April 2003 ~ Credit And Debt Management

Wednesday, April 30, 2003

Medical Debt Collection Notice Rights

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If you are faced with mounting medical bills, you may be concerned about dealing with debt collectors. Federal law gives you certain rights in how your debt is reported to credit bureaus, the manner in which a collection agency can contact you, and your right to dispute a debt.

The Fair Debt Collection Practices Act is a federal law that establishes the rights of individuals to information about their credit report and to dispute debts. It also limits the tactics that debt collectors can use against consumers.

The Health Insurance Portability and Accountability Act is a federal law that establishes strict guidelines for protecting the privacy of medical patients.

You have a right to dispute the charges on a medical bill. If a bill collector contacts you, the collector must notify you that you have 30 days to dispute the debt.

A third-party bill collector is obligated to restrict phone calls to the hours between 8 a.m. and 9 p.m., to refrain from making threats (including threats of imprisonment), or to reveal your indebtedness to other people (with a few exceptions).

HIPPA requires that your health-care provider protect your privacy when placing your debt for collection, providing only information necessary to identify you (such as your name and Social Security number) and information about your payment history. If your debt is reported to a credit bureau, your health-care provider's name and affiliation must be coded so as not to reveal the medical specialty.

How Long Do Debts Stay on Credit in Texas?

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Nearly all debts, particularly those in default, will appear on the debtor's credit report. When a debt is paid off on time, it will generally do little damage to a person's credit score. However, an overdue debt, particularly one that the creditor has sent into collections, will pull down a person's score for a long time. In Texas, debts can remain on a credit report for up to seven years.

According to federal law, most negative information can only appear on a credit report for a maximum of seven years. This includes notices of accounts in collection, as well as all overdue or written-off debts. In Texas, as in other states, negative information must be removed from a credit report seven years from the date in which it was entered, at which point it will cease negatively affecting a debtor's credit score.

While negative information can remain on a credit report for a maximum of seven years, positive information can remain on a report for up to 10 years. While an outstanding, overdue debt is negative information, a debt that was taken out and paid off on time and is considered positive information. It helps establish a positive credit history for the individual, indicating to the credit reporting agency that the individual is capable of paying off loans.

While a bad debt may appear on a credit report for seven years, under Texas state law, the debt can only legally be collected for four years. This is because Texas has a statute of limitations on debt collection, much like states have statutes of limitations on crimes. The statute of limitations period begins immediately after the last payment made on the debt. This statute will restart again anytime a new payment is made on the debt.

There are several large exceptions for how long a debt will stay on a credit report. First, if any information on a credit report is incorrect, the credit reporting agency has an obligation to correct it. Secondly, the record of a personal bankruptcy can stay on a credit report for up to 10 years. In addition, student loans, as well as other debts owed to the federal government, can stay on a credit report for longer than 7 years if they remain unpaid.

What Are the Benefits of New Credit File?

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New credit files are often referred to as CPNs, or Credit Profile Numbers. There is a huge amount of misunderstanding with regard to CPNs. Some unethical lenders and outright scammers have used CPNs as a method to defraud vulnerable consumers. In most cases, regular consumers cannot get a new credit file. However, highly visible consumers--such as celebrities and government officials--can get a second credit file. There are many advantages associated with these accounts.

A new credit file is obviously a fresh start. This can be both positive and negative, though. While negative history is no longer reporting, lenders are still wary about lending to customers with no credit history. However, a fresh start on a new file gives consumers a chance to re-establish credit and borrowing behavior--and thus begin securing lower interest rates and fee loans. All future scores will be based solely on the payment history of the new file.

As mentioned, CPNs are often offered to very visible public service consumers (government officials) and celebrities. These new CPNs give these consumers a semblance of privacy in their financial dealings. Reporters and sometimes even the general public can gain access to credit files. However, if the CPN is anonymous (only accessed with a unique number, like a Social Security number), the person owning the new file can hide from public scrutiny.

While it is very difficult, average consumers can get a CPN, too. This presents a money-saving advantage to those who are struggling with poor credit under their Social Security number. (It's important to remember that a new file does not erase old debt. All debts obtained under a Social Security number must be repaid as agreed.) The new CPN can relieve a borrower from struggling with high-interest debts. This is especially beneficial when it comes to large loans--like mortgages and car loans.

How to Write a Cease and Desist Letter to a Collection Agency

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Debt collectors may not harass you by phone or in person. By law, debt collectors may not call you repeatedly at your place of work, early in the morning or late at night, and they may not threaten you or make false statements regarding your debt. You may contact the debt collection company in writing and ask them to formally stop calling you over your debt. Even if you write this cease and desist letter, you are still obligated to pay your debts.

Instructions

Before officially writing a letter, it is best to find a way to work out a payment plan with a collection agency. If you are behind in your payments, you should call the collection agency and negotiate a way to pay off your debt.

Keep the letter brief and write it as a formal business letter. Provide your contact information, the name of the collection agency and your account number.

Quote the Fair Debt Collections Practices Act and your right under that law to be free from harassment from collection agencies. Tell them to cease contacting you. You may tell them that you will file a complaint with the Federal Trade Commission and your state's attorneys general if they don't cease and desist. You may also write that you plan to contact your original creditor to work out a plan.

Close with "Sincerely" and your name.

Send your request certified mail.

Keep the receipt and a copy of the letter for your records.

Duties of a Collection Agency

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A collection agency is responsible for collecting debts owed to various creditors. In their attempts to recoup money, collection agents may write to debtors or call them at their homes or workplaces.

Collection agencies must always abide by the rules and guidelines of the Fair Debt Collection Practices Act, (FDCPA), which is a law established by Congress. Among other things, the FDCPA states that debt collectors cannot harass or abuse debtors during their collection activities. They cannot misrepresent themselves by pretending to be law enforcement personnel, a representative from an attorney's office or a government official.

A collection agency will engage in "skip tracing" activities which is a process of searching for debtors whose whereabouts are unknown. They will contact personal references, public records and review a debtor's credit report for location information.

Collection agencies will pursue legal action if a debtor refuses to pay after being contacted. Legal action can lead to a judgment through the court system.

After receiving a judgment a collection agency can get a bank levy which is the process of freezing all or a portion of the funds in a debtor's bank account. The money is then released to the agency for payment of the debt.

Collection agencies can also garnish the wages of a debtor. This allows them to deduct 25 percent of the debtor's income from his paycheck as payment for the past-due debt.

Explain Surety

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In the financial terminology of debt and lending, a surety is a third party guarantee to take on the repayment obligations of a debtor in the event that the debtor is unable to repay his debt obligations. A simple example of a surety is a parent co-signing on a lease agreement for a child renting a house or an apartment. Most landlords would be unwilling to rent to an 18-year-old college student if the student's parents were not contractually obligated to back up the rent obligations. There are, of course, more complicated surety relationships involving businesses, which often include a right of subrogation.

One of the three main parties in a surety agreement is the borrower, the party in need of the funds. In the context of a surety agreement, the borrower may have little or no credit history, or poor credit. In a business setting, the borrower may be a new business venture with virtually no collateral but with a potentially successful business model.

The lender is the party in the surety agreement providing funds. Lenders are understandably wary of lending money to risky borrowers, because there is a very real chance they will be unable to make their payments. A lender in this situation may refuse to offer the loan, or may decide to require a guarantor to contractually agree to back up the loan.

The guarantor is the key party in the surety relationship. So long as the lender is able to make its payments, the guarantor will have virtually no active involvement in the entire lending process

In the event that a borrower is unable to make its loan repayments, the law will generally allow the guarantor the right of subrogation. Subrogation gives the guarantor the right to take control of the borrower's contractual rights to recover the cost of making the borrower's payments. For example, the guarantor of a restaurant may have the right to take control of the operation of the restaurant in order to make payments on the borrower's debt.

What Does Making Extra Principal Payments on a Loan Do?

