May 2003 ~ Credit And Debt Management

Saturday, May 31, 2003

About Credit Card Debt Loans

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Debt consolidation loans are another name for what is commonly thought of as credit card debt loans, because that is their primary purpose--to help people consolidate and rectify the debt that accumulates from personal spending.

The difference between debt consolidation loans (or loans in general) and credit card debt is that one is secured and the other is not. Essentially, a loan is usually secured against your assets, while credit card lines of credit are not, so you risk losing your assets (usually your house) and a loan, but there's relatively little risk, other than destroying your credit, with credit card debt loans.

A debt consolidation loan serves to do what its name suggests: take several different, higher interest loans of credit and replace them with a single, low-interest, fixed-rate loan to pay them all off. Because these lines are secured, the interest rates can be lower because there is less risk involved for the bank.

While this can be a fantastic option for replacing high-interest debt that has gotten out of control, keep in mind that it is a loan that needs repayment, the interest rate will still be substantial, and it will be held against your assets, which means that unlike defaulting on a credit card, defaulting on the loan will cost you your home.

For many this is billed as a one-hit wonder miracle bailout for debt, but it's simply not the case. It is still a substantial loan, and generally of considerable size so that you won't be saving very much out of pocket. Often your best bet is to actually barter with your credit card company to lower rates.

Debt consolidation loans can be an effective tool when used appropriately, but keep in mind that a secured loan with continued spending beyond your means will land you straight into a destroyed credit portfolio and bankruptcy proceedings. Approach debt consolidation with the advice of a credit management adviser and a commitment to more responsible spending.

Can Creditors Close a Good-Standing Account?

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Consumers who keep their credit cards in good standing may assume they're not at risk of having their accounts canceled by their card issuer. However, a credit card company and a cardholder have competing interests when it comes to protecting their finances, which can cause some cardholders to lose their accounts.

The U.S. Equal Credit Opportunity Act (ECOA) gives credit card companies the right to close accounts that cardholders aren't using. Furthermore, the ECOA doesn't require card issuers to give cardholders advance notice before closing their unused accounts. Even longtime customers whose accounts are in good standing may have unused credit cards canceled by a card issuer if the issuer sees the unused account as a potential credit risk for the company.

Sometimes cardholders who haven't used a credit card for a long time only begin using it because they've lost their job or have unexpected expenses to pay. That presents a risk to the card issuer if a customer's financial situation makes it difficult or impossible to pay off the credit card charges. Nonetheless, a 2009 "New York Times" article on credit card industry losses notes that some cardholders who have unused accounts in good standing keep them open simply to bolster their credit scores. For instance, the length of time a consumer maintains credit and loan accounts in good standing affects about 15 percent of a FICO credit score. The older an account, the better it is for a consumer's score.

Creditors also may close inactive accounts that have large credit lines to offer more credit to other customers. Canceling large, unused credit lines helps a card issuer protect the company's profits. For example, closing an inactive account with a $20,000 credit line frees the issuer to offer that large credit line to another qualifying customer who may use it. The issuer would then profit from any interest earned on the account balance.

You can avoid having a credit card closed for inactivity by using it at least one time per month. Keep yourself from accumulating additional debt by charging things to your card that you regularly buy. Avoid racking up interest charges by paying off the card balance each month. You also should keep track of your card issuer's terms. Some issuers change their terms to charge cardholders annual fees or membership fees just for the privilege of having a credit card.

Debt Repair Programs

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The simplest way to repair your debt is simply to pay it off. Consider ranking your debts starting from the smallest to the largest, and paying them off one by one, even if that means taking a second job or cutting back on unnecessary expenses. If that doesn't work for you, several other options are available, but most will require that you pay back at least some of what you owe, and the process could take several years to complete.

Bankruptcy is the most extreme form of debt repair. With Chapter 7 bankruptcy you can eliminate all your unsecured debt--such as credit card debt--in about four months. There are income limits for applying for Chapter 7 and they vary from state to state. The best candidates for Chapter 7 are people who have modest income and do not own real estate. Others can qualify for Chapter 13 bankruptcy, which requires you to make payments to your creditors over a period of three to five years. After that period, much of your remaining debt will be discharged, or eliminated. You can file for bankruptcy on your own, but the process can be complicated. Most bankruptcy attorneys will offer a free initial consultation, and that could be valuable even if you plan to handle the filing on your own.

Debt management plans are typically directed by nonprofit credit counseling agencies, including those affiliated with Consumer Credit Counseling Services (CCCS). The agency will evaluate your income and expenses before placing you on a budget as part of a four-year plan to repair your debt--and your credit. You'll send one check to the agency each month covering all your bills. The agency then will send individual checks to your creditors, and also ask them to lower interest rates, waive late fees and reduce balances by reversing some finance charges. The goal is for you to emerge from the plan with four years of on-time payments, less debt and an improved credit score. CCCS agencies are located nationwide and can be found in your telephone directory.

Debt settlement allows you to pay off debt by offering less than the full amount owed. Credit card companies and other creditors often will agree to settlement offers after you fall four or five months behind. According to the New York Times, debt collectors sometimes are willing to forgive up to 80 percent of what you owe, although settlements for about half the balance due are more common. The companies would rather settle with you than sell your account to debt collection companies, often for pennies on the dollar. Firms specializing in debt settlement will represent you for a fee, but the Federal Trade Commission says many of the companies are untrustworthy and that you should handle your own debt settlement.

How to Compose a Financial Hardship Letter Template

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A financial hardship letter template is a tool to help you draft a proper explanation of your inability to keep payments. This letter template can help stop foreclosure on your home or restore credit if you have suffered a financial hardship.

Instructions

Choose a sample format to pattern your letter template. You can use sample letters of financial hardship found on the internet or create your own in a word document program.

List the borrowers name and property address at the top of your financial hardship letter template.

Format the top of your template by addressing your financial hardship letter to your lender or contact person, followed by the name of the lending company ,address, and loan information.

Also include name of the financial institution, bank address, and loan number in your letter template.

Decide on a resolution request such as short sell or loan modification that best meets your financial hardship and format it in an RE: statement at the beginning of your template indicating that request.

Then start with a letter statement explaining your specific circumstance of financial hardship and the main reason you are unable to make payment at the present time.

Next state your future payment intentions in your template and ask for help by restating your request to the financial lender.

Now explain that if this hardship request is granted you would be able to make payments and achieve your financial goal( to keep house, car, restore credit, etc.)

As the final statement on your hardship letter state your anticipation of the lender working with you to meet your common objective and resume payment again.

Illinois Money Lender Requirements

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The Illinois Attorney General's Office has the legal authority to investigate consumers' complaints filed against creditors who violate the Illinois anti-predatory loan acts. Lenders, consumer credit agencies and collection agencies face criminal and civil penalties for violating the Illinois consumer protection laws. Furthermore, the federal Fair Debt Collection Practices Act, the Illinois Consumer Fraud and Deceptive Practices Act and the Illinois Collection Agency Act establish the legal rights Illinois consumers have against deceptive debt collection practices.

In an effort to protect Illinois residents against advance-fee loan lenders, the Illinois legislature enacted consumer protection laws prohibiting lenders from charging borrowers advance fees prior to entering into loan agreements with them. The Illinois Attorney General's Office works with the Canadian government to prosecute advance-fee loan lenders who conduct business illegally in Illinois but are registered in Canada. The Illinois Military Lending Act protects active-duty military service members against tax-refund loan lenders who charge more than 36 percent on their loans in exchange for their tax refund-anticipation loans.

The Illinois Payday Loan Reform Act of 2005 applies to payday loans after December 7, 2005. According to the act, payday loan lenders cannot enter into business transactions with consumers for more than 45 days and must wait at least seven days before renewing or reissuing subsequent loans.

Payday lenders are required to verify consumers' gross monthly incomes before extending loans to them. They must ensure their loans are less than 25 percent or $1,000, cannot charge more than $15.50 for every $100 loaned and must offer payday loan repayment plans to consumers who are more than 35 days in debt. Additionally, payday loan lenders must defer their collection efforts against military service members deployed for active duty.

