil court on a certain date. Or it may instruct you to provide a response to the lawsuit, called an "answer." The immediate scheduling of a court date presents a challenge. Illinois Legal Aid reports that you have no chance to win in court if the attorney for the credit card company proves that you defaulted on a credit card and failed to pay the balance. Also, you automatically lose the case if you fail to show for a scheduled court date.

There's always the chance that the attorney will fail to show for the hearing or isn't properly prepared. Under either scenario, the case would end in dismissal, but Illinois Legal Aid reports you should not count on that. More likely, the attorney will arrive with complete documentation about your defaulted credit card account. This will include the original application you signed, a record of your charges, a listing of payments that you missed, and copies of correspondence notifying you of the delinquency.

You have the right to offer a defense during a court hearing. However, Illinois Legal Aid reports that the judge is sure to side with the attorney for the credit card company if he documents the case and you fail to offer a suitable defense. Possible defenses include identity theft, which allows you to argue that you never opened the account. You can also argue that you paid the debt, but the credit card company did not credit your account. Whatever the defense, you will have to prove it with documentation, such as a police report alleging identity theft or canceled checks showing you paid the bill.

The summons may not list a court date, but could ask that you provide a written answer to the allegations. If the summons requires an answer, you must provide a written statement responding to each numbered allegation in the complaint. You are legally entitled to deny each allegation, which is the equivalent of pleading "not guilty." This forces the attorney for the credit card company to prove the case in court, and a court date will be set when you return your answer. The lawsuit will include basic instructions for returning your answer.

Illinois Legal Aid advises that you settle the lawsuit and avoid court. There is no way to escape the debt if the credit card company can prove the case. If the company wins in court, the judge will issue a judgment against you. The judgment requires you to pay the full amount owed, plus attorney's fees. If you fail to pay, the credit card company can request garnishment of your bank account or wages.

You can settle the case on your own by contacting the attorney for the credit card company. A name and contact number will be on the lawsuit. The Smart Money website reports that credit card companies and debt collectors will often settle for 20 to 75 percent of the balance, but with a court date looming, you won't have much leverage for a low settlement. You can hire an attorney to settle the case for you. A lawyer can also file various legal motions that can delay the trial date and give you more time to save money for a settlement.

How to Consolidate Credit Card Loans

12:21 AM No comments

Consolidating credit card balances in a single loan could save you money. Interest rates on bill consolidation loans are usually considerably lower than credit card interest rates. The result of consolidation could be a lower overall monthly payment, providing you with flexibility to manage other financial obligations.

Instructions

Gather all credit card statements. Decide how much money you need to pay them all off by adding up the amounts.

Shop for bill consolidation loans and also consider home-equity loans if are a homeowner. Check several banks and credit unions to find the lowest advertised rates. In addition to checking around in your home market, check other lending institutions' websites.

Obtain credit reports from the three nationwide reporting bureaus.Check them for accuracy. Write letters to them specifically asking that each remove any inaccurate information. The bureaus are required by law to do this as of 2010. Also look for any accounts reporting as past due. Make payments to bring those accounts current before applying for credit. The credit report self-audit will improve your approval chances for new credit avenues. Obtain free credit reports from the Annual Credit Report website. Click on "Request Report" from the home page. You can also telephone your order at 877-322-8228. The site was established by the three nationwide reporting agencies to provide free reports as required by federal law. Visit each credit bureau's website. Under "Disputes" menu tab, you can enter the correct information for the items you are disputing. The contact information for the bureaus: Equifax, P.O. Box 740241, Atlanta, GA 30374-0241, 800-685-1111; Experian, P.O. Box 2104, Allen, TX 75013, 888-397-3742; TransUnion, P.O. Box 1000, Chester, PA 19022, 800-916-8800. (See Resources for websites.)

Apply for bill consolidation or home-equity loans. Bill consolidation loans generally are unsecured, meaning they are guaranteed only by your signature. Real estate is needed for collateral for home equity loans. Use the proceeds from your loan to pay off credit card debit. In addition to a bill consolidation action or a home-equity loan, consider cutting up your credit cards and closing the accounts to avoid building up new balances.

Consumer Credit Act, CCA

11:23 PM No comments

Established in 1974, the Consumer Credit Act, CCA, requires lenders or those who offer products or services on credit in the United Kingdom to have an Office of Fair Trading, OFT, license. Those who perform lending practices without a license can face imprisonment or a fine. The CCA also protects the rights of consumers and regulates lender business practices.

Consumers who signed a credit agreement at a location other than a creditor's place of business, such as a home, with a broker or made an agreement over the telephone have the right to cancel the agreement within 14 days without providing a reason. The Department for Business Innovation & Skills, BIS, states the 14-day period allows a borrower to consider her decision about the credit agreement and cancel if she feels like it was not an appropriate choice for her. Upon cancellation, the borrower must repay the loan amount and any interest accrued. The borrower can provide a cancellation notice in writing via fax, email or postal mail or provided verbally, but the notice must be per the standards outlined in the agreement regarding withdrawals. According to the BIS, under the CCA, a borrower does not have to adhere to a particular writing format or wording when withdrawing from a loan.

Section 75 of the CCA states a credit card company bears the burden of refunding a customer for the full amount of a faulty good or service if the provider goes bankrupt or disappears. Section 75 also applies to breaches in contract. However, a customer can only receive reimbursement for goods or services that cost between $41.72 and $139.06. The CCA extends this provision to cover transactions customers make with foreign companies or overseas, including products delivered to the UK, via Internet, telephone or mail order services. Under the CCA, consumers can seek legal assistance if a credit card company does not honor a claim.

Sections 77 through 79 of the CCA state that consumers have the right to receive a copy of a credit agreement from his creditor free of charge. The statement should include information relating to fixed loan amounts, a running total of debts, the outstanding and total amount due. Upon receiving the request for a credit agreement, a creditor has 12 working days to provide the information. Under the CCA, if a creditor takes longer than 12 business days to provide the requested documents, the debt is not enforceable until the borrower receives a copy of the agreement. Moreover, a creditor can face criminal charges if it takes them longer than one month to provide a requested credit agreement.

The BIS reports that sections 157 through 159 of the CCA states that if a lender rejects a customer's credit application, the lender must provide him with information regarding the credit reference agency used to access the customer's credit information upon request. A customer has to request this information in writing within 28 days of the rejection, and the lender has seven days to respond.

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Wednesday, October 31, 2012

Other Signers on the Mortgage

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Tuesday, October 30, 2012

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Sunday, October 28, 2012

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Saturday, October 27, 2012

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Friday, October 26, 2012

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Thursday, October 25, 2012

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Wednesday, October 24, 2012

How Do I Choose the Right Card?

Is There Any Limit On the Number of Credit Cards I Can Have at Once?

Is it a Good Idea to Consolidate Cards if I Fall Into Debt?

Should I Choose Secured or Unsecured With a Higher Interest Rate For Bad Credit?

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Tuesday, October 23, 2012

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Saturday, October 20, 2012

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Friday, October 19, 2012