November 2003 ~ Credit And Debt Management

Friday, November 28, 2003

Arizona Unsecured Debt Laws

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Unsecured debts differ from secured loans such as mortgages or vehicle loans in that the debt is not backed by any property. Thus, creditors cannot seize your property if you fail to pay a debt. In Arizona, creditors can sue debtors for the amount of an unpaid debt and may be able to garnish the debtor's wages to collect the debt. However, creditors must obey Arizona laws regarding how and when they may collect debts.

As of June 2011, most unsecured debt in Arizona has a statute of limitations of three years. Creditors have three years from the date of default to pursue legal action against a debtor who fails to pay a credit card or other unsecured debt. Creditors can still contact the debtor to ask him to pay a debt after the statute of limitation expires. In addition, creditors have five years to collect a judgment after going to court to get one against the debt; however, a creditor can ask the court to renew this five-year period an indefinite number of times.

Wage garnishment is legal in Arizona. If a debtor fails to pay a debt as agreed, the creditor can, after going to court and obtaining a judgment against the debtor, ask the court to garnish the debtor's wages. If the court grants this request, the debtor's employer must withhold a certain percentage of the debtor's wages each pay period and forward them to the creditor. Arizona follows federal rules on wage garnishment, which say that creditors may not garnish more than 25 percent of the debtor's disposable income, or income after taxes.

If you file for bankruptcy, the bankruptcy court orders a stay on most of your unsecured debt. Creditors cannot collect the debt while the bankruptcy is in process. After your bankruptcy is approved, the court discharges most of your unsecured debt under Chapter 7, while under Chapter 13 you may have to pay a portion of the debt back over the next three to five years. Student loans and tax debts are exempt from bankruptcy proceedings; you cannot discharge these debts by filing for bankruptcy.

While creditors and debt collectors may contact debtors to collect debts, they may not harass or threaten debtors. Debt collectors in Arizona may not call debtors at unreasonable hours or call them an unreasonable number of times in a day. In addition, debt collectors may not threaten debtors with physical harm or with legal action that they are not empowered to take. Debtors in Arizona have the right to demand that debt collectors stop contacting them, with the exception of sending them summons to court action against them.

Credit Card Reduction Laws

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Credit card debt is only reduced when a settlement between borrower and lender is reached. This can occur through bankruptcy, debt repayment plans, and debt forgiveness. The law requires that the reduction in credit card debt be taxed as income.

Personal bankruptcy has two forms, Chapter 7 and Chapter 13. Chapter 7 involves liquidating your assets and then using it to pay off all debts, including credit card debt. In Chapter 7 bankruptcy, the law requires credit card debt to be paid off with available funds. If the creditor gets a reduced amount than was originally owed, they accept that lost as the debt is discharged. Chapter 13 bankruptcy involves a repayment plan to all creditors. Credit card debt may be reduced with the elimination of fees and penalties, but the debt is still owed. Credit card debt reduction through bankruptcy is not taxable as income. Credit card debt for non-business expenses is also not taxed if it was included in a Chapter 11 business bankruptcy.

If a debt is reduced or forgiven outright, the lender files a 1099 form. Forms 1099A and 1099C are used to report partially or completely forgiven debt. In most cases, the amount by which the debt was reduced or forgiven becomes taxable.

Debt forgiveness for a mortgage can still result in state income tax liabilities.

The Mortgage Forgiveness Debt Relief Act was passed in 2007. While debt reduction or forgiveness is generally taxable, the first $2 million of debt for first mortgages forgiven between 2007 and 2012 is not taxed. However, this law does not affect the taxability of credit card balance reduction through debt settlement. As of 2010, there was no equivalent debt relief act for Americans in credit card debt.

The Bankruptcy Abuse Prevention and Consumer Credit Protection Act was passed in 2005. This law requires credit counseling for those who file bankruptcy for any debt, including credit card debt.

Credit card debt reduction only occurs after a settlement is reached and agreed upon by both parties. The consumer can offer a settlement for partial payment of credit card debt. The lender or collection agency can offer a settlement as payment for the outstanding credit card debt. If a debt reduction amount is not agreed upon, the original debt remains outstanding. If the consumer cannot settle the debt for a reduced amount, they can be sued for the entire amount in small claims court.

Is There a Statute of Limitations on Defaulting on a Credit Card?

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There is no statute of limitations that governs defaulting on credit card debt. There is a statute of limitations, however, that establishes a maximum time frame within which a creditor must file a civil action in court to recover the default balance owed.

The statute of limitations is a principle of law that precludes a plaintiff from filing suit against a defendant after the expiration of a certain period of time. Statute of limitations periods are established by each state for various legal causes of action. The statute of limitations period for filing lawsuits against a credit card debtor is governed by each state's limitations period specified for breach of contract actions.

The statue of limitations period can vary from state to state. The relevant limitations period for a breach of contract action may be six years in one state and only three years in another.

A civil action by a creditor that is filed outside the statute of limitations period is said to be "time barred," and upon request of the debtor must be dismissed by the court.

Florida Fair Credit Act

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The Fair Credit Reporting Act is a federal initiative that protects the rights of Florida citizens when it comes to consumer credit transactions and credit reporting, according to the Florida Department of Agriculture and Consumer Services.

Starting in June 2005, the Fair Credit Reporting Act enabled Florida citizens to get one free copy of their credit reports from each bureau annually, according to the state Department of Agriculture and Consumer Services.

If you review your credit reports and see errors such as incorrect address information, late payments that really didn't happen or accounts you did not open, you have the right to dispute that information, notes both the Florida Department of Agriculture and Consumer Services and the Federal Trade Commission. The FTC advises Floridians to make any disputes in writing and to send them through a traceable mailing method.

Under the Fair Credit Reporting Act, negative information such as missed payments are noted on your credit profile for seven years from the date of the activity, according to Experian. Some situations, like Chapter 7 bankruptcy, can be legally reported for up to 10 years, according to the United States Bankruptcy Court, Middle District of Florida.

(References 3 and 4)

Drawbacks of Debt Settlements

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Not being able to pay your debts, for whatever reason, is stressful. The collection calls can become relentless. Many people eventually settle their debts for less than the amount owed, whether through the original creditor or through a collection agency. Though settling your debt for less sounds great, there are some drawbacks to keep in when considering debt settlement.

Settling your debt for less than you owe can lead to tax implications. If the settlement amount is far less than the amount owed, you may owe the IRS. The IRS rule states that if you settle a debt for $600 or more below the total amount owed, you have to claim the unpaid amount of the debt (Canceled Debt in IRS speak) as income.

Settling a debt for less than you owe does not report the same on your credit report as paying off the debt. The balance of the debt on your credit report will read 0 or paid, but oftentimes creditors add a little note stating that you paid the account for less than the balance owed. This creditors note can cause problems when you apply for credit in the future. Sometimes, it can cause lenders to deny your credit applications completely.

Even if you pay off your debt through debt settlement and your credit report shows them as paid, your ability to obtain new credit at a decent rate will be extremely difficult. This is because the debts, whether paid or not, still show as negative items on your credit report for seven years. You can opt for bad credit credit cards and loans in an attempt to rebuild your damaged credit, but you will pay high interest rates and be subject to costly application and processing fees.

Do Credit Card Companies Negotiate With Their Customers to Reduce Debt?

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Credit card companies usually send accounts to collection agencies when no payment has been received for 180 days. In such cases, cardholders may have to pay the full amount they owe to the collection agency. Therefore, it's better to try to negotiate a debt-reduction settlement with a creditor before your account is referred to a collection agency.

The U.S. Federal Trade Commission (FTC) website recommends that consumers make an effort to work out debt-reduction settlements with credit card companies if they're struggling to pay their card issuers. The FTC notes that cardholders can try to reduce their debts without using the services of a debt-settlement company by contacting a card issuer's customer service department. However, it's important to work out agreements that reduce your credit-card bills to amounts you can afford to repay. Creditors will likely be unwilling to offer further concessions if you agree to settle your debts for amounts that are less than what you owe and then fail to pay them.

A Smart Money article titled "Debt Settlement: A Costly Escape" asserts that credit-card companies try to make it difficult for cardholders to negotiate debt settlements. According to the article, some card issuers refuse to even consider reducing the amounts cardholders owe unless they're at least three months behind on payments. Yet a New York Times article titled "Credit Bailout: Issuers Slashing Card Balances" notes that the enactment of the Credit Card Accountability, Responsibility and Disclosure Act in 2010 may make some credit card companies more willing to negotiate settlements with their customers. The legislation hampered card issuers' profits by restricting some rate increases and fees. Therefore, companies may be willing to negotiate debt settlements with cardholders to protect a portion of their profits.