Illinois law protects consumers against spot-delivery loan lenders who are unable to secure financing. Spot-delivery lenders allow car buyers to purchase cars without performing credit checks, and after buyers take delivery of their cars, spot-delivery lenders may reject their loan applications after promising them financing at negotiated interest rates. Feeling pressured to negotiate their loans under different terms, borrowers scramble to find cosigners or agree to different loan terms. Under Illinois law, borrowers have legal rights to return their vehicles when spot-delivery lenders fail to secure financing as promised. After buyers return their vehicles, lenders must return their down payments and trade-in vehicles.

Debt collectors must comply with Fair Debt Collection Practices Act, the Illinois Consumer Fraud and Deceptive Practices Act and the Illinois Collection Agency Act. Under the three laws, they cannot engage in harassing or unfair collection practices. Although the regulations provide extensive protection to consumers, several important aspects include the prohibitions placed on creditors' conduct. Creditors and third-party credit agencies cannot use threats of violence or false threats against debtors. Furthermore, they may not contact consumers after 9 p.m. or before 8 a.m., unless they obtain specific permission to call them during these hours.

Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

How to Avoid Paying Late Fees

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Late fees are never fun to pay. Think of all the shoes, dinners, movies and computer games you could have purchased with money that, instead, has gone toward late fees over the years. Being charged late fees on bills that are overdue is like adding insult to injury. Not only do you have to pay a bill, but you now have a late fee and it could have an adverse affect on your credit.

Instructions

Store your bills in a visible place that you access daily. Being able to locate bills and write out checks for them is important when trying to avoid late fees. Store your bills on an envelope rack on your desk, or any other visible filing system.

Update your calendar the moment you receive a bill in the mail. Whether you prefer electronic calendars and reminders or paper desk calendars, you must track your bill due dates. Put a note on your calendar that the bill is due on BOTH the actual due date and a date one week prior. The day one week prior is when you should actually mail your bill.

Buy Forever stamps. There is nothing more frustrating that having a bill returned in the mail because there was not enough postage attached. Not only will this earn you a late fee, but it will result in you having to visit the post office. Instead, buy Forever stamps so that when rates change, your stamps are still good.

Sign up for automatic drafting of your bills. You can download forms online or call each of the companies that you pay monthly bills to. They should be able to set up an automatic draft from your bank account on a certain day per month. This way, your payment is always on time, and you eliminate the need for stamps.

Pay bills in advance. There are certain bills like auto insurance and homeowners insurance that can be paid in advance. You can pay them three, six or 12 months in advance and save yourself the hassle of mailing out monthly payments Additionally, many companies charge a surcharge when you pay monthly so you could end up saving money by paying in advance.

What Do I Do When a Collection Agency Won't Settle With Me?

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Debt settlement serves as a staple of the collection industry. Each collection agency, however, employs different policies. Some collection agencies do not offer consumers debt settlement agreements on recently defaulted debts or debts that fall beneath a pre-set amount. Fortunately, you have options if a collection agency refuses to settle your unpaid debt.

The older a debt is, the harder it becomes for debt collectors to recover it. If your original creditor recently charged off the account and sold it to a collection agency, the collection agency will typically attempt to collect the full amount from you before offering you a settlement. Thus, neglecting to pay off the account immediately works in your favor if you are hoping for a settlement. The amount of time you must wait, before the company provides you with a settlement offer, will vary depending on the collection agency's specific policies. While waiting for a settlement places you at greater risk of a lawsuit from the collection agency, a lawsuit is a collection agency's last resort. Most debt collection companies will offer you a debt settlement before filing a lawsuit against you.

If you have the funds available to do so, paying the debt in full is a better option than accepting a settlement. While paying off collection accounts does not help your credit score, it does result in the collection agency reporting to the credit bureaus that you paid off the debt in full. The resulting "paid" notation looks much better to future creditors who review your credit files than if you had settled the debt.

If you ask a debt collection agent for a settlement and he turns you down, call back and speak to a different representative. Because certain collection agencies pay their agents commission on the debts they collect, a debt collector is motivated to get you to pay as much as possible -- and can refuse to offer you a settlement even if doing so is not against company policy. By calling back and speaking with a different representative, you have a higher chance of getting the settlement offer you want. Calling back at the end of the month also increases your chances of receiving an acceptable settlement offer. Debt collector commissions are frequently tabulated on a monthly basis. Thus, if you can pay your settlement in a lump sum, a debt collector has greater incentive to agree to your proposal closer to the end of the month.

Just because a collection agency refuses to settle a debt, it does not mean that the company will not negotiate other aspects of the debt with you. If you pay in full, you have much greater negotiating power. While each collection agency has different regulations in place regarding what aspects of consumer debts it will and will not negotiate, you can request that the company delete the collection account from your credit report in exchange for payment or eliminate any excess interest charges and fees your debt has incurred rather than reducing the balance you owe.

How Debt Consolidation Hurts Your Credit Score

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Debt consolidation programs can seem like a great deal at first. The prospect of bunching up all your loan payments into a single payment, plus paying less each month, make these deals seem too good to believe. Unfortunately, they often are. In the long run, debt consolidation can be more harmful than helpful, and can end up damaging your credit score.

A credit score is a number that represents your potential risk as a borrower. The higher the score, the less risk you represent to a lender; the lower the score, the more risk you pose. Companies that create credit scores use the information in your credit report to come up with the number. Though the exact formulas are trade secrets, your score is based on five key factors: Your payment history, the amount you owe to lenders, how long you've had credit, how many new lines of credit you have and the mix of credit types you use.

When you consolidate debt, you take out a new loan to pay off all the old loans. You are then responsible for paying back the new loan. Like all loans, the debt consolidation loan influences your credit score. In the beginning, even applying for a new loan gets reported and appears on your credit score. This inquiry can slightly lower your score, though this doesn't last long.

If you consolidate your loans and start paying back the debt, you credit score will probably go up. As long as you make regular payments and don't fall behind, your credit score will reflect this positively. However, debt consolidation loans typically allow you to pay less every month by increasing the amount of time it takes to pay back the loan. This ends up requiring you to make more payments, and thus gives you more chances to miss a payment and lower your score.

People who use debt consolidation loans can face difficulties even if they end up paying less money per month to pay the debt. Using a loan to pay off a loan doesn't do a lot to change the lender's behavior, and if the borrower is unable to pay back the new loan, the problem of endless borrowing continues. This in turn lends to lower credit scores, because the borrower is unable to minimize his debt and often fails to make timely payments.

Employer Garnishment

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If you think ignoring a debtor erases your debt, please think again. Creditors may file a civil suit against you in the court of law, and if the judge rules in its favor, the creditor may come after your wages to collect on the debt. Once the court orders your employer to garnish your wages, an employer must deduct from your earnings until the debt has been paid in full.

Different types of debts that you may be garnished. Student loans, child support, bank loans, car loans, credit card accounts and utility accounts are some debts that the court may order your employer garnish your wages to pay back. Your wages are also subjected to be garnished to pay any federal or state taxes you may owe.

The amount employers may garnish from an employee's check is limited under the Consumer Credit Protection Act (CCPA). The garnishment amount may not exceed 25 percent of an employee's wages for that pay period, or an amount of the employee's wages that is 30 times more than the federal minimum wage amount ($7.25). The CCPA does not allow employers to garnish more than the maximum amount regardless of the number of garnishments an employee has against her. Some debts such as federal and state taxes, child support and bankruptcy may require a higher garnishment amount.

According to the U.S. Department of Labor, only 50 percent of an employee's earnings may be garnished if he is supporting another child or a spouse. However, if an employee is not supporting any other person, 60 percent of her wages may be garnished for these debts. An employee that is 12 weeks or more delinquent on paying arrears (back child support); an additional 5 percent of his wages may be garnished by his employer.

