How to Use Common Law to Settle Credit Card Debt

Contracts that you sign with credit card companies and collection agencies are considered binding agreements under common law. The contracts that you initially signed when taking on debts are fully renegotiable at any time. You may even renegotiate your debts if a judgment has been obtained against you in civil court. Debts are contracts that fall under the category of common law, although they are subject to some regulations from the Federal Trade Commission (FTC).

Instructions

1

Review your current agreements with your creditors. Make copies of all correspondence for your records. Although verbal contracts consisting of an offer, an acceptance and some exchange of value (money or some other property) are considered legally binding, it is very hard to prove their validity in court without some kind of recording. Ask for any agreements that you make with your creditors be in writing. Debt agreements are considered common law in the U.S. legal system, which means that they can be freely renegotiated at any time.

2

Contact your creditors if you have a late or delinquent account with them. Offer to settle the debt for less than the full amount. Keep as much communication as possible in writing to create a paper trail. Start by offering 20% of the total amount you owe on the debt. It will be easier to negotiate with a creditor if the debt is about to be sold to collection or is already in collection. If you demonstrate that you have a paper contract authorizing the debt settlement, it's considered valid under common law.

3

Send payment to settle the debt once you receive a written agreement in the mail. If you fail to provide payment as per your written agreement, it may be used as evidence against you if you are sued for debt collection. These written agreements are legally binding contracts under common law even if they aren't drafted by lawyers.

4

Settle your debts in a similar fashion if you are summoned to court for a debt collection lawsuit. Show up to all court dates to avoid a default judgment against you. Negotiate a written debt settlement with the lawyer representing your creditor when you arrive at the courthouse. You may negotiate a settlement even if your creditor obtains a judgment against you.

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How to Ladder Debt

Everyone wants to get out of debt and find the quickest way to do so. A popular idea is Dave Ramsey's "snowball method," which instructs you to first pay off the debts with the highest interest rate. A similar method is the "ladder method," which requires you to pay off your loans from smallest to largest. It's easy to ladder your debt to make a plan for paying it off, but the key to success is to remain committed to paying it.

Instructions

1

Gather all of the financial statements from your creditors. Look at the most recent statements.

2

Make a list of the debts, starting with the lowest debt and going up to the highest. This is your "debt ladder."

3

Pay the minimum amount due on all debts, except for the smallest one. You need to make these minimum payments to keep your good credit score or to improve your credit score.

4

Free up extra money to pay towards the smallest debt. Look at your budget to find areas where you could reduce expenses. Apply all of the extra money towards the smallest debt.

5

Continue paying your way through the debts on your debt ladder. After you finish paying off the smallest debt, take all of the money that you were paying towards that debt and apply it to the second one. Repeat this process until you have paid all of your debt.

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The Best Practices for Credit Management

Good credit management is the cornerstone of personal finance. The two largest expenditures in a typical household are mortgage payments and auto loan payments. Student loans, personal loans, credit cards and other revolving accounts are also common personal finance tools. Managing credit properly can reduce the amount of interest payments by hundreds of thousands of dollars over a lifetime. The earlier you can start building your credit, the more money you can save in the long run.

Credit Monitoring

Monitor your credit rating regularly to build strong habits and prevent accidental damage to your profile. Subscribe to get your credit rating from any of the three major bureaus: Transunion, Equifax and Experian. Late payments and other issues on your report can harm your rating, bringing higher interest rates and even getting you turned down for loans in the future. Stay on top of your rating so you can correct mistakes and repay owed money to ensure a strong rating.

Avoiding High-Interest Revolving Debt

High-interest revolving debt--most often incurred through credit cards--can have devastating effects on personal finances. Credit card debt often reaches the mid-teens or higher in terms of interest rates. As a general rule it's sensible to pay off such loans in full every month. Avoid making expenditures that you won't be able to pay off immediately. Paying interest on such loans results in essentially making everything in your life more expensive. It also makes it nearly impossible to profit from savings and investments, decreasing future opportunities.

Faster Debt Repayment

Quickly paying down mortgages, auto loans and student loans is a fantastic way to save money on interest. Every dollar you spend in principle reduces the amount of interest you need to pay. Also, the more you pay down existing loans, the better it is for your credit rating. If you're interested in growing your credit rating quickly, pay off loans early.

