The Impact of Identity Theft

Identity theft is a serious crime that involves the theft and use of an individual's personal information, credit and financial accounts. The Federal Trade Commission reports that 8.3 million U.S. citizens were victims of identity theft in 2005 and that these figures increased by 22 percent by 2007. Protecting yourself from identity theft is critical, as its impact can be devastating to your credit and your mental well-being.

Emotional Impact

Identity theft can have a great emotional impact on its victims, most of whom are unaware of how or where the criminal obtained their personal information. Many people find themselves feeling vulnerable, angry, depressed and stressed when recovering from the theft---so much so that identity theft support groups have started up all over the country. The groups help individuals deal with the emotional side of the theft and help them move forward with their lives.

Credit Impact

You credit report and score can be greatly affected by identity theft. Although the law protects you from being financially accountable for the fraud committed in your name, your credit can be affected before you even realize you're a victim. To correct the credit information, you must contact the credit reporting agencies and any business where fraudulent accounts were opened. You must continue to monitor your reports closely for at least 12 months to ensure that the fraud has ceased.

Financing

Getting financing for new purchases can be difficult after an identity theft. If you have followed the appropriate procedures with the credit reporting agencies, a theft flag will be attached to your reports. When applying for new accounts, you may be required to provide additional information to prove that you are, in fact, the person you claim to be. While this is for your protection, many of the conveniences extended to you in the past will no longer apply. Such conveniences include quick credit approvals and online access to credit decisions.

Driver's License

Most victims of identity theft are so concerned about the impact on their credit that they forget the identity thief also might be using their driver's license and other forms of ID. Some criminals completely assume their victim's identity by obtaining driver's licenses and identification with new pictures and information. If this happens to you, you may find that you have outstanding tickets and criminal complaints resulting from the fraud. Having your passport stolen can even make it hard to prove your citizenship.

Overall Economy

Identity theft has had a dramatic impact on the country's economy. Individuals and businesses are affected by identity theft. The Federal Trade Commission estimates that businesses have lost more than $50 billion due to this type of fraud. In addition, the FTC estimates that businesses have spent more than $1.5 billion in efforts to avoid losses and resolve identity theft consequences. These business losses have resulted in lost jobs and an overall decline in financial stability.

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What Control Do You Have When Your Bank Account Has a Freeze on It?

Creditors will often attempt to put a freeze on an individual's bank account if the person has failed to pay the money he owes on a debt. After the bank account is frozen, the creditor may then attempt to extract money in an amount equivalent to what the debtor owes. When the account is frozen, the debtor will have limited control and will only be able to perform certain actions.

Freezing

In order to freeze an account, a creditor must first receive a civil judgment against an individual and have a civil judge agree to freeze the account. Depending on the law of the state in which the account is frozen, the individual may be notified ahead of time. All banks ordered to freeze an account by a court of law must comply. After the account is frozen, the bank will restrict access by the account holder.

Actions

While an account is frozen, an individual will be able to look at the balance of the account and see what transactions have been made. However, he will not be able to make withdrawals or to shift money out of the account to another account. However, he will be able to deposit additional money into the account and he will be able to receive outside payments into the account, too.

Exemptions

There are a number of different assets that are legally exempt from freezing. For example, most types of federal benefits cannot be legally frozen. If assets in an account derived from exempt types of payment are frozen, then the person can request that a judge overturn the freezing and restore him access to these payments. In additional, a person who holds a joint account with a debtor may be able to reclaim his own assets from a frozen account.

Solutions

After an account has been frozen, an individual will have the opportunity to appeal the freezing to a court. Generally, depending on state law, the individual will be allowed to plead his case before a judge, who will decide if the freeze should remain in place. If the freeze has been placed illegally, then the judge will have the freeze removed and the individual will have access to his account restored.

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Legal Ways to Get Out of Debt

Sometimes personal debt can become overwhelming. However, there are many options available to people who want to reduce or eliminate debt. Following a plan can help you get debt-free over time.