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Interest expenses on debt can erase thousands of dollars away from your bottom line every year. As such, effective debt management is central to the success of any financial plan. With free cash flow, you can spend money to make extra principal payments, which will result in cost savings on your current and future loans. As part of your overall money management strategy, you must learn to properly evaluate interest rates on debt.

Loan principal describes the amount of money that you have yet to pay off on a particular debt. In exchange for loaning out the principal, your bank will collect interest payments at a certain rate. Interest charges are calculated at either a fixed or variable rate. Fixed-rate loans carry the same interest rate through their term, while variable-rate loans feature interest rates that fluctuate according to the prevailing interest rate environment.

Making extra principal payments on your loan will save you money on interest expenses over time. To determine the amount of cost savings, you can run projections through an online financial calculator. The financial calculator allows you to toggle through regular payment, interest rate, and principal figures, before determining the amount of interest expenses on a particular loan.

Prospective lenders will evaluate your personal finances, prior to approving a loan principal and setting interest rates. You will be better able to negotiate credit approval on good terms if you demonstrate an ability to make timely payments and manage your debt effectively. Extra principal payments on loans will result in lower balances on outstanding debt, and therefore strengthen the case for your loan application. As part of your loan application, the bank is likely to review your credit report, which documents your debt management history.

Order a copy of your credit report from Experian, TransUnion or Equifax before making any major purchase that requires debt financing. Once you receive the report, you should verify that the information is correct. Each credit-reporting agency provides online materials to help you dispute potential errors. Next, you can use the credit report to help you list out your outstanding debt balances according to interest rates. To save money, you should make it a priority to pay down your most expensive debt. To do so, you can make minimum payment on low-interest rate debt, in order to preserve cash to aggressively pay off the loan with the highest interest rate.

When making investment decisions, you will weigh potential returns against interest rates on your debt. For example, you should spend $5,000 to pay off a credit card that charges a 15 percent interest rate, instead of putting the money into a certificate of deposit that only pays out a 2 percent interest rate. Once your expensive credit card debt is paid off, you may then consider building up your cash reserves alongside a diverse portfolio of stocks and bonds.

Questions About Credit Card Collection Accounts

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If your delinquent credit card debt gets turned over to a collection agency, you have a collection account. Collection accounts can appear on your credit report and may influence your credit score. Having a collection account may also result in frequent phone calls from debt collectors. Many consumers have questions about how having a collection account affects them and what debt collectors can and cannot legally do to collect a debt.

Not all collection agencies report collection accounts to the credit bureaus. When a collection account appears on your credit report, however, it will negatively influence your credit score as long as the debt you owe is over $100. Paying the collection account will not improve your credit score unless the collection agency agrees to remove the derogatory notation from your credit record after receiving payment. Otherwise, the Fair Credit Reporting Act dictates that the collection account can remain on your credit report for seven years from the date your original credit card debt went delinquent.

The Fair Debt Collection Practices Act (FDCPA) regulates debt collector activity and the actions collection agents may take when attempting to collect a debt. Having a collection account does not mean that you will automatically be subjected to harassment or abuse from debt collectors. If debt collectors threaten you, call you at odd hours, use abusive language against you or continue to telephone you after you request, in writing, that all communication stop, the company is in violation of the FDCPA and you have the right to file a lawsuit.

If you are pursued for an old credit card debt that does not belong to you, you have the right to dispute the debt with the collection agency reporting the debt and the credit bureaus. If the collection agency that owns the debt can neither provide proof to you that you owe the debt nor prove to the credit bureaus that the debt is legitimate, it must cease collection activity immediately and the credit bureaus will remove all evidence of the collection account from your credit report.

If you don't pay a collection account, the collection agency that owns the debt may opt to file a lawsuit against you. Each state only allows civil lawsuits over unpaid debt to be enforced for a limited amount of time. This is known as the debt collection statute of limitations. If the debt collection statute of limitations in your state has expired, you must appear in court and notify the judge of that fact in order to have the lawsuit dismissed. Keep in mind, however, that submitting a payment on a collection account can reset the statute of limitations. Contact your state attorney general's office to find out the statute of limitations for unpaid credit card debt in your state.

How to Receive Credit Card Offers

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Compare credit card offers to see how your current cards stack up. There are many new programs to select from. Travel incentives, student offers and options for individuals with poor credit are available. The best way to receive credit card offers is to seek them out on the Internet.

Instructions

Try opting-in for credit card offers. Go to the credit opt-out website listed in the Resources section. This website can be used to stop or start receiving unsolicited credit card offers.

Follow the directions in the credit opt-in website. Never enter your personal financial information online.

Request that credit card offers be sent to you via regular mail or through email.

Research online information that compares credit card offers. Several online credit card comparison websites are listed in the Resources section below.

Determine which card is right for you. Request that information on your selected card be sent to your home.

Apply for your new credit card.

When Does the Minnesota Statute of Limitations Apply for a Debt?

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A Minnesotan's last payment on a debt affects a state law that determines if residents can face a collection lawsuit filed by a creditor, lender or debt collector. In some cases, old credit card accounts and other debts that consumers have long forgotten about can legally be targeted for collection lawsuits.

Creditors and lenders have a limited amount of time to file lawsuits to sue Minnesota residents to collect debts. The state statute of limitations outlines that time limit. The statute gives creditors and lenders six years to sue residents to collect credit card debts and other debts that involve written and oral contracts. The statute doesn't keep debt collection companies from trying to collect legitimate debts, but a company can't legally sue a resident to recoup a debt after the statute of limitations has run out.

Get a copy of your credit report to determine the date of last activity on a debt, which will help you figure out whether the statute of limitations has expired. MSN Money article "Is There a Statute of Limitations on Debt?" says the date of last activity generally is the last date on which you made a payment on an account. For credit card accounts, the date of last activity also may be determined by the last purchase date if it's later than the last payment date. People who file lawsuits involving debts based on oral contracts may not be able to prove they can legally sue to collect the debt if they can't document the date of last activity.

Minnesota residents should add six years to an account's date of last activity to determine whether a debt is too old for a creditor or lender to sue to collect it. In any case, the MSN Money article notes that some debt collection companies may violate the U.S. Fair Debt Collection Practices Act and sue to collect debts even after the statute has expired. In such cases, you may need to hire an attorney to protect your rights and keep a collector from using illegal practices to recoup an old debt.

Minnesotans who want to pay off an old debt should first ensure they can afford to pay the debt in full to avoid a potential lawsuit. You could inadvertently reset the statute of limitations on an old debt by sending a partial payment to a collector, since your last payment date affects the statute's expiration. Ultimately, a court may decide that a collector has the right to sue to collect full payment on an old debt because a consumer's partial payment restarted the statute of limitations. In essence, a partial payment can make an old debt new again.

Alabama Statute of Limitations on a Judgment

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Judgments allow creditors to collect the money you owe. With a judgment a creditor can garnish your wages, tax returns and bank accounts. All 50 states have a statute of limitations that limit the time a judgment can be used to collect money owed.

When you obtain credit, you are obligated to repay the debt. If you fail to repay the debt, the creditor can pursue legal action to recover the money you owe. The creditor must have court approval to obtain a judgment. The creditor must file a petition and serve you notice. This notice allows you to go to court and defend your position. If the creditor can show the court you do, in fact, owe the money and have failed to repay the debt, a judgment can be granted. The judgment can then be used to garnish a certain amount of your paycheck, garnish your tax returns or withdraw money from your bank accounts.

Each state, including Alabama, has statute of limitations on debt. The statute of limitations places a limit on how long a creditor can attempt to collect on a debt or a judgment. In most states, judgments can be renewed but only for a limited time. Once the statute of limitations runs out, the debt is no longer legally collectable.

There are various types of debt and Alabama has different statute of limitations based on the type of debt. The types of debt are oral agreements, written contracts, open accounts and judgments. When a judgment is granted in Alabama, it is good for 10 years; however, the creditor can renew the judgment for an additional 10 years. After a 20-year period has passed, the creditor cannot renew the judgment nor use any of the powers authorized with the judgment such as garnishing your wages.