It can be costly not to work out a debt-reduction settlement with credit card issuers yourself. According to the FTC, some debt-settlement companies require their clients to deposit money for the company's fees into a bank account that is handled by an account administrator. Clients could end up paying several types of fees, including a sign-up fee and a monthly service fee that lasts as long as a client participates in a debt-settlement plan. Some fees also may be based on a percentage of the amount of money a client saves through a debt-reduction plan.

Waiting to negotiate debt settlements with your card issuers can damage your credit rating. That's because credit-card companies often aren't willing to settle accounts unless cardholders are already behind on making payments. Creditors usually report late payments to credit bureaus when accounts are delinquent at least 30 days. Every reported late payment will hamper your credit score.

Successfully negotiating debt-reduction settlements with your creditors may have tax consequences. Some credit-card companies report debt settlements to the Internal Revenue Service (IRS). In turn, the IRS may consider any amount of debt a creditor doesn't require you to pay as income that needs to be reported on your tax return. One exception to that rule would be if the IRS determines that taxpayers' debts are more than the total value of their assets.

Will the Debt Be Removed From My Credit Report If I Pay the Collection Agency?

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You got behind on your bills and missed some payments --- and your accounts went into collection. Now the financial tides have changed and you're ready to pay off that debt and improve your credit score. It sounds straightforward enough, but paying off your debts isn't always a surefire way of getting negative marks removed from your credit report.

When a notice that an account is in collection appears on your credit report, it generally stays on your credit report for seven years, unless it's actively removed. Your credit report contains additional information about the account, such as when you defaulted; its impact on your credit score decreases as the account gets older. Just how much it impacts your credit score at any given time is difficult to predict and determined by a number of different factors, ranging from the size of the debt to whether or not the report is an anomaly in an otherwise healthy report or part of a pattern.

When you pay off a debt, your creditor typically makes a report to the credit bureaus that the debt is paid and whether it was paid in full, or if you reached a settlement with the creditor to close the account by paying a lesser amount. After this happens, the account is listed on your credit report as a paid collections account, but the actual collection notice stays on your credit report and continues to negatively impact your credit score.

To get the entire debt and collection wiped from the credit report completely, you must convince your creditor to agree to ask the credit bureaus to remove it. You can negotiate this agreement when you're making arrangements to pay the debt. Tell them you'll pay the debt if they agree to remove it from your credit history. Be sure to check your credit report after the amount of time agreed on with the creditor to be sure they did actually follow up and remove the collection.

When you make an agreement with a creditor to remove a debt from your credit report, get it in writing. Keep the letter from the creditor agreeing to the removal in case it doesn't keep up its end of the bargain and you have to dispute entry on your credit report with the credit bureaus. You can find instructions for disputing information on your credit report on the website for each of the credit bureaus (see Resources).

Is It Bad to Settle With a Credit Card Company?

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When you have a large credit card balance, you may be tempted to try to settle your account for less than you owe. While this can help you save a considerable amount of money on repaying your debt, it can also have some negative consequences of which you need to be aware.

To settle a credit card debt, you typically have to be delinquent on your account by several months. Once you have shown that you are unwilling to pay your credit card debt, the company may offer to settle your account. When this happens, they offer to take less than the full balance of your account in exchange for closing out your account. You can often pay less than half of what you owe with this strategy.

Even though settling your debt can work to your advantage in the short term, it can have long-term consequences to your credit. When you settle debts, it can hurt your credit score by as much as 125 points, depending on how good your score was to begin with. The debt settlement will stay on your credit report for seven years and every creditor will be able to see the settlement on your report when you try to obtain credit.

If you are not necessarily worried about your credit score right now, you should still think about the tax consequences of using this technique. When you have a debt forgiven, the credit card company writes it off and sends a document to the Internal Revenue Service stating that they forgave your debt. The IRS counts this as income and you will have to add it to your annual income for the year. This could raise your tax bill, depending on how much money you have withheld in taxes.

Many people in this situation hire a debt settlement company to help them negotiate a settlement. While you could do this, it will not usually be to your advantage to do so. You can negotiate a settlement yourself without having to pay anyone to do it for you. Some debt settlement companies are frauds and will not actually help you after taking your money. If you are going to pursue a credit card settlement, you should be able to do it without assistance.

How to Find a Credit Score Without Paying a Fee

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The law mandates that each of the credit bureaus must give you a free copy of your credit report once per year. If you've ordered yours through the official AnnualCreditReport.com, you may have been disappointed to see that, while you could see your report for free, you have to pay to get a copy of your score. If you want to get your credit score without paying a fee, you can do it, but you have to be very careful.

Instructions

Sign up for a copy of your credit report from a website that offers a credit monitoring service trial. Examples include FreeCreditReport.com, Equifax.com and CreditReport.com.

Submit your credit card number for the membership. These sites offer a free trial membership. Your card will not be charged until the trial is over.

Cancel your membership before the trial period ends. You typically have to call a number to cancel it.

How to Answer Civil Summons for Debt Collection

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Answering a civil summons for debt collection is a serious matter. A civil summons for debt is a civil lawsuit. If you fail to answer the lawsuit, the debt collector will win an automatic victory called a "default judgment." A judge will sign the default judgment ordering you to pay a specific amount of money to the debt collector. If you fail to pay, the debt collector can request garnishment of your checking account or wages. Answering the summons protects your rights under the law.

Instructions

Read documents sent to you by the court called a "summons and complaint." A summons is a notice of a lawsuit and a complaint is the actual lawsuit. The summons offers general guidance on how to respond to the lawsuit. In some states a summons requires you to appear in court on a certain date. In other states the summons requires you to provide a written response to the lawsuit, with a court hearing set later.

Hire a consumer affairs attorney. There is no way to win a debt lawsuit if you owe the money, according to Illinois Legal Aid. However, an attorney can stall the case by filing various legal motions, giving you time to settle out of court.

Answer the lawsuit by attending the court hearing listed in the summons, or provide a written answer if required. Write your written answer by responding to each numbered allegation in the lawsuit. For example, the lawsuit may allege that you opened an account on a certain date and made charges that you never paid for. Exactly how to answer depends on laws in your state. Or you can contest each allegation by simply writing "I deny that this is true" for each allegation. The denial forces the attorney for the debt collector to prove the case. It is advisable to have an attorney prepare the written answer and at least offer initial advice.

Return the written answer before the deadline listed in the summons.

How Does Switching Jobs Affect My Wage Garnishment?

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A wage garnishment is a legal remedy that your creditors have against you in the event you do not pay monies owed. Once a court grants a wage garnishment to the creditor, it is served to your employer. From that point on, your employer is legally obligated to withhold funds from your pay and submit the payments to the court, who in turn sends the payments to your creditor.

When the court rules in favor of the creditor, a writ of garnishment is issued. The writ specifies your current employer. If you quit your job or are fired or laid off, the creditor must go back to court and request a new writ specific to your new employer. A sheriff will deliver the garnishment paperwork to your new employer and the new employer will withhold funds from your pay, just like your previous employer did.

While changing jobs can slow down the garnishment process, it will not stop a garnishment. Your employer is required to notify the court when you no longer work there anymore. Once this happens, the creditor will make an effort to track down your new employer. Once the new employer has been located, a new court date must be set. On average, the whole process will delay your wage garnishment one to two months.

If you are concerned about paying off your creditor quickly, this may be your opportunity to contact the creditor to make payment arrangements rather than wait for your new employer to find out you have financial problems. You are not obligated to tell the creditor your new place of employment. The creditor may prefer to work with you than to incur the additional court costs, or if you like the money taken directly out of your check and want the debt paid off as quickly as possible, contact the creditor and provide the new employer information. A new writ can be issued more quickly this way.

An employer may look unfavorably on any employee who is garnished. The best course of action is to prevent a wage garnishment before it starts. Work with your creditor to set up repayment terms. Many creditors would prefer to take payments than to go through the time and expense of a court case. Do your part by following up on whatever new payment terms that can be negotiated.