Debt Consolidation

Debt consolidation can move debt from high-interest credit cards to one low-interest rate loan. When you consolidate your credit cards, you also replace multiple sets of service charges and administration fees with one manageable fee. You can consolidate your debts on your own by using a personal loan, a home-equity loan or you could refinance your home for a lower interest rate and get additional money to pay off your credit cards as well. There are also debt consolidation organizations available to help you. With the money you will save from consolidation, you can apply extra money to the payments of your other debts.

Monthly Budget

Some people find themselves in financial trouble simply because they do not take the time to organize a monthly budget. Gather your bills and list them out on ppaer or a spreadsheet. Record the due date of each bill and the minimum payment due. Remember to include such one-time bills as book club payments or doctor's bills. Total your bills and then compare that number to your monthly revenue. Now you know how much you have to spend on expenses such as food and gasoline. You can use this information to develop a monthly entertainment budget, and apply any extra funds to paying off your debt.

Debt Negotiation

You can also negotiate with credit card companies for a lower payoff amount that can fit into your monthly budget. You may need to agree to cancel the account, but a negotiated payoff can save you money on interest and principal payments, and help you pull yourself out of debt. Call your creditors and explain your situation. Then tell them that you would like to negotiate a payoff amount that is less than what you currently owe. In many cases, your creditors will work with you to put together a program you can afford. If you do not want to close your accounts, then contact your creditors and ask them to lower your interest rate. If your current credit card interest rates are higher than 12 percent, then ask the credit card companies to lower your rate to no more than12 percent. Tell the company you would be willing to transfer your business to a credit card company that will lower your rate. In many cases, your rate will be lowered and you will save money on interest payments.

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How to Refinance a Consolidated Student Loan

If you have already consolidated your student loan, you may not know you have the opportunity to refinance again if interest rates fall. In the case of a federal student loan, your refinancing opportunities are limited. You can only refinance if you are adding new money to the federal loan. But private student loans can be refinanced after they have already been consolidated.

Instructions

1

Improve your credit score. There should be a marked difference in your credit score if you are refinancing privately. Ideally, it should have gone up 50 to 100 points since you consolidated your loans.

2

Check the current interest rates. Call a lender to see what the interest rate would be to refinance. Rates for refinance programs on student loans typically change yearly, around July 1. Since the interest rate will likely be based on your credit score, you will have to provide your Social Security number for a credit check.

3

Compare rates from several lenders. Although the organizations base the rates on credit scores, you still might find a lower rate offered through a particular lender. As an example, Wells Fargo has a private student loan refinancing program.

4

Apply for the refinancing program through the lender. If the rate is lower than your current rate, submit a loan application. Also, find out if the rate for the refinancing is fixed or variable. You could end up paying more in the long run if the rates are variable.

5

Determine your payment. Payments will likely be less if you have secured a lower interest rate. Also, extending the length of the student loan can allow you to pay less.

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How to Cooperate With Debt Collection Agencies

Collection agencies can be frustrating to deal with if you don't know how to properly work with them. It's important to cooperate with debt collection agencies to resolve your debt problems and prevent your credit from permanently being destroyed. Avoiding phone calls and collection letters from a debt collection agency will only create more problems. By dealing with debt collection agencies and responding to collection letters, you can work out payment plans and have a better chance of protecting your assets and credit. It's important that you understand your rights under the fair debt collection practices act, and how to make the right choices when cooperating with collection agencies. By understanding your rights, you'll avoid being unlawfully pressured by a debt collection agency. Here's some tips for dealing with collection agencies.

Instructions

1




Before you do anything, you must confirm that the debt reported by the debt collection agency is valid. You can do this by requesting a debt validation from the collection agency. Under debt collection laws, a debt collection agency must comply with requests for debt validations. If you have problems then you should speak with a collection attorney.

2




Gather all of your financial records and statements regarding your debt amounts. You will need this information when working with the debt collection agency. Review your copy of the debt validation after you receive it from the collection agency. Compare the amounts on the validation form and collection letters to your own records, to see if the collection agency has been accurate in their reporting. Contact the original creditor or credit reporting agency, if you believe the information is not accurate. In the meantime, do not avoid the debt collection agency when they call or send collection letters to you. This will only make matters worse.