Judgments are very damaging to a credit score. A judgment will never remain on your credit report longer than seven years even if the judgment is good in Alabama for 10 years and is then renewed for an additional 10 years. This means the damage to your credit score will last no longer than the initial seven-year period.

Problems That Personal Debt Could Cause

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People usually consider extensive personal debt to be a financial problem. In fact, while the primary effect of personal debt is financial, its side effects are equally distressing. Often, the problems of debt can go well past having to skimp and save on various purchases, but can take a personal toll on the debtor and his family.

One of the main emotional effects of personal debt is stress. Debt weighs on the debtor like a burden, something that constantly follows him and presses down on him. The work that must go into making sure debts are paid off, including the sacrifices the debtor is forced to make, can result in lost sleep and lost hair.

If a person owes a significant amount of money to another party, the creditor may attempt to receive payment by initiating a court order for wage garnishment. When wages are garnished, the debtor's employer withholds money from each paycheck.

This is not only embarrassing, but can potentially cost the debtor his job. While under the Consumer Credit Protection Act, an employer is not allowed to fire an employee because he receives a single garnishment, he can fire him for receiving multiple garnishments.

With excessive debt in a household usually comes some assignment of blame. If one spouse in a relationship was responsible for incurring most of the debt, the other spouse may feel angry or frustrated toward the other. This can spark arguments that, if the debt continues, are not always easily resolved. In many cases, this can act as a catalyst for divorce.

If payments on debt are late, the debtor's credit rating is negatively affected. If the debtor's credit score drops too low, he may be unable to obtain loans at a reasonable rate of interest. This may prohibit the debtor from obtaining a mortgage to purchase a home, confining his family to rental units.

When debts pile up, debtors often must shift their financial resources away from some expenses in order to pay back the debt. Often, this can mean the rent on a residence goes unpaid, resulting in an eviction. Not only does this force the debtor to find new accommodations, but the eviction may show up on his credit report, further lowering his score.

Do Hardship Letters Work With Creditors?

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A hardship letter to a creditor explains why you have fallen behind, or are about to fall behind, on your payments. The point of a hardship letter is to show the creditor that you want to, but are not able to, meet your financial obligation. It may also explain what the creditor can do to help you repay the debt to avoid charging off the account. There are no figures available to show how often hardship letters work, because no one agency or organization collects such data from individual creditors. However, experts, including LoanBiz columnist Gabriel Traverso, agree that harship letters often help consumers find relief from creditors.

If you completely stop paying back your debt, the creditor has no choice but to initiate collection proceedings, which cost it money. And if it charges off the debt without collecting, it is essentially taking a loss. Thus, creditors realize that by showing consumers who have fallen on hard times but genuinely want to repay their debt some leniency, they can get back at least some of the money they're owed.

A hardship letter should state any negative changes to your financial situation, such as a job loss or unexpected medical bills, as well as how you expect the situation to persist. Depending on your analysis of your situation, you might want to ask the creditor to lower your interest rate so that more of your monthly payments go toward paying down the debt. Or you might ask that the account be closed so that no new interest accrues, allowing you to make lower monthly payments. Creditors are sometimes even willing to forgive part of the debt in exchange for a lump-sum payment.

If you do not hear back from the creditor within a reasonable amount of time, call to ask whether the letter was received and if your proposal was considered. If the creditor offers you assistance, whether in the form of a reduced interest rate or an affordable payment plan, ask to have this information in writing.

The key to a successful hardship letter is to be as clear and honest about the situation that is preventing you from paying your debt. Don't exaggerate your hardship; your creditor might ask for proof of the hardship, such as an unemployment check stub or a copy of your monthly bills. If possible, provide such proof with your hardship letter so your creditor doesn't have to ask for it and create an extra step in the process.

What Does it Mean to Have a Credit Card Company Discharge a Debt?

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Credit card companies are very good at pointing out your legal responsibility to pay your debt. This is not necessarily a bad thing, because it prevents people from abusing the credit card companies. However, people who are in serious financial trouble sometimes can get their credit card debt discharged, meaning they no longer have to pay.

When a credit card company truly discharges your debt, it acknowledges that it is no longer going to pursue collection and that you no longer owe. In issuing a discharge, a credit card company effectively terminates its legal right to payment. Discharge with credit card companies often occurs as part of bankruptcy cases.

A discharged credit card debt means you no longer have to worry about the creditor trying to collect money from you, which can result in greater peace of mind. Because you don't have to pay the balance of the debt, you have an opportunity to restructure your finances and get back on track with your money. However, depending on how you receive the discharge, it can cause a serious ding to your credit score, and you may have to pay income taxes on the amount of debt that was discharged.

Credit card companies understand that not all credit cardholders will pay what they owe. For this reason, many credit card companies have insurance that protects them from discharge losses, as well as from losses from settlements and other forms of debt forgiveness. After issuing a discharge to you, the credit card company may file an insurance claim, depending on how much you owe. If the claim is valid, the credit card company's insurance company will pay the credit card company at least some of the discharged amount. Even if the credit card company does not have this type of insurance, it still can report your bad debt as a loss to the IRS.

People often confuse credit card discharge with credit card charge-off. A charge-off means that the credit card company no longer has your debt in its active accounts. It means the company formally has acknowledged that it isn't likely to get payment from you. It also means the credit card company has sent the debt to collections or sold your debt. Charge-off does not absolve you of responsibility for the debt the way discharge does.

Is Debt Settlement a Good Way to Get Out of Debt?

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If your debts become overwhelming, debt settlement programs may seem an attractive alternative to habitually making late payments. However, the negative impact of debt settlement on your credit record can be significant. The potential for lawsuits also exists as does the possibility that a debt settlement program will fail to renegotiate your debt with creditors. Although debt settlement may be an alternative to bankruptcy, it may not be your best option.

Debt settlement programs offer to negotiate with your creditors to reduce the amount of money you owe. Program representatives may advise you to stop making payments to your creditors during the negotiations. The typical program requires you to send payments directly to the debt settlement company, which holds your money in an account until a settlement is reached. At that time, the negotiated balance is forwarded to the creditor. Debt settlement firms also collect fees for services once a settlement with creditors is reached.

If you agree to a debt settlement program, your financial situation may get worse rather than better. If you stop paying your creditors, interest continues to accrue and your accounts may be subject to late fees and over-the-limit fees. This results in higher credit balances, sometimes doubling or tripling the amount you owe, cautions the Federal Trade Commission. Creditors may also refuse to negotiate accounts and sue you for the balance. Failure to make timely payments results in negative entries on your credit report, and Consumer Reports notes that negotiating a partial payment with creditors hurts your credit as well.

Debt settlement companies have taken hits from the Federal Trade Commission for unfair business practices, including charging customers prior to negotiating with creditors and misrepresenting their services. The FTC warns consumers to steer clear of debt settlement firms that charge up-front fees, instruct you to cut off communications with your creditors, promise to stop collection calls, tell you that debt can be settled for a fraction of the balance or allude to government programs that rescue you from credit card debt. If you consider working with a debt settlement company, check out the company history with the Better Business Bureau and your state attorney general's office.

You have other options when it comes to debt management. Nonprofit credit counseling organizations provide budgeting help and offer debt management plans to help you pay off your creditors without debt settlement. These agencies often negotiate with creditors for fee waivers and lower interest rates. You send a monthly payment to the credit counseling agency, which then makes payments to your creditors. The U.S. Trustee Program maintains a list of approved credit counseling companies by state.

Who Can I Report Credit Card Harassment To?

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Whether a collector is calling for a legitimate credit card debt or for one that a consumer does not owe, the collector must follow the rules set by the Fair Debt Collection Practices Act. Unfortunately, many collectors do not. To seek relief from harassing calls, understand the rules and where to report violations.

