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New offers options to American consumers who need an effective debt reduction plan. We have settled over 150 million dollars worth of unsecured, credit card debt while saving clients thousands of dollars. AmeriGuard believes it is important to make an informed decision especially when it affects your financial health. Understanding your options can be overwhelming; that’s why we offer experienced, knowledgeable guidance along the way. provides the information you need to participate in creating a better future..

Saturday, November 30, 2002

About Consumer Credit Counseling Agencies

About Consumer Credit Counseling Agencies

When someone finds themselves in debt and they just don't know where to turn, they can find some much needed help by visiting a credit counseling agency. There are thousands of these agencies across the country and finding the right one is the key to you getting out of debt and staying that way.

Considerations

    Being in debt can be very stressful and sometimes so overwhelming you don't know what to do. Fortunately there is help out there. The first thing you want to ask yourself is, if you need counseling or if your credit is something you can fix yourself. If you are just starting to have trouble paying your credit cards then you might want to call the company and see if you can work a payment schedule out with them first. In most cases the credit card companies will try to work with you if you have a good paying record up until now. If you are at the point where you are paying multiple late fees or taking cash advances from one credit card to pay another than you are probably a good candidate for credit counseling.

Warning

    Once you have determined to seek credit counseling you will want to investigate a few agencies. You can go to the Federal Trade Commissions Website for a list of questions to ask the agency before you sign up. Ask for a list of their fees even if they say they are a non-profit organization. Some non-profits ask for a mandatory donation. Most agencies though will charge a small fee to set up the account and administration fee. The National Foundation of Credit Counseling has a list of Agencies listed by state and the FTC will have a list of all agencies that have had complaints filed against them. The last thing you want to do at this point is end in more debt and not get the help you need.

Benefits

    When you start working with an agency they will ask you many questions about your loans, credit cards and income. You will want to be as honest and give them as much information as possible. The counselors will find out what you can afford to pay each month and negotiate with your creditors to accept smaller monthly payments and have late fees and rates reduced. You will pay the agency your monthly payment and they will send it out to each of your creditors. You will set up for a plan that could take as little as 6 months or as long as 2 years depending on your debt. While you are involved with the program you will have to stop using credit cards and attend some financial classes to learn how to handle your money better in the future. One of the biggest benefits is the bill collectors stop calling at all hours of the day and night giving you less stress to deal with.

Potential

    With credit counseling you may prevent your credit score from dropping too much if you start before it gets too delinquent. If you complete the program you will come out with a better understanding of how to handle your credit. Some credit agencies even offer education on buying homes and investing money for your future. You will learn how to build your credit back up. This is important, not to be able to obtain more credit cards, but because many things you need every day are based upon your credit score. Insurance companies base your rates on your credit score, renting a house may not even be possible if you have a bad score and it's even used for getting a cell phone contract. You're whole life is just a lot easier with good credit.

Misconceptions

    There are some misconceptions about credit counseling. One is that your credit score is ruined by going to counseling. The fact is that your credit score may go down if the creditors accept less than the full balance. However, even if you negotiated this with the creditor the result would be the same. And the fact that you can't make your payments on time will reduce your credit score. Another is that you will never be able to regain your credit or buy a home. Nothing is further from the truth. By following the plan and getting the financial education you will be in a better position to build your credit up and learn how to and where to get a mortgage to buy a home. The truth is if you are in a bad financial situation already, a good credit counseling agency can only help you make it better.

The Average Debt of MBA Students

Getting an MBA prepares students for the rigors of life and gives them the skills necessary for a career in the business world. According to Forbes Magazine, the richest people in the world tend to be business people who have learned to invest wisely and run businesses effectively. Aspiring MBA students may assume that the costs associated with getting their degree are negligible relative to the potential payout.

Total Debt

    According to FinAid.org, as of 2010, the average MBA graduate has accrued $41,676 in student loan debt (for loans covering both undergraduate and graduate education). This figure should cause MBA graduates to take heart, since it is actually lower than the average student loan debt for graduates in general, which is $47,503. (One reason that the general average is higher is because of graduates in law and medicine who tend to accrue over $90,000 in debt.)

Total Cost of Debt

    The face value of student loan debt does not express the true cost of your education unless you find some way of paying it off in full immediately after graduation. You must take into account the interest you pay as well as the opportunity cost of making those student loan payments over the years. (The opportunity cost is the monetary value of what you could do with that money instead of putting it toward student loan payments, such as investing it in something that will bring you even more money.) If the difference there is greater than the difference in salary that you expect as a result of your MBA, you may find that getting an MBA is not worthwhile for you.

MBA Graduate Salaries

    Depending on the economic climate when you graduate, you can typically expect a starting income of $70,000 or above if you have an MBA from a respectable business school. However, if your degree is from a top-15 business school, this number could easily be between $100,000 and $150,000. With a salary like this and some frugal living, it is possible to pay off $50,000 in debt in just a few years and minimize the amount you would otherwise end up paying in interest if you were to only make the minimum monthly payments.

Other Considerations

    After calculating the opportunity costs and interest payments against your current salary, it may seem to you that accruing the necessary student loan debt to get an MBA is not worthwhile. However, also remember that your current income is not necessarily a guaranteed thing. Having an MBA under your belt helps to ensure that, even if you do lose your primary source of income in the future, you will be able to more easily adapt and find another one instead of remaining unemployed and accruing other debts.

Friday, November 29, 2002

How to File a Complaint Against a Creditor Who Has a Cease & Desist Letter Against Them

If you have a creditor that is calling you relentlessly at home and work, you can send a cease and desist letter to the business. Once you send this letter to a creditor, the creditor must stop its contact efforts. While contact by mail is typically permissible, this means that the creditor should no longer try to contact you by phone to collect a debt. Despite this letter, sometimes a credit continues to contact you, which is when you can file a complaint against the creditor with the Federal Trade Commission and your state Attorney General.

Instructions

    1

    Get the full business name, address and phone number for the creditor that you want to file a complaint against. Usually you can find this information on a recent statement or notice from the creditor. You need this information to fill out your complaint forms.

    2

    Visit the National Association of Attorney Generals website to view the directory of current state Attorney Generals. The alphabetical list includes a mailing address and the URL for each state. Click on the URL for your state and look for the "File A Consumer Complaint" link on the site. Click on that link to fill out your complaint form online. On the form, you must enter your contact information, the creditor's contact information, the date of the incident, what happened and details as to any documentation to backup the complaint. If you prefer, you can write a letter with the same information and mail it to your state Attorney General's office.

    3

    File a complaint against the creditor with the Federal Trade Commission via the FTC website. You must enter your contact information, the creditor's contact information, the date of the incident, what happened and details as to any documentation to backup the complaint. The FTC does not take complaints by mail, but does offer a toll-free hotline that you can call if you prefer to give the complaint over the phone instead of online.

Truth About Creditors & Debt Settlement Agencies

Advertisements advocating debt settlement programs make settling debts you cannot afford to pay seem like a safe and simple process. In reality, paying your creditor less than you owe to settle your debts is a risky undertaking and one you should only consider after familiarizing yourself with the potential consequences of debt settlement.

How It Works

    A creditor settles a debt when it accepts less than the debtor owes as full payment, writing off any balance that remains. You can attempt to settle outstanding debts with creditors on your own or hire a third-party agency to negotiate a settlement agreement for you. Depending on your financial situation and the creditor's demands, you can pay a settlement either in one lump sum or in payments over time.

Considerations

    While some creditors limit their financial losses by offering nonpaying debtors settlement agreements, no law requires them to do so. The Federal Trade Commission notes that a creditor reserves the right to refuse to negotiate your unpaid balance with you or any third party that you hire to negotiate in your stead. If you hire a debt settlement company or credit counseling agency to work with your creditors on your behalf, you still must pay the fees associated with the service, regardless of whether or not your creditor agrees to lower your debts.

Tax Consequences

    If your creditor agrees to let you settle your outstanding balance, it writes off the unpaid remainder you owe as a tax loss. Federal tax laws require you to include the amount the creditor wrote off as income on your tax return. Your creditor will send you a Form 1099-MISC at the end of the tax year noting the exact amount it forgave. Depending on the amount your creditor forgave and the other information on your tax return, including the debt settlement balance as income could result in a tax liability.

Credit Damage

    Few creditors will agree to lower your balance if you make timely payments. Only when payments cease and the creditor is in danger of losing money will it consider lowering your debt. Unfortunately, if the creditor makes regular reports to the credit reporting agencies, skipping payments in order to successfully settle the debt will result in missed payments on your credit file and eventual credit damage. Missed payments remain a part of your credit history for seven years.