Having your wages garnished due to a court order is a private matter. Employers may not disclose this financial information with any non-authorized employees or individuals. Your garnishment has no bearings on your work ethic. The CCPA prevents an employer from discharging an employee because his earnings have been subjected to garnishment due to any debt, no matter how many proceedings brought or levies have been made to collect the debt.

Sanctions and penalties are in place for an employer that violates the court order. Refusing to pay the debt is a violation, as reinstating an employee that was discharged to avoid the garnishment. The court of law is able to criminally prosecute an employer, resulting in a $1,000 fine and possible imprisonment.

Contact the debt collector and make payment arrangements before a judge has the chance to rule on the case. After the court orders your wages to be garnished, you aren't allowed to make a voluntary wage assignment. The amount turned over by an employer is out of your hands, which could have been less per pay period if you would have made the attempt to communicate with your creditor.

Tips to Get Out of Credit Card Debt

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Credit card debt can take years to pay off, especially if you are only making the minimum monthly payment. If you can't even make the minimum payment, your credit score will drop significantly, making it difficult for you to get credit for many years. With careful financial planning and an aggressive payment plan, you can get yourself out of debt more quickly and avoid paying thousands of dollars in interest.

Even if you are making monthly credit card payments, your debt can get even more substantial if you are still using your credit card. Putting more money on your card every month than you are paying off is not a good idea, and neither is using a different card instead. Switch to using cash, checks or a debit card as your payment type for all of your expenses.

To stop using a credit card, you will need to have as much money as you are spending every month. Make a budget that takes into account not only your monthly expenses, such as rent or mortgage, utilities, gas, phone and television bills, insurance, food and credit card payments, but also saving up money for irregular expenses, such as car registration, vacations, Christmas gifts and car repairs. If your budget is not balanced, you need to make more money or spend less money. Categorize expenditures as either essential or non-essential, and consider cutting back to the bare essentials until you are out of credit card debt.

Minimum payments on credit cards are set at levels that are far too low. When paying only the minimum monthly payment on a large balance, most of your payment will go toward paying off the interest, and very little of it will actually pay for the items you charged to your credit card.

Looking at an example can help emphasize the significance of this phenomenon. If your credit card has a balance of $10,000 and an interest rate of 15 percent when you stop using it for purchases and start paying it off at just the minimum monthly payment, the federal reserve repayment calculator estimates that it will take 32 years to finish paying it off, and you will pay $15,580 in interest over those years. If, instead, you make regular monthly payments of $350, you will pay off the entire debt in less than threeyears, and less than $2,500 of your payments will go toward interest. Paying off your credit card debt quickly will save you a lot of money in the long run.

If you just cannot make a budget that will allow you to stop using your card and make the minimum monthly payments, much less make aggressive credit card payments, it is time to think about seeing a credit counselor. Call your credit card company or bank and ask for contact information of a recommended counselor. Work together to figure out the best options for you to get out of credit card debt. Just make sure to not work with a counselor that is not accredited, as you may get scammed and find yourself in more trouble than before.

Credit, Debt and Financial Counseling Help

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Debt is not always a bad thing. Loans and credit cards allow you to purchase big-ticket items like homes, cars or boats that you cannot afford to pay for in a lump sum. You build up your credit history by borrowing and repaying money. Sometimes, consumers get into trouble with excessive use of credit and cannot repay the debt, but financial counseling gives options to put them back on track.

Credit-counseling firms provide financial counseling for people struggling with their bills. The counseling entails looking at your income, assets and debt, and assessing various options to manage your finances. Financial counseling recommendations run the gamut from money management or budgeting classes to debt negotiation and special repayment plans. Financial counseling is usually affordable because many counseling companies are non-profit and get funding from creditors, according to the Better Business Bureau.

Financial counseling referrals are often available from banks, credit unions, colleges or community extension offices, the Federal Trade Commission advises. The National Foundation for Credit Counseling and the Association of Independent Consumer Credit Counseling Agencies are two professional organizations that provide free online or telephone referrals. You do not necessarily have to find a counselor close to your home because many firms offer online counseling or telephone sessions. Screen counseling firms carefully because some exaggerate their services or charge excessive fees. Ask about licensing and employee training, suggests the BBB.

Sometimes financial counseling is not enough to relieve credit and debt problems. Counselors work with creditors to get concessions on your bills, including lower interest and minimum payment requirements, or forgiveness of late payment fees. They then set up and administer your repayment plan, the FTC explains. This clears your debt within a set number of years if you make regular, timely payments. Your creditors may rescind their concessions if you do not pay as agreed.

Federal law requires financial counseling if you opt for bankruptcy. You must work with a financial counselor to explore other potential solutions for your credit and debt problems before you can file your case, advises the FTC. Counseling is mandatory, even if you cannot afford it, as government-approved providers must waive their fees for indigent clients. If you move forward with bankruptcy, you must complete more counseling at the end of the bankruptcy process. This session covers credit and debt management to prepare you for your new start.

How to Fix a Low Credit Report

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Having a low credit score can affect your chances of obtaining additional credit to purchase major items, such as a house or a car. Past credit problems can also hinder you from attaining employment in certain fields. It's important to know what it is in your credit file so you can take the necessary steps to clean up and improve your overall credit. Cleaning up your credit is not an overnight process--it will take some effort on your part--but in the end, you will have accomplished something that will open doors that might have been closed to you.

Instructions

Obtain a copy of your credit report from all three credit bureaus. Through AnnualCreditReports.com, you are entitled to one free credit report from Experian, Equifax, and Transunion every year. You can access this site and fill in the needed information to request your free credit reports, which takes no more than 30 minutes.

Examine your credit reports as you receive them from each bureau in the mail. Make sure to thoroughly go through each entry including your name and addresses listed to make sure they are accurate. Many times there is inaccurate information in your credit report that can adversely affect your overall credit score. Highlight any information that is inaccurate.

Gather all notes and highlights of information that is inaccurate or simply not yours. You will need this in order to dispute the information. You can dispute the inaccuracies online or via the United States Postal Service. Each report will have an address and website to report errors.

Note if you find any collection accounts on your credit report. These can be disputed with the credit bureau and with the collection agency directly; it is best to begin the dispute with the bureau itself. When you dispute information in your credit report, the credit bureau then has 30 days in which to verify the information. If the information cannot be verified, it must be deleted from your report.

Observe very carefully the verifications and changes the credit bureaus make when you receive their report back in the mail. If they verify any collections account, then you will need to contact the collection agency directly. Their addresses will be on the credit report along with the account number.

Look carefully at the age of the collection account on your report. The older it is, the less impact it has on your overall credit score. Newer collection accounts are the ones that are the most damaging to your credit score.

Contact all collection agencies on your credit report so that you can get the latest information on the account. Many times collection agencies will seek a settlement with you, especially if the case involves an older debt. If you are financially able to and you are offered a settlement, it is advantageous to accept the offer.

The Best Debt Reduction Programs

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As debt reduction programs go, there are bad companies who take your money and further wreck your credit and there are good companies who help you find a way out of your debt. This might include credit counselors or bankruptcy attorneys. Then there are software programs that help you find your own way for free. Which program is best partly depends on how deeply in debt you are and how fast you need to get out.

One way to reduce debt is to launch your own debt reduction program with the help of a budget software. Many of these can be purchased for $30 to $60 as of 2011 and help you create a budget that shows where your finances go so you can make adjustments and put more money toward paying debts (see Resources). You may also want a debt payoff calculator such as the one you can download from Vertex42 (see Resources). This helps you figure out a plan for paying off debts such as smallest first or highest interest first, according to which one will save you the most money.

Many organizations offer debt management plans by which the consumer gives them a monthly payment and they pay the consumer's unsecured debts. This is sometimes called debt relief, debt reduction or debt consolidation. Through these agencies, the debts are slowly reduced. Many companies that offer this service are scammers who take big upfront fees and fail to pay creditors. For this kind of debt reduction, MSN Money recommends you find an agency through the Association for Consumer Credit Counseling Agencies or the National Federation of Credit Counseling (see Resources). Their fees are low, and they are accredited by outside agencies.