Become familiar with some general guidelines to spot violations of the Fair Debt Collection Practices Act, which prohibits collectors from using abusive, unfair or deceptive practices in pursuit of debt repayment. Collectors are not allowed to call before 8 a.m. or after 9 p.m. If informed that the consumer cannot accept calls at work, collectors cannot call a consumer's place of employment. Collectors cannot threaten consumers with violence, use profane or obscene language, or make false statements. Commonly encountered false statements include threats of impending lawsuits or imprisonment, or claims that the collector is an attorney or government official.

Report illegal or harassing collection practices to the Federal Trade Commission or FTC. The FTC works to prevent consumer abuse in a variety of fields, including credit card collections. The FTC records complaints made against collectors and may bring charges against a collector for repeated violations of the Fair Debt Collection Practices Act and other regulations. The FTC can also provide basic information to consumers n dealing with credit card collectors.

Report harassing behavior from a credit card collector to your state's attorney general. Among other duties, the attorney general represents the interests of consumers in his state. Depending on the specifics of the violation, the attorney general's office may take action on behalf of the consumer. Many states have laws that are even more restrictive than the Fair Debt Collection Practices Act. The attorney general will have information on your state's laws and can assist you with determining illegal collection activities and the proper course of action.

Consumers may contact an attorney to file suit against a collector for violating the Fair Debt Collection Practices Act or other applicable laws. The act allows consumers to collect $1,000 even if the consumer cannot prove actual damage. The consumer can also sue the collector for attorney fees. In the case of threats of violence, consumers should file a report with their local police department. Consumers can also make a complaint with the Better Business Bureau about the harassing behavior of a collector.

Options for Credit Card Debt Payments

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Help is available if your credit card debt has spiraled out of control. The website Bank Rate reports that, in 2009, nearly all the major credit card companies were offering programs to help people control debt. Other options are available as well, including programs that will allow you to pay less than what you owe on your cards.

So-called hardship programs allow credit card companies to reduce your monthly payment and slash your interest rate while you get back on track. According to Bank Rate, one major card company was willing to slash minimum monthly payments by up to 40 percent in 2009. Find out if you qualify for a hardship plan by calling your card company's customer service number and explaining your financial situation.

Debt management plans are similar to hardship plans but are far more comprehensive. Nonprofit credit counseling agencies, such as those affiliated with the Consumer Credit Counseling Services, offer debt management plans for a monthly fee of about $50. The agency takes complete control of your finances by analyzing your income and expenses and then creating a budget for you to live on. You will have input, but the goal is to create a four-year plan for eliminating or greatly reducing your credit card debt and other unsecured debt. You agree to remain in the program for the four years and to send one check to the counseling agency each month covering all your bills. The agency then pays your creditors. You're not allowed to use other credit options or apply for new credit while in the program. Contact a nonprofit credit counseling agency in your area to enroll. Get referrals for agencies from your bank or credit union, or from community organizations such as the United Way or Urban League.

Debt settlement allows you to settle delinquent debts for less than the full amount. The practice usually comes into play when accounts are nearly six months past due and on the verge of being closed, listed as charged-off and sold to debt collection companies. Credit card companies sometimes would rather settle with the card holder than sell the account to a debt collector for as little as pennies on the dollar. The "New York Times" reported in 2009 that some card companies were willing to settle for as little as 20 percent of the balance, although settlements for about half the balance are more likely. Inquire about debt settlements by contacting your credit card company after you have fallen more than three months behind. The companies typically will not entertain settlements before that.

How to Make a Settlement With Creditors When Your Wages Are Being Garnished

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Overwhelming consumer debt affects many Americans. The consumer culture that thrives in the U.S. also causes problems for those who struggle with fiscal discipline. There are various stages of debt collection. It starts with 30-, 60- and 90-day delinquencies with an original creditor. After an account is more than 120 days overdue, accounts are often transferred to collection agencies. If these companies cannot collect debts, they bring the debt to court and acquire a judgment against you. After this, creditors can garnish your wages. Fortunately, if you take swift action, you can negotiate a settlement.

Instructions

Contact your employer to make sure that your wages are in fact being garnished. Creditors with valid judgments can garnish up to 25 percent of your "disposable" earnings. These are any funds after all other paycheck deductions (retirement accounts, health insurance) and taxes. Your lender will likely have the contact information for the collection agency garnishing your wages.

Calculate your debt-to-income ratio (DIR). For the purposes of this calculation, pretend your wages are not being garnished. To find your DIR, divide the sum of all monthly expenses by your total gross monthly income (without the garnishment). Most creditors will not settle unless your DIR is higher than 50 percent.

Calculate how much you can reasonably pay on a settlement agreement. Be reasonable, but not hasty. You must make sure the monthly payment leaves room for your food budget, housing budget and all other necessary expenses (gas, electric, water).

Log on to all of your other accounts--bank accounts, retirement accounts, investments. Calculate how much you can afford to spend on a one-time payment. Most creditors will not accept a settlement unless you submit a good faith payment showing your commitment to repayment.

Contact the collection agency and open the negotiations. Ask for a 50 percent settlement. This is a drastic cut to the outstanding account, and you will not likely get the agency to agree, but if you can settle on an amount that is 75 percent of the original balance, you can call that a win.

Ask the collection agency for the settlement agreement in writing. Review this document with a trusted adviser, such as your family accountant or attorney. Make sure the agreement includes an agreement to stop the wage garnishment. Send the signed agreement back with your one-time payment.

How to Get Relief From a Payday Loan

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A payday loan is an advance that a private company provides to consumers on a short-term basis. These types of loans can be very dangerous as the charges and fees associated with them can compound over four times the amount in a matter of months. These types of loans are considered emergency cash loans to consumers, who should pay them back within a few weeks. However, for many consumers caught in the payday loan cycle, repayment in full can be a very difficult proposition.

Instructions

Contact the payday loan lender and discuss repayment installment plans. While this will not negate the inflated charges and fees associated with a payday loan, it can make repayment more manageable for consumers. Most payday loan firms will charge $100 for every $500 that they lend, so making monthly payments of $100 to $200 can eat some of the principal and interest charges.

Refinance the payday loan using another type of personal loan or advance on a credit card. While this does not break the cycle of debt completely, it does allow a consumer to make more reasonable monthly payments without the extensive charges from a payday loan company.

Contact a consumer credit agency and speak with a consumer advocate. These skilled professionals can assist you in getting out of the payday loan trap by negotiating on your behalf with these agencies to either come to a settlement agreement or a better installment repayment plan of the loan than what the company is prepared to offer on its own.

Use a payday loan advance company that offers you a promotional 0 percent interest loan for your first transaction to pay off an existing payday loan with another company. This option should only be used if you cannot work out payment arrangements or have no other method readily available to pay down the loan. This will give you a way to pay off the old payday loan, then repay only the amount borrowed with the new company.

Pay off the loan completely and resist the temptation to take out a new payday loan. Because of the levels of interest charged with this type of cash advance, consumers can pay thousands of dollars per year in interest fees and charges. Payday loans are expensive and very dangerous for financial health over long periods of time. The sooner you are able to get out from under them, the better off you will be.

How to Fix Damaged Credit

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A consistent pattern of on-time payments on all your accounts may be the best remedy for fixing your damaged credit. Not missing a payment for 12 to 24 months will likely boost your credit scores, albeit gradually. Eventually you will find it easier to qualify for mortgages, auto loans and other credit. There are other moves you can make as well---but don't expect a quick fix. The Federal Trade Commission says honest credit repair takes time, and that you should avoid so-called credit repair agencies as you rebuild your credit one month at a time.

Instructions

Get a copy of your credit report from the website Annual Credit Report. The site is managed by the three nationwide credit bureaus---Experian, Equifax and TransUnion---and offers free credit reports as mandated by the Fair Credit Reporting Act. The act entitles you to three free reports a year, one from each of the bureaus. Order one copy about every four months as you spend one to two years fixing your credit. Visit the website and click on "Request Report" to order, or call 877-322-8228.

Study your credit report for all negative information. Focus on the biggest drags on credit scores: delinquent accounts, accounts that have been charged off and sold to collection agencies and accounts over the credit limit.