Reduce Nonessential Expenditures

Reduce your nonessential expenditures to make your income go farther. To increase your standard of living, you need to earn more income, which increases your tax burden. If you reduce your expenditures, you have more money to save for the future without affecting how much you need to pay in taxes. Avoid eating out or purchasing prepared meals. Try not to buy new gadgets on a constant basis. Choose durable clothing that will remain fashionable for the foreseeable future. The fewer extravagances you purchase in the early years, the better your quality of life will be in the future.

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Can Anybody Garnish Your Wages?

A wage garnishment is when a court issues a judgment requiring your employer to withhold a portion of your paycheck and send it to a creditor. Your wages can be garnished only with a court order; your wages can't be garnished directly by any creditor. And your wages can't be garnished by just anyone; they have to file a lawsuit and win, then serve the court judgment to your employer.

How Garnishment Works

Once a creditor has won a court judgment and your employer has been served, up to 25 percent of your net pay can be garnished. Child support is the exception; 50 percent or more of your net pay can be garnished for back child support. Generally, only one garnishment at a time can be in place, but again, child support is an exception to that rule. Your employer is served with a notice of garnishment and is required to comply. Your employer can't fire you over one garnishment, but, in general, you're not protected if you have multiple garnishments. Some states provide additional protection against being fired for multiple garnishments.

Who Can Be Garnished

Not everyone can be garnished. You have to earn wages (in other words, you can't be self-employed). You have to be left with 30 times the minimum wage ($7.25 as of 2011) each week. Social Security, welfare, unemployment, disability payments or a pension also can't be garnished. If the garnishment doesn't leave you enough money to live on, you can also appeal the amount of the garnishment with the court.

Student Loans

If you default on your student loans, your loan servicer can garnish your wages without a court order. Up to 15 percent of your wages can be garnished. You have to be notified at least 30 days in advance of the garnishment and you can still set up a repayment plan at that time. You can only appeal the garnishment if you've returned to work in the past 12 months after being fired or laid off.

Taxes

If you owe the Internal Revenue Service back taxes, the agency can garnish your wages without a court judgment. The amount of pay you can keep varies depending on the size of your household. If you're being garnished by the IRS, the agency sends a notice to your employer and your employer is required to give you a copy of it. State and local tax agencies can also garnish your wages, but how much and how often varies by area.

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Help With Credit Problems

Credit problems can ruin your chances of qualifying for a mortgage or getting a low-rate auto loan. Some consumers run into credit issues because they don't know how to manage their debt and money, or because of other issues such as the inability to pay high medical bills and loss of employment. However, with better credit habits, you can improve your present score and become a prime candidate for financing.

Improve Payment History

Fixing a bad payment history is imperative to reversing credit problems. Late payments have a major impact on scoring, and a history of late arrivals or skipping payments will eventually ruin your credit score and stop credit approvals. Demonstrate a good payment record by paying auto loans, mortgages, credit cards and other bills by your due date. Starting anew will not fix your credit overnight, but consistently paying future bills on time will gradually add points to your personal score and slowly repair credit problems. You can start by authorizing automated payment withdrawals from your bank account to avoid forgetting to submit a payment by the due date, or mail payments a week or so before the due date.

Control Debt

Stopping credit card use and resolving to carry a low balance on your credit cards can help solve credit problems. Balances on credit cards can soar out-of-control with excessive spending. Outstanding balances also have a great impact on scoring, and lowering your balances to less than 30 percent of your credit limit can give your personal score a quick boost. Pay more than your minimum and use credit cards only if you can afford to pay off balances by the end of the month. Ask your employer for overtime work or get a part-time job on the weekends, which can provide the extra cash you need to increase monthly payments. You can also generate extra money by selling unused household items such as electronics, furniture or jewelry, or re-evaluate your lifestyle and cut back on certain non-essentials such as recreation, dining out and frivolous shopping.

