The Definition of Debt Deflation

Debt deflation seems like a dense term you might hear in your Economics 101 class, something that you must study but has no relevance in real life. However, debt deflation can have serious consequences on your investments and has real relevance both in history and in modern everyday life.

Definition

Debt deflation, according to the Contrary Investing Report, occurs when there is an abundance of outstanding debt that goes unpaid. Values of that debt plummet and, if you are still paying down that debt, you are left with an asset that is worth less than what you are paying down.

Concerns

Both lenders and borrowers alike worry about debt deflation since deflating values can lessen an investment. One of the greatest examples of debt deflation occurred during the Great Depression and one of the era's premier thinkers, professor Irving Fisher of Yale, explained how debt depression was responsible for much of the financial woes. Fisher explained how debt deflation leads to financial stressors such as "debt liquidation," "fall in the level of prices" and, worse still, the loss of value (both personal and in business) as well as a loss of net profits. You might think the lowering of prices might be a good thing, but, if you own property, real estate or assets depending on a strong market, deflation could ruin the value of your business or personal assets.

Japan's Debt Deflation

Japan is a prime example of a nation crippled by debt deflation. According to the Research Institute of Economy, Trade, and Industry, as late as 2002, Japan was struggling with the effects of debt deflation. Debt deflation hit the nation's banks and businesses hard, forcing companies and institutions to sell assets at a loss, forcing down profits, wages and salaries. Banks were left with excessive debt and the call was for the Bank of Japan to provide relief measures by not only relieving debt but allowing for a free flow of funding. As of 2010, the debt problem still had not been solved, with the BBC reporting that Japan's gross national debt is approaching 200 percent of its economic output, with hopes of recovery resting on new industries and changing demographics.

U.S. Housing Market

The U.S. housing market also shows signs of bearing debt deflation. In 2011, according to the Home Buying Institute, home prices are predicted to fall 6 percent to 9 percent, and foreclosures increasing by 20 percent. As home values fall, lenders and mortgage holders alike are exposed to risk, from defaults for the lenders and for owing more than the home is worth for homeowners. Debt deflation in the housing market is a particularly toxic mix since much of a consumer's wealth and spending power is tied to their home value. The fall of that value, and wealth, can drag other areas of the economy down as well, leading to more deflation and loss of profit.

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Why Pay Debt Collectors?

Debt collectors purchase a variety of debts from companies that cannot collect, such as hospitals and credit card companies, and attempt to recover those debts themselves. The debt collection agency profits by purchasing accounts for far less than the value of the debt and then collecting the full balance. There are several valid reasons consumers pay debt collectors.

Avoiding a Lawsuit

Debtors sometimes agree to pay off their collection accounts merely to avoid a lawsuit. As the legal owner of the account, the debt collection agency reserves the right to sue the consumer in court. If the company wins, the individual may face such consequences as wage garnishment, a bank levy and even property liens.

Collection agencies only enjoy the legal right to sue consumers for a limited period of time. Once the statute of limitations for collection lawsuits expires in the debtor's state, the individual no longer has to fear a lawsuit. Unfortunately, not all individuals realize this and some pay old debts in an effort to prevent a lawsuit that is not even legal.

Credit Repair

Paying off a collection account does not improve your credit score. A collection account, whether paid or unpaid, is always a derogatory entry in your credit report. If a debt collector agrees to delete the collection account from your credit report, however, your credit will improve. Collection agencies are not likely to delete credit information without incentive to do so. Thus, some individuals negotiate with debt collectors to remove their negative credit information in exchange for payment.

Personal Responsibility

Even if paying a collection agency does not benefit you in any way, satisfying your unpaid debts is a way of accepting responsibility for past mistakes. In order to be truly debt free, its necessary to resolve all of your outstanding accounts---including those that are in collections.

Although paying debt collectors does not improve your credit score unless the company deletes its information from your report, doing so will result in the derogatory notation updating as "paid." This looks better within your credit history than debt that remains unpaid.

New Mortgage Application

All mortgage lenders' policies differ, but your mortgage company views unpaid debts as a liability. Owing debt to a collection agency makes you a higher default risk---especially if your debt is still within your state's statute of limitations for a lawsuit. Some consumers pay debt collectors in order to eliminate their outstanding debts and qualify for the mortgage loan they need at the interest rate they want. Factors that influence whether or not your mortgage lender will expect you to pay off outstanding collection accounts when you fill out a loan application include the amount you owe and the age of the collection account.

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What Does Being Turned Down for a Credit Card Do to Your Credit?

Being turned down for credit is often disappointing but causes little damage to your credit score unless you apply repeatedly. An inquiry is added to your credit report each time a creditor reviews your file, with excessive inquiries causing your credit score to drop. A single inquiry usually has little effect.

Credit Bureaus

TransUnion, Equifax and Experian are three major credit bureaus providing credit reports to banks, mortgage companies and other lenders. Credit reports contain detailed information about your credit, including the number of credit accounts, credit lines, balances and payment history. Information obtained from public records also appears and could include judgments and tax liens.

Hard Inquiries

Credit reports also list creditors who reviewed your report after you applied for credit. The reviews are listed as so-called "hard inquiries" because you initiated the credit review by applying for a loan, credit card or credit limit increase. Most people apply for credit only a few times a year; applying more than that can hurt your score.

Credit Score

Credit scores are three-digit numbers ranging from 350 to 850 and are used to determine creditworthiness. Scores of 720 or higher are excellent, with scores below 620 considered poor. Several factors contribute to low scores, including excessive debt, missed payments and other negative information including charge offs and collection accounts. Hard credit inquiries are also a factor, but it is impossible to predict exactly how much an inquiry will affect your credit score. Single inquiries may affect your score by a point or two, if at all.

Applying

Check your credit report and score before applying for credit. Obtain a free copy of the report from AnnualCreditReport.com. The website is managed by the credit bureaus and offers free reports under terms of the Fair Credit Reporting Act. It is the only site endorsed by the Federal Trade Commission for offering free reports. Obtain your credit score separately, for a fee, by following instructions on the report.

Errors

Review the credit report for errors and then write the credit bureau at its address on the report to dispute any information that is wrong. The Fair Credit Reporting Act, a federal law, requires credit bureaus to respond to you within 30 days after receiving your letter. The credit bureau must tell you if it agreed with your complaint and any action it took, such as deleting incorrect information. Obtain an updated copy of your credit report to confirm changes, if applicable. Also, ask about general credit approval standards before applying for a loan. A loan officer or representative from the lender's customer service department can provide guidelines. Reviewing your credit report and score before applying for a loan can help avoid being turned down.

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How to Recover From Debt

It seems like your world is over. You are in so much debt that you're not sure what to do with yourself or even where to start. While it's not going to happen overnight (unless you win the lottery), it is possible to recover from debt with a little planning. After you are finished reading this article, you will have plenty of ideas of how to get yourself out of debt which will lead to a much healthier and happier you.

Instructions

How to Recover From Debt

1

Figure out how much debt you are in. Take all your bills and write them down in a notebook. Once you have a good idea of how much you are in the hole, you can start to plan how to get out of it.

2

Ask your credit card company for help. Sometimes a simple phone call can lower your interest rate. This will translate to less debt and more money to pay off debt.

3

Start pinching your pennies. Look at what you spend your money on. You can do without your fancy Starbucks coffee and save about $20 per week. If you want to get out of debt, you have to stop creating it.

4

Visit a credit counselor. A credit counselor can help you consolidate your loans and point out which debt to pay off first. Many people find this helpful because their counselor is able to put them on a specific plan with variables they may not have thought of themselves.

5

Use cash as much as possible. With cash, you can only buy what you can afford and can't splurge. If you can do it, cut up those credit cards! If they aren't around to use, you can't put more purchases on them.

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How to Get a Loan for Daycare With Bad Credit

If you want to start a daycare business but are discouraged by the potential effects of your bad credit, you should know that there are still ways to get a loan. Even if you have bad credit, there are certain lenders who can step in and help, even if they are not able to provide the best terms available. By getting a loan, you will have the potential to make money and rebuild your credit to improve your current situation. In order to get a loan for a daycare with bad credit, follow these steps.