Make payments to make all past-due accounts current. Contact collection agencies, if applicable, and offer to settle charged-off accounts by paying less than the full balance. The collection agencies often buy delinquent accounts for pennies on the dollar, so start negotiating by offering to settle the accounts for say, 20 percent of the balance. So-called debt settlement companies will do this for you for a fee, but the Federal Trade Commission says you're better off settling debts yourself.

Address any judgments or liens. Resolve the issues and have them removed. These serious red flags will continue to act as a drag on your credit reports even as you bring all your other accounts current.

Open fresh lines of new credit and never miss a payment, while staying far under your credit limit. Consider secured credit cards, which are easy to get because you must put cash in a savings account as collateral. The amount on deposit becomes your credit line.

Stay with your plan as you continue to fix and rebuild your credit. Create a weekly or monthly budget so that you stay on track for the long run.

How to Use IRA to Pay Off Credit Card Debt

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An IRA is an individual retirement account that you can open to help you manage assets such as mutual funds, stocks, bonds and 401k rollovers. The money contained in your IRA is intended to be used during retirement. For individuals with high credit card debts, however, funds contained in an IRA can have another useful purpose: paying down balances. Because an IRA will usually allow you to offer a lump sum payment to your creditors, you may be able to actually save money by cashing in the IRA, paying your debts and reinvesting any remaining funds.

Instructions

Calculate any tax penalties you will owe before withdrawing funds from your IRA. Your tax penalties will vary depending on your age, the age of the IRA and the type of IRA you have. The standard penalty, however, is 10 percent. Knowing your tax obligation ahead of time is helpful as it lets you know exactly how much money you will have after the withdrawal to bargain with your creditors.

Contact the company that services your IRA to see if you are eligible for a partial distribution. A partial distribution occurs when you withdraw only a portion of your retirement funds. Not all IRA programs allow partial distributions, but if yours does, it can save you from being forced to withdraw and pay taxes on excess funds you do not need.

Request that the company holding your IRA provide you with the necessary paperwork to make the withdrawal. You can request a check in the mail or provide the company with your banking information to have the funds deposited directly into your bank account.

Negotiate with your creditors for lump sum payments of your credit card debt. If you opt to settle for less than the amount that you owe, request that the creditor provide you with a statement of your settlement agreement in writing.

Pay your creditors via a check or money order after you have received a signed agreement detailing the terms of the settlement. This protects you in the event that the credit card company later denies any knowledge of the arrangement.

Invest any money that you have left over if you took out more money than you needed. See a financial adviser before you invest to create a plan that will give your investment the greatest return. Over time, your money will accrue interest that will help offset the loss of funds that occurred when you paid off your credit card debt.

California Statute of Limitations for Credit Card Collection

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California's statute of limitations on debt doesn't prevent legitimate collection efforts to recoup unpaid credit card debts. The statute only limits the legal action that collection companies may take against residents to collect delinquent debts. Still, Californians should understand the law or consult with an attorney to protect their rights.

The statute of limitations on debt is the amount of time that a creditor or debt collector has to file a lawsuit against consumers to collect unpaid debts. The statute varies from state to state. California's statute of limitations on credit card debt is four years. However, debts aren't erased by the state statute. Unpaid credit card debt is collectible as long as it hasn't been paid off, forgiven by the creditor or discharged by a bankruptcy court.

Debt collection companies have the right to contact Californians in an attempt to collect delinquent credit card debts even if the statute of limitations has expired on a debt. The expiration only prevents a company from filing a lawsuit to recoup an unpaid debt. It doesn't stop collection calls and delinquency notices. Nonetheless, the U.S. Fair Debt Collection Practices Act gives consumers the right to send written notices to debt collectors to tell them to stop contacting them.

The last date of activity on a credit card account determines whether the statute of limitations on the debt has expired. A Bankrate.com article titled "Can Paying Old Bills Hurt Your Credit?" says the last date of activity refers to the last payment made on the account. The statue of limitations generally has expired on California credit card debts that haven't been paid in more than four years. However, any type of payment or payment arrangement made with a collector is counted as activity on an account. That activity may restart the statute of limitations on an old debt and make a consumer vulnerable to legal action by a collector.

Some debt collection companies may attempt to sue consumers to collect debts, even after a state statute of limitations has expired. In such cases, people should consult with an attorney to get help in handling the case. Furthermore, you should respond to a lawsuit even if you're sure the statute of limitations has expired and a collector has no right to sue to recoup a debt. Consumers who don't respond to such suits risk having a court decide in the collector's favor.

How to Increase Your Credit Score by 30 Points

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Buying a house, a car or another big-ticket item requires good credit. The problem is, improving your credit score can take up to a year if you employ traditional methods. If you want to improve your standing in the short term, here are a few quick fixes that will help increase your credit score by as much as 30 points.

Instructions

Look for duplicate entries on your credit report. Removing a duplicate account can increase your score by as much as 14 points.

Request the removal of negative credit report items on accounts that have been inactive for more than seven years. Email the respective credit reporting agency (Experian, TransUnion or Equifax) and provide any account information that you have available to support your claim.

Red flag accounts that you don't recognize. For these accounts, request proof of the account holder's identity from the collection agencies in question. You can do this by filing a dispute with the credit reporting agency.

Check your payment history. Look for payments that were made on time but reported to the credit bureau as late. For this type of dispute, you'll need copies of your bank statements and credit card bills from that time period to verify that you made the payment on time.

Look for paid accounts that are still labeled as "outstanding." Again, you will be required to submit notices of final payments and bank records to verify that you paid off the balance in question.

Request a credit increase for all of your existing accounts that are in good standing. While this might sound counter intuitive, it actually increases your debt-to-income ratio, which in turn raises your credit score.

Pay down credit cards that are near their limits. Consider transferring your maxed-out cards to a low-interest card that carries a higher limit.

Stop applying for new credit cards. Every time you open a new account, your credit score is docked.

What Can I Do to Fix My Really Bad Credit?

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All types of debt and credit missteps can get you in trouble. Some people fall victim to charging up credit cards, while others conveniently forget to put the check in the mail and go past due on bills. Regardless of the reason, a not-so-good or downright bad credit file often results from poor financial management. No matter how bad the situation seems, you can take steps toward improvement.

You need to know where you stand to properly begin the task of fixing your dismal credit report. Secure a free copy of your credit report from one or more of the three major credit reporting agencies, Equifax, Experian and TransUnion. Federal law entitles you to one free copy from each annually. Go to the Annual Credit Report website to request yours. If you want your credit score, you need to pay an additional fee directly to one of the credit bureaus when you retrieve your free report, as of January 2011.

Scour your credit report for errors. Sometimes bad credit -- or at least some of the problems -- ends up being somebody else's fault. All kinds of inaccuracies can appear ranging from the serious like somebody trying to steal your identity to the relatively mundane, yet erroneous reporting of a late credit card payment. In any case, when you view your report, follow the prompts to dispute errors. You can also write letters to the bureau; make sure to include any account numbers and your name and social security number. The appropriate credit bureau will get back to you after reviewing your request.

It sounds obvious, but you've got to stop spending. If you have really bad credit, the upside of likely not being able to obtain new credit is that you won't run up any more debt. If, however, you have room to spend on credit cards, resist the urge. The percentage of credit used versus the income you bring in (debt-to-income ratio) is a major factor in determining your credit score.

Pay down as much of your debt as you possibly can. And don't be late. Two of the biggest factors holding back many borrowers' credit reports are high debt levels, particularly on credit cards and late payments. Focus on high interest rate debt first or use another method, such as hitting the largest or smallest balance first.

When you pick a debt to tackle, pay more than the minimum. It doesn't have to be a credit card. If you have an overwhelming auto, student or personal loan holding you back, tackle it first. Make more than the minimum payment; credit cards illustrate the power of doing this best. If you make a $100 monthly minimum payment on a $5,000 balance at a 19.99 percent interest rate, it will take you just under nine years to bring the balance to zero. Just double the payment and you'll get ride of the debt in less than three years.