Collection Lawsuits

    Skipping payments to your creditor does more than lower your credit rating -- it causes your debt to increase even more. Each time you miss a payment, many creditors impose a late payment fee. This fee increases your debt and, by doing so, results in the debt accruing additional interest charges. Each month that you do not pay in the hopes of obtaining a settlement, your debt steadily grows.

    Should the creditor refuse a settlement, your unpaid balance places you in danger of a collection lawsuit from your creditor. A lawsuit permits a creditor to collect the full amount you owe via force, such as through a wage garnishment order.

Thursday, November 28, 2002

Consumer Rights Involving Debt Collectors

If debts are not paid in a certain amount of time, debt collectors have the right to contact the debtor and take legal action to collect the debt. However, debtors have rights, too. Debt collectors cannot harass them, threaten them or otherwise act unfairly toward them to collect the debt, and debtors have the right to secure representation from an attorney regarding the debt.

Fair Debt Collection Practices Act

    The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from engaging in unfair, deceptive or manipulative practices in an attempt to collect a debt. For example, debt collectors may not threaten to have debtors arrested or call them in the middle of the night in an attempt to collect the debt. The FDCPA applies all personal debts, but it does not cover debts incurred while running a business.

Phone Calls and Contact

    Debt collectors may contact debtors only between the hours of 8 a.m. and 9 p.m. In addition, debtors can request in writing that debt collectors refrain from calling them at work and can demand, via a wrttien request, that they cease contact altogether. If a debtor takes this action, debt collectors cannot contact the debtor except to inform him of a lawsuit or other action taken against him to collect the debt.

Other People

    A debt collector must contact your attorney if you secure representation regarding a debt. Debt collectors also may contact others, such as your relatives and employers, to attempt to locate you. The debt collector must limit the conversation with these people to a request for contact information, such as your current address or phone number. The debt cannot be discussed with these people.

Deceptive Practices

    Debt collectors cannot lie to debtors in an attempt to collect a debt. For example, debt collectors cannot send you official-looking forms and claim they are legal documents when they are not, nor can they threaten to garnish your wages if it would be illegal to do so. Debt collectors also cannot threaten to sue you if they don't intend to do so.

How to Pay Off Credit Card Debt with Micropayments

How to Pay Off Credit Card Debt with Micropayments

A micropayment system can help you pay down your credit card debt faster. Most people pay their bill monthly, which allows more interest to accrue because companies compute that on an average daily balance. However, making several payments each month as money becomes available enables you to lower your average daily balance, thereby lowering interest. As you pay off accounts through this micropayment system, more money becomes available to accelerate your payoff plan.

Instructions

    1

    Create a budget, allocating the minimum payment due on each of your accounts. Be sure that you hold back money for paying regular bills as they come due. If you are depositing money into a savings account, be sure to include that in your budget. Even if you are in debt, it is wise to save money each month in an emergency fund.

    2

    Set up online bill pay for all your credit cards. This will save you money on postage and check printing, thereby providing more you can allocate to micropayments.

    3

    Pay your bills on time and as soon as possible, instead of piling up a stack of bills for your monthly or biweekly bill paying session. If you have extra money at this point, add it to one of your credit card payments.

    4

    Make a goal to save or earn a specific amount of extra money for weekly micropayments. Most people should be able to come up with at least $15 to $25 weekly in savings and/or extra income.

    5

    Focus on paying off one account at a time with weekly micropayments in addition to your minimum monthly balance due. If your goal is to pay off the card at the highest rate first, then that is where you will apply those payments.

    6

    Continue paying the initial minimum payment on this card until it is paid off, regardless of how much your minimum payment is reduced. When that account is paid in full, transfer the minimum payment you were making to the next credit card on your payoff plan and repeat the process.

How to do College Loan Consolidation

How to do College Loan Consolidation

College loan consolidation is a relatively simple process that may save you money and improve your credit at the same time. By consolidating your student loans, you can free up more of your monthly income to pay off extra principal each month. Consolidating these loans will also improve your credit score.

Instructions

College Loan Consolidation

    1

    Learn the basic requirements for consolidating your student loan debt. You must have at least $20,000 in federal loans for federal loan consolidation. These must all be in your name; you can no longer consolidate loans with a spouse. Private loans can not be consolidated under federal consolidation; those are separate.

    2

    Consider your current enrollment status. You can not be in school more than half-time for loans you are consolidating. If your current enrollment is not paid for by loans you're consolidating, you're fine.

    3

    Don't worry about your income, as current employment is not necessary to qualify for consolidation. You don't need collateral or a co-signor, either.

    4

    Check current student loan consolidation interest rates and compare them to the rates you are currently paying. If there is a large discrepancy between them, this may affect your decision. After all, student loans at 2 percent interest are better than a consolidated loan at 6 percent.

    5

    Apply online at a banking institution that is part of the Family Federal Education Loan Program (FFELP) or otherwise authorized to consolidate student debt. Most debt consolidating services are through private banking institutions.

Wednesday, November 27, 2002

Wage Garnishment Procedures

Wage Garnishment Procedures

One of the most dreaded debt collection procedures is wage garnishment. In wage garnishment, your employer deducts a previously agreed-upon portion of your wages and pays it to the requesting creditor. Wage garnishment procedures must be followed precisely for the order to be valid. If you suspect improper wage garnishment procedures, you can contest them in a court of law.

Beginning Garnishment

    Your creditor first seeks a court order, or injunction, to garnish your wages. The creditor provides a detailed summary of the debt you owe, any payments you have made toward the debt and the payment dates. The court uses this information to decide whether garnishment may be appropriate. According to Fair Debt Collection, no more than 25% of your total wages or 30 times the federal minimum hourly wage can be taken from each paycheck. Your employer will receive a letter detailing the intent to garnish your wages should no action be taken on your part.

    If the garnishment motion is successful, you will receive a notice in the mail detailing your debt, how much of your wage will be garnished plus any exempt funds and what happens should you fail to make payment arrangements.

Serving the Notice

    If you fail to make payment arrangements within 30 days, your local sheriff will deliver the wage garnishment notice to your employer, who will then send you paperwork informing you that a garnishment order has taken effect. Your employer must give you these notices before taking money out of your paycheck. Among the garnishment notices should be a piece of paperwork entitled "Request for Hearing" or a similar phrase. From here, you can contest the amount being taken from your check.

Taking Wages

    Your employer notifies the payroll department of your garnishment. After taking out state, federal and local taxes in your paycheck, the payroll department writes a check for the amount specified in the garnishment notice to the debtor and issues you the remainder. The garnishment continues until the debt has been paid in full. Keep records of all check stubs and tally them against the original debt to ensure that your wages are not garnished beyond the amount you owe.

Non-Profit Debt Consolidation Companies

Non-Profit Debt Consolidation Companies

If you're feeling overwhelmed by bills, you may be considering using the services of a non-profit debt consolidation company. You will have no trouble finding a company to handle the process for you, but evaluating all of the companies and determining which is the best for your situation will take some time. Before you sign anything, there are some things you should know about non-profit debt consolidation.

Function

    Non-profit debt consolidation companies negotiate with your creditors to lower the interest rates and fees on your accounts or accept a lower amount for payment than what is currently due. Consolidation covers unsecured debt, which is debt that is not connected to a product or property. Unsecured debt includes medical and credit card bills. Secured debt, which applies to mortgages and auto loans, cannot be consolidated.
    After consolidation, you make one payment to the consolidation company to cover all of your consolidated accounts. The new payment will usually be lower than the combined amounts you paid prior to consolidating your debts. The debt consolidation company then pays each of your creditors.

Features

    A credit counselor will meet with you, evaluate your debts and give you an estimate of how much money you will be able to save by consolidating your debts. You will also be given advice on debt management, finances and budgeting, as part of the process is not only reducing your current debt but providing education on how you can better manage your money in the future.

Considerations

    Even though you are working with a non-profit company, you will still be required to pay fees to begin the process and may be charged a monthly handling fee. In some cases, the set up fee will equal a monthly payment. You will want to speak to several companies and ask how much each charges for set-up and monthly fees. Find out how long the companies estimate it will take you to pay your bills and ask what will happen if you are unable to make a monthly payment.

Misconceptions

    Your creditors may consider an account to be in collections even if they have agreed to accept a lesser amount as payment. This will be reported negatively to the credit reporting agencies and will affect your ability to be approved for credit in the future.
    Good credit counselors can not only negotiate to reduce the amount you will have to pay, but can convince your creditors to issue a positive report as long as they receive payments. Make sure that any company you are considering can successfully negotiate a positive credit report before you decide to work with them. Your goal is to pay off your debt and increase your credit score, which can't be done if debt consolidation will damage your score.