As a general rule, MSN Money recommends against debt settlement. It is roughly as hard on your credit as a bankruptcy but, unlike Chapter 7 bankruptcy, still leaves you paying a lot of your debt. Debt settlement arrangements pay a fraction of what you owe your creditors. Debt settlement companies often charge around 15 percent of your original debt to settle your debts. If your income is too high to file Chapter 7 or you just decide to go with debt settlement, look at the Federal Trade Commissions guidelines on finding a company (see Resources). This included refusing to guarantee results and belonging to the Better Business Bureau. Check the BBB website for this credential; don't just believe the company.

Bankruptcy is the ultimate debt reduction. With a Chapter 7 bankruptcy, all your debts are forgiven but you must liquidate everything except those things that are exempt, such as necessary automobiles and basic household furniture. With bankruptcy you are unlikely to be able to get any credit for at least seven years. A Chapter 13 bankruptcy allows you to keep your property, but it is a kind of payment plan like a debt management plan, that gets creditors off your back but you still have to repay debts. If you choose bankruptcy, the FTC has guidelines for finding an attorney on its website (see Resources).

How to Get Rid of a Charge Off

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Charge offs can appear on your credit report once a creditor or lender concludes that you have no intentions of paying a delinquent balance. Typically, lenders and creditors submit charge-off information after six months of non-payment. The consequences of a charge off include a drop in credit score and difficulties getting a new credit account or loan. Charge offs tend to remain on reports for seven years. But paying off an account can persuade a lender or creditor to remove this negative item early.

Instructions

Get in contact with the creditor or collection agency that owns the debs. Some creditors and lenders keep records of old debts or charge offs, while others sell the debt to a collection agency that then tries to collect the balance. Speak with the original creditor or lender to see if it still holds the debt. If not, ask for the name and telephone number of the collection agency.

Inquire about how much you owe. Mention your intentions to pay off the charge off, and ask for the balance on the account.

Offer a settlement. If you can't afford to pay off the entire balance, negotiate with the creditor or collection agency to see if it will forgive a percentage of the charged-off debt. Know in advance what you can afford to pay, and then offer this amount to the creditor or collection agency.

Ask the creditor to update your credit report following receipt of your payment. Paying off or settling a charge off does not guarantee the removal of this negative item from your credit report. But if creditors or collection agencies know your intentions, they may respond in kind and remove the charge off after receiving your payment. Discuss this possibility with the creditor or collection agency before sending in your payment.

Check your report a few months later to see if the creditor or agency updated your file. If the creditor or collection agency agrees to remove a charge off once you pay off or settle an old debt, order your report after a few months to confirm the update. Annual Credit Report issues free reports yearly from all three reporting bureaus.

What Happens if Wages Are Garnished?

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When people have their wages garnished, this means that a portion of the money that they are earning from their employers is automatically deducted and goes to pay off outstanding debts that they have accrued. In most cases this is done as a result of a court order, where the person whose wages are being garnished has been taken to court and ordered to undergo this process to pay off her debts. In certain cases (owing federal taxes as an example), a person could potentially have their wages garnished without ever having gone to court.

Having wages garnished can negatively affect a person long after his debts are paid, as wage garnishment is reported on credit reports. This can affect a person's ability to apply for credit cards, open bank accounts, and even in some cases apply for jobs or housing. It is a law in many states that no more than 25 percent of a person's wages can be taken to repay debts.

Having your wages garnished can, in theory, happen for any kind of debt, but there are several kinds of debt that most commonly lead to this. Repaying outstanding child support, for example, can lead to having your wages garnished. Also repaying student loans one has defaulted on, repaying back taxes, and repaying any outstanding court costs are all types of debt that could lead to having your wages garnished.

The Impact of Debt Settlement

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Taking advantage of a debt settlement arrangement offered to you by a creditor can impact you in both positive and negative ways. Although the stress level of owing a debt may be lessened, the settlement itself can have an adverse effect on your credit score. You can take action ahead of time to reduce the negative impact a debt settlement can have on your credit history by negotiating with your creditor.

Debt settlement occurs when a creditor to whom you owe money accepts less than the amount you owe as payment for the debt. Debt settlement is not typically offered to you until you fall behind on payments and are in danger of defaulting on the debt. You can request a debt settlement offer from a creditor at any time prior to this, but the decision of whether or not to extend this privilege belongs to the creditor. Debt settlements are negotiated on a case-by-case basis.

Paying a debt settlement offer has a positive impact on both you and your creditor. Not only are you allowed to pay much less for the debt than you would have without the settlement, but you gain peace of mind knowing that your debt is paid. You do not have to worry about legal action from your creditor to recover the debt. Even though creditors receive less than they are owed through debt settlements, the amount they receive is still greater than the amount they would have received from a collection agency. In addition, participating in a successful debt settlement prevents your creditor from being forced to report your debt as a tax loss.

Settling a debt has a negative effect on your credit score, but you may be able to lessen the damage it does. Two factors contribute to how damaging a settlement may be to your credit score. The first is the payment history of the debt itself. Debts are rarely settled by creditors unless you have been late on payments and there is a chance you will default. Late payments hurt your score. The second way a settlement negatively impacts your credit score is by the debt being reported as "settled" on your report rather than "paid". You may be able to negotiate with your creditors to get rid of any late payments that are on file and to report your debt as "paid" rather than "settled". This will negate any negative effects the debt settlement has on your credit history.

Settled accounts will appear on your credit history for a seven-year period. The impact an account has on your credit score is determined primarily by your payment history on the account. Your payment information for the past two years is reflected on each debt in your credit file. If a debt is settled, it is technically considered a derogatory notation, but lack of late payments may have a positive impact on your score rather than a negative one. As the settled account ages, it has less of an impact on your score.

Opting for debt settlement does not make the unpaid balance of the debt disappear. Your creditor may still sell the unpaid balance to a collection agency. Collection agency reports have a devastating effect on your credit score. You must get a statement in writing from your creditor agreeing not to sell the unpaid balance of your debt after the settlement is complete. If your debt is sold to a collection agency, you will be responsible for added fees and may even be sued over a debt you already settled.

Should I Use My 401(k) to Pay Off Debt?

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Many people in tough economic times get pressured by collection agents to pay off their debts with their 401(k) or similar retirement vehicles.

While the funds can be used for this, should they?

Why do you have a 401(k)? The simple answer is retirement. For that purpose, the government lets you take money OUT of your taxable income to save for your retirement.

The money is not taxed at the current rate, but at the rate it will be some years hence. If you break up your 401(k) today to pay existing debts, the money is taxable, and at your current rate.

A second problem with this idea is that most debts that are being retired in this way are unsecured debts. Credit card debt is unsecured, meaning it is not secured by some asset.

Even creditors on secured debts are not able to force you to use your retirement savings to pay them. So why cash this protected asset to pay off unsecured debt?

What you need is long-term thinking about your future. The law protects your 401(k) from creditors. Why give it away without thinking about your long-term financial health?

Information on Debt Reduction

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If you have an abundance of credit card debt you may want to investigate methods of debt reduction. Reducing your debt can make your budget more manageable and help you become debt-free.

If you want to reduce your debt, you should contact all of your credit card companies and negotiate lower rates of interest. When you make your payments, a larger portion of the payment will go toward the balance, resulting in faster debt reduction.

Call your credit card company and negotiate a settlement of the balance. Credit card companies will offer and accept settlements in the area of 20 percent to 75 percent of your balance. You need to be past due 90 pays before they will negotiate with you.

If you deal with a debt reduction company, it can negotiate with your creditors but the fees it charges you can be costly. Sometimes the fees can be as much as 15 percent to 18 percent of your balance. This information can have a negative impact on your credit report. Fees can vary from company to company.

If you have a balance of $7,000 and you settle for $5,000 the remaining balance, which is forgiven debt, of $2,000 may have to be reported as taxable income when you file your taxes. Insolvency, which is when your liabilities exceed your assets, and bankruptcy are the two exceptions under which forgiven debt does not have to be reported as taxable income.