Total Debt Recovery

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Total recovery from your debt requires planning, dedication and perseverance. Like making new year's resolutions, you may launch your debt elimination plan full of energy and excitement. However, in the middle of the payment process, you may find it difficult to see the light at the end of the tunnel. By concentrating on the freedom that total debt recovery will bring you, you're more likely to experience success in the long run.

The first step to gaining control of your finances is to understand where your money is going each month so you can create a plan that puts you back in control. Often, people don't like to face the reality of their spending, but it's crucial to be completely honest with yourself about how you're using your money so you know where to make adjustments. The Liberty Mutual website suggests logging all your expenses for one week, including meals, gas, movie tickets, books, groceries and anything else. At the end of the week, multiply the total by 4.3, which provides an estimate of your monthly out-of-pocket expenses. Add in your recurring monthly bills for an estimate of your grand total monthly spending.

Once you understand how you're using your money, you are equipped to make decisions about where to cut back. You may be surprised to find that your frequent small expenses quickly add up. For example, if you spend $7 on lunch every weekday, that's at least $140 per month. By bringing your lunch each day, you can use the savings to pay down the balances of your credit cards. For example, assume, you have a card with a $2,000 balance and 18 percent interest rate. Paying the minimum balance of $50 each month will take 182 months to pay off, and you'll pay over $2,400 in interest. That's more than the total balance. By using that $140 you're saving on lunches, you'll pay off the card in 17 months, with just over $267 in interest payments. Whenever you lose motivation to pack your lunch, consider the nice dinner you can have once the card is paid off, using some of that money you've saved.

If you want to recover from your debt through debt payments alone, you have two options: paying off the debt with the lowest balance first or paying off the one with the highest interest rate. Dave Ramsey on his website suggests that by focusing your efforts on paying off the debt with the lowest balance, you give yourself a psychological boost by seeing your balance dwindle quickly. However, you'll save money by paying off the debt with the highest interest rate first, because you're minimizing the amount of time the high interest is accumulating on your balance.

Overwhelming debt issues may be too big to handle on your own. Contact credit counseling organization approved by the National Foundation for Credit Counseling to understand your options for eliminating your debt. Credit counselors assist in budget creation and also help clients make decisions for their personal debt situations. Debt consolidation, debt settlement, debt management plans and bankruptcy are among the options a credit counselor may present to you. Credit counselors also help you create a plan to stay out of debt, so that you never allow debt to become a heavy burden again.

Options for Non Bankruptcy Debt Relief

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Bankruptcy is not always the best solution for those in financial trouble. A bankruptcy can stay on your credit for up to ten years. Moreover, if you file Chapter 7 bankruptcy, you could lose some of your property. By choosing a non-bankruptcy debt relief solution, you can work on getting yourself back on track without your credit score taking a complete nosedive and potentially losing property.

If your primary financial strain is with your mortgage payment, filing bankruptcy may not be the appropriate action to take. Contact your mortgage company to see if they can provide you with a loan modification. A loan modification is a change in the terms of your loan which would allow you to reinstate your loan. Your lender can possibly change your interest rate and loan payments to make your mortgage more affordable. If the lender is unwilling to work with you, you may want to consider bankruptcy to possibly save your home. Be sure to contact a consumer law attorney or a bankruptcy attorney to determine your best legal option.

You may be able to consolidate all of your loans and credit card accounts into one loan. If you have a home or a car loan that can be used as collateral you can typically get a lower interest rate through a consolidation loan. When debtors are overwhelmed with high interest credit cards and loans, debt consolidation may be an option to consider because the consolidation loan will cut down total monthly payments. However, be wary. There is one important aspect to keep in mind when considering loan consolidation. If you convert unsecured debt, like credit cards, into secured debt by using your home or car as collateral to obtain a consolidated loan, you are at jeopardy of losing your property if you default on the consolidation loan. For that reason, negotiating with your credit card companies may be a better option.

If credit card bills are the reason you are unable to take control of your finances, it may not be in your best interest to file bankruptcy. Credit card debt is not secured debt, it is unsecured. That means you cannot lose your property by simply falling behind on your payments after a couple of months. The only ways a credit card company could turn your credit card debt into secured debt is to sue you and obtain a judgment or if you consolidated your loans with your home or car. Before a credit company goes to the trouble of suing you over a credit card bill, they would prefer to work out an arrangement with the debtor. Contact your creditors to negotiate a settlement on your account. You can attempt to negotiate a percentage of your debt through one lump sum settlement payment or if you believe you'll have an increase in your income soon, work out a payment plan until you can get back on track. Remember it is always best to seek the advice of a consumer law attorney or a bankruptcy attorney to discuss the legal ramifications of all your options.

Statue of Limitations for Credit Card Debt in the State of Vermont

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Statutes of limitations are laws that set a maximum time limit for individuals and businesses to seek compensation for breaches of contracts in a court of law. A debt that exceeds the statute of limitations is referred to as a time-barred debt. The state of Vermont sets the state statute of limitations on credit card debt in Title 9A, Article 3 of the Vermont Statutes.

In the state of Vermont, a credit card company or a debt collection agency can attempt to collect a debt through legal action up to six years after a borrower defaults on payments. In addition, creditors can levy fees on unpaid credit card balances and collect a maximum interest rate of 12 percent annually on unpaid balances, as of February 2011. If a borrower declares bankruptcy, the debtor cannot collect on owed monies, regardless of the six-year statute of limitations, according to the Attorney General of Vermont.

To prove that the statute of limitations has caused the debt to expire, a Vermont debtor should keep written records of when they defaulted on their credit card payments. When a creditor takes action against a debtor in a Vermont court, the debtor must prove that the debt is time barred to avoid a judgment in favor of a credit card company or debt collection agency.

Neither the Fair Debt Collection Practices Act, FDCPA, nor Vermont law forbids a creditor from trying to collect on owed credit card debt past Vermont's six-year statute of limitations. Debt collectors can send letters to the debtor requesting payment for time-barred debt and may offer a reduced settlement or payment plan. If borrowers pay off even a fraction of the debt, they have accepted responsibility for the debt, which resets the statute of limitations. This means that the debt collector can attempt to collect the full amount in court. Per Vermont Attorney General Rule CF 104.05, Vermont debt collectors cannot try to obtain from the debtor a written statement acknowledging his responsibility for a time-barred debt.

According to the Federal Trade Commission, FTC, borrowers should not discuss time-barred debts with a collection agency. If the statute of limitation passes on a Vermont credit card debt, the debtor should send a letter requesting the collection agency to verify the debt, a process which involves sending the debtor a dated copy of the bill. Debtors can send a stop letter to the debt collector halting all future communications. An individual can sue debt collectors for $1,000 under the FDCPA if the collections representative claims he will sue for a time-barred debt. According to Vermont CF 104, the Vermont Attorney General may charge debtor collectors with fraud if they use dishonest means to try to collect a time-barred debt.

Can a Spouse's Assets Be Taken in a Civil Judgment?

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Obtaining a civil judgment against you in court is usually a creditor's last resort to force repayment of a debt. If you have fallen behind on your bills because of a job loss, medical condition or other unforeseen reason, you may find that you can no longer pay your creditors. Your creditors may pursue you in court and receive the right to collect the debts you owe in other ways. This can make your spouse's assets vulnerable in some situations.

As soon as you realize that you do not have enough money to pay your bills, contact your creditors to attempt a modification or other resolution. If you are not successful, you will receive collections calls and letters. Late fees and penalties may increase existing debt. If creditors remain unsuccessful in collection attempts, they can sue you in court. If they prove that the debts are yours, you will receive a civil judgment against you and the creditors can use it to attach your assets or other property.

After a creditor wins a civil court judgment against you, the company may attempt to collect from you in any way possible. A lien may be placed on your house so that when you sell it, you will have to pay the creditor before you receive any proceeds. In addition, your creditor may collect your debt by giving the judgment to your employer, who will garnish your wages until full repayment is made. If you have a bank account with your name on it, your bank can freeze your account and give all of the money in it to your creditors up to the amount that you owe.

All assets that you and your spouse own in both names are vulnerable to your creditor judgments. Your spouse's assets may be not be taken if they are in your spouse's name alone. However, in community property states such as California and Texas, a lien can be placed on your house even if it's owned solely by your spouse, if the civil judgment debt was acquired after the marriage. In states that are not community property, your house may be protected from civil judgments. The same rules apply to other assets, such as automobiles and bank accounts. Property owned jointly by you and your spouse is at risk for repayment of debt that you accumulated yourself.