Warning

    Ask to see the non-profit company's 501(c)(3) certificate. Some for-profit companies claim to be non-profit in order to draw customers. A legitimate non-profit organization will have this certificate and will be able to show it to you.
    Check with the Better Business Bureau before signing on with a non-profit debt consolidation company. If you find that consumers are complaining that their debt is not decreasing due to the percentage of the payment that a consolidation company is keeping, steer clear of this company. Some companies fail to make payments to creditors on time, damaging their clients' credit. Because your credit history is at risk, you will want to choose wisely when considering non-profit debt consolidation.

Who Pays Debts When You Die?

Who Pays Debts When You Die?

Dying while in debt is a common occurrence. Many people remain in debt their entire lives. Yet when you die, your family members do not inherit your debt like they inherit your assets. If a debt also belongs to someone else in addition to you, that person is responsible for payment. Some family members prefer to pay the outstanding debt of the deceased because they feel it is the right thing to do, yet rarely are they legally required to do so.

The Facts

    Responsibility for payment of a debt is restricted to the person who originally signed for the account. If each of your debts is in your name only, no one but you should suffer the consequences for lack of payment. Upon your death, your family may opt to distribute your assets to your creditors--but they are not required to. If your family does not use your assets to pay off your debts, creditors can opt to file a lawsuit against your estate to recover any money owed. Creditors must adhere to state-regulated time limits when attempting to collect money from your estate.

Joint Accounts

    Joint accounts are accounts owned by two or more people. Each of the individuals listed on the account must have signed paperwork agreeing to a joint account. If you die, responsibility for debts accrued under joint accounts passes to the other person listed on the account. Each account owner is individually responsible for the debt in its entirety. This allows the creditor to pursue collection activity for the full debt from either party if the other party dies or is unable to make payments.

Authorized Users

    Some accounts, such as credit card accounts, give you the option to add authorized users. An authorized user is someone you permit to make purchases and accrue debt in your name. An authorized user, however, is not a joint account holder. When you die, responsibility for payment of the debt is not transferred to the authorized user since he is not the owner of the account. Even if all of the debt was accrued by the authorized user, he is still not legally responsible for payment of the debt once the account holder dies.

Child Support

    Minor children who are entitled to child support from a deceased parent will still be eligible to receive payments. Those payments, however, will be awarded to the child in the form of Social Security benefits. The U.S. government provides Social Security to children of a deceased or incarcerated parent until the child reaches the age of 18 or marries. Your children are only eligible for current government support when you die. Although the custodial parent may file against your estate to collect back child support, any amount beyond what is collected in the suit will be waived.

Warning

    Although people who do not own a debt are not legally obligated to pay it, unscrupulous creditors may still attempt to collect from your family members if you die. Collection activities may range from lies and harassment to illegal practices such as changing the name on an overdue accounts to that of your spouse or next of kin. Any family in this situation should immediately report the offending creditor to the Federal Trade Commission.

How Do I Get Rid of Over 100K in Credit Card Debt?

How Do I Get Rid of Over 100K in Credit Card Debt?

You'll need an aggressive plan to get rid of $100,000 in credit card debt. The mounting finance charges will make it virtually impossible to pay off the cards by making the minimum payment each month. At an overall interest rate of 18 percent, a $100,000 debt would increase by more than $18,000 over the course of a year.

Instructions

    1

    Get a home equity loan. Not everyone will qualify for a $100,000 loan, but you should explore this option if you're a homeowner. According to figures cited by the Federal Trade Commission, homeowners typically can borrow up to 85 percent of the appraised value of their homes minus the amount due on the first mortgage. That means you'll need a minimum of $118,000 worth of equity in your home to qualify. Contact your bank or mortgage company to inquire about home equity loans.

    2

    Enter into debt settlement to significantly reduce the balance on the credit card debt. Debt settlement allows you to pay off your credit cards by offering less than the full amount owed. According to The New York Times, credit card companies sometimes settle delinquent accounts for about half the amount owed -- or even less. Debt settlement generally becomes possible after you have fallen four to six months behind on your payments, and your credit card company is preparing to sell your account to a debt collector for pennies on the dollar. You can hire a debt settlement company to negotiate for you, but the Federal Trade Commission says you should do it yourself to save money on fees and avoid scams.

    3

    Sell some of your assets to pay down the debt. Cash in your 401K and other retirement accounts. Sell anything you can to raise the money.

    4

    File for bankruptcy. Personal bankruptcy might be your only option if you can't raise the cash needed to pay off $100,000 in credit card debt. See a bankruptcy attorney about the two types of personal bankruptcy -- Chapter 7 and Chapter 13. Chapter 7 is the simpler form and you could be rid of your debts in just months. Chapter 13 takes longer -- up to five years.

How to Use Superannuation to Pay Debts

Superannuation funds (more commonly called pension funds in the United States) are one of the most tax-advantaged retirement accounts, but they're available from certain companies only. In most cases, you're not allowed to withdraw from a superannuation without paying a penalty in taxes and other fees. Company-managed pension funds are subject to the rules of the company that owns them. Contact your company's human resources department about whether there are any hardship exceptions for early withdrawal from the pension fund.

Instructions

    1

    Contact your company's human resources department and ask about early withdrawal penalties for money in your superannuation fund. Mention that you need to withdraw the money early to pay off some of your debts to preserve your financial security. In many cases, companies offer hardship exceptions to early withdrawals. If your union manages your pension, you may have to contact the human resources department of that organization for more information about using superannuation funds to pay down your debts.

    2

    Ask your pension plan administrator if you're allowed to borrow money from your pension to pay down your debts. In some cases, your company may be willing to lend you money in return for withdrawing a commensurate amount from your pension. You will be essentially withdrawing money from your pension early without needing to pay any penalties or running afoul of any company rules regarding early use of pension funds.

    3

    Check to see whether your pension qualifies for an exception by the IRS. In many cases, if you retire before age 55 and gain access to a pension plan from your company early, you may be allowed to withdraw from your pension without paying any additional tax penalties. In addition, if you are withdrawing the money because you have become totally disabled, you may be able to waive the tax penalties for doing so.

    4

    Withdraw money from the pension fund and pay all relevant fees. All pension funds are tax-advantaged by the IRS, so you will also pay an additional 10 percent federal tax on the withdrawal and it will count towards your gross income for the year for the purposes of calculating income taxes.

    5

    Spend the money on paying down your debts. You may need to provide a record of this payment to your company to avoid consequences for misusing money provided for hardship purposes.

How to Fix Bad Credit in Canada

How to Fix Bad Credit in Canada

Being laid off is difficult, and so is a debilitating illness. Whatever problem you may have, it could cause you to pay bills late, if at all, and that will have a devastating effect on your credit score. Most Canadian lenders will look at your credit score to see if you pay your bills on time before granting you credit. So a bad score will dictate whether you get the loan or not.

Instructions

    1

    Get credit reports from Equifax Canada Inc. and Trans Union of Canada, the two major credit bureaus in Canada. The majority of creditors, both Canadian and international, will send information to them, so you will need to get information from both. Through the Residential Tenancies Act, you may receive your credit report from the two bureaus free once each year, so that gives you the opportunity to review your credit each year.

    2

    Go over the reports with a fine-toothed comb. Make sure the bureaus' records show you have paid your accounts on time. Because so much information is sent to the credit bureaus, negative information about someone else can appear on your report, as well as accounts that have gone into collection that are not true. That error alone can make the difference between you getting credit and being turned down, so be sure that you contact the credit bureau by disputing those types of errors on the form available on each report.

    3

    Pay off as many of your accounts as you can. Try to get your credit cards to raise your limit because applying for new ones will raise a red flag with the bureaus. Also, try to get your balances on your credit card below a third of your credit limit, a characteristic of those with great credit.

    4

    Make sure your bills are paid on time. Try paying them the day they arrive as opposed to when they are due. That will impress the credit bureaus and they may increase you credit score. Also, because of high interest rates, you might consider paying off your credit cards. Doing so will be viewed favorably by the credit reporting bureaus.

Colorado State Laws on Collecting Debts

Debt collectors are bound by the law, which in Colorado is defined by the Fair Debt Collection Practices Act. The act sets aside rules for what creditors and debt collectors can do in the attempt to get money from you. It applies even to out-of-state companies trying to collect from Colorado residents.

Finding You

    If a debt collector tries to find you through other people, she cannot tell anyone she interviews that you owe a debt or send them letters with any language or symbols that would indicate she works for a debt collector. She can only identify her employer if the interviewee asks her to do so. She can only call each individual once, unless the people she talks to ask her to call back, or she has grounds for believing they lied.

Contact

    A debt collector isn't allowed to call you at an inconvenient time --- before 8 a.m. or after 9 p.m., for instance --- unless you or your attorney invites him to do so. If the collector is aware you have an attorney representing you, he must direct his communications to her, unless she authorizes the collector to talk to you. A debt collector must stop calling once you request it, unless it's to inform you the agency is taking further legal steps to collect.