Instructions

1

Improve your credit. Although you currently have bad credit, you can take proactive steps to improve your situation. Focus on saving money on an everyday basis and on paying your bills on time. If you don't have a credit card account for yourself or for your daycare business, open one now to help establish a good credit history. Go to genxfinance.com to find more tips on how to improve your credit. (See Resources for link.)

2

Get a partner. Even if your business is incorporated, a lender will want to look at your personal credit if the daycare has not been in operation for long. To improve your situation, have a friend or family member co-sign the loan with you or go into the daycare business with you as a partner. If they have good credit, it will improve your chances of getting a loan with good terms.

3

Register your company with Dunn & Bradstreet. A prospective lender will check your company's credit profile with Dunn & Bradstreet (D&B), the leading business credit bureau. (See Resources for link.) To obtain your D&B number and start building your credit profile, you must register and pay a fee.

4

Create a business plan and budget. Write a business plan that shows your goals and five-year projections, as well as the amount of start-up capital needed. List your financial resources, including any personal loans to the company and any bank loans. Set a budget that allows you to achieve your projected goals while staying within the company's projected means. Your lender will want to see both a business plan and a budget, not only to learn more about your daycare business and its finances, but also to ensure that you are thinking carefully through the finances and will not default on the loan.

5

Obtain all applicable licenses. You must have a license to operate a daycare, even if it is located in your own home. Some states will also require a background check. Visit BabyCenter.com to learn more about the requirements for licensing. (See Resources for link.)

6

Find lending quotes that are specific to your situation. Spend some time researching commercial lenders and their rates. You may need to look at lenders who specialize in giving loans to people with less than stellar credit, such as sub-prime lenders. Ask your lenders what kind of loan would be the most favorable for you. You can get quotes from multiple lenders at loanapp.com. (See Resources for link.)

7

Apply online and close the loan. After deciding on a lender and the type of mortgage that will best fit your needs, complete your application online. You will want to act fast so that you can take advantage of the interest rate that you have been offered. If you wait too long, the interest rates may increase.

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How to Negotiate Interest Rates With Debt Collectors

Between harsh phone calls, bills in the mail and threats to garnish your paycheck or take you to court, you may feel unequipped to negotiate with debt collectors. Additionally, your stress may double if sky-high interest rates are keeping you from making headway on your payments. However, if you take the time to develop a proposal, you may be able to convince your debt collector to reduce your interest rates -- which can significantly reduce the time it will take you to repay your debt, and help you to finally cut all ties with the collections agency.

Instructions

1

Decide in advance exactly what you're going to ask for, and overcompensate. For example, if you want a 10 percent reduction in your interest rate, ask for a 15 percent reduction. This gives you some room to rebut any counter-offers that the debt collector suggests.

2

Ask to speak with a supervisor if the debt collector says they can't help you. Continue asking to speak with the next person up if everyone claims there is nothing they can do. Sometimes perseverance is all you need to strike a deal.

3

Write down the terms you agree to while you converse with the collector. Save your notes from the phone conversation, date it, and write an agreement that includes everything you discussed. For example, an agreement may be as simple as a single statement: "(Name of debt collection agency) has agreed to reduce my interest rate to 2 percent and accept 50 percent of my total debt as payment in full."

4

Request a written confirmation from the debt collector at the end of your agreement. Keep a hard copy of this document with your notes from the phone conversation. Sign and date your agreement and mail it to the debt collector.

5

Wait to receive a written confirmation back before you make any payments on your debt. When you do make payments, use paper checks. The more physical evidence you have of your payments, the better prepared you are in case the debt collector tries to back out of the agreement or take you to court.

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Should I Pay Extra on My Mortgage or My Credit Cards?

If you have extra money to pay creditors, analyze where the money would be most effective. The answer lies within your personal finances. Assessing the situation will help you decide whether to pay extra on your mortgage or credit cards.

Considerations

Extra money indicates you are managing to live within your means. Financial consultants recommend a savings account with six months of living expenses, according to Bank of America. This savings account is a priority for your protection in case you lose your income source or become ill. Once you have accomplished that goal and your choice is between credit cards and mortgage payments, the usual recommendation is to pay whatever has the highest interest rate.

Effects

If you have extra money and want to pay off debt, credit cards usually have the higher interest rate and therefore you should pay the credit cards. Check the interest rate on your mortgage. Second mortgages often have a high interest rate, but a primary mortgage should be lower interest than a credit card.

Significance

A mortgage is long-term debt and credit cards are short-term debt. Once you pay off the short-term debt, you might want to tackle the long-term debt. Payment into a retirement plan is usually wiser than paying off the mortgage, according to MSN Money Central. This is particularly true if your employer matches or pays 50 percent on every dollar you put into the retirement fund. Dollar-for-dollar match is best, but 50-cents-on-the-dollar match is still worthwhile. Some employers have a 401(k) and 403(b) combination matching plan where if you add to the 403(b), they will add to the 401(k). The Social Security Administration reports that Social Security meets about half of retirement needs, so it is important to save for retirement.

Time Frame

In the credit business, time matters. The earlier in the month you pay your credit card, the less the interest costs. If you carry a balance on your credit card, there is no grace period. Interest accrues every day. Bankrate.com suggests that you pay early in the month every month to save what will be a small amount every month but a large amount over the course of the year or the life of the credit card.

Potential

The key to paying off credit card debt is to stop charging on the card, according to Bankrate.com. Once you stop adding to the balance, you have a better idea of what you are spending and the payments have some decreasing effect on the balance. Debt advisors like Steve Bucci of Bankrate.com suggest striking a balance between spending, saving and debt repayment. Develop a spending plan based on this balance to get the most out of your money.

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What Happens to Your Credit Score When You Get Sued in Circuit Court?

If you do not pay a debt, your creditor will typically respond by sending you letters and calling you to compel you to bring your account current. However, if you avoid your creditor or refuse to negotiate a repayment arrangement, the creditor may sue you for the debt. Most debt lawsuits are handled by county municipal or magistrate courts. However, if the debt meets a certain monetary threshold as determined by state law, the creditor may file the lawsuit in civil court in some states. A debt lawsuit filed in circuit court can severely damage your credit.

Lawsuit Process

If the creditor determines that you do not intend to repay your debt voluntarily, it will typically hire an attorney to file a civil suit against you. You will receive a summons notifying you of the lawsuit and giving you an opportunity to defend yourself against the suit. In some states, you may answer the summons in writing; in other states, you must appear at a court hearing. If you do not respond or cannot raise a valid defense, such as providing evidence showing that you paid the debt, the court will issue a judgment against you.

Credit Damage

After a circuit court awards a judgment against you for a debt, the judgment becomes public record, which means that anyone, including credit bureau employees, can access information about the judgment. Credit bureaus frequently review court records and add judgment information to credit reports. Depending on your credit score before the judgment entry, a judgment can lower your score between 50 and 100 points.

Indirect Credit Effects

Once a creditor has obtained a judgment against you for a debt, it may use several strategies to collect the debt. In all states except South Carolina, North Carolina, Texas and Pennsylvania, private creditors can garnish a portion of your earnings. Federal law permits judgment creditors to take up to 25 percent of your wages, although some states place additional restrictions on wage garnishment. Creditors may also seize assets in your bank accounts and use them to pay your judgment debt. These practices reduce the money you have available to pay other creditors, which can cause you to fall behind on other debts and incur additional negative credit entries.

Considerations

You can typically prevent being sued for a debt in circuit court by staying in contact with your creditor. Even if you have fallen behind on your debt payments, your creditor will likely work with you to find a solution that meets your needs. Creditors know that judgments are expensive and can be difficult to collect, so they typically exhaust all other collection efforts before resorting to this strategy.

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Can I Be Sued in a Credit Card Debt Settlement Program?

When people borrow money using their credit cards, they are legally required to pay this money back. Failing to pay this money back according to the repayment terms in their credit card agreement places the person in breach of contract. A debtor can, in some cases, be sued by his credit card company. A person can be sued even if he is enrolled in a debt settlement program, although it may be less likely.