If you contact the consumer credit counseling debt management program, it can negotiate lower rates of interest and lower balances. You will be able to reduce your debt quicker than you would under normal circumstances.

Define Line of Credit

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Individuals may borrow against a line of credit to make purchases. When the borrower makes payments on his line of credit, he frees up additional credit that he can again use to make purchases. Thus, lines of credit are categorized as "revolving" debt. Home equity loans and credit cards are two common types of credit lines.

Each line of credit carries a credit limit. The borrower may make purchases against the line of credit, but cannot surpass the limit. In some cases, his lender my allow him to surpass his credit limit up to a certain point, but charge him a penalty fee for doing so. Before extending a line of credit to a consumer, most lending institutions require him to meet certain credit criteria.

Many banks expect borrowers to make payments on their credit lines monthly. Lines of credit carry a minimum payment. A borrower must pay at least the minimum payment, but can opt to pay more if she so chooses. Payments are based on the amount of the credit line the borrower uses, plus interest. Lenders only charge interest on the amount the borrower spends rather than the entire spending limit. In the event the individual surpasses her spending limit, however, the lender levies interest charges on the full spending limit plus the additional amount.

Lines of credit may be secured or unsecured. According to the Federal Trade Commission, secured debts are connected to an asset, such as a borrower's home or vehicle. In the event the individual does not meet the minimum payments on his line of credit, the lender may recover the amount the borrower owes by seizing the secured item. Unsecured lines of credit are not tied to an asset and do not grant the lender the ability to claim any of the debtor's possessions as collateral should he default on the amount he owes.

One of the benefits a line of credit offers is purchasing freedom. Because a line of credit allows the borrower to make purchases and pay for the items over an extended period rather than all at once, she can make large purchases that she may not possess the up-front cash to afford. In addition, a line of credit offers a consumer an alternative to short-term, high-interest loans, such as payday loans, when unexpected emergencies arise. In addition, should an individual opt for a home equity line of credit, she can write off the interest charges as a tax deduction.

A line of credit appears on the borrower's credit report. The amount he borrows and whether he makes timely payments directly affects his credit score and future buying power. The Fair Isaac Corp., the company that owns the FICO scoring formula, notes that each individual's payment history on his accounts makes up 35 percent of his credit score while the amount he owes his creditors makes up 30 percent of his credit score. Thus, the way a borrower manages his line of credit plays a role in determining his eligibility for additional credit and loans in the future.

Can a Debt Collector Use Information From a Check I Paid Them With to Garnish My Bank Account?

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If a debt collector or creditor garnishes your wages or places a levy on your bank account, your ability to pay bills or afford basic necessities can be hindered. So it's smart to be diligent when paying back your overdue debts. Creditors gather your personal information by various means, and they can remove funds from your bank account once they gain access to your account number.

Bank account garnishments involve a creditor taking action to collect on an overdue debt. After several collection attempts, creditors can file a lawsuit and obtain a judgment order. Creditors then serve financial institutions with a garnishment order from a judge, and the bank levies or remove the funds.

Debt collectors need bank-account information to garnish or levy funds from an account. Collectors can use the wealth of information on checks that were previously written by the debtor. This method for collecting personal account information works as long as the debtor keeps the account opened.

Debtors who suspect a potential levy or garnishment may close their personal bank account and open an account with another bank. This move, however, may not stop a bank levy or garnishment. Debt collectors with a garnishment order can contact banks in the debtor's locality. Banks cannot reveal personal information about a debtor. But if a creditor inquires as to whether the debtor has an active account with the bank, the bank must reveal this information. Debt collectors can enforce the garnishment upon locating your bank.

After a debt collector locates your bank account and levies funds, consider communicating with the creditor to pay the debt -- perhaps through an installment plan -- and stop additional garnishments. Debt collectors can only remove available funds from your account. The initial removal of funds may not resolve the overdue balance. If you deposit additional money into the account, creditors may levy these funds as well.

The Cheapest Way to Fast Credit Repair

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If your credit is damaged, then repairing it can lead to a higher credit score, a number which is used by creditors to determine financial risk. With a higher score, your chances of getting approved for a loan improve, allowing you to secure a loan for a favorable interest rate.

Importantly, a strong credit score improves your chances of getting a job, as many employers will check your credit worthiness before considering you for employment. Quickly repairing your credit is in your best interest, and doing it cheaply is essential to your financial health.

There are a number of companies that can help you repair your credit quickly, but they charge fees. Certainly, you could use their services, but they are not the cheapest way to fast credit repair. Instead, if you are looking to save money, then a do-it-yourself credit repair plan is the best way to go.

Three credit reporting bureaus--Equifax, Experian, and TransUnion--maintain data about American consumers, detailing important information about you. The Federal Trade Commission (FTC), which oversees consumer credit, defines a credit report: "A credit report includes information on where you live, how you pay your bills, and whether you've been sued or arrested, or have filed for bankruptcy."

According to the Fair Credit Reporting Act (FCRA), consumers may obtain one copy of their credit report annually for free from each of the three companies. Consumer advocates recommend that you get all three and compare each one to determine accuracy, notifying the credit bureaus if there is a mistake. Mistakes can lower your score. Consumer Reports says that consumers "...find some 13 million inaccuracies on their credit reports each year." Only one website allows you to get your reports for free: AnnualCreditReport.com; no other website is authorized to provide these free reports.

The same site offering free credit reports also makes credit scores available, but for a fee. Pay the $8 or so for your scores which you will use as a benchmark for improving your credit.

Now that you have a good picture of exactly where you stand, then do the following to begin credit repair: pay your bills on time; reduce your outstanding credit card balances; pay off personal loans; negotiate with creditors if behind on bills; keep your current accounts open as closing them will lower your score.

Familiarize yourself with your FICO score which is used by Experian, TransUnion, and Equifax to determine credit scores. MyFICO.com outlines how five categories of credit data are given varying importance to determine your FICO score: payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and types of credit used (10%).

Lastly, three to six months after improving your score, pay to obtain copies of your credit reports and scores. You should see a strong improvement; a clear demonstration that fast credit repair can be done cheaply.

How to Turn a Second Balloon Mortgage Into a Fixed Rate

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Reworking your home loan to eliminate a balloon payment on a second mortgage could help you avoid a bind. You could find yourself facing foreclosure if the balloon payment comes due and you don't have the money. Contact the lender on your first mortgage, as soon as possible, about reworking your loan, especially if the balloon payment is coming up soon. Even if you have the money for the balloon payment, you should explore alternatives. A new loan may save you money and allow you to keep the balloon payment in the bank.

Instructions

Contact a housing counselor certified by the government. The Federal Trade Commission reports that the one thing you should not do is seek help from a for-profit loan modification firm. These firms often advertise themselves as "foreclosure rescue" firms, but many are scam artists, according to the FTC. Instead, make an appointment with a housing counselor approved by the U.S. Department of Housing and Urban Development. Find a counselor in your city by checking the HUD website.

Show the counselor all of your current loan documents, including the first mortgage and the second mortgage with the balloon payment. Tell the counselor about your credit and debt situation as you ask her advice on how to proceed.

Ask the counselor to contact your lender and request a loan modification if you are struggling financially and possibly already behind on your payments. The lender can modify or refinance your loans to give you a fixed rate without a balloon payment. Consider the expert knowledge of the housing counselor, as an asset, as you prepare to speak with your lender. Make a three-way call to the lender with you and the counselor on the line to begin.

Shop around for a new mortgage if your financial situation is sound, the balloon payment is not a pressing issue and all you need is a standard refinancing. Authorize the housing counselor to pull your credit to determine your credit score as she recommends local lenders for the refinancing.

Rid yourself of the second mortgage and balloon payment through a loan modification or a standard refinancing.

Tips to Qualify for Financial Aid if You Already Owe

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You might still be eligible for various forms of financial aid if you owe money on other financial aid you received in the past. Depending on your individual circumstances, you can still get student loans, grants or scholarships. Avoiding and rectifying loan and grant repayment default is important to qualify for new financial aid.