Protect your assets legally before you owe creditors more than you can repay. Apply for a home equity line of credit (HELOC). You do not need to use it. However, if a civil judgment is made against you, the creditor will know that there is very little, if any, money that will be left over if you sell your house because the first and second mortgages must be paid first. With your ability to remove equity at will with a HELOC, your house becomes a less attractive option for a lien. Protect your business or rental properties by forming one or more limited-liability companies and transferring your assets into them. Learn your state's laws for asset exemption rules that apply to other property that you own, such as retirement accounts and vehicles.

Correcting a Delinquent Credit Card

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Correcting a delinquent credit card likely means you're trying to change information on your credit report about the account. The credit card delinquency could be hurting your credit score or even keeping you from being approved for a mortgage. Fortunately, you can easily have the information changed on your credit report--if it is inaccurate. Otherwise, you'll have to live with it. Negative information that is true can remain on your credit report for at least seven years, according to the Federal Trade Commission.

Instructions

Get a copy of your credit report for free from the website Annual Credit Report (see Resources). The three nationwide credit bureaus created the site to offer free reports as required by the Fair Credit Reporting Act. You can view and print your report immediately online or follow instructions on the homepage to order by telephone or mail.

Find the delinquent credit card account on your credit report. Determine why the information is incorrect. Perhaps you paid the bill on time or never paid it late.

Write a letter to the credit bureau insisting that the incorrect information be removed from your credit report, and state the reason why it is wrong. By law the credit bureau must fix the erroneous information within about 30 days after being notified by you. Mail the letter to the credit bureau at its address on the credit report and wait for a response.

Contact the credit bureau again if you have not received a response within 45 days. Send your original letter, attached to a new letter stating that you are still waiting for a response to your original inquiry. Also point out that the Fair Credit Reporting Act obligates the credit bureau to respond to your request in a timely way.

Check your credit report again after hearing from the credit bureau to confirm that the information has been removed or corrected. If the situation was not corrected to your satisfaction write the credit bureau again to complain. Consult an attorney if you cannot resolve the situation.

Texas Laws on Surviving Spousal Debt

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Texas laws regarding surviving spousal debt differ from the laws of most states, primarily because Texas is a community property state. Community property states differ because property, assets and credit accounts are considered to be jointly owned by both parties in a marriage. This means the debts accrued during a marriage are also shared by both parties. The type of property held by the couple determines whether the surviving spouse is legally obligated to use that property to pay the debts of the deceased spouse.

Separate property is property that either spouse owned prior to the marriage or gained during the marriage by means of a gift or an inheritance. The separate property the deceased spouse had accumulated is used to pay his debts. The surviving spouse is not obligated to use her separate property to pay the deceased spouse's debts. Examples of property that may be in question include cash, investments, real estate, jewelry and works of art.

All property that is not separate property is community property. Community property that was solely managed by the deceased spouse should be used to pay off the deceased spouse's debts. Community property solely managed by the surviving spouse is not typically used to pay off the debts of the deceased unless both spouses are found to be liable for the debts or if the debts were incurred for the benefit of both parties. Joint property is subject to payment of the deceased's debts.

Texas lawmakers have passed certain laws to protect the family home, household furnishing and personal vehicles. The laws allow a surviving spouse to stay in the family home for life and for minor children to remain in the family home until they are adults. These laws are designed to protect the well-being of the family of the deceased, but only to the degree that the family is able to maintain the property and pay the mortgage and property taxes.

A family facing probate of a deceased spouse's estate may be allotted a living allowance while the estate is in probate. This living allowance can help the surviving spouse through that awkward stage of adjusting to less income and to maintain a standard of living while the estate negotiations payment of debtors prior to the release of remaining assets to the family.

Services That Help You Rent With Credit Problems

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Rental agencies, apartment complexes and rental brokers use credit scores and past credit references to determine an individual's credit history. Evictions, credit card delinquencies, defaulted loans and late rental payments can damage a person's credit history. Bad credit can also ruin a person's rental prospects. With the help of services like the Rent Well Tenant Education Program in Portland, Oregon, people with poor credit are learning how to rent places to live.

The Rent Well Tenant Education Program is a service designed to help Portland, Oregon metropolitan area residents with poor or limited credit history become responsible renters and find access to rental housing. The Rent Well program consists of a 15-hour class that covers all aspects of responsible renting, including landlord-tenant relationship, tenant's rights, laws and regulations, budgeting, timely payments and landlord's expectations. To graduate from the program, tenants must attend all classes, develop in-depth knowledge of renting and complete a "housing portfolio," which is a binder full of items that are relevant to renting such as a rental application, cover letter and personal references. Upon graduation, the program will work with prospective tenants to find housing, and will provide the tenant's landlord with a fund that guarantees the full dollar amount of the tenant's lease.

Rent Well provides education and assistance to tenants with poor credit scores, but it does not actually raise a person's credit score or guarantee an approval for housing. Additionally, prospective tenants should choose to apply for housing owned by landlords who work with the Rent Well program.

Although programs such as Rent Well will help you find housing with a poor credit score, a person may still have to take certain extra steps because of his credit history. According to Bank Rate, finding a co-signer for a lease will increase an individual's chances of approval if she has bad credit. Additionally, Bank Rate recommends saving up money for a higher security deposit, as landlords often require more up-front money from tenants with poor credit. Completing the Rent Well program and taking adequate preparation will increase your chances for finding housing.

How to Reduce a Debt Problem

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Debt problems can sneak up on consumers. Whether you struggle with job loss or health issues, getting stuck in financial hot water is stressful. Reducing debt can be accomplished. However, it's not a quick fix. Tackling debt takes hard work. You'll need to create a repayment plan and partner with creditors to reduce debt obligations for good.

Instructions

Create a budget. The Federal Trade Commission (FTC) recommends creating a budget to get debt under control. List the amount of money coming in each month. In another column, list each debt obligation, and the amount owed. Look for opportunities to reduce spending. For example, if food expenses are high, cut back on eating out or buy groceries in bulk to reduce per unit costs.

Contact your lenders about debt obligations. If you're struggling to make monthly payments, negotiate lower payments. Lenders are motivated to work with you. However, according to the Federal Trade Commission, it's important to do this before the account is turned over to collections. Otherwise, your credit score will suffer.

Deal with accounts in collections. If accounts have already been turned over to collections, ask about cash settlements. Collections may settle debt for pennies on the dollar.

Consolidate debt obligations. For example, if you have several credit cards, consider balance transfer offers. These offers provide a low interest rate for a fixed term. Choose an offer that doesn't charge transfer fees. These fees add up to hundreds of dollars. Personal loans are another option. If the interest rate is lower than your existing lender, you'll be paying more on principal each month. Check out Bank Rate (see Resources) to find lenders.

How to Make a Payment on My Iowa Student Loan

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There are four ways in Iowa to pay off loans for higher education. Borrowing for college averages $7,100 annually in the United States in 2007-2008, according to the National Center for Educational Statistics. Most loans offer a grace period, after graduating or leaving school, before repayment must start. For example, the grace period for federal Stafford Loans is six months. Graduated payment plans, in which payments are smaller in the beginning and rise in later years, are available for federal and private loans. Falling behind or defaulting on a student loan can affect your credit rating and make it harder to reach your desired career track.

Instructions

Make automatic monthly payments. Auto-debit is a free automatic payment program that allows Iowa Student Loan, a non-profit organization, to deduct monthly payments from checking or savings accounts. This ensures that the bill is paid on time. Allow about two months to set up an auto-debit program, and make sure your account can cover the monthly amount on a regular basis. Auto-debit is deactivated if three payments within a two-year period are returned for insufficient funds.

Pay online. Set up an online account with Iowa Student Loan. Online payments can be made to the entire loan account or to specific loans. You can request immediate payment or schedule payments up to 60 days in advance. Have your 10-digit Iowa Student Loan account number ready. You will need loan sequence numbers when making payments to specific loans.

Pay by telephone. An automated toll-free number is available around the clock, seven days a week. Des Moines area residents can use a local number. Have your 10-digit Iowa Student Loan account number ready. Follow the prompts to make a payment in the desired amount. Payment can be made from your bank account, ATM card with one of the logos PULSE, STAR or NYCE, or with a Visa or MasterCard credit card. You will receive a confirmation number after paying. If you want to speak to a loan counselor, press 1 for the recorded announcement on how to make a payment, and press 0 anytime during the announcement.