Banned Action

    Under Colorado law, a debt collector cannot use threats, obscene or abusive language when she talks to you. She cannot publicize or threaten to publicize your debts to humiliate you into paying, nor can she threaten any action she can't legally take. Threatening jail time when that's not a penalty for your debt, for instance, wouldn't be legal. Claiming or implying she's an attorney when she isn't, or that she represents law enforcement or any other government agency, is also against Colorado law.

Penalties

    Colorado can levy fines on debt collectors who break the law, and you have the option to sue them. If you win, you can collect any damages you've suffered because of the collector's actions; in addition, the judge can assess damages of up to $1,000 (as of 2011). The judge's decision should consider how frequently the collector broke the law and whether it was deliberate. If the collector can show he didn't break the law intentionally or through gross negligence, he can't be held liable.

Tuesday, November 26, 2002

What Happens If I Don't Pay My HELOC Before the Call Date?

A home equity line of credit, or HELOC, is an alternative source of credit for homeowners. The bank extends a line of credit based on the fair market value of the residential property and the owner's credit score. A HELOC serves as a revolving credit line without many of the rules that credit cards or loans carry. The interest rate on a HELOC is usually substantially lower than that on a credit card.

Features

    A bank offers a HELOC based on a percentage of a home's appraised value. Using a predetermined calculation of value based on property appraisal and creditworthiness, the bank uses the customer's house as collateral against the debt. The bank retains the right to freeze or drastically reduce the amount of available credit if it believes the property value of the home has severely declined.

Significance

    The bank may send a "call notice" to the customer requiring him to pay down the HELOC or pay it in full by a certain date. If the line of credit is called, the homeowner must pay any outstanding debt, in full, by the due date. Often, drastic calls for HELOC repayment are due to a sharp decline in property value, which a homeowner may be able to dispute. Banks have been known to freeze or call for payment upon learning of a change in the owner's financial circumstances.

Work With the Lender

    When a homeowner receives a call notice for a large sum and knows in advance that payment by the due date will be impossible, he should contact the lender as soon as possible. Learn the bank's rationale behind asking for the payment before deciding on the next steps to take. A homeowner may want to dispute a bank appraisal that drastically reduces the estimated value of his home. It may be possible to set up a payment arrangement or extend the due date to avoid further action.

Penalties and Default

    Late payments on a HELOC can result in fees, a reduced line of credit and a negative impact on the borrower's credit score. Because home equity lines are secured by the customer's house, the bank has the legal option to pursue a lien against the property and a judgment against the borrower. If the home itself has very little equity, lenders may enlist the help of a collection agency before pursuing a judgment in court. The borrower should make every attempt to avoid default, as a successful judgment against him from the bank can result in garnished wages and a significant decline in credit score.

How to Resolve Credit Card Debt

How to Resolve Credit Card Debt

Despite your best efforts, it's not always easy to get rid of debt. High interest rates and little income can impact your ability to reduce your debts. What's more, continuing to use credit cards or repeatedly applying for new lines of credit can hinder any attempts to live debt-free. Fortunately, debt doesn't have to enslave you forever. There are practical and effective ways to resolve debt and alleviate financial stress.

Instructions

    1

    Increase monthly payments to reduce your debt faster. Minimum payments rarely put a dent in your overall credit card balance. Rather, they only pay off the monthly interest charges. If your credit card company asks for a $25 minimum each month, aim to pay $50 or $75 a month.

    2

    Get rid of credit cards to eliminate temptation. Do not contact credit card companies to cancel the credit card since this can reduce your length of credit history and bring down your credit score. Instead, take the credit cards out of your wallet and only leave the house with cash. If necessary, use scissors to cut the cards and throw them away.

    3

    Ask for a lower credit card rate. Paying zero percent interest or a low rate means a greater portion of your payments will go to reducing the principal balance. Call your credit card company if you're in good standing (good payment record) and request a rate reduction. If they grant your request, continue to make higher payments to resolve debt faster.

    4

    Borrow from cash sources. Taking money from retirement accounts, personal savings and home equity can quickly get rid of outstanding credit card balances. You'll have to repay money borrowed from retirement accounts and home equity, but these loans typically have low, affordable interest rates. This benefits individuals with high interest credit cards.

    5

    Re-evaluate your monthly spending. Excessive spending on unnecessary items can take a bite out of your disposable income and keep you in debt. Assess your monthly expenses to see where you're able to reduce spending. Eat out less, entertain less and shop less. Use this extra money to pay off credit card balances. An extra $200 a month will pay off a $2,000 credit card balance in about ten months.

    6

    Take a proactive approach. If you really don't have any extra money to pay off debt, think creatively and consider ways to bring in extra income. Turn your talents or skills into a money making business. Start tutoring neighborhood kids, teach music lessons, sell personal items, begin a lawn care service or get a part-time job.

Monday, November 25, 2002

What Is a "B" Credit Rating?

What Is a

Within a credit score, an additional letter grade is often assigned to further identify a customer's trustworthiness when it comes to credit. These ratings resemble letter grades received in school (A, B, C and D) with "A" being the highest grade and "D" being the lowest.

Significance

    Credit ratings are based on a customer's credit score to further categorize credit valuation. The most widely accepted credit rating model is FICO (Fair Isaac Corp.) which calculates a credit score number from 300 to 850 to an individual's history.

Function

    Credit ratings (A, B, C, D) give a quick letter grade to an individual's credit history. This allows financial institutions to determine how likely an individual will pay money back if given a loan, as well as employers to verify how responsible their employees are.

Letter Grade Breakdowns

    FICO designates letter grades to credit score numbers in the following way: "A" rating is 720+ (excellent), "B" rating is 650+ (good), "C" rating is 575+ (average), and below 575 is a "D" rating (poor). Different lenders may vary from these standard four credit ratings (i.e., A+, C-).

Consequences

    Credit ratings which a financial lender deems to be "low" (this definition varies from lender to lender) can affect an individual's ability to get a mortgage, a loan for a car or other large purchase, a low interest rate on credit cards, insurance rates and, in some cases, employment and housing.

Calculation of Credit Rating

    The exact calculation for how a credit rating is determined is not disclosed by the institutions that create them (i.e., FICO). However, the following factors have been identified as playing key roles in the calculation: past payment history, debt owed, length of credit history, any newly obtained credit and types of credit used.

Questions to Ask About Equity Lines of Credit

Questions to Ask About Equity Lines of Credit

Home equity lines of credit provide you with a revolving credit capability. In exchange for certain fees and interest payments, you can can repeatedly draw up to the maximum amount of the credit line, pay it down and draw again. Taking out an equity line of credit with your house as collateral for the debt can facilitate new business ventures or allow you to pay off high interest credit card debt with low interest debt. To do this, you need to open an equity line of credit with terms that meet your specific needs.

Rates and Fees?

    Ask your lender to explain details of interest rate and fees. Some lenders charge closing costs. Others offer a "no fee" closing. Some lenders renew the line of credit periodically and charge another fee at that time. As a Federal Reserve Board article on the subject of equity lines of credit points out, the APR, or annual percentage rate that your lender quotes you for a home equity line of credit does not account for fees. Get a more realistic understanding of your actual interest rate including fees and closing costs with a real estate calculator. Access a number of useful rate calculators at the Mortgage-Calc website. If you plan to draw most of the money from the credit line for the greater part of the loan period, you will do better with a line of credit with a low interest rate and higher fees; if you plan to draw less often and for smaller amounts, you will do better with a credit line with lower fees and a higher interest rate. Some lenders will require you to draw a certain percentage of the line of credit when you open it and not to repay it for some period of time.

Fixed or Variable?

    Does the line of credit have a fixed interest rate or a variable rate? As of September, 2010, the U.S. prime interest rate (Prime Rate), a basic indicator of secondary rates, such as home equity loan interest rates, has dropped to a more than fifty-year low of 3.25 percent. During that period, however, the Prime Rate climbed above 12 percent four separate times, and in 1981 peaked at nearly 21 percent. A variable home equity line of credit rate may pose considerable rate-increase dangers. At 3.25 percent, the current rate, you will pay about $135 in interest each month. At 12 percent, you would pay $500 each month.

What Factors Affect Your Line of Credit?

    Some lenders require you to repay the line of credit once each year and not to withdraw again for 30 days. This poses no problem if you use the line of credit to fund occasional short-term investments, but if you will use it to fund a long-term investment or an investment with an uncertain payoff date, you could run the risk of a default. Ask your lender what could cause a reduction in your credit line or a freeze (basically a cancellation of the line of credit). Some lenders include clauses that allow them to freeze or reduce your line of credit if your financial statements weaken or the house loses value.