If you are in default on any student loan, you typically cannot receive any new financial aid. This is true of financial aid in the form of grants and loans from the federal government. Other financial aid sources might have other policies. Until you make satisfactory repayment arrangements, you must pay your tuition and other related expenses. Avoid student loan default by staying in regular communication with your lenders about your financial situation. You might be able to adjust your payment schedule according to your income or have your loan go into deferment or forbearance.

Some grants have service requirements. If you dont fulfill them, you might have to repay the amount of the grants you received. This is the case for grants for teaching, allied health and other fields for which education grants are offered to attract people to the fields various occupations. If you do not meet the repayment requirements of a grant for which you did not meet the service stipulations, you will not be eligible for further federal financial aid. To qualify for financial aid in the future, meet your grants service requirements, or stay current on your payments.

If you currently have student loans and are not in default, contact your lender about putting your account into deferment or forbearance. When you defer your payments, you stop making payments on your loan, and your interest does not continue to accrue. Forbearance means that interest still accrues on your principal and is capitalized. You can choose whether to pay the interest while in forbearance. If you enroll in college, your lenders might be willing to put your loans into deferment. If youre having financial difficulties, you might be eligible for forbearance. When you find that youre having problems repaying your loan or that you will soon have problems, ask your lender about putting your loans into deferment or forbearance to avoid not being able to apply for new financial aid.

If you are current on your student loans, you can apply for grants, scholarships, private loans and federal student loans if you have not used the maximum amount of federal student loans for which you are eligible. Staying current on your loans is the best way to be eligible for financial aid in the future.

Can a Government Job Repay My Student Loans?

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Many college students take out student loans to help defray the high cost of tuition, student fees, housing and books. Unlike scholarships and grants, student loans must be repaid with interest. This can create financial hardship for recent college graduates trying to pay rent, car insurance and other living expenses on salaries from entry-level jobs. If you're wondering whether a government job can repay your student loans, the short answer is yes. Learn more about government jobs offering student loan repayment to determine whether this is the right choice for you.

The federal government has repaid more than $132 million in student loans for new hires and current employees since 2002, according to Federal Jobs.net. Government agencies offer repayment program incentives to attract applicants for hard-to-fill jobs. The federal government usually links student loan repayment amounts with years of service completed. This makes such programs a way to retain workers in those jobs to cut down on time and money spent in hiring processes. Not all government agencies participate in student loan repayment programs, and programs typically work to recruit highly qualified students -- so expect a competitive job market.

Repayment plans vary depending on the job type and hours worked. In some cases, certain government jobs can reward students with as much as $10,000 per calendar year in student loan payments, with a maximum cap set at $60,000, according to Federal Jobs.net.The government may make payments spread throughout the calendar year rather than making a lump sum payment, according to the U.S. Office of Personnel Management.

To accept government repayment of student loans, students must sign a contract committing to working three years in a specified job position. Breaking contracts can result in a loss of funds used toward student loan repayment, or a requirement to repay all benefits received. Not all loans qualify for student loan repayment through the government. Examples of eligible government loans include subsidized Federal Stafford loans, unsubsidized Federal Stafford loans, Federal PLUS loans and Federal Consolidation loans.

Examples of jobs that may offer student loan repayment include civil service government jobs, such as the Peace Corps. Some teachers, including educators working in less-desirable inner-city or rural schools, also qualify for student loan repayment through the government. Individuals who join the military may be eligible for government student loan repayment.

Bad Debt Advice

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Everywhere you turn these days, financial advisers are telling you how to save money and how to deal with your debt. If you listen to the wrong source, you could find yourself worse off than you were. Some debt options might not be the best route to take to get out of debt. Always trust your gut and, if it sounds too good to be true, it probably is. Consider a few options to help solve your debt problem.

One of the first steps to reduce your debts is to list them. While this is intimidating at first, it helps you to see the overall picture. List each debt along with the monthly payment and interest rate. Next, call each lender and ask for an interest rate reduction. Even just a small reduction in rate will save money over the life of the loan. This method works best with credit card companies. If you receive a rate reduction from one, tell the next company that you want that rate matched. If you are not successful the first time around, call a week or so later and ask a different customer service representative to reduce your rate.

When you are on the phone with each credit card company, ask if they have any balance transfer programs available for your cards. If you can transfer the balance from one card to another and receive a lower or zero percent interest rate--even for a limited time--it will help to reduce the amount of interest you will pay over the life of the loan. But do not forget that you will incur a fee for the transfer, usually 3 percent of the total amount transferred.

If you have a home mortgage, you can consolidate your debt by refinancing your first mortgage or by taking out a home equity line of credit to pay off your debt. Although this may lower your monthly payment, it will extend the life of your loans. You will pay for the same debt over a much longer period, and therefore will pay more interest. Yet if you use this method and continue to make serious reductions to the loan principal, you will be better off in the long run.

Take the list of debts that you had when you negotiated your rates, and add all of your monthly bills to it. Then include line items for each category of money you spend. Look at your bank statement for three months, and create a budget based upon your actual expenditures. After you see where all of your money goes, see if there is anywhere where you can trim your budget. Are you spending too much money eating out? Could you trim your clothes budget? What about your subscription services, such as cable TV or the Internet? Could you switch to another service to save money? Could you trim services to reduce your monthly payment?

Once you have trimmed your budget and have deleted excess spending, find ways to earn extra income to pay your debt down faster. Can you volunteer for overtime at work? Can you get a second job? What about babysitting or mowing neighbors' lawns? Can you freelance online in your career field?

Look back at your list of debts. List them in order from smallest to largest in terms of each monthly payment. Take all of the extra income you "found" in your budget and are earning on the side to pay it down. Once that debt is paid in full, take all the money you were paying to that debt, and add it to the monthly payment of your next highest debt. Keep paying on the next debt until it is paid in full. Keep "snowballing" your payments until you pay off all your debts in full. This is a great way to help keep you disciplined to pay down your debt as quickly as possible.

Credit Card Debt Negotiation & Reduction

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With consumer credit counseling agencies, there are programs in place that can help you negotiate and settle your debt---and even pay less than what you owe. However, many of these programs charge a fee for their service. Luckily, it's possible to negotiate credit card debt and obtain a debt reduction on your own, as long as you understand how the system works.

The first step in negotiating to reduce your debt and pay less than what you owe is to stop making payments. Creditors only negotiate when they want to avoid selling a credit account to a collection agency, because when that happens they only get pennies on the dollar. So your account has to be in danger of going to collections or already in default before creditors will find it advantageous to reduce your debt and accept a settlement.
This is when you can begin to negotiate terms of the settlement, and it's best to negotiate in writing, via registered letter. Creditors are usually more willing to accept a single, lump-sum payment, so if you save money during the months you're not paying your debts you'll be able to make a settlement offer. Some creditors are also willing to work out a monthly payment plan. You can make an initial offer, which creditors may counter. Typically between 30 ad 50 percent of your debt can be reduced, depending on how much you owe and how likely creditors believe you are to default entirely.
Keep all paperwork associated with the settlement, including your offer and the responses. If you must negotiate on the phone, make sure you get everything in writing before you send any money. Once you and your creditors have come to an agreement, make sure you have a letter specifying the amount of money you have to pay, how you will pay it (all at once or in monthly installments), and a statement that the settlement is being accepted as payment in full for the debts (make sure the debts are listed). At that point, send a check or money order---never give creditors access to your bank account.

Negotiating debt can have an adverse impact on your credit score. Your payment history makes up 35 percent of your credit score, and when you stop making payments this will be reflected on your credit report. Similarly, when you settle a debt for less than what is owed, this is also noted on the credit report and the account is listed as "settled," as opposed to "paid in full." This can lower your credit score and remain on your credit report for up to 10 years.