Toll-free: 800-243-7552

Des Moines area: 515-243-5626

Pay by mail. Iowa Student Loan will send a monthly bill to you by mail about 20 days before the due date. You can pay with a check or money order, and you must detach and enclose the payment stub on the monthly bill. Mail the payment to:

Iowa Student Loan

P.O. Box 7388

Des Moines, IA 50309-7388

How Does a Forbearance Affect a Credit Rating?

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Forbearance is a term used to describe a pause in required payments on a loan. This is common with student loans and mortgages. Lenders will grant a forbearance when borrowers lose access to income and cannot continue to make payments for some time. The forbearance halts required monthly payments for a period of time, usually no longer than a year, and then allows payment requirements to resume, counting the missed payments back into the total amount. This has effects on credit ratings depending the borrower's situation.

The timing of the forbearance is important. A forbearance cannot cancel out loan payments that have already come due but have not been made. A borrower may qualify for a forbearance, but if they still have previous payments they have not made, these will be recorded as late and have a negative effect on the credit rating and continue to lower credit until they are fully paid off.

A forbearance has little direct effect on a credit rating. This is why it is a popular choice for those who are struggling to make their monthly payments. No debt is recorded as late as long as all payments are up to date, and when the forbearance ends the borrowers can continue to build up credit.

In the long term, a forbearance can make it more difficult to pay off the loan. Since the missed payments are added back into the loan amount, a forbearance raises the monthly payments required when they resume. As a result, the borrower may find it more difficult to pay off the loan and may have a greater chance of missing future payments, leading to lower credit ratings.

The alternative to forbearance is often a defaulted loan or late payments. These options have severely negative effects on credit and can make it very difficult to get a new loan. In this way, by helping borrowers avoid defaulting, forbearances (and other options like deferred payments) can have a highly beneficial, if passive, effect on credit ratings.

How to Fix My Credit Report If It Is Showing a Former Married Name

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Changing your name after a marriage or divorce can be a hassle. If you've recently examined your credit report and found that it is still under a previous name, correct the problem immediately. This error has nothing to do with the credit reporting agency; the agencies merely display the information they receive from creditors and service providers.

Instructions

Gather the documents needed and make copies. You'll need your divorce decree and valid photo identification (such as a driver's license or state ID) reflecting the name change. If you are remarried, you'll need your current marriage certificate.

Contact your creditors to update your accounts. Start with a phone call to see if you can complete the process by telephone. In most situations, you'll be required to send a request by mail or fax, along with the appropriate documents.

Contact your service providers and utility companies. While telephone and energy companies don't report monthly account information, they often report names and addresses. Make sure any accounts you have are under your current name; if they're not, provide the information to change it.

Wait 30 to 60 days for your credit report to update. Once the time has passed, run your credit report to verify the information is correct.

Contact each individual credit reporting agency, if the information is still not correct. Send a letter via certified or registered mail; explain your situation and furnish proof of your correct name.

Mortgage Interest Reduction Tips

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As anyone who has taken out a mortgage knows, the interest charged over the life of a 25 or 30 year loan can add up to a large amount. Too many people just pay it. What you might not know is that there are some strategies that result in paying less interest and getting rid of the principal faster. Keep in mind that banks structure loans in a way that is beneficial to them and so that they can make the most profit (interest) from your mortgage.

One clever way to reduce the amount of interest you pay is to set up an "offset" account, according to the Financially Free website. The process and reasoning behind it are not complex. Many people have their paychecks deposited into a checking or savings account and pay the mortgage manually each month. These types of accounts pay next to nothing in interest. Instead, open an interest-bearing account where your paycheck is deposited. Let your money sit there each pay cycle and arrange to have the mortgage automatically paid by your bank at the latest date possible. Meanwhile, get a no-fee credit card with a 30-day interest free feature and charge your day-to-day living expenses to it. The end result is that you have a big chunk of change drawing interest in your offset account that has the effect of reducing your mortgage interest. The key to this method is always to pay off the credit card on time.

Receiving a loan modification from your lender is another way to reduce the mortgage interest that you pay on your loan. For a variety of reasons, or for no reason at all except a desire to save money, you can ask your lender for a loan modification. The process works by the bank creating a new loan, with more favorable terms, that allows you to pay off the old one. Banks, of course, prefer to make more money rather than less, but, if you can show a legitimate need to have your loan modified, such as a change in your financial situation that makes the present payment untenable, your lender may listen. A good time to seek a loan modification is when you notice that the federal rate of interest has dropped below what you're currently paying.

Since mortgage interest is calculated on a daily basis, some borrowers split the monthly mortgage payment in half and make a payment every two weeks instead. There are a few different ways this helps reduce your mortgage interest. The first is that you are paying down the principal balance at a faster rate, which reduces the interest charged compared to a once a month payment. Also, since there are 12 months in the year, but 52 weeks, you pay an extra monthly payment each year by going the biweekly route. This reduces the amount of interest that you are charged by reducing the loan amount faster.

Online Information For Debt Consolidation for Bad Credit

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If you're in a bad credit situation, you may be searching for online information to help you understand your various options for debt consolidation. While the Internet has a wealth of information about debt consolidation, it may be difficult to sort the good from the bad. There are four resources offering excellent launching points for your research into debt consolidation.

The first place you should look online if you have bad credit and are considering debt consolidation is the Annual Credit Report website. All U.S. citizens can obtain a free copy of their credit report once a year from each of the three credit bureaus -- Equifax, TransUnion and Experian. Your credit report will tell you where you stand and what kind of consolidation you should pursue. If you want to consolidate through a debt consolidation loan, you'll need to have good credit as well as collateral. To qualify for a debt management plan, you must prove you're having trouble paying, and possibly have defaulted on payments already. Your credit report will give you the information you need to know about your credit situation when you begin exploring your consolidation options.

The Federal Trade Commission website contains a wealth of reliable information if you need help understanding your credit situation and your options for becoming financially free. Their article "Knee Deep in Debt" details the differences between debt management plans and consolidation loans, warns of problems that you may run into by using these methods, and includes information on bankruptcy. The Federal Trade Commission website also has articles on budgeting, choosing a credit counselor and accessing your credit report.

One of the biggest problems people run into with credit counseling companies is they are often unreliable or fraudulent. Among the problems people have with so-called credit counseling companies is their practice of making late payments to clients' creditors, resulting in dramatically lower credit scores. The National Foundation for Credit Counseling website helps people find reputable credit counseling companies through phone, in-person or online options.

Oftentimes, people jump at debt consolidation before they fully understand their options and how to tell hype from reality. The Bankrate.com article "10 debt consolidation myths" breaks down the information thrown at you from advertisements so that you understand what you're really going to get if you take on a consolidation loan, credit counseling or a debt management plan.

I Have a Problem Paying My Credit Card

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When your budget becomes strained and you find yourself without the funds to pay your credit card bill, you have options. The options that are available and logical for you to accept depend on the amount of your debt, what your creditor or other debt management solution offers and the future of your finances.

When you find that you can't make the payment on your credit card, you should contact your creditor and inform a customer service representative of your plight. Ask the representative if the creditor can defer or lower your payments for a certain period while you regain control of your financial situation. Creditors want their money and are often willing to give consumers a break. Sometimes, a creditor may offer you a debt settlement. This is an option if you are far behind on your payments and you cannot afford to make the payments the creditor is requesting to bring the account current. A debt settlement requires you to pay a amount agreed upon by you and the creditor that is less than you currently owe on the account. For example, the creditor may agree to waive late fees and over-limit fees, saving you hundreds of dollars.

If you have several credit cards and you can't make payments on any of them, a credit counseling service may be the right choice for you. Choose a reputable organization that has an absence of negative information from the Better Business Bureau. Credit counselors help you develop a workable budget based on your finances. Credit counseling services can also set up a debt management program for you if you have a considerable amount of debt and no means to pay it. A credit counselor gathers your credit card information such as creditor names, card numbers and balances and attempts to negotiate a lower payment and interest rate with each of your creditors on your behalf. This can save you thousands of dollars in interest charges and consolidate your debt into one convenient monthly payment. You send the credit counseling service a lump sum plus a nominal fee to handle the credit card payments for you each month.