Bankruptcy Court & Credit Counseling

Bankruptcy discharges a person's debts or forces creditors to accept a court-approved repayment plan, depending on the type of filing, according to the Federal Trade Commission (FTC). A 2005 law called the Bankruptcy Abuse Prevention and Consumer Protection Act imposed a counseling requirement on consumers. They must get special credit counseling before they can file a bankruptcy case.

Description

    Pre-bankruptcy credit counseling is done through a government-approved organization, the FTC explains. The session includes a budgeting discussion, information on bankruptcy alternatives and an overall evaluation of the consumer's financial situation. It may be held in a credit counselor's office, online or over the telephone.

Time Frame

    A typical pre-bankruptcy credit counseling session runs between 60 and 90 minutes. Counseling must be completed 180 days before a person files for bankruptcy. Consumers can proceed with a case after that time frame or proceed with another option discussed in the session, like a tight budget plan.

Cost

    The FTC states that most approved credit counseling sessions cost about $50. The provider must disclose the fee up front, and it must be waived for people who cannot afford to pay.

Providers

    Bankruptcy courts require prospective filers to use approved credit counseling firms. The U. S. Trustee Program maintains a searchable database for all 50 states and the District of Columbia (see Resources), including firms that hold sessions in languages other than English. Some of the providers only provide telephone and online sessions.

Considerations

    The law that requires pre-bankruptcy credit counseling also forces people to go through debt education once their cases are discharged. Classes usually run about two hours, according to the FTC, and they cover topics such as money management and responsible credit use. The information is meant to help consumers avoid repeating the problems that led them to bankruptcy. Debt education fees run between $50 and $100, although the FTC advises that payment is waived for people who cannot afford it.

Alternatives

    Bankruptcy is reported by the credit bureaus for ten years. Consumers with this information on their reports often have a hard time opening new accounts, especially in the first years after their filing. Some opt for plans that have a shorter impact, like self-budgeting, negotiating with creditors or entering into formal debt management plans through credit counseling firms. Late payments hurt a person's credit reports, but they are erased sooner than a bankruptcy. The bureaus only list them for seven years.

How to Negotiate to Settle a Hospital Bill

Medical bills can be devastating, especially for the uninsured. Treatment for a serious injury or illness can easily top $10,000. One point in your favor is that medical debt is unsecured, meaning there is room for negotiation. Unsecured debts, which also include credit cards, are not backed by collateral. Secured debts, such as mortgage loans and automobile loans, allow the lender to take the property if you cannot pay. Medical bills can be settled for less than the full amount owed, and you can handle the negotiations yourself.

Instructions

    1

    Offer to settle as soon after your illness or treatment as possible. Some hospitals and physicians will offer to discount your bill even before it becomes past due. Health.com reports you may receive a 20 percent discount just for asking.

    2

    Contact the billing department after receiving your statement and explain you simply cannot afford to pay. Offer to provide financial statements proving you do not have the money. Ask for a 50 percent discount with payments in installments over several months. Asking for such a large discount may seem bold, but it gives you room to negotiate.

    3

    End your conversation in a polite way if the representative balks at 50 percent. Call back weekly to continue negotiations until you have a deal. Yield a bit each time in your negotiations, but do not go below 20 percent. Keep offering to provide documentation of your financial situation such as a copy of your credit report.

    4

    Take a similar strategy if you are negotiating an old medical debt that has gone to a collection agency. The debt collectors are likely to be much more difficult to deal with; therefore, it may be helpful to negotiate with them only in writing. If necessary, get contact information for the debt collector from your credit report. A company name and address will appear on your report alongside the delinquent account. View and print your report from AnnualCreditReport.com, the only website the Federal Trade Commission (FTC) has authorized to offer free reports under the Fair Credit Reporting Act

    5

    Write a letter to the debt collector. Indicate that you noticed an old medical debt on your credit report you would like to resolve, though your finances are limited. Take a tougher stance now that the bill has been sent to a collection agency. Delinquent unsecured debts generally are settled for 20 to 70 percent of the balance. At this point, your goal should be to pay as little as possible. In your letter, offer to settle the bill for 20 percent of the balance in a lump sum or 50 percent with installments.

    6

    Continue the discussion by mail --- or telephone, if you prefer --- until you have a deal. Be patient. It is unlikely the debt collector will make his best offer right away. It may take several months before you receive the offer you want.

Saturday, November 23, 2002

Tennessee Credit Freeze Laws

Tennessee Credit Freeze Laws

A credit freeze prevents release of information on a person's credit report without his authorization, and is an action people may take to prevent or respond to identity theft. A credit freeze requires a lender or creditor to contact an applicant to verify his information prior to granting credit. Failure to verify the applicant's identity results in denial of credit. In 2007, the state of Tennessee signed the Credit Security Act to allow residents to freeze their credit files and prevent identity thieves from using their information to commit fraud. The bill became law January 1, 2008. Tennessee joins 47 states that currently have credit freeze laws in place (as of July 2010).

Provisions

    A credit or security freeze allows Tennesseans to block access to their credit files, making their credit files inaccessible should an identity thief attempt to open a fraudulent account. Under the law, residents are allowed to lift a credit freeze for 15 minutes to make a large purchase, such as a car, open a new credit account or buy insurance. Social Security numbers are not allowed to be publicly displayed by business or non-profit agencies nor printed on membership cards.

Requesting a Credit Freeze

    Consumers may submit a written request to the credit reporting agency (CRA) via certified mail or electronically via a secure method. A freeze can be placed on a credit report free of charge to victims of identity theft if they provide a copy of a police report. All others are charged a $7.50 set-up fee and $5.00 for removal of the freeze. There is no fee to temporarily lift the freeze.

Duration

    The freeze goes into effect three business days after the CRA receives the request and remains permanent until the consumer requests removal. The CRA sends a confirmation letter containing a PIN to the consumer no more than 10 business days after the freeze becomes effective. Requests for a temporary lift are done by the method determined by the CRA, which can be either phone, fax or online. Consumers must provide the proper identifying information, PIN and the time their credit report is to be accessible. By law the freeze must be lifted within 15 minutes via secure electronic method if the request is received between 6:00 a.m. and 9:30 p.m.

Access

    Consumers may still get a copy of their credit report even if it is frozen. Information on frozen credit reports may still be released to government agencies that have a court order or subpoena or are collecting child support or income taxes. Collection agencies may also get access to review and collect on an account.

Collection Agent Tips

When you fall behind on your debts, you may soon start to be contacted by a collection agent. While there is nothing wrong with being called by a debt collector, it can be a frustrating experience. If you find yourself in this situation, you need to keep a few tips in mind.

Communicating With the Agent

    When you first are to receive calls or letters from a debt collector, it is generally a good idea to try to communicate with him. Many people make the mistake of avoiding collection agents, which usually leads to even bigger problems like a lawsuit. Try to talk to the collections agent so that you can work out a deal. In some cases, it may be a simple mistake that you can resolve and you might not even owe the debt.

Stopping the Calls

    If you are being constantly called by a debt collector, you may feel like stopping the calls at some point. One option that you can purse to stop the calls is to hire a lawyer. Once the lawyer is hired, you can direct all debt collectors to contact him instead of you. At that point, the collection agent will not be able to contact you any longer. Another way that you can get the agent to stop calling is to request contact in writing.

Negotiating a Deal

    When a debt collector contacts you, you may have the option to negotiate a settlement. Many debt collection agencies only pay pennies on the dollar for your account and they may be willing to take much less than you actually owe. When you talk to the debt collector, you can ask if he would be willing to take a lump sum settlement. If so, you can make a one-time payment and the debt collector will close out your account.

Get Proof

    When you come to an arrangement with a collections agent, it is important that you get some kind of proof. This could come in the form of a letter from the collections agency. Many people have negotiated deals with debt collectors only to find out that their accounts were not closed out as agreed upon. If you get everything in writing, you can avoid the potential problems that can come with this type of negotiation. Ask for a signed letter from the debt collector before making your payment.

Friday, November 22, 2002

Does Making Late Credit Card Payments Ruin Your Credit Score?

Does Making Late Credit Card Payments Ruin Your Credit Score?

Banks and credit card companies notify the major credit reporting bureaus each time a debtor misses a payment on a credit card. Missing credit card payments may not ruin a credit score outright, but will make it difficult to maintain a high score. Credit scores range from 300 to 850, and scores 720 or higher are considered superb. At that level people rarely miss a credit card payment or pay late. This helps them qualify for easy approval on most loans along with the lowest rates.

Considerations

    People who are near the bottom end of the credit scoring scale tend to miss payments on credit cards and other loans. In addition to hurting credit, missing credit card payments hurts in other ways. The bank or card company usually adds an expensive late fee, and in some situations missing a payment could result in an increase in the interest rate--up to 35 percent, according to finance portal Bills.com. Late fees range from $15 to $50, with card companies charging the fee for each missed payment.