Credit Card Debt

A person incurs credit card debt by borrowing money against the card's line of credit. If a person doesn't pay the money back within the same payment period at which he borrowed it, he will likely be charged interest. In addition, if the person fails to make the required minimum payment on the card, he may face additional penalties and punitive interest rates. These fees can cause his debt to snowball.

Debt Settlement Programs

As a solution to credit card debt, some debtors enroll in debt settlement programs. These programs provide financial counseling to the individual and help him negotiate with his creditors to settle his debts for a smaller amount of money. In many cases, credit card companies will not require that the person pay the full amount of money owed to them. However, companies are not obligated to accept less than full payment.

Lawsuits

If a person breaches his credit card agreement, the credit card company is legally allowed to file suit against the person, as he has violated a legal contract and, in doing so, caused it to suffer financial losses. Enrolling in a debt settlement program provides no financial protection. The only way debt settlement could protect a debtor from a lawsuit would be if the credit card company signed an agreement through the program in which it agreed to accept partial payment and this payment was made.

Considerations

While a credit card debt settlement program cannot legally protect a person from being sued by a credit card company, it may postpone the filing of the suit. This is because if the company learns that a person has enrolled in a debt settlement program, it may wish to hear the person's settlement offer before filing suit. However, the fact that the person enrolled may also make no difference.

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Can Canceling Credit Cards Help My Debt Ratio?

Your instincts might tell you that it's best to close a credit card after you've paid it off. However, if you're concerned about your debt-to-credit ratio, it's actually better to leave unused accounts open. Credit scoring companies don't care whether your accounts are active or inactive. Even if your lender eventually closes your card due to inactivity, this won't hurt your score any more than if you'd closed it yourself --- and in the meantime, leaving it open could actually boost your debt ratio and credit score.

Debt Ratio

Your debt ratio, called "utilization" where credit reports are concerned, is a percentage that signifies how much total debt you have in relation to total available credit. For example, if you have only one line of credit with a limit of $1,000 and a balance (debt) of $200, your debt ratio is 20 percent. If you have multiple accounts all of your debts are lumped together, and the same goes for your available credit.

Account Closure and Your Ratio

Closing a credit card account will never help your debt ratio. If you have an unused card with a high credit limit, once you close that card, your debt-to-credit ratio will go up. Even if your total amount of debt stays the same, closing an account decreases your amount of available credit, which tightens the gap between what you owe and your available credit. However, if you must close a credit card, choose the one with the lowest credit limit, because this will have the least impact on your score.

Leaving Accounts Open

In most cases, it is best on all aspects of your credit score to leave your credit card accounts open --- especially when it comes to your debt ratio. According to Bankrate, your credit utilization comprises 30 percent of your overall score. This means that, even if you have a variety of lines of credit and carry a long, positive credit history, a high debt-to-credit ratio could knock your score down into the lower percentile.

When Closing Makes Sense

Sometimes it makes sense to close a credit card. If the card requires a high annual fee or charges an unreasonable inactivity fee, you are better off nixing the card. If you have trouble controlling your spending, cutting all ties with a tempting card is the best option. If your account information has been stolen or you suspect unauthorized use of your card, it's definitely best to close the account. Although closure might shave a few points off your score, you will do your finances much more harm by leaving a stolen account open.

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How to Get Rid of Loans

Getting rid of loans could help you become debt free. However, not all loans are easy to eliminate. Secured loans such as mortgage loans and automobile loans are backed by collateral. You must pay these loans off in full or forfeit the house, car or other collateral. Even then you could still be held responsible for a portion of the loan after the property is sold at auction, according to CNN. Unsecured loans, which do not require collateral, are easier to eliminate.

Instructions

1

Make separate lists of your secured loans and unsecured loans. Get rid of the secured loans by accelerating payments until the loan balances are paid in full. Or, for a secured loan such as a house or car, sell the property and use the proceeds to pay off the loan. Add additional cash, if necessary, to pay the full balance.

2

Gather billing statements for your unsecured loans. Total the balances and compare the number to your cash available in and checking, savings and retirement accounts. Prioritize the loans according to their interest rates. MSN Money recommends that you focus on the loans with the highest interest rates first because they are costing you the most money in monthly finance charges.

3

Pay off as many of the unsecured loans as possible using your available cash. Choose other options if your cash is limited and the amount of outstanding unsecured debt is extensive.

4

Contact your lenders to discuss getting rid of your unsecured loans through a process called debt settlement. This option allows you to pay off your unsecured loan for less than the full balance, but only if the account is seriously past due and the lender feels you are on the verge of default. SmartMoney reports that accounts must be at least three months behind to be considered for a settlement offer. According to SmartMoney, creditors will sometimes settle delinquent accounts for 20 to 75 percent of the balance.

5

File for bankruptcy to eliminate other unsecured loans. Unsecured loans can be completely eliminated in just months through Chapter 7 bankruptcy. However, many people will not qualify for Chapter 7 because of income limits that vary by state. Those who don't qualify can opt for Chapter 13, which requires a payment plan of three to five years. Unsecured loans not completely paid off during that period will be eliminated by the bankruptcy.

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What Does Account Update Mean on a TransUnion Credit Report?

TransUnion is one of the three main credit reporting agencies that maintain and sell consumer credit information. The types of information listed on a TransUnion credit report include personal contact information, employment history, public records and individual credit accounts. An account update on a TransUnion report means that new information is reported. TransUnion uses codes to describe account information and updates; reading a TransUnion requires code translation.

Types of Accounts

TransUnion indicates the type of account with single letters on the credit report. "O" designates an open account, either 30, 60 or 90 days; "R" indicates a revolving or option account; "I" designates an installment account; "M" stands for a mortgage; and "C" indicates a check credit or line of credit. The account types are listed below the name and address of the creditor as well as at the end of the file line as part of the Manner of Payment---MOP---on the TransUnion Credit Report.

Manner of Payment---MOP

The MOP is the primary indicator of an account update on the TransUnion credit report. The codes designating current method of payment change based on the information provided by the creditor. The code 00 means that an account is not yet rated or approved, but not used; 01 means that the consumer pays the account as agreed; 02 means that the payment is 30 to 59 days past due; 03 indicates that the account payment is 60 to 89 days past due; 04 means that the payment is 90 to 119 days past due; 05 indicates that the payment is more than 120 days past due.

Special Account Codes

Other MOP codes indicate special circumstances relating to the credit account. An MOP code 07 means that the account is being paid under the Wage Earner Plan or a similar payment arrangement. Code 08 indicates a repossession; 8A indicates a voluntary repossession; 8D is a legal repossession; 8P indicates a paying account with a repossession; and 8R means that the repossession is redeemed. The MOP code 09 means that the account has been charged off to a bad debt; 9B indicates a collection account; and 9P means that the account is being paid or is paid off after begin charged off or turned over to a collection agency. The code UC means that an account is unclassified, and UR means that an account is unrated.

Opened, Verified and Closed

In addition to MOP codes, a TransUnion credit report lists sections for each account indicating Open, Verified and Closed. Account information updates are also listed under these categories. "Open" can mean the date the credit account was opened or the date that a collection agency reported the account. "Verified" means that the account information has been verified as accurate by TransUnion. "Closed" indicates the date that the credit account was closed.

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What Happens if You Have a Lien & No Job?

Sometimes having a lien and no job can go hand-in-hand. A creditor can only get a lien against you after filing a lawsuit, something that usually doesn't happen until you are months behind on your payments. If you have no job, this could easily happen as you divert your resources to other expenses. While a lien may not directly affect you while you have no job, you will usually have to pay it off eventually.

Liens

If you owe a creditor money, that creditor cannot simply decide to file a lien against you. A creditor must win a judgment in court to get a lien. The process of going to court, winning a lawsuit and getting a judgment against you can be costly and time-consuming for your creditor. However, a lien is also a good way for a creditor to improve the chance of repayment. A lien attaches to your property, meaning you cannot sell your property and receive the proceeds until you pay off the lien. If you can pay off the lien, it will vanish, but if you have no job, that may be difficult to do. What a lien does not empower your creditor to do, however, is to take money out of your bank account. A lien is only satisfied when the underlying property is liquidated.