Debt settlement companies exist but can be risky, according to the Federal Trade Commission. These type of companies offer to negotiate with your creditors to settle the debts that you owe, often at a settlement rate of 30 to 70 percent of the total balance. This can be a viable option for people who have a large amount of debt or a high balance on one credit card that they can't pay. You may be advised by the debt settlement company to stop paying your creditors, but be aware that late fees and over-limit fees could accrue if you stop paying. Debt settlement companies often have you send payments to them, and they hold your funds in a special account until the amount reaches the amount that they can negotiate as a debt settlement with your creditors. Then, they pay the creditors the settlement amount on your behalf. Investigate any debt settlement company before you agree to work with them. Check with the Better Business Bureau for any negative information that may have been reported about the company. Be aware that the fees this type of company charges for its services may be considerable.

If you have enough income to pay your debts, but you don't keep track of your spending, you can develop a budget that can help you manage your income more efficiently. The first thing to do is add up all of your necessary monthly expenses. Don't include categories for entertainment, dining out and other unnecessary expenditures. Then, subtract the expenses from the net income you receive each month. Once you see how much income you have left over after paying all of your necessary monthly expenses, you can budget a set amount for dining out, entertainment and other items.

How to Deal With a Derogatory Credit Report

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False information on a credit report can hurt you. A lender who reads that you're still in default on an account you paid has no way to know differently. Neither do employers or insurers who check credit data before deciding to do business with you. Fortunately, federal law protects you against derogatory credit reports. Credit-reporting companies and anyone providing them with information have a legal obligation to correct errors. It's up to you to catch the errors and notify them.

Instructions

Order a free credit report from each of the three major credit card bureaus -- Equifax, Experian and TransUnion -- and review it for errors. Each bureau must provide you with a free report once every 12 months. You can order all three at once or space them out over the year.

Contact the credit bureaus in writing about any errors you find. If you have documentation -- a written statement from your creditor that you closed the account or settled the debt -- make a copy and send that with your letter. Send the letter by certified mail, return receipt requested, so that you have proof the bureau received your correction.

Wait for the bureau to investigate and respond, which usually happens within 30 days. If the bureau agrees the report was incorrect, it sends you a copy of the amended report and identifies the source of the information. Contact the information provider, in writing, and ask him to correct his files too.

Ask the bureau to notify anyone who received a credit report containing the derogatory data. When you ask, the bureau has to send corrections to everyone who received an inaccurate report in the last six months. If employers received an inaccurate report at any time in the last two years, the bureau has to notify them too.

How to Run Credit Check on a Minor

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The only reason to run a credit check on a minor is to ensure his personal information isn't being used illegally. Credit monitoring companies do not purposely keep credit scores of minors. In today's age of identity fraud, thieves are finding any way possible to take advantage of the credit system. No one is entirely safe from identity theft, and thanks to the Internet it is becoming easier to gather personal information. Only a parent can call the credit monitoring companies and check up on his child's information.

Instructions

Have the parent or current guardian take care of the credit check. Unless you are the parent, you will not be granted the right to request any personal information about the child.

Call the three major credit monitoring companies:

Experian:
(888) 397-3742

Equifax:
(800) 685-1111

Trans Union:
(800) 888-4213

Explain the circumstance and ask them to check to see if there is anything on file for your child. They can quickly confirm if they have a credit file for the minor.

If they do have a file, immediately request to freeze the account. The Fair Credit Reporting Act allows a free credit report when it is believed you have been a victim of identity theft.

Most likely you will need to send off for a credit report, and will not be able to view it online. The credit monitoring companies will provide you with the information needed to mail a formal request to view the credit reports. You will need to supply personal information about yourself and your child.

How to Dump a Home Equity Loan

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The U.S. Department of the Treasury reports that a home equity loan allows you to leverage your home's built-up equity. Banks, credit unions and other lending institutions may lend you money based on your credit and the equity in your home. However, the equity serves as collateral, making it difficult to simply "dump" the home equity loan. Defaulting on a home equity loan could lead to the lender foreclosing on your house -- a key reason why you should treat a home equity loan very seriously.

Instructions

Talk with your lender about why you are dissatisfied with the home equity loan. You may be dissatisfied because your credit line was frozen or reduced, or your interest rate has increased significantly. It's possible that the lender may be able to modify the loan to make the interest rate affordable. Or you may be given an opportunity to argue that your credit line should not have been frozen or reduced.

Visit with a nonprofit credit counselor if you are still not satisfied after meeting with the lender. Getting an objective opinion about your home equity loan could help shape your strategy as you prepare to get rid of the loan. Find a nonprofit credit counselor in your area by seeking a referral from a charitable organization such as the United Way or Salvation Army.

Dump your home equity loan by applying for -- and receiving -- a home equity loan from another lender. Use the proceeds to pay off your present home equity loan.

Mortgage Lenders & Credit Problems

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Credit problems can occur during the application process for a mortgage. Errors on credit reports, unpaid delinquent debts and other issues can delay approval. However, major credit problems, such as a recent bankruptcy, could result in an immediate denial.

Credit problems are closely reviewed by mortgage lenders because they are a reflection on your ability--or willingness--to pay your bills on time.

BCS Alliance, a credit website, says a minimum credit score of about 660 is usually needed for approval on most mortgage loans. However, people applying for loans insured by the Federal Housing Administration (FHA) can be approved with scores as low as 500, according to The Washington Post in a 2009 story.

Other potential credit problems during a mortgage application include the listing of charge-offs, court judgments and liens on your credit report. In most instances, these negative items must be resolved before mortgage approval.

Review your credit report before applying for a loan and resolve all issues. Get a free copy of your report from the website Annual Credit Report--established by the nationwide credit bureaus to offer free reports as required by law.

Creditor Settlement Agreement

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If you're struggling with debt, there are a number of options for dealing with it, including debt consolidation, bankruptcy and debt settlement. A debt settlement agreement, which you negotiate with your creditors, allows you to pay less than what you owe and avoid the potentially complicated process of filing bankruptcy.

While each creditor has its own requirements regarding settlement agreements, you must meet some basic criteria to begin the process. In general, your account must be past due for a creditor to consider a settlement. The longer your account goes unpaid, the more likely a creditor is to settle. While there is no specific amount of debt needed to negotiate a settlement, most debt settlement companies offer services for consumers who owe $10,000 or more.

Negotiating a creditor settlement agreement can be done two ways: by using a debt settlement company or on your own. Either way, the process is fairly similar. You or the debt settlement company contacts the creditor with a settlement offer. The creditor may accept the offer or make a counteroffer. If you agree on the settlement amount, you can then negotiate how payments will be made and how the account will be reported on your credit. Once both parties have signed off on the agreement, you pay the creditor, either in a lump sum or multiple payments.

The obvious benefit to entering a creditor settlement agreement is that it can allow you to pay less than what you owe while saving money in interest and fees. If your creditors are threatening a civil lawsuit, reaching a settlement agreement can help you to avoid having a judgment entered against you. If you're considering bankruptcy, a creditor settlement agreement can be less damaging to your credit.

A debt settlement can have significant consequences at tax time. If the amount of debt forgiven exceeds $599, you may have to pay income tax on the remaining unpaid debt. Consult an attorney prior to signing any agreement that requires you to consent to a judgment. If you fail to pay the settlement as agreed, your creditors can resume collection actions against you, including a civil lawsuit, for the full amount of the debt.

If you're considering contracting the services of a debt settlement firm, research the company beforehand. While there are a number of legitimate companies offering debt settlement services, there are also many organizations operating scams. The Federal Trade Commission is taking steps to eliminate these fraudulent business, but as of 2010, debt settlement companies remain largely unregulated. The FTC advises consumers to thoroughly scrutinize the company's terms prior to signing any type of contract.

How to Get Debt Collectors to Stop Calling

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It's emotionally wearing to be struggling financially and then cope with harrassing bill collectors. The Fair Debt Collection Practices Act places some limits on their behavior. Here's the Federal Trade Commission's advice on how to apply this to your situation.

Instructions

Within five days after you are first contacted, the collector must send you a written notice telling you the amount of money you owe. The notice should also include the name of the creditor that you owe the money to and what you should do if you think you do not owe the money.

Within thirty days of receiving the written notice, send a letter to the collection agency stating that you do not owe the money. This only works if the debt is a mistake or already paid. The collector is not allowed to contact you after that unless they can send you proof of the debt. This could be a copy of the bill for the amount you owe.