Effects

    Multiple delinquencies can ruin credit scores. Some people battling financial problems may miss two or three credit card payments in a row. This leads to the debtor's credit report showing delinquencies of 30 days, 60 days, 90 days or even more. Each delinquency hurts credit ratings, and is a tip off to other creditors that the debtor is struggling with his finances.

Scores

    It's impossible for anyone to say exactly how late credit card payments will affect a person's score or how many late payments are necessary to ruin credit. The FICO computer scoring model for credit scores does not feature pre-determined penalties. For example, credit scores are not automatically docked, say, one point for each missed credit card payment. Damage to scores depends on a person's specific credit profile, and there is no guarantee a score will drop after just one missed payment. People with high credit scores have the most to lose if they miss a credit card payment. CNN reports that someone with a credit score in the low 800s could lose 100 points off a credit score by missing a single credit card payment. People with low credit scores already have bad credit, meaning they can't do much more to ruin their credit or cause their score to drop.

Solutions

    People who anticipate missing credit card payments should contact their bank or card company. The company may offer special hardship plans that could reduce--or even suspend--payments temporarily while the debtor works through a hardship such as a job loss or illness.

Definition of Conduit Debt

Definition of Conduit Debt

Conduit debt is a bond marketed by public entities such as states, counties and cities on behalf of a private entity. Common issuers of conduit debt include businesses, hospitals and educational institutions. The public entity does not have any obligation to repay--the debt is assumed by the private issuer.

Tax Treatment

    Normally, conduit obligation bonds are taxed like municipal bonds: Interest received on these bonds is free of federal income tax. This makes them attractive to investors in higher tax brackets.

Alternative Minimum Tax Brackets

    However, certain conduit debt issues, known as private activity bonds, are subject to federal income taxation under alternative minimum tax rules,. Investors with very high incomes might have to calculate interest received from these bonds and pay a tax of up to 28 percent.

Private Activity Bond

    IRS Publication 4078 governs the tax treatment of private activity bonds.

What Gives Junk Debt Buyers the Right to Report to Credit Bureaus?

Companies who purchase bad or delinquent consumer debt from credit card companies acquire the same legal rights under the terms of the credit card agreement as the original card company. Since the junk debt buyer now owns the account, it has the status of any other creditor and can report account information to the various credit bureaus.

Third-Party Purchasers Of Bad Debt

    Credit card companies will frequently sell their non-performing or delinquent credit card accounts to businesses that specialize in purchasing bad debt. Most of the delinquent accounts sold have aged considerably (past due status 180 days or greater). The card companies write off the bad debt and the company that acquires the account frequently pays only pennies on the dollar. It is important to note that although the third-party purchaser may have paid five cents on the dollar to acquire the account, the debtor is still liable for the full amount of the default balance.

Assignment of Contract Rights

    Under principles of contract law, an assignor is one who transfers his rights and obligations under a contract to a third party who is called the assignee. The assignee stands in the shoes of the assignor and acquires all his rights and obligations under the contract. Since the assignee has ownership rights in the credit card account and is now entitled to receive payment from the debtor, it can report the credit status of the account to credit bureaus in much the same manner as the original creditor.

Card Agreement

    When consumers open a new revolving credit account, they sign a card agreement with the bank or lending institution. These agreements are characterized as "adhesion contracts" because of the unequal bargaining power between the consumer and the card company. The terms and conditions of the credit card agreement can be onerous and are drafted in favor of the credit card company. The agreement as drafted is offered to the consumer on a take-it-or-leave-it basis.

Debtor's Consent Not Required

    One of the standard provisions contained in most credit card agreements is a clause that allows the card company to assign or sell the account to a third party. The consumer agrees to the assignment and no notice to the consumer is required in the event the account is assigned to a third party.

Fair Credit Reporting Act (FCRA)

    Credit reporting bureaus collect and maintain consumer credit information supplied by lenders. Under the provisions of the Fair Credit Reporting Act (FCRA), negative credit information about a consumer (delinquencies, late payments) can remain on the credit report for no more than 7 years. Bankruptcy information remains for 10 years. The 7-year FCRA clock commences on the date the delinquency was first reported by the original creditor; the clock does not get reset every time an account is assigned or sold to a bad-debt purchaser.

How to Get Rid of a Current Mortgage

How to Get Rid of a Current Mortgage

Aggressively trying to get rid of your mortgage while the payments are still current gives you some flexibility. Without the pressure of a looming foreclosure you have time to consider all of your options, including voluntarily surrendering the house to your bank or mortgage company. The good thing is that you don't have to be behind in your payments to talk with your mortgage company about a solution.

Instructions

    1

    Sell your house. This is obviously the best way to get rid of your mortgage, but go on to the next step if a sluggish real estate market or some other reason prevents this option.

    2

    Ask your lender or mortgage company to consider a deed in lieu of foreclosure. This strategy, which is also called a voluntary foreclosure, allows you to surrender your house to your bank or mortgage company. The process is simple although there is a lot of paperwork involved. The bank agrees to take complete ownership of the house and mortgage and you get nothing. The bank also relieves you of any further responsibility for paying the mortgage.

    3

    Ask your lender for permission to engage in a so-called short sale. Short sales allow you to sell your home for less than what you owe on the mortgage. It's a viable sales strategy for homeowners whose property has lost value because of a recession or other reasons. Homeowners in this situation are said to be "under water" on their mortgage, making it sometimes impossible to sell their homes. In a short sale lenders have the option of waiving any remaining balance on the mortgage, allowing you to freely walk away. Or the lender can come after you for the deficiency balance.

How to Report Payments to a Credit Bureau

How to Report Payments to a Credit Bureau

Credit-reporting agencies track data shared by creditors that define a company's experience with a consumer. But creditors are not required to report information, and in some instances cannot. Creditors must subscribe to credit bureau services to report payment histories, according to Experian. In addition, some states prohibit some types of payments---including utilities, cellular services or rental payments, for example. You can contact your creditors and each credit bureau to request timely reporting.

Instructions

    1

    Order your credit reports. Contact the major reporting agencies---Equifax, Experian and TransUnion---to request a copy of your credit report. You may be eligible to receive a free report by visiting annualcreditreport.com or contacting each agency directly. Otherwise, credit reports typically cost a nominal fee. See the Resource section for links to each bureau.

    2

    Review your credit reports. Once you receive each report, carefully review and compare each account. You may find that your payment history has been updated. If not, take note of each account you would like to report.

    3

    Contact each creditor. Contact your creditors via telephone and request that they begin reporting your account payments immediately. Inform the representative you will follow the discussion with a confirmation letter. Draft a letter to each creditor that includes the following information: a copy of the credit bureau account reporting, your contact information, your request for immediate reporting and your signature.

    4

    Contact the credit bureaus to request an update to your file. Provide a letter requesting the bureau add the accounts in question. Provide proof of your last 12 months of payment history. For example, provide copies of canceled checks for your rental or mortgage payments.

    5

    Monitor your credit reports. Continue reviewing your credit reports for the next three to six months. Confirm the presence of your updated account information.

Thursday, November 21, 2002

What Is Fiscal Consolidation?

What Is Fiscal Consolidation?

Wednesday, November 20, 2002

Can a Debt Management Program Stop Wage Garnishment?

Sometimes, creditors will attempt to pursue the collection of a debt through methods more aggressive than simply calling or writing letters. In some states, a creditor is allowed to garnish a person's wages or seize his bank account. Some debtors may attempt to get out of debt through the use of a debt management program. Use of this program, however, will not guarantee that a person can stop the garnishment.

Debt Collection

    When a creditor seeks the collection of a debt, he will often choose to sue the debtor in court, which is his right, so long as he files the suit before the statute of limitations for the collection of debt in his state has not expired. If the creditor wins the case, he may have the legal option of collecting the money owed him by garnishing the person's wages. A garnishment can only be stopped in court.

Wage Garnishment

    All wage garnishments must be performed with the express permission of a judge. Extrajudicial garnishments -- garnishments performed outside of the court system -- are illegal. If a person has a garnishment served on his employer, the employer must abide by the garnishment. The only way that the garnishment can be overturned is if the creditor withdraws or a judge orders that the garnishment cannot stand.

Debt Management

    Many people choose to attempt to get their debt under control through debt management programs. These range from programs that offer simple counseling on managing debt to companies that offer legal services and negotiate with creditors in an attempt to get the debt burden lowered. A debt management company cannot stop a current garnishment unless it offers legal services that includes the filing of court motions, but it may be able to help the person shift his debt burden to prevent additional garnishments in the future.