A key factor impacting your credit can be old delinquencies such as medical bills. Your credit report should have contact information for any old debt, so contact them and find out how you can resolve the old debt. It will then be marked as "Paid" on your report and will help rebuild your credit score.

Can My Credit Affect Someone Else in My Household?

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You understandably have a deep desire to work out your credit problems and financial situation privately, but if you live with other people, the matter can become complicated. Under most circumstances, your credit history is your personal business and part of an exclusive, confidential relationship between you and your creditors. The credit of your household members won't be affected by your credit, that is, unless your poor payment habits extend to accounts that you share with housemates.

The person most likely to be affected by your credit is your spouse. Although credit is a contract between you and your creditor, the two of you won't be able to jointly purchase important items like a house or a car if you have bad credit. Although not legally bound to, your spouse will likely have to take up the slack financially while you are cleaning up your credit. The strain on your finances can jeopardize your spouse's credit, if for example, there's not enough money left over each month to pay all the bills. In addition, should you divorce in a community property state, a judge could require one spouse to pay the debts incurred by another during the marriage.

If you have a son or daughter who is about to go off to college, your credit could negatively affect your child's ability to get a student loan. For example, the federal Parent PLUS loan program, in which parents borrow money for the cost of their children's education, requires that applicants have no adverse credit history. Given the high cost of a college education, parent loans are becoming increasingly important.

Your bad credit will make it difficult to go in with your housemates on joint purchases on credit. In addition, if you pool money in a bank account, for example, from which you pay your joint bills, that account can be subject to wage garnishment if a creditor seeks a judgment against you. In addition, it's common for cohabitating couples to put each other on their credit accounts. If you make those credit accounts joint-user accounts --- as opposed to authorized-user accounts --- your payment habits will be reflected on your loved one's credit report.

If you are in a roommate situation, your bad credit can cause embarrassing problems. For example, if you are going after a lease in both of your names, you may be charged a higher deposit because of your credit. Some financial advisors say it's important to do a credit check on potential roommates, because bill paying habits may reflect how responsible that person is. You don't want someone who will skip out on a lease, neglect to pay a month's rent because of overspending the month before or allow utility bills to go unpaid. If you don't pay any of the bills that may be joint accounts, landlords and utility companies can hand over a delinquent account to a bill collector, at which point your roommate may be on the hook for bills you were supposed to pay.

Who Is Responsible for Credit Cards If a Parent Dies?

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After the tragic loss of a parent, money is often the furthest thing from your mind. But if your parent had active credit card accounts at the time of her death, you may be worried that you are responsible for any debt. Fortunately, in most cases you aren't responsible for credit cards after a parent dies.

Some credit cards allow two people to use the card at the same time with both names on the account. Although these joint accounts are normally held by spouses, they can also work for a parent and child. If you hold a credit card account jointly with a parent and the parent dies, the credit card debt transfers to you, the other joint credit card holder. You would then be responsible for paying off the debt as if the credit card was exclusively your own.

If your parent wasn't able to get his own credit card due to bad credit, you may have had to act as a cosigner to help him get the card. Similarly to a joint account holder, you would still be accountable for the debt after the parent's death. This is the chance you take when becoming a cosigner on an account.

If you weren't a joint account holder or cosigner to your parent's credit card, you are not liable for the debt after death. In this case, the money owed to the credit card company is taken from the parent's estate. For instance, if your mother dies and has enough money in total estate funds after death, the creditor can take the total amount of the debt after funeral expenses have been paid, according to BCSAlliance.com. This is only the case if there's enough money left in the estate.

There may be a chance that your parent's estate doesn't fully cover the debt incurred with the credit card. When this happens, the remaining estate amount after funeral expenses is divided up equally between all creditors, including credit card debt, though the creditors may not get the total amount they require. In cases where there is no estate money at all, the credit card company will incur a loss. Although they may ask you to pay for your parent's debt, you aren't responsible. If there is an issue, you can contact your parent's executor with any questions about money and the handling of credit card debt.

How Long Does a Satisfied Judgment Stay on Your Credit Report?

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A credit judgment on your credit report can negatively impact your ability to get loans and various other types of financing. Derogatory items on a credit report have long-term consequences. But if you receive a judgment on your personal credit file, you have the option of paying the judgment and satisfying the debt. Even after you pay a judgment, the information can remain on your credit report.

If a creditor or lender files a suit, you can appear in court to dispute the lawsuit. But if a judge determines that you owe the money, he places a judgment on your credit file. Consequences of a credit judgment include a decrease in your credit score, more credit rejections and higher interest rates on your loans.

Ignoring an unpaid judgment on your credit report and refusing to pay or satisfy this debt harms your credit history. Benefits to satisfying a judgment, or paying the debt, include the ability to qualify for future loans. Future lenders checking your credit history will see the judgment. However, after satisfying the debt, your previous creditor or lender should update your report and include the note, "paid or satisfied judgment." This provides evidence that you paid the creditor, and this responsible action can open the door to new financing opportunities.

Paying or satisfying a judgment doesn't guarantee instant removal. In fact, a satisfied judgment can remain on your credit file for seven years. Even though a paid judgment stays on your report, the fact that you paid the debt is advantageous when applying for mortgages and auto loans. You can include an explanation on your credit report highlighting the reason for the judgment such as lack of income from a job loss or illness. Knowing the cause of past credit issues can persuade a lender to approve your application.

If you've already paid a judgment, you can request the removal of this negative item. Understand however, your creditor or lender doesn't have to remove the judgment. It never hurts to ask, though.

What Are the Effects of Debt Consolidation on Credit?

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Debt consolidation is a common way for many consumers to lower the impact of monthly bills, yet many people are concerned about the effect such consolidation will have on their credit score. While there are legitimate questions and some negative effects, consolidating debt can also have a positive impact on your score. Before beginning on a debt consolidation program, you'll need to understand the implications.

One of the best effects from debt consolidation is that, to lenders, your accounts will appear paid-off. Even though you have simply moved your existing credit into a new credit account, your credit score can be impacted in a positive way. A new credit account could come in the form of a home equity loan or line of credit or from a credit counseling firm. If you decide to consolidate your debt through a service, that activity will be noted on your credit report. Many consumers worry about having the use of a counseling service recorded on their credit report but, according to the Fair Isaac Corporation, even if you use a credit counseling service and it is reported, "you should not have any impact on your FICO score." More importantly, though, if you pay off your new credit quickly and make payments consistently and on time, that will have an even better impact on your score.

A very important aspect of debt consolidation is what you do after you have made your decision. If you have consolidated with a home equity loan, for example, you'll need to make payments on the new account on time and any way you can accelerate your payment will be a benefit. Conversely, if you are consistently late on payments, your score will suffer. If you have decided to use a credit counselor to manage your debt, you'll need to make sure your payments are being paid on time and in full by the firm or person you have hired. If your counselor is delinquent on payments, your score will suffer.

Consumers are often temped by debt settlement programs that offer to cut your bills significantly. Those enrolled in debt settlement deals do see a decrease in their bills but what they have done is defaulted on their debt. Once you have defaulted, your credit score will be negatively impacted and it will take a long course of good credit history to lift your score. If you default, you might also find yourself having difficulty getting new credit. According to Bankrate.com, if you are enrolled in a debt settlement or debt management program, you might find credit card companies shying away from you, seeing you as a risk for payment of future credit you might accumulate.

When consolidating debt, the temptation is to close out the cards that got you into trouble in the first place. However, closing out these cards after you have consolidated may impact your score negatively. If you are planning to cut up your credit cards, choose the newest cards first. Your oldest accounts will provide you with the longest credit history and, hopefully, that history will be mainly good. You'll also want to avoid transferring balances from one credit card to another to take advantage of introductory or promotional rates. Changing credit cards every six months or less also raises red flags. It's best to pay off your cards on a regular schedule and only close out debts after you have paid off debt so you don't give the appearance of maxing out your credit.