Levies

In some cases, a creditor can go one step beyond a lien and get a levy against your assets. This can be difficult to do, as each state has its own laws regarding the rights of creditors regarding the seizing of assets. However, if your creditor manages to get court approval to levy your assets, it has the right to take money from your bank accounts or seize other property. If your creditor is the IRS, it can simply choose to levy your property, rather than going through the courts. If you have no job, you have little defense against a levy, since it can only be satisfied through payment. You may lose assets if you have a levy against you and no job.

Wage Garnishment

Some creditors opt to enforce their judgments by filing for wage garnishment, rather than a lien or levy. In most states, a creditor can garnish up to 25 percent of your disposable wages, subject to court approval. However, if you have no job, it would be fruitless for a creditor to pursue wage garnishment, particularly if it already has a lien against your property.

Bankruptcy and Liens

For many debtors, bankruptcy is a way out from debt or judgments. If you have no job, you can often qualify for bankruptcy. With a properly prepared bankruptcy petition, you might be able to get a discharge of your debt in as few as three months. However, if you have a lien filed against you, bankruptcy might not be the answer. With few exceptions, a bankruptcy discharge will not invalidate the lien against you. While you could quite possibly dismiss your obligation to pay the debt that forced the lien, the law states that the lien remains against your property and it must still be satisfied when you sell your property.

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Can a 1099 Be Garnished in Indiana?

Many people do not earn their income working regular 9 to 5 jobs. Rather, these people may instead do contract work for various companies. So, instead of being paid under a regular W-3 classification, in which the individuals have their salary withheld from their paychecks, they are paid under 1099 status, as contractors. These payments can be garnished in Indiana, as well as in other states.

1099s

A 1099 is a classification of worker, one who is not a regular employee, but a contractor. There are many differences between contractors and regular employees, but one of the largest is that contractors do not receive a weekly paycheck from which money is withdrawn, but one or more irregular, lump sum payments. Thus, when garnished, a creditor doesn't just have to take a portion of the salary, as with W-2 employees, but sometimes he can take the whole payment.

Garnishments in Indiana

In Indiana, garnishments are allowed for creditors who wish to collect on old debts. However, as in all states, the creditor must first have his lawsuit against the debt heard by a civil court and must receive the authorization of a judge to serve the garnishment. Garnishments for contract work function very similarly to garnishments for full-time work, although a creditor is not limited to taking only a portion of the paycheck.

Garnishment of 1099s

While the money paid in a 1099 -- the taxes paid to the IRS -- cannot be garnished, the money provided by the employer hiring the contractor definitely can. All a creditor has to do is serve the employer with a garnishment order, authorized by a judge, before the money is paid to the contractor. The money will usually be taken in a lump sum instead of as a percentage.

Considerations

If the money from a 1099 cannot be seized from the employer before it is paid -- as is often the case, as a court may not have any forewarning of a contract work's payment -- then the money may be seized from the individual's bank account later. Indiana allows creditors to, in certain circumstances, seize money from the bank account of debtors and use it to pay down the debt.

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How to Manage Credit Card Debt with a Simple DIY Plan

Although financial advisers and debt management businesses provide services to help individuals handle their debt, you should first try managing your debt on your own. That way, all of your money can go toward paying your debt rather than paying the professionals. All credit card debt management strategies come down to one major principle: paying more than the minimum on your bills. This accelerates your credit card debt payment and cuts down on how much interest you have to pay.

Instructions

1

Call each of your credit card companies and ask for a lower interest rate. This does not always work, but when it does, it reduces your interest rate so more of your money goes toward paying down the balance.

2

Create a table representing all of your credit cards. For each card, list the name of the card, the interest rate, the current outstanding balance, the current minimum payment and the due date. If the card has more than one interest rate, such as a rate for cash advances and a lower one for purchases, list the highest rate you are paying.

3

Add the minimum payments to find your total minimum payment. Add to this any additional money you can afford to put toward credit card payments every month. The more you add, the faster you pay off your debt. The sum is your total monthly payment.

4

Pay the minimum on each of your credit card bills every month, and then pay the remainder of your total monthly payment toward the card with the highest interest rate.

5

Switch your extra payment to the card with the next-highest interest rate when you pay off the balance on the card with the highest interest rate. Continue until all of your cards are paid off.

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Can You Offer Settlement for Wage Garnishment?

Wage garnishment is extremely harmful to personal finances and can create significant embarrassment for the person whose wages are garnished. Wage garnishment allows a creditor to receive a percentage of a person's paycheck each pay period. It is possible to offer a settlement to end garnishment, but the creditor does not have to agree. A debtor seeking to end garnishment through a settlement should be willing to settle for the full amount in a lump sum -- or agree to pay more than than the amount due as part of a payment plan.

Taxes

The Internal Revenue Service and state governments have broad powers that allow them to initiate wage garnishment for past due taxes without going through the court system. Usually, government tax agencies garnish wages only as a last resort for collecting the debt. Employees seeking to end wage garnishment and offer a settlement for back taxes may need the help of an experienced tax attorney. Depending on the situation, the IRS and other agencies may agree to a payment plan to end the garnishment. However, it may be impossible to negotiate a settlement for less than the full amount due. Generally, tax settlements are available for people who clearly cannot pay. A person with regular employment may not qualify.

Consumer Debt

Debt collectors for consumer debt are also unlikely to settle a wage garnishment order for less than the full amount due. Debt collectors win garnishment orders after winning a civil lawsuit and a court judgment for the full amount of the debt. Garnishment gives them total leverage, and they are unlikely to end it without incentive. One option for the employee is to offer a settlement agreeing to pay more than the amount due. For example, on a $5,000 debt, the debtor may agree to a settlement paying $6,500, including a $2,500 payment upfront. That may be enough to entice the debt collector to drop the garnishment and accept regular monthly payments. The goal for the debtor is to end embarrassment at work prompted by the garnishment and to negotiate affordable monthly payments.

Counseling

Nonprofit credit counselors may be able to help with wage garnishment. Counselors approved by the U.S. Department of Housing and Urban Development can contact the debt collector to negotiate a settlement or payment plan. Referrals for government-certified counselors are available from charitable organizations such as the United Way.

Bankruptcy

Bankruptcy is an option if a settlement is not possible. Some people with multiple wage garnishments on different debts decide that bankruptcy is their only choice. Although it has a number of drawbacks, bankruptcy immediately stops all wage garnishment. Consultations with bankruptcy attorneys are usually free.

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Information on Online Bankruptcy

Filing bankruptcy is a process that can help you get out of debt and get your financial life back under control. One of the ways that you can do so is to use an online bankruptcy filing service to help with the process. This can provide you with some benefits, like lower costs, but you may not get the personal service that you need.

Online Service

Even though you might work with an online bankruptcy service, this does not necessarily mean that you can do everything online. To file bankruptcy, you will have to go to your local bankruptcy court to process the paperwork. The online bankruptcy service is simply going to help you fill out your bankruptcy forms instead of working with a lawyer. With this strategy, you can pay the online service a flat fee to have all of your paperwork done.

Cost Savings

One of the benefits of using an online bankruptcy preparation service is that you can save money. With this strategy, you can pay a low, flat rate and complete all of your paperwork. By comparison, if you hire a lawyer to help you complete this process, you might have to pay for many hours of assistance. Paying a lawyer for this might be unnecessary if you can get the whole thing done from an online bankruptcy preparation service.

Help Needed

Many people wonder why they would need any help at all when filling out paperwork for a bankruptcy. While you could potentially complete the entire bankruptcy process yourself, this may not be in your best interest. For example, you will most likely have to fill out many different pieces of paperwork to complete the process. If you do not complete one of the forms correctly, part of your debt could be challenged during the case. By having professional help throughout the process, you can eliminate the odds of making a mistake.

Personal Service

One of the drawbacks of using an online bankruptcy preparation service is that you may not receive the level of personal service that you need. When engaging in the bankruptcy process, it can be very time consuming and confusing. With a trusted guide on your side, such as a lawyer, it can help you throughout the entire process. If you have any questions about the bankruptcy, you can simply ask your lawyer and he should be able to assist you with the process.