Avoid Collections and Judgments

Collections and judgments can appear on your credit report after defaulting on a bill. But working with your creditors can help alleviate these negative items. Once creditors report a negative item to your report, this information can stay on your record for up to seven years. Avoid negative remarks if possible. Rather than ignore a lender or creditor's correspondences, talk with them and explain your situation. Propose solutions to avoid having your account sent to collections such as a lower monthly payments or possibly a skip payment option for a few months.

Clean Up Report

Even if there are legitimate negative items on your credit file, it doesn't hurt to check your report periodically for mistakes that can also reduce your personal score. Annual Credit Report issues free reports to consumers every year. Reports are quickly viewable online; and by disputing errors and asking creditors to update your file, you can add points to your score and help your credit improvement efforts.

Get Assistance

Not everyone has the skills to budget their money and manage their debts effectively. Rather than live with credit problems, be proactive and solicit help from a credit counseling agency. Counselors provide multiple services such as negotiating with a consumer's creditors to lower the interest rate on his debt, as well as offering education on how to avoid additional debt and manage existing debts/credit lines.

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Help Consolidating Medical Bills

A Harvard University research study conducted in 2007 found that 62 percent of all bankruptcies filed were due to overwhelming medical expenses. Most of the debtors were well-educated, middle-class citizens who had health insurance. With the ever-rising costs of health care in America, it is not uncommon to seek help consolidating medical bills. There are a number of things you should consider when you decide to consolidate and eliminate your medical debt.

Loans

Three factors should be taken into account if you are contemplating a personal or home equity loan to pay off medical bills: interest, risk and monthly payments. Consolidating your medical bills through a personal or home equity loan is only worth it if you can get a lower interest rate on a reasonable term. However, since you often do not pay interest on medical bills, by consolidating medical debt through a loan, you will be paying interest. If you are thinking about using the equity in your home, bear in mind you are putting your home at risk if you should default on the loan. Lastly, by acquiring a loan for help consolidating medical bills, you could end up with a higher monthly payment than what you were previously paying the doctors or hospital. Even if your payment is lower, it is likely you will end up paying more than you would have over the life of the loan.

Negotiation

The Patient Advocate Foundation (PAF) is a charitable organization that helps people with debilitating, life-threatening or chronic illnesses to manage health care expenses and issues. PAF may be able to negotiate for you in regard to insurance access concerns, your medical debt crisis and job retention issues. NeedHelpPayingBills.com offers a range of information on state and local assistance programs and credit card and medical debt help. If you do not qualify for help through charities, Medicaid or other assistance programs, you may be able to negotiate with your health care providers to find an acceptable settlement amount for all outstanding balances.

Bankruptcy

When you have exhausted all other options and nothing will work with your current financial situation, filing for bankruptcy protection may be the most effective alternative. Before making a final decision, it would be beneficial to consult with a bankruptcy attorney so you can learn about all consequences involved with filing for bankruptcy. As medical bills are a form of unsecured (no collateral) debt, they can often be partially or completely eliminated in a bankruptcy filing.

Credit Counseling

If you are having difficulty negotiating successfully with your health care providers or sticking to a repayment plan, a credit counseling agency may be able to help. Many credit counselors offer their services in a local office, by telephone or on the Internet, and some organizations work on a nonprofit basis to help consumers manage debt. Credit counseling is designed to help you learn how to better manage your finances, including help with consolidating medical bills. A credit counselor may ultimately advise you to enroll in a debt management plan, and can point you in the direction of a reputable company.

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How to Stop Car Repair Bills

Managing car repair bills can be difficult if the repairs are unexpected and very costly. If you are living on a tight budge, car repair bills can completely throw you off track. Unfortunately, car repairs on older model cars are more frequent than that of newer cars and the car repair industry is making large sums of money at the expense of the average consumer. Hoovers, a research company, reported that the car repair industry earns an annual revenue of 85 million. Deciding to end car repair bills take research and decisiveness.

Instructions

1

Purchase a Kelley Blue Book or go online to www.kbb.com. Kelley Blue Book is a resource that determines the current value of your car.

2

Find the make and model of your car, in the book, and write down the value determined for your car.

3

Add all of your car repair receipts for the last 12 months. If the receipts are more than the value of your car, consider purchasing another car. If you are currently making payments on the car, try trading it in for a newer model.

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