Debt Consolidation Techniques

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Individuals who want to simplify their debts and reduce their balances more quickly often consider a debt consolidation. Consolidations lump all your debts into one loan, wherein you decrease your number of monthly payments. Those who consolidate their debts aim to receive a lower interest rate to pay less interest a month and reduce the principal on debts faster. Consolidation methods vary, and there are options to suit everyone.

Taking out a home equity loan with your mortgage lender lets you borrow cash from your equity. Once you have the cash in hand, you can use funds to accomplish numerous purposes such as consolidating all your outstanding balances. Lenders will review your list of debts, and after approving your request for a home equity loan or line of credit, you're able to pay off your credit card balances, auto loans and other debts.

Because home equity loans put your home at risk (lenders can foreclose on your property if you default on a home equity loan), you may prefer safer options when deciding to consolidate your debts. Banks do issue debt consolidation loans. But like home equity loans, you'll need collateral to get approved for such financing. Rather than use your home's equity as collateral, talk to potential lenders about using a car title or other personal property to secure the loan.

A low interest rate credit card presents an opportunity to consolidate your debts. Instead of paying 18 percent or more on several credit cards, apply for a low or zero percent interest card, and transfer all your balance to the lower rate. Not only will you simplify your monthly finances, but with a lower rate, you'll save money on interest payments each month. Pay more than the minimum each month and you can get rid of the debt faster.

Not everyone is in a position to get a home equity loan, debt consolidation loan or balance transfer. These options benefit property owners and persons with an acceptable credit history. Those who don't qualify for the above options can seek help from professional non-profit organizations that specialize in debt and credit relief. Companies of this nature do not approve or issue loans. Rather, they re-work loans and debt to create lower payments by persuading creditors to reduce the interest rate. While working with a debt consolidation agency they receive one monthly payment from you each month. They'll take this payment and use the funds to pay your individual credit accounts until they're paid off.

What Happens After a Leased Car Is Repossessed?

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Leasing a vehicle can be an effective way to drive a nicer vehicle than you could afford through a loan. Your payments are based on the depreciation of the car over the time you drive it, rather than on the entire sale price of the car. However, if you fail to make your lease payments, the lessor may repossess the vehicle. Several events typically occur following the repossession of a leased vehicle.

After the repossession company takes your vehicle on behalf of the lender, it will typically transport the vehicle to a storage facility. The lessor will send you a letter stating that it has repossessed the car and telling you how you can recover the vehicle, if recovery is permitted by your state. Most states provide a statutory right of redemption period, during which you can recover the vehicle by paying the entire market value of the car, plus repossession costs and any other fees imposed by the lessor. For example, Ohio provides a 20-day right of redemption.

If you do not redeem the vehicle within the statutory time frame provided by your state, the lessor may keep the repossessed vehicle for its own use or sell it through a private sale or public auction. In most cases, the lessor will opt to sell the vehicle to recover a portion of its expenses. Depending on your state's laws, the lessor may be required to notify you of the date, time and location of sale if it intends to sell the car at a public auction.

When the lessor sells the repossessed car through a private sale or at a public auction, it may not obtain a sale price sufficient to cover its costs. The lender will send you an invoice for the deficiency, which represents the amount of your unpaid lease payments plus repossession fees, storage costs, auction fees and other expenses incurred by the lessor in repossessing and selling the vehicle. It will then usually send your account to a third-party collection agency to collect the deficiency if you do not pay immediately.

If you do not pay the deficiency amount, the lessor may file a lawsuit against you in civil court to obtain a judgment against you. This gives the lessor rights to additional collection strategies, which may include garnishment of your earnings, seizure of your bank account balances and sale of your personal property to satisfy your deficiency.

Does a Spouse Have to Claim a Cancellation of Debt of the Deceased?

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It can be easy to be overcome after a loved one's death, but neglect of important financial details of the decedent's estate may leave the survivors paying more than they should. In many cases, debts incurred by the deceased individual during his lifetime are canceled upon death and do not become the debt of the surviving spouse. Surviving spouses should follow the probate process properly to satisfy or cancel debts.

People often die with outstanding credit card bills, loan payments or other forms of outstanding debt. The only types of debts automatically forgiven upon the death of the debtor are federally backed student loans. In most states, however, these debts cannot automatically be assigned to a surviving spouse or other family members unless those debts were incurred through a joint account. Creditors do have the legal recourse to collect their outstanding debts during the court-ordered probate process.

Probate is the court process through which a decedent's estate is legally transferred to surviving heirs. This occurs whether the debtor passed away with a will or intestate, meaning "without a will." The probate process is administered by an estate representative who manages the decedent's assets after they are placed into an estate account. Although the exact process varies from state to state, an estate representative must satisfy all creditor claims on outstanding debts owed by the deceased person before transferring the remaining assets among the heirs. Joint accounts held by the decedent with his spouse are not subject to probate. Creditors have a window of opportunity during which to make claims against the estate, after which time new claims on the estate become null and void.

States that observe community property laws place more of the responsibility of satisfying a deceased person's debts on the spouse's shoulders. The nine community property states in America are Alaska, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin. In these states, credit cards and other debt accounts opened during a marriage are considered joint accounts, even if they are solely in the decedent's name. Therefore, these debts become the debt of the spouse upon the main account holder's death.

Creditor claims that cannot be satisfied during probate are typically canceled in the other 41 states that don't observe community property laws. In these cases, creditors must file a Form 1099-C, "Cancellation of Debt," with the Internal Revenue Service. This debt cancellation is considered taxable income under IRS rules and is typically added to the final tax return for the deceased individual. Form 1099-Cs cannot be issued for forgiven loans that are less than $600.

Can Pension Income Be Garnished in Virginia?

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If you owe money to a creditor, he may be able to obtain a judgment against you, which he can use to garnish your wages and other income. However, if you receive certain types of pension income, it may be exempt from garnishment in most states, including Virginia.

The Fair Debt Collection Practices Act protects most federal benefits from garnishment. Under this law, Social Security retirement benefits, federal retirement benefits, civil service retirement benefits, military retirement benefits, railroad retirement benefits and foreign service retirement benefits aren't subject to garnishment for most debts in any state. However, if you have certain types of debt, your federal benefits may be subject to garnishment. These debts include unpaid child support, unpaid spousal maintenance, federal and state tax debts and delinquent student loans.

Because the Fair Debt Collection Practices Act protects benefits in all states, Virginia must comply with it. However, Virginia also protects other types of retirement benefits from garnishment for debts. Under Virginia law, an individual's interest in a retirement plan is exempt from garnishment by most creditors regardless of whether the individual is a participant, beneficiary or alternate payee. However, Virginia laws don't protect retirement plans from garnishment for child support or spousal maintenance, garnishment under a qualified domestic relations order or garnishment to repay tax debts.

If a retirement plan provides an annual benefit that exceeds $25,000, the excess amount isn't exempt from garnishment for debts in Virginia. If an individual has more than one retirement plan, the portion of the combined annual benefit that exceeds $25,000 is subject to garnishment. If two married individuals have interest in the same retirement plan and are subject to garnishment for the same debt, the annual benefit that exceeds $25,000 is still subject to garnishment even though the plan belongs to more than one debtor.

To exempt your income from garnishment in Virginia, you must complete the Request for Hearing Garnishment Exemption Claim. On this form, you must indicate which types of exemptions you can claim. You can request to exempt certain types of retirement income by checking the box on line 20. After you submit the form, you must attend a hearing to validate your claims.

How to Remove Negative Credit Older Than 7 Years

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The FCRA (Fair Credit Reporting Act) gives you the right, as a consumer, to ensure that the information on your credit report is correct and not outdated. There is a portion of the FCRA that is referred to as the Statue Of Limitations. Under the Statue Of Limitations, any accounts on your credit report that has been charged off or sent to collections and has been inactive for more than seven years has to be removed. The credit reporting bureau does not always automatically remove these outdated negative items from your report. In that case, you can take action to get the negative items removed.