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How to Build Credit for the First Time

No matter how great your sense of humor is, how much education you have or how well you can cook, all a lender is going to see to make a judgment about you is your credit history. This is why it is vital that you build a good credit history early on in life. Your credit impacts more than just your interest rates on credit cards and loans. Poor credit can cause you to be turned down for an apartment, cell phone or the job that you want. Unfortunately, building credit when you have no credit can be tricky. There are, however, steps you can take to successfully build credit for the first time.

Instructions

1

Ask a friend or family member with good credit to add you to his credit card account as an authorized user. Your friend or family member's good payment history on the card will then appear on your credit report.

2

Apply for a secured credit card. Secured credit cards are primarily marketed to those with bad credit or not credit. Your credit rating, or lack thereof, should not factor into your approval. Secured credit cards are safer for credit card companies because they are "secured" by a deposit you must make to the card provider. You may apply for a secured card online or via mail.

3

Use your secured card to make small purchases and pay the balance off in full each month. Doing so helps you build your own positive payment history in addition to the payment history that appears within your credit profile from your friend or family member's credit card account. Continue making purchases and payments for 90 days to create a limited credit history.

4

Visit your bank and talk to a loan officer about taking out a small personal loan and securing the loan with a savings account or car title. A secured loan is less risk for the bank. Your positive credit profile, no matter how limited, also works in your favor.

5

Apply for an unsecured card after making regular payments on your secured credit card and your bank loan for at least six months. The longer and better your credit history, the higher your chances of acceptance. Unsecured credit cards often offer much more attractive interest rates than unsecured cards.

6

Make payments on time to each of your creditors. Your payment history on each of the debts that appear on your credit report accounts for 35% of your credit score.

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How To Avoid Judgments

A judgment occurs when a creditor who is owed money for a legitimate debt has been trying to collect and has been unsuccessful. As a last resort, the creditor will go to the court and ask for a judgment against the person or entity who owes them money. A judgment is filed by the court against the debtor for the amount of the debt, where it goes in county records and is put on the debtor's credit report. Judgments, even when paid, stay on your credit report for 12 to 20 years and can seriously affect your ability to get a loan or buy a home. There are ways to avoid judgments, but they involve an ounce of prevention.

Instructions

1

Obtain a copy of your credit report to become aware of your debts. A lot of people are not aware of joint debt with spouses, or have forgotten about old debts that could come back to haunt them. Creditors have seven years before the statute of limitations wears out and the debt is no longer legitimate.

2

Talk to your creditors, taking notes on who you spoke to, what was said and when you spoke. It's never pleasant to talk to someone you owe money to, but avoiding the problem doesn't make it go away. It leaves the impression that you don't care and forces a creditor to take action.

3

Come to a settlement. Since getting a judgment against you does not guarantee they will ever get any money, most creditors are happy to make an arrangement. It could be paying a reduced amount or it could be a payment plan.

4

Get the agreement in writing. This protects both of you and keeps you honest.

5

Stick to the plan and keep receipts you receive; or copies of the cancelled checks or money orders you used for payment. As long as you are fulfilling your end of the agreement, then they cannot take any further action against you.

6

Dispute any further negative reports on your credit that occur after your agreement using your proof of payment and a copy of your agreement. If they try to place a judgment, you will have the opportunity to show that you have an agreement and that you are paying according to schedule.

7

Talk to an attorney if you have a lot of debts against you and have no way to repay. You may wish to consider bankruptcy before those debts become judgments. Bankruptcies are a way to start fresh and impact your credit for less time than a judgment does.

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About Student Loan Payments

College is expensive, and for this reason alone, many college students rely on federal and private student loans. Qualifying for a student loan is relatively simple, and government loans don't involve credit checks. Thus, people with bad credit or no credit history can obtain a student loan. And the best part, federal and private student loan lenders offer flexible repayment plans to accommodate borrowers.

Function

Federal and private student loans are extremely useful. Without them, many people would be unable to attend a college or university. Some people pay their college expense out-of-pocket or rely on credit cards. But this is a quick way to deplete one's savings account or accumulate debt. Federal and private student loans help persons who don't have the money to pay their college tuition. Additionally, student loans are often used to pay rooming expenses and other miscellaneous college expenses such as books, supplies and lab fees.

Types

Student loans feature different types of repayment plans. A standard repayment plan reduces the balance within 10 years, and the monthly installment payment remains the same for the life of the loan. A graduated repayment plan offers lower monthly payments in the early years. Payments gradually increase over the life of the loan--approximately every two years. If unable to afford the payment on a standard or graduated payment schedule, you can select an extended repayment term, in which you pay the least amount possible each month. In this case, it can take up to 25 years to pay off a student loan.

Time Frame

The average student loan has a 10 to 15-year term. However, student loan payments are negotiable, and most lenders are prepared to offer a lower monthly minimum and extend the loan term. What's more, payments aren't required until after graduation. Student loan lenders grant a 6 or 9-month grace period. This gives graduates ample time to secure employment and adjust to their new expenses.

Features

Student loans feature a provision to help financially strapped individuals. If you can't pay your student loan for one month or several months, federal and private lenders offer two options. You can request a forbearance, in which the lender temporarily postpones monthly payments for a specific period. During this time, payments aren't required, but you incur interest. In the case of deferment, lenders also temporarily postpone payments. However, you don't incur interest.

Expert Insight

Unlike other debts, a student loan cannot be included in a bankruptcy. Once you apply and receive money to attend school, the debt stays with you for life. Additionally, failure to repay a student loan can have a negative impact on your credit score. Student loan lenders are flexible, and they're willing to work with borrowers. Communication is the key. Rather than skip or submit late payments, contact your lender and work out a new payment plan. They'll likely modify your due date, reduce the monthly minimum or approve a forbearance request. Thus, you're able to maintain a good relationship with the lender.

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How to Fight Home Foreclosures

When the reality of losing your home hits, it can be easy to think that there is nothing you can do to fight foreclosure. Depending on how far along in the process it is, there are specific steps you can take to ensure you keep your home.

Instructions

Fighting a Home Foreclosure Early in the Process

1

Renegotiate your loan with the bank. No one wins in a foreclosure situation and your bank may be willing to renegotiate payment terms. Your options include asking for a payment holiday, making partial payments until you get back on your feet, or refinancing the entire loan.

2

Ask your local Housing and Urban Development office for help. There are numerous government programs in place that can help you fight home foreclosures. From homeowner grants to low-interest loans that will take care of the amount that you owe in arrears, HUD can offer several different options for assistance.

3

Ask family or friends for help. If you are only a few months behind, a small loan may be enough to help you fight home foreclosures. If you do get assistance from friends or family, it is vital to set up a repayment plan that you can easily stick to. This will help you avoid straining these relationships. The repayment plan needs to factor in interest for tax purposes.

4

Sell your home. Often called a "short sale," in many cases this process can can help stop a foreclosure. The main problem with this tactic is that it can take months to complete a sale. This method is best if you are just starting foreclosure proceedings.

5

Refinance your home loan with a different bank. If your credit is still in good shape, you may be able to qualify for a loan with another bank. Be advised, however, that this process can take three months or more.

6

Seek assistance from Freddie Mac or Fannie Mae. Congress recently passed the Housing and Economic Recovery Act, which will provide these two lenders with special funding that could assist more than 400,000 homeowners facing foreclosure. Not everyone is eligible for assistance, but this avenue should be explored before foreclosure proceedings begin.

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Can a Creditor Take My Car?

Creditors can take your car, your house, your bank accounts, your boat and anything else of value that you own. Of course, to accomplish this, the creditor needs a judgment issued against you by a court for the seizure. If the creditor is the loan holder for the car and you default on the loan, the circumstances are different and different laws apply. In this case your car would be termed repossessed instead of seized.

The Process

If you owe a debt to a company, they can sue you to recover what you owe. If the creditor wins the lawsuit, the court issues a judgment against you. With this judgment, the creditor can request a wage garnishment order and he can also file an asset discovery. You will be served with a discovery of assets questionnaire which you must answer truthfully to avoid the risk of being held in contempt of court. The questionnaire attempts to discover what you own and its potential worth. With this information, your creditor can get an execution of the seizure order from the judge and seize your car.