Effects

    There are two ways that a debt management program could conceivably end or prevent a garnishment. One is by leading negotiations with the creditor and getting him to agree to end the garnishment voluntarily. However, not all debt management companies can do this. The way in which a program could prevent a garnishment is by helping the debtor shift his debt burden so none of his debts are currently delinquent, making them ineligible for garnishment.

Can Wages Be Garnisheed if You Are Sued in Texas?

Can Wages Be Garnisheed if You Are Sued in Texas?

Individual state debt collection laws tend to favor either the consumer or the creditor who sues him for money he owes. Texas law favors the consumer. If you're unable to pay a credit card balance or an auto loan and your creditor gets a judgment against you, Texas limits its options to use it. This doesn't mean that your creditor can't collect from you, just that it can't garnishee your wages, with a few exceptions.

Child Support

    Not only does Texas allow garnishment of your pay for child support, it requires it. With rare exceptions, this happens on an automatic basis as soon as the court enters an order that requires you to pay child support. The garnishment would be in the amount of your scheduled payment, unless you fall behind. If you owe arrears, or past-due support, the garnishment could be anywhere from 55 percent of your take-home pay if you're currently supporting another family, to 65 percent if you have no other dependents, if you fall behind three months or more.

Bank Accounts

    Texas legislation specifically defines wages as money for work you've performed as an employee but that you haven't received yet. This means that once your employer pays you and you receive that money, and if you deposit it in a bank account, Texas law no longer protects it from garnishment. Once you receive your pay, it's not "wages" anymore, so a creditor who sues you can garnishee your bank account.

Other Income

    Texas also does not protect money you earn if you work as an independent contractor as opposed to as an employee. Independent contractors are self-employed; they're not on anyone's payroll. They provide services in exchange for pay, but the person or company who pays them does not have any control over when or how they do the work. Payment is for the completed task or product. If you earn your money this way, a creditor with a judgment against you can garnishee it in Texas. The creditor can also levy against any royalties or rent payments you might receive.

Out-of-State Judgments

    Other exceptions exist if your employer is not in Texas, or if the judgment against you arises from a contract you signed outside the state. For example, if you live in Texas but cross over the state line into Oklahoma to go to work, Oklahoma law, not Texas law, would apply if a creditor sues you and attempts to garnishee your wages. If you moved to Texas from Louisiana and you incurred a debt and were sued for it while you lived there, Texas will usually honor a garnishment from another state.

Other Exceptions

    Texas' garnishment laws generally apply only to your creditors. Like the exception for child support, your wages can also be garnisheed for taxes, student loans or past-due alimony obligations. Your employer can garnishee your wages if you owe him money.

How to Negotiate Interest

How to Negotiate Interest

Many banks are willing to negotiate interest rates on credit cards, mortgages, and personal loans. Working with a big bank can be intimidating, as many are inundated with customer service requests, and it can be challenging to have a conversation with someone authorized to reduce the interest rate. In general, banks are only willing to negotiate interest rates with borrowers that either have excellent credit ratings or those that are having significant problems meeting their obligations. Banks have particularly strong incentives to negotiate rates with borrowers who are about to default, as a means of salvaging the loan.

Instructions

    1

    Look at your account statement for the loan, credit card, or line of credit for contact information for the bank in question. Some banks send out periodic letters to borrowers in distress offering interest rate adjustments. If you have received such a communication, you can likely find special information about rate negotiating enclosed.

    2

    Prepare your negotiating strategy before contacting the lender. It's best to start with an interest rate lower than you expect to receive as a general negotiating strategy. Select an upper boundary that you're willing to adjust upwards if the lender shows resistance.

    3

    Contact the lender and request a rate reduction. If you are experiencing financial distress, be transparent about your finances. Explain how reducing the rate will assist you in being able to meet your obligations and maintain your credit rating. Alter your offer depending on his reactions. You may have to spend an extended period of time speaking with lenders. Some banks may request that you visit an office to conduct the negotiations.

    4

    Request a copy of your new lending agreement before finalizing a deal. Maintaining copies of the new contract is the best way to hold the lender accountable for the alteration. In some cases, the bank may request that you pay a small fee in return for the interest rate adjustment.

Tuesday, November 19, 2002

Can You Get Denied for a Car Repossession?

Can You Get Denied for a Car Repossession?

If you're like many people, you need a car to get to work and earn money. After a lender repossesses your vehicle, you might be frantic to replace it so you can continue to pay your other bills and prevent a bad situation from becoming even worse. Your best option is to try to avoid the repossession, if at all possible. But if it happens, it doesn't necessarily mean that no company will ever extend you credit again.

How Long It Hurts You

    A repossession remains a blemish on your credit report for seven years. It might drop your FICO score to 500 or lower, though you can repair this over time. Your FICO score is a measure of your creditworthiness, and how low it falls after a repossession depends on the rest of your credit history as well. A score of less than 500 makes lenders very wary about advancing you money. The top finance companies with the lowest interest rates will probably deny you credit. However, that doesn't mean that all lenders will do so.

How a Low FICO Score Hurts You

    If the standard lenders deny you, you'll have to look to subprime lenders for loans. Subprime loans are those with higher interest rates to balance the risk the lender takes. As of August 2011, large banks and lending institutions offered customers with the best FICO scores, usually 700 or better, interest rates in the area of 3.25 percent. With a repossession in your credit history, you can expect an interest rate of 17 percent or more, and only certain lending institutions will be willing to take you on.

What to Do

    You first goal should be to repair your credit. Take out a small credit card, one secured by a deposit if necessary, and make the payments consistently. If you need to replace your car immediately, take a subprime loan. The higher interest rate might make the monthly payment more than the one on the car you lost, but if you make the payments on time for six months to a year, you might be able to refinance the loan at a somewhat lower interest rate. You might have to readjust your budget to accomplish this task, perhaps by taking on a second job or cutting discretionary expenses for a while. But it might go a long way toward repairing the damage the repossession did to your FICO score and your credit history.

Other Options

    If your credit record wasn't good before the repossession, even a subprime lender might deny you, depending on how low your FICO score drops. You can probably still get a secured credit card, but you might have to explore other options to replace your car. Some used car lots will finance you directly, without involving a bank or lending institution. You won't get a great vehicle, and the interest rate might be even higher than a subprime loan, but such dealers don't always run your credit report. You'll have transportation to get back and forth to work while you repair your credit.

How to Negotiate With a Collection Agency

Debt-collection agencies can strike fear into the hearts of consumers, but you shouldn't be afraid to negotiate with them. If you know your rights, remain calm and go into the negotiation process with reasonable expectations, you might be surprised at how willing the agency is to work with you. You may even be able to settle the debt for less than you owe and preserve your credit history in the process.

Instructions

    1

    Review your budget and figure out the maximum amount you can pay monthly to reduce the debt.

    2

    Learn your rights when it comes to debt collection. The federal Fair Debt Collection Act outlines what you can and cannot do, as well as how the collection agency can operate and communicate with you (see Resources).

    3

    Call the collection agent when you can be focused and calm. Tell him how much money you can afford to pay, either in a lump sum or through monthly payments. Be polite but firm in communicating what you are able to pay. If you start to get emotional during the conversation, get off the phone and call back once you have calmed down. Do not give out personal information, and never give the collection agent your banking information.

    4

    Keep a detailed, written log of every call. Record the date and time, along with the name of the person you talk to and her contact information. Summarize the details of the call, including any offers that are made.

    5

    Get every offer or settlement plan in writing, and send all your correspondence via certified mail. Do not agree to a "one time only" offer that must be paid that day over the phone. See the offer in writing first.

    6

    If you're able to negotiate a payment plan, insist that the debt be reported as "paid in full" rather than "paid in settlement" on your credit report. You can use this as a concession in negotiating the amount of your payment, with the understanding that it will affect your credit report.

How to Reduce Debt to Reduce Stress

How to Reduce Debt to Reduce Stress

Many people are in debt because of student loans, being out of a job or making a bad business deal. Debt can cause a lot of stress, making it difficult to sleep or function properly in daily life. When figuring out how to get out of debt, sometimes it can feel like an uphill climb. Reducing debt is possible if you are willing to work hard and take positive steps towards debt freedom.

Instructions

    1

    Obtain lower interest rates. If you have paid your credit cards on time consistently, you can call the credit card company and it may lower your interest rate. If the credit card company will not do this, apply for a 0% APR credit card and move the balance to this card. You can also ask for lower interest rates on your student loans if you have been consistent in payments.

    2

    Make a budget. Use your budget to cut costs. If your food bill used to be $200 per month, make it $150 per month and use coupons. Use the extra money to pay down debt.

    3

    Build an emergency fund. Make sure this emergency fund covers two weeks of bill payments. This way if there is an emergency, you will not need to turn to more debt to help pay for it.