The amount of debt forgiven is, in most states, considered to be taxable income. This means you will get a 1099 form at tax tim, with the amount of money listed as income. Generally, you will have to pay at least 15 percent of the forgiven amount in taxes, although it varies depending on your tax bracket and income. Speak with an accountant to gain an understanding of the implications of this decision, and be prepared to have the money to pay the IRS come tax time.

Credit Card Debt Removal

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Every day, people are inundated with credit card offers, and most Americans have at least one credit card in their wallets. This doesn't necessarily mean that credit cards are a good thing, however---it's much easier to get into credit card debt than it is to remove it. Needing a little help when it comes to digging out financially is normal. With the right strategies, you can get back on your feet.

Unlike cash, a credit card still is accessible to the cardholder even if he goes over his credit limit. It is also quick and convenient to use a credit card, and for security reasons, many people prefer not to carry and use cash. Furthermore, as inflation continues, many people use credit cards to make ends meet when they lose their jobs, have fewer work hours than expected or don't have a high enough pay rate---that is, the economy sometimes makes people reliant on credit. It also is hard to stop using credit cards because using them makes it easy to establish a higher standard of living.

Even though getting rid of credit card debt is hard, it has major benefits. Paying off your debt can raise your credit score. You also save money on interest. With your debt gone, you no longer have to worry about how you will repay and therefore may be less stressed. Lastly, the money you budget toward credit card payments can be reassigned as discretionary income you can use toward other purchases or savings. You'll still be able to buy at least up to your minimum payment amounts, but you won't be legally obligated to anyone else for what you spend.

Usually, the best plan for paying off credit cards is to attack the card with the highest interest rate first. List all your cards according to their interest rate. Then look at your budget to see if you can come up with a little more than the minimum for the card with the highest interest. Paying more on the minimum on the card with the highest interest quickly reduces the principal. For the cards that don't have the highest interest, stick to paying the original minimum payment you budgeted. Continue budgeting more than the minimum on each card until each card is paid off.

If paying down the cards in order of interest still isn't enough, call your card companies and ask for a lower interest. Some will give you one if you just ask. The next step is to write a hardship letter that explains your financial situation and asks for either forgiveness on some of the debt (debt settlement), a lower interest rate or a lower monthly payment. You also can transfer balances to other cards with better interest rates, consolidate your debt or use debt management plans. It's imperative to track the spending in your budget if you want to get debt under control. Whatever method you use, don't expect miracles overnight---it will take time to remove your debt.

How to Negotiate Credit Card Debt Reduction

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It can be almost too easy to get yourself in over your head with credit card debt. If you are swimming in credit card debt and you need help, youll find a variety of services available for helping you manage your debt. The Federal Trade Commission warns consumers to be careful when hiring a debt settlement firm to negotiate with creditors because there is no guarantee that the firm will be successful and you may encounter high fees for these services. Instead, you can negotiate credit card debt reduction yourself by contacting your creditors directly.

Instructions

Gather your most recent credit card bill so you have current data about your credit card balance. Examine your finances to determine how much you can afford to pay both for monthly payments or for a lump-sum settlement. Gather copies of bank statements and income tax returns to enable you to prove your financial difficulties with the credit card company, if necessary.

Call the customer service number, found on your credit card statement. Ask to speak with a customer service representative about a settlement for debt reduction.

Speak with the customer service representative about your credit card balance. Verify your account information and explain that you wish to enter into an agreement to pay a reduced balance because of your financial difficulties. Answer any questions about your financial situation and offer to send copies of your financial documents, if necessary. Specify the lump sum or the monthly payment you have determined you can pay for your debt reduction settlement.

Escalate your request and negotiations if the initial customer service representative cannot or will not negotiate. A supervisor may be able to make this decision instead. If the representative accepts your offer, ask for a confirmation letter to outline the details of your agreement. If the representative declines your offer, end the call and move to the next phase of your plan writing a letter.

Write a business letter to the supervisor of the customer service department. Include your account number and the full name of the account holder. Open the letter with a direct request to reduce your credit card debt in the initial paragraph. Provide details about the reasons you are requesting this reduction and state the precise offer you are making. Finish the body of the letter in the final paragraph by asking the credit card company to contact you to discuss the matter within one business week. Sign the letter and place your telephone number and email address under your name. Enclose copies of your bank statement and income tax return to validate your request. Make a copy of the letter for your own files and send the letter to the credit card company via certified mail with return receipt requested.

Call the company within one business week if you do not receive a response. Ask to speak with the supervisor of the customer service department. Push politely for a resolution to urge the credit card company to accept your offer. If your offer is accepted, ask for a confirmation letter to record the agreement. If your offer is not accepted, continue striving to make the minimum payments and consider approaching the company again in the near future.

Where Can I Get Credit Help When I Would Like to Rebuild My Credit?

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When it's time to start rebuilding your credit, several resources can help. A wise first step is asking your bank or credit card company about ways to repair your history.

Credit unions are nonprofit organizations that offer their members deposit accounts, credit cards and loans, as well as financial education. Their service is more personalized and flexible than major banks, and they tend to be more lenient with their lending practices. When choosing a credit union, make sure it is insured by the National Credit Union Administration.

Credit counseling services can assist you in rebuilding your credit and teach you how to track your bills and set a budget. Before you sign up with a company, verify that it offers legitimate and affordable services.

Credit repair companies help people fix their credit, especially if they have filed bankruptcy or had loans turned over to collection agencies. Make sure the company is a legitimate enterprise. Before you sign a contract, make sure the company provides you a document outlining your state and federal rights, as well as a written contract, recommends the Federal Trade Commission.

Can a Credit Card Close My Account for Lack of or Non-Use With a Balance?

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Although credit card companies are generally interested in providing more lines of credit to more people, most have the legal right to close a line of credit at any time. A company may do this for many reasons, such as if you fail to use your card frequently enough or at all. The company can close an account whether there is a balance on it or not. If a balance does exist, you still have to pay it.

A credit card allows a person access to a credit line that is controlled by the company that issued the individual the credit card. Credit cards differ from checking accounts in that the financial institution is not holding any funds provided by the account holder. Instead, it is essentially issuing a series of loans. This arrangement provides it with more flexibility with regard to whether it can close the account.

The issuance of a line of credit to an individual is expressed legally in a contract that the credit card holder must sign before he can use the card. This contract spells out the terms of the card, including the credit card company's rights with regard to the line of credit. Most contracts allow the company to close the account at any time, for any reason.

A credit card company does not need to provide a reason for closing an account. So long as the contract includes language that allows the company to close the account when it wishes and does not mandate that it provide loans to the account holder, it is perfectly legal for the company to close the account. Accounts are often closed for non-use.

An account can be closed even if a person has an outstanding balance. In such a case, the person still must pay back the money that he borrowed from the finance company. In addition, the company can still charge the person interest and penalties. The only real change is that the person cannot draw money against the line of credit anymore.

Four Laws of Debt Free Prosperity

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"The Four Law of Debt Free Prosperity" is a book written by Blaine Harris and Charles Coonradt. The book follows the financial woes of Paul Smith, a man drowning in debt. He eventually meets Mary Sessions, a former IRS officer with $20 million in the bank. She convinces him to move into her house and learn the four laws of living debt-free. Enticed by her offer of $2 million dollars, Paul agrees and learns how to create a financially secure life.

The book, based on a true story, explores the four laws of debt-free prosperity and gives practical, easy-to-understand advice that you can use to get out of debt, just like Paul.

According to the book, keeping an accurate record of every penny you spend is the first step to getting out of debt. Too many people spend money without understanding where the money is going. The authors, using Paul's story as an example, show how writing down every penny spent or earned allows you to understand where your money is going.

After tracking your money, the next step is to set achievable money targets, or goals. The authors explain that each financial goal must be written down, be specific, be measurable and have a deadline. The authors explain that financial goals must also be achievable -- setting a goal to pay off $10,000 in credit card debt in three months with an annual salary of $30,000 is not achievable, but paying off $10,000 in three years on a $30,000 salary is possible.