Repossession

If you default on your car loan, your creditor can have your car repossessed. Your creditor typically does not have to go to court to repossess your car, as the loan contract generally delineates what will happen if you default on the loan. Usually the creditor has a right to repossession. Your creditor also has the right to sell your loan contract to a third party and the third party then has the right to repossession. When the creditor repossesses your car, he cannot do so with force or use any method that would cause a breach of the peace. What constitutes a breach of peace varies from state to state.

Exemption

If your car is in danger of being seized due to a judgment being issued against you, there is still hope, depending on the worth of your car. You are allowed to keep your car if its value is less than an amount set by state law. This limit varies from state to state. If your car's value qualifies as exempt, your creditor cannot seize your car.

State Variations

Seizure for judgments and repossession for defaults are both covered by state law. As such, the laws vary from state to state. For example, an act that is a breach of the peace in some states can mean the use of physical force, while in another state taking the car out of the garage can constitute a breach of the peace. If there is a breach of the peace, you may have an actionable claim against the creditor in court. Check with your state for your rights under repossession.

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How to Help My Husband Rebuild His Credit

When one or both members of a couple has bad credit, it can increase stress on the marriage. Managing your credit and debt is a good way to take a step toward financial freedom and a happier marriage with fewer worries. If you want to help your husband rebuild his credit, the most important thing to remember is to stay positive. When people have bad credit or a lot of debt, they often feel overwhelmed by the entire process of rebuilding their credit. This is, of course, the perfect time for a loved one to step in and offer help.

Instructions

1

Help your husband get a copy of his credit report. Everyone is entitled to a free credit report. As per the Free File Disclosure Rule of the Fair and Accurate Credit Transactions Act, credit reporting companies like Equifax and Experian are required to provide everyone with a free copy of their credit reports once every year. The information that will be included on the credit report will include identity and employment information, which you should make sure is accurate, as well as payment histories, matters of public record, such as bankruptcies and foreclosures, and any credit agencies that have inquired about the credit report.

2

Contest any possible errors on the credit report. All accounts, for instance, might not be listed on the report. Credit reporting companies might be able to add any open accounts not listed on the report for a fee. If there are any items on the report that are contestable, your husband has the right to dispute them.

3

Talk to your husband about the ways he can rebuild his credit. He can contact credit agencies, for instance, to prevent any accounts from being turned over to debt collection agencies. He can pay off collections and outstanding accounts and rebuild new accounts in small, manageable ways.

4

Make some time together for budget planning. This can prevent you and your husband from getting into any more debt in the future. While it's good to have a credit card handy for emergencies, it's even better to have an emergency savings fund ready to pay off any emergency expenses as soon as possible. Making a budget can help you save money. Budgeting is also important because it can help you manage your credit. You can improve your credit score by budgeting the amount of money you want to spend on food, a necessary expense, purchasing it with a credit card, and immediately paying it off before any interest accrues on the purchase.

5

Visit a credit counselor. Credit counselors can help you make a debt management plan and negotiate with creditors. Make sure you are dealing with a legitimate, legally licensed agency. Get quotes of their costs and fees in advance.

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Can Collectors Freeze My Checking Account?

Many consumers have questions about the debt collection process creditors may use. Often, they are confused about what a collector can and cannot do in order to legally collect a debt. The collection process can lead to a creditor seeking your assets, and that includes your checking account under certain circumstances.

Court Orders

A debt collector must first win a lawsuit in court before they can freeze an asset like your checking account. Even after that, they must get an order from the judge in the case specifically allowing them to freeze your bank accounts, called a writ of execution. You will have plenty of warning this process is happening, because you will be served legal papers before the lawsuit.

Finding your Account

Once the creditor has an order allowing them to seize your assets, they need to find the bank where you have your checking account. If the creditor doesn't know where you live, they may hire a skip tracing company to try to locate you. The creditor may then call banks in the area to try to locate your account. The creditor will get a writ of execution, and have it served to local banks in an attempt to locate you. While the bank cannot give out your personal information, it is required to hold your money for the creditor. After about 21 days, it will release the money to your creditor to pay off the debt.

Compounding Problems

Having all of the money frozen in your checking account can cause quite a few problems. When the bank receives the order to withhold money from your checking account, any outstanding checks you have written will probably be returned unpaid. The bank still may charge you the non-sufficient funds fees it charges for a returned check. Since most or all of the money in your account will have been held out for debt payment, this is extra money you will need to pay. If your paycheck is direct deposited, you may not be able to stop the deposit soon enough, and you run the risk of having one or more paychecks deposited into the account. The creditor can take that money as well.

Prevention

Work out an arrangement with your creditors before the situation gets to this critical stage. Often, creditors will accept payments or they may work out a lump sum settlement with you. Creditors may also file a lien against your property or seek garnishment of your wages, so working out a settlement can help prevent these problems as well. If an account freeze is imminent, you may want to close the account and use cash or money orders for a while until the situation improves. If a creditor is seeking garnishment of your wages or a freeze on your checking account, filing for bankruptcy will stop these actions immediately.

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How Bad Debt Affects Your Credit Score

Your credit score is an estimate, made available to lenders and other financial services companies, of the likelihood that you will pay off a new loan. The scores are developed by credit report agencies, which collect information on your financial history and enter it into a formula, calculating your creditworthiness. When you fail to pay back a loan according to its terms, this makes you appear less creditworthy and lowers your score.

Beginning Scores

According to the Fair Isaac Corporation, people with higher credit scores will actually see greater declines in their score if they incur bad debts as opposed to people whose credit scores are already relatively low. This is because incurring a bad debt is relatively consistent with the credit history of a person with a low credit score. However, a bad debt represents a major shift in the credit history of a person with good credit, requiring the credit reporting agency to make a more drastic correction.

Late Payments

According to the Fair Isaac Corporation, the company that pioneered the modern version of the credit score, a single payment that is late by 30 days can badly hurt your credit rating. Depending on the rest of your credit history and the size of the debt, this late payment can drop your score between 60 an 110 points.

Bankruptcy

One of the single most devastating effects on declaring bankruptcy is the damage to your credit score. When you declare bankruptcy, most of your debts are set aside and forgiven. This is the equivalent of having an enormous number of debts written off. According to the Fair Isaac Corporation, your score may fall by up to 240 points. Bankruptcies can only listed on a credit report for up to 10 years, but in most cases, your score can improve over that time with improved financial habits.

Debt Settlement

If your debt becomes unmanageable---meaning you cannot pay down the existing debt without suffering major personal or financial consequences---you may attempt to settle the debt. Under debt settlement, your creditors agree to accept less money than the person actually owes. The Fair Isaac Corporation states that a debt settlement can cost a person between 45 and 125 points, depending on the person's previous score and size of the debts settled.

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How Can I Get a Title From the Bank Used as Collateral?

Titles to property, such as boats, recreational vehicles and automobiles, are often held by banks as collateral for loans. The bank establishes a value for the property through an appraisal and compares the value to the loan request. Loan approval is possible if the value of the titled property exceeds the requested loan amount. The bank will release the title after receiving all payments on the loan.

Instructions

1

Confirm that the title and loan are in your name. It is not possible for you to obtain the title if the loan is not yours. For example, a spouse may have obtained a loan by pledging the title to a motorcycle. In that case only the spouse can obtain the title. Exceptions are possible when the debtor is deceased and an estate is settling his affairs.

2

Review the billing statement if the loan and title are in your name. Determine the loan balance, and confirm it by calling the lender. Tell the lender that you wish to pay off the loan and retrieve the title offered as collateral.

3

Pay the payoff amount by sending a cashier's check or personal check. A money order or cash paid in person are other options. Obtain a receipt if paying in person.

4

Contact the bank's customer service department thee or four days after paying off the loan. This allows the time for the check to clear -- if you paid by check. Confirm that final payment was applied to the account, ending the balance. Request that the bank remove the lien placed on the title -- if it has not already done so -- and mail the title to you at your address.

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Debt Reduction Planning

Some people come to the realization that they have too much debt before they get in over their heads, while others may reach a financial breaking point first. Getting into debt is easy, getting out is extremely tough. Too much debt is unsustainable, and it prevents you from reaching many financial goals in your life. With a bit of planning, effort and consistent work however, you can begin your personal path to debt reduction.