    4

    Increase your income. Get a part-time job. Sell items online. Have a garage sale. Use all of the money you make to pay your debt off.

    5

    Sell your car. If you are still making payments on a vehicle, you can sell it to reduce debt. Once you sell it, buy yourself a cheaper car and use the rest to pay down your debts. Once you are out of debt, you will be able to pay cash for a better car.

    6

    Get credit counseling. A good credit counseling agency will help you with financial planning. Do not pay an upfront fee for credit counseling as some of these places are scams. A credit counseling agency should help you with a budget and ways to pay down your credit cards without an agreement or payment.

Monday, November 18, 2002

Grants for Low-Income Families in Credit Card Debt

Grants for Low-Income Families in Credit Card Debt

There is no simpler way to say it: there is no grant -- either private, government or corporate -- that helps a borrower pay off credit card debt, regardless of the individual's income. However, that doesn't mean there isn't help available. Low-income families have excellent opportunities for aid. Learning to recognize a scam when you see it and realizing that there's no easy way out of your financial situation are your first steps toward financial independence.

The Grant Scam

    The federal government takes grant scams so seriously that it has issued numerous public alerts warning desperate borrowers about fraud. Warnings appear on both the Federal Trade Commission and Grants.gov websites. Grants are used to further the public good, and competition for this "free money" is fierce. Grantors don't feel that paying your credit card debt assists the general public in any way, but a grant scammer tells you otherwise. Scammers not only charge a fee for grant information -- this information is provided free by the federal government, by the way -- but they collect personal information and use it to steal your identity.

Legitimate Help

    Your best move is to contact a credit counseling agency. The best have earned an "A+" rating by the Better Business Bureau. A credit counselor will give you a free, no-strings-attached one-hour budget consultation and determine your eligibility for enrollment in a debt-management plan. If you're eligible, the counselor will contact your creditors on your behalf to negotiate better terms. The accounts are then closed, and you begin an affordable repayment plan. Debts are paid in full, and the plan usually lasts for three to five years. Only unsecured debts, like credit cards, can be enrolled in a debt-management plan, but counselors often provide housing and bankruptcy advice, as well.

Settlement and Bankruptcy

    If you are able, you may consider settling your debts. This only works if you're at least three months behind in payments, and you must be prepared to make a lump sum payment. However, if approved, you can pay your debts off for anywhere between 30 and 50 cents on the dollar. Be advised that this approach damages your credit severely; settlements and late payments last for seven years on your credit. The other approach -- even worse for your credit -- is bankruptcy. Credit card debt is usually eliminated entirely in bankruptcy, although the bankruptcy remains on your credit report for 10 years.

Additional Assistance

    If you have a low income and are struggling to make ends meet, consider investigating local programs established to provide a helping hand. Each state and county offers food assistance, health insurance assistance and housing resources, and you may qualify for aid but not realize it. For example, there are several programs available to get nutritious food on your table, from farmers' market programs to the summer food program for kids to the Supplemental Nutrition Assistance Program, also called SNAP. Benefits are often paid via debit card for ease of use. In addition, states provide a variety of health insurance programs. Program eligibility requirements for each are available online, and through reputable private and government agencies.

Can I Have an Unrequested Credit Check Removed From My Report?

Every person who has taken out a form of credit is given a credit report. This report includes information about the person's lending activity and forms the basis for the individual's credit score. The report can be consulted by lenders and other parties with a legitimate business interest in knowing a person's credit history. If a company checks on a person's credit, it is noted in the report. These checks cannot be removed.

Credit Checks

    Whenever an outside party checks an individual's credit, this check is noted on the credit report and is available to others who subsequently check the report. In some cases, a credit check can harm a person's score. There are two types of checks: "soft" and "hard."

Soft Checks

    Many credit card companies and other lenders will look at people's credit reports -- without asking them -- in an effort to determine whether they will offer them credit. Generally, people with good credit reports are offered more credit than people with poor credit scores. Individuals do not generally request these offers or these checks on their credit. Unsolicited checks are known as "soft" checks. Because an individual did not request them, they do not hurt a credit score.

Hard Checks

    Credit checks that an individual did solicit by applying for a loan are known as "hard" checks. These checks do generally drop a person's score down a few points, because they indicate the person may be seeking to take out additional forms of credit. To credit rating agencies, this suggests an increased credit risk, as the person may be preparing to take on more debt. Therefore, each hard check renders the individual slightly less creditworthy. Although there is no way for an individual to shop for more credit without hurting their score, the drop in score is small and temporary, if the pattern shows that the borrower was shopping for a loan.

Removal

    A person can request to have an unrequested credit check removed from his credit score, but a credit reporting agency will be unlikely to agree to his request. However, there is little reason that a person would wish to have this credit check removed. Any party that looks at the person's credit report will know that the individual did not request the credit checks and they do not count against his score.

Saturday, November 16, 2002

Can Debt Collectors Get Your SSI Check?

If you default on a debt, the creditor may sue you. Upon winning a lawsuit, the creditor can ask the court to garnish your wages or levy your bank account. However, Social Security income is usually exempt from garnishment as of 2011. This includes Supplemental Security Income, or SSI, which the Social Security Administration pays to low-income disabled, blind or elderly people each month. Thus, debt collectors can't take your SSI check to satisfy a debt under most circumstances.

Protected Property

    SSI checks and other Social Security checks are considered protected property: Debt collectors can't garnish this income, and no court will entertain a motion to garnish SSI income. In addition, if you deposit your SSI checks in a separate bank account from other types of income, debt collectors may not ask a court to levy the bank account in an attempt to recollect the debt because of the protection clause.

Federal Debts

    If you owe money such as back taxes or back student loan payments to the federal government, the government may garnish your SSI check or other exempt income. However, the government can't garnish your entire paycheck to satisfy these obligations. As of June 2011, the federal government may garnish up to 15 percent per year of your SSI check to collect federal taxes. If you owe other federal debts, the government must leave you $750 per month out of your check.

Bank Accounts

    State laws vary as to whether any amount of SSI income can be garnished from your bank account. Creditors usually can't garnish bank accounts. However, if you co-mingle your accounts --- that is, if you deposit SSI income into an account that also holds nonexempt income --- creditors can garnish the account. In addition, certain states allow banks to garnish an SSI-only account if the debtor owes money to that bank.

Considerations

    Debt collectors can't make threats that they aren't empowered to carry out. Thus, if a debt collector threatens to garnish your SSI check, document the conversation and report the collector to the Federal Trade Commission. This behavior is illegal, and debt collectors can face hefty fines if they engage in it. If you receive a garnishment notice on your SSI income or on your SSI-only bank account, contact Legal Aid to help you get a low-cost attorney to help you challenge the garnishment.

The Statute of Limitations for Revolving Debt in Texas

The statute of limitations in Texas for revolving debts is in place to provide creditors a certain amount of time to pursue you for money owed. After the time limit expires, creditors become limited in what actions can be taken to legally force payment. If you communicate with creditors, including answering phone calls or responding to letters, the clock on the statute of limitations resets.

Revolving Debt Definition

    A debt is considered revolving when it has an open term of repayment, monthly payments based on the percentage of the balance and usually a fluctuating interest rate. A credit card is the most common example of a revolving debt. The credit in a revolving debt is open-ended, meaning you don't have to reapply for credit to continue to use the account. You may use the account up to a predetermined spending limit and make monthly payments to reduce the balance over time. As long as your account is in good standing, the credit is available for you to use.

Texas Debt Statutes

    In Texas, the statute of limitations for the collection of a revolving debt is four years. The clock on the statute begins on the first day after the debtor misses a monthly payment. This clock resets if you bring the account into good standing through proper payment. After the statute expires, a creditor or debt collection agency can no longer legally file a lawsuit against you to obtain a judgment for payment. Other collection practices, including phone calls, emails and letters, may continue past this date. A delinquency notation on your credit report from a past-due revolving account may remain for up to seven years.

Legal Collection Practices

    The practices of debt collection in Texas are regulated by the Texas Debt Collection Act. The regulations detailed in this law prohibit the use of fraudulent or abusive behavior for the purpose of collecting debt. It is illegal for a creditor or debt collection agency to threaten you, use abusive language or harass you while attempting to collect on your delinquent account. It is also illegal for a creditor or collection agency to attempt to collect more than was originally agreed upon unless the balance of your debt increased due to attorney fees, investigation fees or collection fees.

Homes and Wages

    In Texas, if your home is declared a homestead it can not be legally seized to pay a debt, including a revolving account, unless the debt is directly tied to the home like a mortgage or deed of trust. Your wages are subject to garnishment for paying back child support, taxes and defaulted student loans. A creditor can not obtain a judgment to garnish your wages for a consumer debt like a revolving account.