If you owe the debt, but want to stop the collector from contacting you, take this step. Write a letter to the collector telling them to stop contacting you.
Once the collector gets the letter, they are not to contact you again except to say there will be no further contact or to inform you of a specific action. When you send this letter, it does not make the debt go away. The debt collector or your original creditor can still sue you.

Report any problems you have with a debt collector to your state Attorney General's office and the Federal Trade Commission. Many states have their own debt collection laws, and your Attorney General' s office can help you determine your rights.
To file a complaint go to the website listed below or call 1-877-FTC-HELP (1-877-382-4357). It's a free call.

Help With Wage Garnishment

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When you lose control of your paycheck, it can be a particularly frustrating experience. This is exactly what happens when you have your wages garnished, as your creditors can have access to your paycheck before you receive it. If you find yourself in this situation, you can pursue a few options.

One option that you may have is to simply allow the garnishment to proceed. The creditor will stop garnishing your wages as soon as the debt is repaid. If the garnishment is not a very large percentage of your pay, this may be the best alternative that you have. Each state has laws regarding how much of your paycheck can be garnished to ensure that the amount taken out is not excessive. This option could take some time to complete, but you will not have to do anything different.

Another option that you could pursue is negotiating a settlement with your creditor. As soon as the wage garnishment is set up, you could talk to the creditor and see if they would be open to a payment plan. While this ultimately results in you getting a portion of your money to the creditor to repay the debt, it will put you in charge of the payments instead of languishing this duty to your employer and your creditor. If you are willing to pay off the debt, the creditor may be willing to negotiate with you.

Another way that you could eliminate a wage garnishment is to take out a loan. For example, you could use a personal loan or a home-equity loan to eliminate the garnishment. With this process, you will borrow the money you need and then use that money to pay off your debt. At that point, you will need to contact the creditor or its lawyer and ask it to stop the wage garnishment. You will then have to start making payments toward your loan instead of to the creditor.

When you are faced with a wage garnishment, you may be able to get out of it by filing for bankruptcy. If you file for Chapter 7 bankruptcy, you can have all of your unsecured debts discharged. By filing for Chapter 13 bankruptcy, you could have a repayment plan set up with your creditors. Either option will require your creditors to stop trying to collect money from you, which includes stopping any wage garnishments that are currently set up. While this will wreck your credit rating, it could help you stop the garnishment.

Myths About Improving Credit

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A person's credit score matters for a number of different reasons, namely that it will often affect the price that a person will receive on his loans. If a person has too low a credit score, he can expect to be charged a high rate of interest from a lender. Many people seek to improve their credit scores, but a number of myths pervade the practice of credit score repair.

In fact, the longest amount of time that negative information can stay on your credit report is seven years -- save for a bankruptcy, which can stay on up to 10 years. After this time has expired, the information is struck from your report and can't hurt your score anymore. In fact, some credit reporting bureaus remove this information before they're legally required to do so.

Although a rise in your income may make you more creditworthy in the eyes of lenders, it will not actually improve your credit. This is because credit reports are composed of information related solely to your lending practices. There is no section on the credit report that has anything to do with income. Therefore, making more money can't directly fix your credit.

One of the surest ways of bringing up your credit score is by paying off debts. In most cases, bringing a debt up to date will make your score climb. However, in some cases, if the debt is old enough that it has already left your credit report -- meaning it is older than seven years, usually -- paying it off may, perversely, cause it to return to the report and bring your score down.

The biggest myth about repairing credit is that the process is a quick one. Just like repairing a relationship in which you have broken the other person's trust, restoring your credit rating -- the trust credit reporting bureaus have in you -- will take time. After paying down debts, your next move is to take out new credit and pay it off on time. After several months, your score will start to climb again.

10 Reasons to Stay Out of Debt

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The number of people in debt is staggering; according to MSN, about 43 percent of American families spend more than they make each year, driving them deeper into debt. People get into debt in a variety of ways, including credit cards, student loans, medical bills or financed purchases that were not paid off in time. While some debt is necessary, like paying medical bills, debt should generally be avoided for a number of reasons.

With debt comes unnecessary stress, anxiety, sleepless nights and even depression. All of these emotional strains can escalate to various mental and physical problems. Living under a mountain of debt adds pressure to people to work harder to get out of debt, which in turn leads to a more stressful daily life.

Married couples that are in debt have a higher chance of getting divorced, as finances are one of leading causes of divorce for couples. It is normal for couples to discuss and even argue over finances; however, too often these discussions can turn into heated fights. Consistent fights over financial struggles add a strain to your marriage.

Individuals in debt do not have as much, if any, money freed up to follow their dreams of buying a house or car, starting new business ventures, enjoying various entertainment or taking vacations. Debt can jeopardize your kid's college fund, your savings and retirement plans, truly sabotaging the future of the individuals in debt and their children.

When you are spending more than you earn on paying down debt and paying other expenses, there is no free money to put aside in case of emergencies repairs, health emergencies or home maintenance. These things can really put individuals in compromising situations and even more debt if there is an emergency.

Debt interest can mount over the years; some individuals might even spend a lifetime paying off interest on items purchased in the past. Even if items can be resold to ease some of the financial burden, the item will be worth much less that its original price tag, and you will take a loss on the item.

As debt and interest begin to mount, there will be less money for healthy foods, medicines and vitamins; exercise activities like gym memberships and yoga classes; or hobbies like skiing. This will in turn affect the overall well being of any person trying to get healthy or add physical activity into their lives.

Many people in debt have become prisoners of their own debt, as they are not financially free to enjoy things like dining out or going to a movie. Even with healthier debt, such as student loans or a mortgage, people are committing to a long-term debt, which can take a lifetime to pay off and thus limit where you can spend your hard-earned money.

Debt will definitely slow down a person's financial progress. This includes long-term investment or savings goals, relocation and overall upgrades to your life. In order to progress financially, people in debt need to do more work to try to keep the debt under control and still save for a new house or car.

Excessive debt has a negative effect on your credit score. People with a large amount of debt will not be approved for home, auto or personal loans.

The average government retirement payment is just over $1,000 per month, which in most cases is not enough to live on. Debt takes any extra money that could be stored away for retirement. It is advised that people take charge of their own retirement savings instead of leaving it to the government. But, if you are under a mountain of debt, it is hard to find any money to put away for retirement.

Statute of Limitations for Consumer Debt in Vermont

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When a consumer debt can't repay his debts in a timely manner, he may be subject to a creditor's collection lawsuit. If the creditor's lawsuit results in a judgment against the debtor, actions used to collect the debt can include a bank account levy and wage garnishment. However, a creditor must act before the statute of limitations expires. In Vermont, the law generally limits the creditor to six or eight years to collect most consumer debt.

A creditor's collection action falls under the definition of a civil action in Vermont law. Section 511 of the Vermont Statutes Annotated states that a civil action "shall be commenced within six years after the cause of action accrues." This means that from the date a consumer's account becomes delinquent, the creditor must file his collection lawsuit within six years of that date. If the creditor does not file before the statute expires, the consumer can prevail in the lawsuit by raising the statute of limitations as a defense.

Consumer debts based on credit card accounts sometimes cause confusion when trying to determine the applicable statute of limitations. This confusion arises from determining whether a credit card account is considered an "open-end account" because it is a series of debits and credits, or an "account based on writing" because it starts with a written application. Some states have different statute of limitation for open-end account and written contracts; however, Vermont law does not make that distinction for purposes of the statute of limitations. All civil actions in Vermont are subject to the six-year limitation period and Vermont courts have applied this limitation period in its case law regarding credit card debts.

A creditor's collection lawsuit in Vermont that results in a judgment is also subject to a statute of limitations. Section 506 of the Vermont Statutes Annotated states that "actions on judgments" shall be brought within "eight years after rendition of the judgment." If the eight-year period expires without the judgment being paid, the creditor cannot use the court process to collect the judgment.

Vermont law provides a variety of protections for consumers struggling with debt, including debts that have an expired statute of limitations, sometimes referred to as "zombie debt." Unfortunately, unscrupulous debt collecters may try to collect such debt by unfair means, including deceiving a consumer to reaffirm the old debt to revive the statute of limitations and make a collection lawsuit viable. The Vermont attorney general's office enforces the Vermont Consumer Fraud Rules, which pertain to several consumer-related issues including debt collection. These rules specifically state that the "use of any unfair or unconscionable means" to collect a consumer debt "barred by a statute of limitations" by obtaining a reaffirmation of the debt constitutes an "unfair trade act or practice." The website maintained by the attorney general's offices includes tips on how to deal with debt collectors.