Instructions

Order a copy of your credit report from all three of the credit reporting bureaus. You can do this for free via the Annual Credit Report website. If you have already received a free annual report you will have to order your report directly through the credit bureaus, Equifax, TransUnion, and Experian.

Look through your credit report to locate all of the negative items. Look at the date of Last Activity for each negative item that is found. The date the account was opened is insignificant in this matter.

Mark each negative item that has not had any activity for seven or more years. By marking the items, you can easily reference them later.

Log a dispute with the credit reporting bureau that is showing the outdated information. You can log a dispute directly through the credit bureau's website, by sending a dispute letter via postal mail, or by telephoning the credit bureau directly.

In your dispute you need to indicate your credit report number which can be found at the top of your credit report. You must also list the item number or the account information that is being disputed, and why it is being disputed. In your case, you will advise the credit bureau that the item is being disputed because the information is outdated. In your dispute, request that the credit bureau remove the outdated information from your report.

Allow 30 days to pass. This is the amount of time the credit bureau has to investigate your dispute and remove the outdated information from your report. If you submitted your dispute online, you can also check the status of your dispute through the credit bureau's website.

Order another copy of your credit report to ensure that the information has been removed. As a consumer, you have a right to a free copy of your credit report after you have logged a dispute to ensure that your dispute was resolved.

How to Tell If an Attorney & Consolidate Debt Program Is Legitimate

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Credit service organizations promising to erase bad credit, judgments and bankruptcies from credit reports may be making incomplete or inaccurate claims to attract your business. Rarely can a credit service organization erase a consumer's credit history without first completing a variety of steps, which still does not guarantee a clean credit report. Combat credit service companies making false claims by learning the ways in which you can check if an attorney and consolidate debt program is legitimate.

Instructions

Obtain proof of licensure. A fully licensed and legally operating attorney or debt consolidation company will hold a Certificate of Authority to do business within your state. Request a copy of the certificate or contact the company directly to ask if it is licensed to do business in your state.

Contact your state's attorney general's office by phone or mail. The Attorney General can verify if an attorney or debt consolidation company is licensed to operate in your state, as well as document consumer complaints. Ask if the Attorney General has investigated the company for illegal operating practices.

Contact the Better Business Bureau. Inquire about the attorney or debt consolidation's favorability rating among consumers. A high volume of complaints will produce a low rating, which may be indicative of poor operating practices. Read the company's report to learn the exact reasons for each consumer complaint.

Contact a consumer rights organization in your state. Inquire about recent and past investigations against the attorney or debt consolidation company, as well as consumer complaints of abuse and low quality financial education and counseling services. Go to Consumer Action's website or call the Consumer Action Hotline at 415-777-9635 to file a complaint or find a consumer rights organization near you.

Ask the attorney or debt consolidation company if it is a member of the National Association of Certified Credit Counselors (NACCC). Members of the association are subject to strict compliance rules and frequent checks. The National Foundation of Credit Counseling is an alternative non-profit organization representing member agencies (see Resources). Contact the NACCC by phone at 800-388-2227 to confirm the attorney or debt consolidation company's membership with the organization.

Debt Consolidation Options for Non-Homeowners

2:39 AM No comments

The facts are crystal clear: a lot of Americans are struggling financially. The recession has affected millions of consumers. Many consumers find themselves either underemployed or unemployed while facing a mountain of debt. With high prices for essentials, is it any wonder that many people are falling behind on their monthly obligations? And not all of those struggling debtors are homeowners. So, what's a conscientious, non-homeowner supposed to do when he's drowning in debt?

To fill the void since the economic meltdown, an old industry with a new twist is emerging: debt consolidation companies. Unfortunately, many of these companies make money from unsuspecting consumers who simply need guidance from knowledgeable, honest companies to assist them with their financial burdens. The good news: credible, honest debt consolidation companies can help non-homeowners consolidate their backbreaking financial obligations.

First, consumers must determine if they need to consolidate their debts. If you consistently are 30 days or more late on your obligations, debt consolidation help is recommended. Another rule of thumb: if you owe more than you earn, you're probably in economic hot water.

Next, consult the Yellow Pages or the internet for the names of debt consolidation companies. Check with your local Better Business Bureau for complaints against these companies. It's also a good idea to contact your State Attorney General's Office and ask what types of licenses, certifications and/or accreditations your state requires for debt consolidation companies. Investigate those companies to ensure they are reputable.

Hire a company with a sterling reputation to assist you with a very difficult problem. Bankruptcy is not an option and should only be considered once all other options have been eliminated. Your credit rating and self-esteem will be restored once a viable economic plan is put into action.

Statute of Limitation on Credit Cards

5:35 PM No comments

Creditors cannot collect credit card debt after the time to do so under the statute of limitations has expired. The U.S. Federal Trade Commission also refers to this type of debt limitation as time-barred debt. The downside for debtors is that the statute of limitations on credit card debt is not a silver bullet and comes with several caveats and potential negative consequences such as poor credit.

Time and debt collection are regulated by state statutes of limitations.

The statute of limitations on credit card debt varies by state. For example, in Virginia, the time credit card debt is legally recognized under the statute of limitations is only three years, but in Rhode Island it is 10 years. Three factors can influence which states' statute of limitations applies; specifically, the domicile of the debtor, the location of the creditor and the terms of agreement signed by the debtor.

Since both federal and state laws have statutes of limitations, many cases are non-exclusive to courts within each jurisdiction. For example, a debt collector can be sued in state or federal court, according to Expert Law. Additionally, the Fair Debt Collection Practices Act states that a credit card debt collector may not collect debt via lawsuit once the applicable statute of limitations takes affect. This same law also circumscribes how a creditor may seek out indemnification for credit card debt owed.

The U.S. Federal Trade Commission points out non-payment of credit card debt stays on credit reports for seven years or longer. This is the case even if the statute of limitations no longer requires the debt to be paid. A record of unpaid debt also affects credit scores that lenders use to determine loan eligibility and interest rates. Despite statutes of limitations' restrictions, a debt can continue to exist and may incur continued debt-collection activities.

Credit card payments reset statutory limitations.

Creditors can legally continue to collect debt if certain conditions nullify or reset a state statute of limitations on debt. For example, if after six years and 11 months a payment is made on an unpaid credit card debt, the time established by the statute of limitations begins again. Another exception to statutes of limitations is the filing of bankruptcy. Bankruptcy court decisions can either absolve or restructure debt, even if the statute of limitations has not led to credit card debt being time-barred.

The New York City Department of Consumer Affairs and other consumer protection agencies recommend keeping organized credit records and correspondence. Doing so verifies both the validity of collection efforts and applicability of the statute of limitations. Reading and assessing a credit card agreement and then signing it on paper, rather than via electronic contract, can influence which state statute of limitations applies to the credit card debt.

How to Find a Number Before a Percentage Markup Has Been Added

6:53 AM No comments

Retail shops and other merchants will sell merchandise after it has been marked up by a certain percentage. Merchandise is usually purchased at one price and then marked up and sold at another price. This process allows the retail outlet to make a profit. Profit is represented by the difference between the selling price and the purchase price. To find an amount before a percentage markup has been added, you will need to put together a formula using the information you have.

Instructions

List the facts and variables you have at your disposal. Write down all of the information you have regarding this problem. If you are looking for a number before a markup is added, you will need to know what percent the number will be marked up and the amount of the markup. For example, if a number is going to be marked up six percent and the amount of the markup is $250, you can calculate the purchase price.

Take the information and put it into an equation. 6 percent of X = $250. You know that some number when marked up 6 percent will increase by $250. Divide $250 by 6 percent or .06 to equal $4,166. The number before the markup is $4,166.

Add the markup amount to the number you found. To get the markup total, add $4,166 to $250 to learn the number after the markup, which is $4,416. The retailer's purchase price would be $4,166 and the selling price would be $4,416.

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Wednesday, April 30, 2003

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Thursday, April 24, 2003

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Wednesday, April 23, 2003

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Tuesday, April 22, 2003

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Monday, April 21, 2003

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Sunday, April 20, 2003