Once you've tracked your spending and set goals, the next law to follow to debt freedom is trimming. Trimming means cutting the excess spending out of your budget to have more money for savings and debt payments. The authors suggest paying yourself first--meaning you immediately take 10 percent out of each paycheck and put it in a saving's account. They explain that saving immediately allows you to adjust your spending right away--if you try to save after all your bills are paid, you won't have enough left over to save.

The authors assert that many wealthy people got to where they are because they understand the importance of intelligent investing. They recommend taking financial education courses to help you understand your money and the intelligent ways you can use it to grow wealth once you're eliminated your debt.

What Do You Need From Someone to Cosign for a Credit Card?

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It is generous of you to lend your good-credit status to a family member or friend by cosigning on a credit card. Be aware, however, that when you cosign on any loan or credit arrangement, you are entering into a binding legal agreement with a creditor, and your signature means you agree to be held responsible for the entire debt. Think first before you agree to cosign for a credit card and then think again. Consider demanding some assurances up front to decide whether the risk is worthwhile.

Both of you will need each other's Social Security numbers. The borrower will need yours to apply for the credit card, so the creditor can check your credit history and score. If you don't already know the borrower's social security number, get it. Having the number will help you in case of default, should you have to go to small claims court, file a lien or otherwise take legal action against the borrower.

Demand evidence that the borrower has the ability to pay for the credit card. Not only should you demand recent pay stubs, but any other items that help you assess his level of responsibility. For example, ask for all three of his credit reports, leasing history, car payment history and proof of any other income outside of his job.

You should also have several agreements in place before you cosign. First, you want to make an agreement with the borrower with terms that give you some security. For example, you can demand an interest in any property purchased with the credit card and online access to the account. Consider a clause stating that you will seek legal remedies in case you are stuck with the bill. Note, any side agreement with the borrower will not release you from any obligation to pay for the credit card if the primary borrower defaults, but it makes a record of what you will do in case that happens. Consider also asking the borrower to give you something as security for your cosigning. The Federal Trade Commission also suggests that you ask the lender to agree in writing to tell you if the borrower misses a payment. This gives you some notice and some time to figure out what to do. In addition, the FTC recommends you get copies of the loan contract and the Truth-in-Lending Disclosure statement from the borrower.

The FTC recommends that you also ask the credit card company to give you a worst-case scenario of how much money you could owe if the borrower defaults. A lender isn't required to do this but may if asked. You should also try to negotiate the specifics of your obligation in case of default. For example, you might be able to limit what you owe to the principal, rather than all the late charges, interest and fees that rack up in default. This agreement could be spelled out in a statement in the contract that reads to the effect of "The cosigner will be responsible only for the principal balance on this loan at the time of default." (FTC)Credit reporting agency Experian advises you to also check your state laws for any additional rights you may have as a cosigner.

How Do Credit Advisers Work?

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Credit advisers help when you cannot straighten out your finances on your own. Credit counseling companies employ advisers to assess your individual situation and explain your options. Many credit counseling firms are nonprofit, offering free or affordable advice. Credit advisers work with clients through face-to-face meetings, online or on the phone, making their services convenient to access.

Your best option to get out of debt depends on your individual financial situation, including bills owed, income, savings and other factors. A credit adviser assesses your finances during a counseling session and makes customized recommendations, which might range from developing a strict budget to entering a structured repayment program to declaring bankruptcy. Beware of advisers who push the same solution for every client, the Federal Trade Commission warns.

Credit advisers work with the companies to which you owe money if you choose to enter into a debt management plan. Advisers can often negotiate better terms, like lowered interest, and get late fees removed from your accounts. You send your payment to the credit counseling company every month, according to the Better Business Bureau, and the firm forwards the appropriate amounts to your creditors. Usually your adviser creates a plan that makes you debt-free within two to five years if you follow it exactly as agreed.

Good credit counseling firms have their credit advisers trained by an independent organization that certifies or accredits them, according to the FTC. Ask about training before working with a counseling company, and choose a different firm if you discover the advisers are not formally trained. A company should belong to a professional group like the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies, and its advisers should adhere to that organization's ethical standards.

Ask how a credit counseling company is funded and how its credit advisers are compensated before working with the firm. Nonprofit status does not necessarily mean a counseling agency is legitimate, according to the BBB. Counselors should not receive commissions for pushing you toward certain options, like debt management plans, and the firm's primary funding should come from creditors, not from client fees.

Do not confuse credit advisers from credit counseling companies with people who work for debt settlement firms. Settlement companies charge high fees and often make unrealistic promises, like wiping out your debt for pennies on the dollar, the FTC warns. Settlement is different than a debt management plan. The company usually has you stop paying your bills to make your creditors more likely to negotiate. This hurts your credit rating, and your lenders may refuse to settle, putting you in a worse position than you were in initially.

How to Track Debt

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Failing to keep track of financial debt will create loads of problems down the road. If you do not pay close attention to financial transactions, debt will become out of control and difficult to reduce. CNN Money states, "If you want to get your debt under control, start by figuring out your spending patterns and identifying unnecessary expenses." Diligently tracking financial debt will not only make you aware of spending habits, but it will put you on track to excellent financial health.

Instructions

Retain a copy of your credit report every year.

Make sure your accounts are in good standing by reviewing your credit report every year. By law, individuals have access to one credit report yearly from the three major credit bureaus--TransUnion, Experian and Equifax. According to the Federal Trade Commission, "Identity thieves may use your information to open a new credit card account in your name. Then, when they don't pay the bills, the delinquent account is reported on your credit report." If you fail to monitor your credit report, this type of debt will remain in your name and ruin your credit.

Keep track of financial information with a spreadsheet.

Create a spreadsheet with a computer program, or dedicate a blank notebook for financial information. Record all monthly bills, expenses and credit card payments, including interest paid. Record your monthly income to help keep track of money you are spending compared to what you are taking home.

Dedicate one day each month to reviewing monthly expenses. Match all receipts to credit card and bill statements. Designate a file for all monthly expenses and receipts.

Organize financial information for easy access and tracking of debt. Sign up for email reminders of bill due dates. Consider direct deposit for monthly bills to ensure prompt and secure payment.

Sign up for a phone application that specializes in tracking financial debt. Phone applications can alert you to excessive spending and encourage healthy financial choices.

Hire a financial adviser or enlist a reputable credit-counseling agency to help you get into a workable system of regularly tracking your debt.

Debtor's Rights for Garnishment in Oklahoma

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Oklahoma residents who are facing wage garnishment from a creditor should be aware of their rights under Oklahoma law. Both state and federal laws limit the amount that can be garnished from your paycheck. If the garnishment is for child support or unpaid taxes, the allowable amounts can exceed the federal limit.

Garnishment laws for debt collection in Oklahoma follow federal law. The garnishment can be no more than 25 percent of your weekly pay, and you must have at least 30 times the federal minimum wage left. If your paycheck is less than 30 times the federal minimum wage, no garnishment can take place. For a garnishment to be enforced, an affidavit must be filed with the court and a judgment ordered.

Oklahoma law permits up to 60 percent of your paycheck to be garnished for child support if you are not financially supporting your spouse or another dependent child. If you are supporting your spouse or a dependent child not subject to the child support garnishment, only 50 percent of your paycheck can be garnished.

In Oklahoma, garnishments are established for periods up to six months. At the end of that time, the creditor will need to file another affidavit with the court to obtain another judgment. The creditor can also charge interest on the unpaid balance. In Oklahoma, this amount is limited to 4 percent above the U.S. Treasury Bill Rate.

Your employer cannot fire you if you are subject to wage garnishment. Although you can still be terminated for other reasons, federal law protects you from losing your job simply because there is a judgment for a garnishment against you.

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Saturday, May 31, 2003

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Friday, May 30, 2003

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Thursday, May 29, 2003

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Wednesday, May 28, 2003

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Monday, May 26, 2003

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Friday, May 23, 2003

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Thursday, May 22, 2003

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Wednesday, May 21, 2003

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Monday, May 19, 2003

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Sunday, May 18, 2003

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