How to Get Medical Records Off of Your Credit Report

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Health care is expensive. And even if you do have health insurance, you may pay a huge out-of-pocket expense for doctor visits, surgeries and emergency care. Unfortunately, failure to pay a medical bill can result in a lower credit score. Hospitals and doctors may report unpaid bills to the credit bureaus. Aside from dealing with a low credit score, having medical records on your credit report can prevent you from getting a mortgage or auto loan. For these reasons, it's essential to get these records off your report and rebuild your credit.

Instructions

Before you can deal with the medical records on your credit report, you have to know the specifics. Order a copy of your report from Annual Credit Report, or write a letter and request reports from each of the three credit bureaus. Next, grab copies of all of your medical bills and statements. Double-check these statements against your credit report and calculate your total balance.

Agree to pay off your medical bills with one payment. If you have money in savings or disposable income, contact the hospital or your doctor and arrange to pay off the balances. Once the hospital or doctor receives your full payment, they'll contact the credit bureaus and remove the negative remarks.

Make weekly or monthly installment payments. Ignoring medical bills doesn't make the problem go away. Rather, the medical records remain on your report for up to seven years, thereby decreasing your credit score. If you cannot pay off the medical expenses, establish a payment arrangement. This way you're able to pay off the balance within a fixed time frame and get the medical records off your credit report.

Wait until the negative remark falls off your credit report. If your medical bills are too expensive and you don't have the means to pay off the balance, you can wait until the credit bureaus delete the medical records from your report. This generally takes seven years.

How to Enforce a Judgment Debt

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Judgments must often be enforced by additional legal procedures. This can be disappointing news to litigants who may have spent large amounts of money and effort to obtain a judgment. Courts will not collect your judgment for you. However, there are legal procedures and techniques that can be employed to collect judgments.

Some judgment debtors file bankruptcy to avoid paying judgments. Although bankruptcy can eliminate many court judgments, there are exceptions to debts that can be discharged in bankruptcy. Among these are court judgments arising from intentional acts and driving under the influence of drugs or alcohol.

Instructions

Obtain at least one certified copy of your court judgment. You will be charged a fee for this service.

Obtain an information packet from the court describing the specific legal procedures that the court offers to collect judgments, if available. Be sure to inquire about the fees for each procedure and whether more than one procedure can be employed at the same time.

Record an abstract of judgment with the county recorder's office where the judgment debtor has personal or real property located. The abstract of judgment will act as a lien upon all non-exempt personal and real property owned by the judgment debtor in that county.

Locate bank accounts owned by the judgment debtor. You may need to hire a private investigator to locate these accounts. A writ of execution form should be obtained from the court and a certified copy of the judgment and writ will be served (by a process server) on the judgment debtor's bank. The debtor will be allowed to file an objection to the levy within a specific time period.

Locate a place of employment for the judgment debtor and serve a writ of garnishment on the judgment debtor's employer. The debtor will be allowed time to file an objection to the writ for wage garnishment and he may be allowed certain exemptions from execution of a wage garnishment.

Locate any businesses that the judgment debtor owns. Many courts allow law enforcement officers to seize cash from a judgment debtor's cash register to satisfy a writ of execution.

Contact the court and file documents requesting a hearing known as a "debtor's examination." This is a hearing where the judgment debtor can be asked questions--under penalty of perjury--about the location of assets or sources of income.

Ask the court clerk whether other legal procedures are allowed.

What Happens to Your Credit if You Don't Pay Your Loan?

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Until the early 1830s, you could still go to prison in the United States for failing to pay debts. It may seem tempting to stop paying back your loans and let your credit score take the hit, but this is the worst possible scenario. Failure to pay loans impacts your future ability to gain credit, but you can eventually recover.

How much defaulting--failing to pay a loan on time--affects your credit depends on how late you are with payments. A single payment late by 30 to 60 days wont hurt your credit much in the long-run, according to the Motley Fool. Stopping payment altogether is the most serious problem. Anything more than 90 days late is a severe negative mark that will drop your score heavily now and in the long-term. Payment history counts for 35 percent of your score in the FICO formula used by nearly every lender.

If a company concludes that you simply refuse to pay your loan, they will probably send the debt to a collections agency. People with a large loan in collections on their credit score tend to fall into the below average score range--659 and below, according to Insider Car Buying Tips. If you have a current delinquent account, you will probably fall into the worst tier of scores: 520 to 300.

A lender or collections agency may sue you in court to get a judgment or pursue the debt until you declare bankruptcy. Bankruptcy, however, does not preclude you from getting credit again. Only the most serious item--bankruptcy--stays on your credit report for 10 years; the rest leave after seven or fewer, according to MSN Money Central. Even before this time you can get credit, such as with a secured credit card. Secured credit cards require a prepayment for your line of credit.

The worst you can do is ignore your bills. Milwaukee Wisconsin real estate agent Marty Searing recommends contacting your lender and asking to renegotiate the terms of the loan or a payment plan you can handle. If you pay less than the value of a loan it will still count as a delinquent account for seven years. You can ask for a month's reprieve on your loan repayment; the lender might grant your request and not report it to the credit agencies.

Credit Counseling Options

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Some credit counseling agencies offer an initial counseling session for free and are able to set up debt management plans, if necessary, by which they take a monthly amount from the consumer and pay the consumer's unsecured debts. You can find counseling through credit counseling accreditation groups, credit unions, some university extension programs and through paid agencies. The Federal Trade Commission suggests you avoid counseling agencies that won't work with you if you can't pay.

The Association of Independent Consumer Credit Counseling Agencies has affiliate agencies all over the country. Counselors are certified through the National Association of Certified Credit Counselors. The agencies offer the first counseling session free and are required not to turn people away for their other services if customers are not able to pay. In addition to creating a plan to handle debt based on a client's financial information, they offer debt management plans for which they charge a small fee to customers who can pay (see Resources).

The National Federation for Credit Counseling, also known as Consumer Credit Counseling Agencies, has agencies all across the country. The agencies are accredited by the Council on Accreditation for Children and Family Services and reviewed for factors including quality assurance, service environment, financial management and professional practices. NFCC agencies also have low fees and offer debt management plans (see Resources).

The Department of Justice U.S. Trustee Program has a list of credit agencies on its website that are non-profit agencies that have been approved to counsel people before they can seek bankruptcy protection. Many of the agencies listed on the site may include those from the AICCCA and NFCC. The Trustee Program has a searchable list separated by judicial district on its website (see Resources).

The Federal Trade commission lists several options for finding credit counselors, including credit unions, military bases, universities and branches of the U.S. Cooperative Extension System. When choosing an agency, the FTC recommends looking for an agency that offers a variety of services including counseling and classes. Also look for an agency whose counselors are certified or accredited by a third-party and that can offer you assurances that your information will be secure.

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Friday, November 28, 2003

Statutes of Limitations

Wage Garnishment

Bankruptcy

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Laws on Reporting Reduction in Debt

Mortgage Forgiveness Debt Relief Act

Bankruptcy Abuse Prevention and Consumer Credit Protection Act

Legal Process for Debt Settlement

Identification

State Law

Significance

Free Credit Reports

Disputing Errors

Time Frame

Thursday, November 27, 2003

Tax Implications

Credit Report

New Credit

Wednesday, November 26, 2003

Function

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Significance

Effects

Warning

Collection Reports

Debt Payments

Removal

Keep It in Writing

Settling Credit Card Debt

Credit Impact

Tax Consequences

Using Debt Settlement Company

Tuesday, November 25, 2003

Instructions

Instructions

Writ of Garnishment

Timeline

Steps

Prevention

Monday, November 24, 2003

Budgeting

Cutting Expenses

Self-Help

Credit Counseling

Request a Loan Modification

Debt Consolidation Loan

Negotiate a Settlement with Creditors

Sunday, November 23, 2003

Time Frame

Considerations

Warning

Solution

Civil Judgment

Liens and Garnishments

Spouse's Assets

Asset Protection

Instructions

Separate Property

Community Property

Protections

Probate

Rent Well Tenant Education Program

Considerations

Preparation

Saturday, November 22, 2003

Instructions

Instructions

Forbearance Timing

Direct Effect

Long-Term Effects

Alternative Actions

Friday, November 21, 2003

Instructions

Offset Account

Loan Modification

Biweekly Payments

Annual Credit Report