Stop Creating Debt

The most important first step in debt reduction planning is to stop creating new debt. If you have credit cards, cut them up and stop using them. If you have revolving credit accounts at department stores, stop visiting those stores or only allow yourself to go there with cash in hand. Make a personal pact with yourself to stop using every source of credit you have, so that you can stop increasing the amount of debt you must repay.

List Current Debts

Create a list of every single debt you currently have an outstanding balance on, regardless of how big or small the debt is. List personal loans from friends or family members, bank loans, mortgages, car finance contracts, credit cards and any other debts you may have. When you create the list, write down the name of the debt, the total outstanding balance, the minimum payment and the interest rate if applicable.

Create a Debt Payoff Plan

Reorganize your list of debts so that the smallest one is at the top, the next smallest is in second place and the next smallest is in third place. Continue ordering the debts from the smallest outstanding balance to the largest. This is the reduction order for your debt plan. Continue paying the minimum bill on every debt you have, but rearrange your personal budget so that you can pay extra on the first one in your list. The more extra you can add to that payment, the faster you will pay it off. Once that first debt is paid in full, apply the original minimum payment from it to the minimum payment of the next debt in your list. Continue rolling payments to the next debt as each previous one is paid off.

Get Counseling

If you are unable to adjust your personal spending habits or household budget in a way that allows you to contribute some small extra amount of money towards reducing your debts then you may want to consider getting professional credit counseling. Counseling is also helpful if you do not earn enough money to cover all of the minimum payments on your outstanding debts. Credit counselors can help you design a personal budget and adjust your debt payoff plan to better fit your personal lifestyle and financial limitations.

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Can a Collection Agency Legally Add on Extra Fees?

If you have unpaid bills, you may find yourself receiving phone calls and correspondence from a collection agency. This is certainly not something you want to disregard; it is sufficient cause for concern. One important detail that may alarm you is the addition of interest fees and other charges to the amount you owe. While this may seem outlandish, a collection agency may be well within its rights to add on these fees, depending on your original agreement.

Function

The purpose of a collection agency is to collect the debt on behalf of the company to which you allegedly owe payment. Collection agencies come in many forms. It may actually be the same company who carries the debt, but using a different name and address to seem more intimidating. Another alternative is an attorney that specializes in collecting debts for clients. Mostly, however, it is simply a separate company that does all the leg work, either for hire or by buying out unpaid debts from other companies.

Legality of Extra Fees

According to Section 808 of the Fair Debt Collection Practices Act (FDCPA), upheld by the Federal Trade Commission (FTC), a debt collector may add extra charges and fees to the bill it is collecting if it meets the following criteria: the initial contract for the debt states that such fees may be charged over the term of the debt or during the collection process; or the charge is permitted by state law. In the alternative, if a contract states a debt collector can add such fees, but state law prohibits said fees, then the debtor is not legally bound to pay them.

Types of Fees

A collection agency may add extra fees to your initial bill during the collection process if the above criteria apply. Typically, these fees consist of interest, attorney fees and court costs. You will see interest added to a debt only if the original contract or subsequent bills from the company collecting the debt specifically state that a late payment will incur interest. Of course, the collection agency must be able to provide proof of such provisions in the contract.

Considerations

Even if the contract does not provide for attorney fees and court costs, or there was no written contract to begin with, the state court may permit the addition of reasonable fees as a means of reimbursing the debt collector for money it spent pursuing payment. For example, if the collection agency is pursuing collection on a bad check, it may add on a service charge if a sign posted on the merchant's property states that such a charge will occur, an implication that the debtor was aware of this possibility.

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Statute of Limitations on Debt Collection in Oregon

A statute of limitations is a law that limits the amount of time in which a legal procedure may be enacted. After this period expires, the debt may not be legally challenged in a court. All states have a stature of limitations regarding debt collection, all with different lengths of time. The statute of limitations of debts in Oregon depends on what kind of debt is outstanding.

Judgments

A judgment is a result of a court case, both civil or criminal. Some judgements may involve a financial remedy. Such judgements will typically begin on the day the judgment is made. Judgements may be amended by the court on a later date. Normally, an individual has up to 30 days to pay the judgment. Judgements in Oregon, which may include any judgment within the United States, has a statute of limitations of 10 years. During this time, and after the initial 30 days, interest accrues at 4 percent over the interest rate of a Treasury bill.

Collection of Debt

This may include any secured or unsecured debts, such as a mortgage payment or a credit card bill. Mortgage payments are typically settled through a foreclosure, in where the house is seized by the lending institutions. Unsecured debts such as credit card debts, however, may be harder to settle. In Oregon, the statute of limitations for the defense of a lawsuit concerning debts is six years.

Contracts

These may be in the form of written or oral agreements between two individuals or companies. Most contracts have liability clauses. If such a liability clause is violated by one of the parties, the other party may be entitled to a financial remedy which may or may not be enforced by the law. Contracts in Oregon, both written and oral, have a statute of limitations of six years and are regarded under the same law as regular debts.

Collection of Rents

Laws involving the collection of rents involve the leasing of property. In the state of Oregon, the landlord or leasing agent has a period of up to one year to claim any past unpaid rents. This law has little to do with eviction, which is covered by another statute. A landlord my pursue a tenant for unpaid rent even if he is already evicted.

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How Can I Freeze My Credit to Prevent Credit Fraud?

Credit fraud and identity theft are two of the fastest growing crimes in the world today, according to USAToday.com. While both of these crimes affect your bottom line, they take different routes to that end. The difference lies in whether the information stolen is to be used to charge illegal purchases on an existing card or if personally identifiable information will be used to open new credit in the victim's name.

Credit History Protection

Placing a freeze on your credit report prevents creditors, employers and others from accessing your credit history. Identity theft occurs when someone uses your personally identifiable information (e.g., Social Security number, name, address, etc.) to open new credit. Because your information was used, the unpaid bills are reported to your record at the major credit bureaus, affecting your score. Once the information is there, you have the burden of proof to have it removed. This can be a costly and long process.

According to Kiplinger.com, placing a freeze with the bureaus is a good strategy if you have reason to believe your information has been compromised. Most states impose a small fee to have this done, usually around $10. The freeze can limit your ability to get quick credit approval, but the information is safe. Each bureau will provide you with a personal identification number (PIN) that allows you to temporarily lift the freeze when you want to apply for credit. You can check FTC.gov to see if your state has passed laws yet providing for free credit freezes.

To place a freeze online, visit the sites for each major credit bureau and fill out the forms. See Resources for links directly to their freeze pages. If your state requires a fee, you can pay this with your credit or debit card. If you prefer to request the freeze through the mail, write each bureau individually at the following addresses and include a check for your payment. You will need to send copies of personally identifying information such as Social Security card, driver's license and a recent utility bill with your name and address.

Experian
P.O. Box 9554
Allen, TX 75013

TransUnion
P.O. Box 390
Springfield, PA 19064

Equifax
P.O. Box 740256
Atlanta, GA 30374

If you feel a freeze would be too drastic a measure for you, you can place an initial credit alert instead. This is free at all three bureaus and in all 50 states. The alert lasts 90 days, but it can be renewed any time you feel it's necessary. An initial alert is easy to place. Simply call one of the bureau's automated numbers and follow the prompts. This action prompts that bureau to alert the other two. The alert goes on your report immediately, so that when a lender pulls the report, it is notified that it must either call you for verification or get extra identification to ensure you are indeed the report owner.

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Can You Apply Mortgage Accelerator Principle to Credit Card Payments?

Using a mortgage payment trick, you can cut the time it takes to pay off your credit card by months and even years. The mortgage accelerator principle is not unique to real estate, it just relies on the fact that paying a bill as soon as possible is the fastest method to eliminate a debt. Also, this method forces you to pay down a credit card you might otherwise let sit.

Mortgage Acceleration

The mortgage accelerator principle states that you should make a payment on your account every two weeks instead of one payment a month. Some months have more than four weeks so you end up making 13 regular payments instead of 12 each year. Also, interest on mortgages and credit cards accrues daily, so making payments sooner reduces the balance on which the bank can charge interest.

Does It Work on Credit Cards?