3




Next, you should learn your rights under the Fair Debt Collection Practices Act. There are certain things that debt collection agencies are not allowed to do and you should know your rights so you can avoid being pressured by a debt collection agency. By understanding the debt collection laws under the fair debt collection act, you'll know your rights throughout the entire process. Report any violations of the fair debt collection act to the attorney general's office in your state, as well as to the Federal Trade Commission.

4




Explain your financial situation and arrange repayment plans with the collection agency. You can also offer a potential payoff settlement if the debt is small enough that you feel you can pay a portion of it off in a lump sum. In some cases, debt collection agencies will still offer you a debt settlement even if you are not able to pay the settlement in full at once. A debt collection agency may even break up the settlement into several different payments if you ask them too. Make sure you arrange repayments in confidence so you can avoid further problems with debt collection agencies.

5




Get everything in writing! Any payment plans or agreements that have been made with a debt collection agency should be submitted to you in writing. Make sure you have copies detailing the payment terms and agreements. The letter should state that the original creditor has agreed to accept the payment as payment in full. You should also ask the debt collection agency to report the debt as being paid in full even if you are offered a reduced payoff option to the credit reporting agencies.

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Collection Assignment Agreement

Large companies, such as credit card providers, often seek the aid of debt collection agencies when attempting to recover overdue consumer debts. The creditor and the collection firm negotiate a collection assignment agreement based on the policies and preferences of both companies.

Significance

A collection assignment agreement grants the collection agency the right to act on behalf of the original creditor when collecting debts. The collection agreement also includes the amount the creditor intends to pay the collection agency for its services. In many cases, the collection agency receives a portion of any amount it successfully collects from debtors.

Considerations

Some creditors do not enter into collection assignment agreements in which both parties actively participate. These creditors essentially "turn over" their overdue accounts to collection agencies for a fee. Thus, the collection assignment agreement in these cases serves as a sales contract.

Effects

Regardless of whether a creditor hires a collection agency to collect debts or sells its delinquent accounts, the collection agency must maintain a copy of the collection assignment agreement. The Fair Debt Collection Practices Act allows a debtor to sue a collection agency that cannot prove it has the right to collect his debt. A copy of the collection assignment agreement protects the collection agency from the legal consequences of not maintaining proof that it owns the debt.

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How to Find a Reputable Debt Counseling Company

Debt counseling is a very personal service, and you need to be able to trust the people who offer it. Before you sign an agreement or give any personal information to a debt counseling company, do some research. When you hand the structure of your personal finances over to a complete stranger you want to take the time to make sure you are comfortable that the company is reputable and has been around for a long time.

Instructions

Finding a Reputable Debt Counseling Company

1

Develop a list of debt counseling companies in your area from the phone book and newspaper advertisements. Avoid companies that claim in their advertising that they can make you debt free or save your credit score. You are looking for qualified professionals who understand their business and do not attract customers through gimmicks and promises. It may be best to stick with certified public accountants or certified financial planners to act as debt counselors.

2

Check your list against the Better Business Bureau files. This can easily be done over the Internet, and it is free. Any company with excessive complaints against it, even if those complaints have been satisfied, may be suspect.

3

Contact your state attorney general's office to see if any of the debt counseling companies you are considering have ever had any official complaints filed against them. If a previous customer is willing to report a debt counselor to the state attorney general, then you may not want to do business with that counselor.

4

Speak to any local financial professionals you know, such as your banker or accountant, and see if they recognize any of the names on your list of debt counseling candidates. Ask these financial professionals for any referrals they may have as well.

5

Set up a series of at least two personal interviews with each prospective counselor. Ask questions and make detailed notes of how each one answers. Pay attention to whether any of them give you confidence in their abilities or knowledge of the industry.

6

Make a decision only after you have gone through the second round of interviews. This allows you to make a better comparison between counselors you saw early on and those you saw after gathering more information. Your perspective may change.

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