The mortgage accelerator principle works with credit card payments because it exploits how credit works in general. The lower your average balance, the less you pay in finance charges. One minor difference is that some mortgages come with the option of bimonthly payments, whereas this may not be an option on your credit card. On the other hand, some mortgages come with prepayment penalties, so the mortgage accelerator principle may work better with credit cards when a card allows it.

Warning

Not all credit card companies accept multiple payments a month. Some banks and credit card companies may charge a fee for extra monthly payments, which negates the entire purpose of this strategy. Alternatively, some banks allow partial payments as long as you send at least one payment equal to the minimum charge. If you fail to make at least one minimum payment, the bank might consider you in default, despite paying more than the minimum due.

Tip

Using the mortgage accelerator principle works best with credit cards when you do not add to your balance. Ideally, you should employ the accelerator principle -- assuming your credit card company and bank allow it -- until your balance reaches zero. If you must spend on credit, put purchases on a separate account if it has a lower interest rate.

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Can You Get Unemployment for Reduced Pay?

Unemployment benefits help support workers who have been laid off while they search for new work. These benefits help them maintain an adequate lifestyle while they line up another job. Although unemployment benefits are mainly meant for those who have lost their jobs altogether, workers who have had a drastic cut in pay or hours sometimes qualify for partial unemployment.

Reduction of Hours

If your employer drastically reduced your hours, you may be able to get unemployment even though you are still working. Each state's laws are slightly different when it comes to reduced hours. Most states have some type of unemployment plan for "partially unemployed" workers -- workers who accepted a severe cut in hours and therefore are making far less money than they used to. These workers will not get their full unemployment benefits, but will get a partial benefit each week until they find new employment.

Disciplinary Action

Workers cannot get partial unemployment if their employers cut their hours in response to poor job performance or for other disciplinary reasons. For example, if a worker's hours were cut because he was always late or called in sick at the last minute too many times in a month, the worker cannot get partial unemployment due to the reduction in hours.

Work Search Requirement

If you receive unemployment due to reduction in hours, you must look for a new job each week unless your unemployment representative tells you that you are exempt from this requirement. The work search requirement obligates you to find a new job that gives you adequate hours and compensation to survive without unemployment. You will not continue to be eligible for unemployment if you reject a new job offer unless you have sufficient reason, such as the job paying less than your current job or being too far away to reasonably expect you to commute.

Quitting Your Job

If you quit your job because of a drastic reduction in pay for reasons not related to discipline, you may still qualify for unemployment. Although voluntarily quitting your job disqualifies you for unemployment, you can get unemployment after quitting if you had to quit because of poor working conditions, including drastic cut in pay or in hours, especially if the cuts were made in violation of your contract with your employer.

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Utah Garnishment Laws

Utah saw 8,906 bankruptcy filings in the first 10 months of 2010 alone, according to statistics from CreditCards.com. While incomplete, this shows a picture of the debt crisis in Utah, where the bankruptcy rate of 6.4 per 1,000 people is among the highest in the nation. Utah's garnishment laws are part of the blame for the high bankruptcy rate, according to a Brigham Young University study cited in the "Daily Herald." The laws offer little protection for debtors, according to the study, so more folks are motivated to file for bankruptcy in order to stop creditors from taking money from their paychecks. No matter what your level of debt, you should be aware of Utah garnishment laws.

Time Limits

Garnishments come after a judge rules that part of your wages should be withheld to pay creditors directly. A debtor has time limits on when they can collect debt owed. After this period, they may no longer legally collect the debt and you need no longer fear garnishment.

A credit card company may continue to collect debt owed for up to four years after the debt was accrued. A written contract gives a debtor six years to collect the money, while domestic and foreign judgments are good for eight years. Garnishment judgments -- rulings from a judge that your wages are to be garnished -- last 120 days and are renewable.

Monetary Limits

Utah state law restricts the amount of your wages eligible for garnishment. The most a debtor can garnish your wages is the lowest amount of one of two formulas. First, the debtor can either take away 25 percent of your disposable earnings in a single pay period -- that is a quarter of your net earnings that do not go toward essential bills such as rent. The other formula is any amount of your earnings that exceed the federal minimum wage by a factor of 30.

Writs of Garnishment

A writ of garnishment is a legal document obtained by a creditor to obtain money or property from a debtor. Utah state law has two different writs of garnishment, one for money and the other for property. Creditors are expected to do due diligence before obtaining a writ of garnishment against property to ensure they are filing a writ of garnishment against the right person. In the event a creditor files a writ against the wrong party, that party has the right to sue for damages in civil court totaling up to $1,000, as of 2010.

Interest

Utah state law does not provide any specific provisions limiting the interest rate on a garnishment. The interest rate is determined at the garnishment hearing in court and is enumerated specifically in the judgment.

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About Home Equity Loans & Credit Card Debt

Some people will use a home equity loan to pay off large credit card debts. The thinking is that they can save money by consolidating debt into a lower interest rate loan. If equity loans are standing at low interest rates--around 5%, that is true. However, you do need good credit to get low-interest equity loans. Most people that have a lot of credit card debt will not be able to get a home equity loan, because their credit score is low. If you have good credit, and still have a lot of credit card debt (which is possible), a home equity loan might be a good idea to consoldiate and save more. However, this could back fire, especially if home values drop and you want to sell your home. Also, if you can't make the equity payment and your mortgage payment, you risk a foreclosure. If you are forced to make a larger mortgage payment, you may run up your credit cards just to pay the bank.

Misconceptions

Paying off credit card debt with a home equity loan is a always good idea. If you can get a low interest rate on the home equity, paying off your credit card will save you money over the long run. It will also result in lower monthly payments, since the home equity is stretched out over 10 to 15 years, and even as much as 30 years. However, you will pay a lot of interest to the bank over those years. You also put more risk on yourself. Missing your equity payments could result in foreclosure, while missing a credit card payment can only result in a lower credit rating.

Risk Factors

Taking on a home equity loan puts the risk of losing your home onto your shoulders, in the form of an extra monthly payment. Missing this payment can result in foreclosures. The other risk is a higher interest rate on a car loan or personal loan, should you need one. When you stretch out your credit among credit card balances and your home, it affects your credit score. Carrying large balances on a credit card, or home means a lower score.

Benefits

A home equity loan can consolidate your credit card debt. Putting all your credit cards into a home equity loan means you only have one payment to think about. Typically, since this payment is stretched out over many years, it is lower than your credit card payments. Credit cards typically have a high interest rate. This means you are paying more each month to the credit card company and less towards your debts. A home equity with a lower interest rates means you could end up paying a little less each month towards your mortgage debt, and free up some cash for other expenses.

The Facts

A home equity loan gives you a lower payment each month so you have more time to pay down your debt. Credit card paybacks are based on a shorter time period, so they typically cost more each month and have a higher interest rate. You might still pay more interest overall on the debt with a home equity loan, because you are making more total payments over a longer period of time. However, if your credit card interest rate is very high, a home equity loan might make sense.

Expert Insight

If you are considering getting a home equity to pay off credit card debt, seek alternate debt reduction methods first. A home equity loan requires good credit and involves extra risk. Debt reduction experts can help you reduce your credit card payments through several legal means. You could also try to find offers for balance transfers with low, lifetime balance transfer rates that hover around 4 percent. This could be lower than the rate you would pay on a home equity loan, and it involves less risk. Always read your credit card offer terms and conditions. Some rates are only introductory, and increase in as little as 6 months.

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What to Do When There is Too Much Debt?

Lowering debt can provide a measure of peace and, in the long run, paying down balances increases FICO credit scores. There are several tips for dealing with too much debt. Some people ignore their debt and continue to accumulate balances. Smart consumers, however, understand the importance of careful debt management and keeping debt low.

Personal Sacrifices

Not everyone has extra income to pay down balances quickly, which is one reason consumer debt can linger for years. Getting serious about eliminating your debt and reducing your balances may call for personal sacrifices. This can include a sacrifice of your free time as you take additional employment to help reduce debt. You also may sacrifice shopping and dining out in an effort to reduce your expenditures and put more money toward paying down your balances.

Consolidation

Consolidation can help manage your consumer debt better, and with a lower interest rate on your debts, you can possibly pay less interest every month and bring down principal balances faster. Methods of consolidation include credit card balance transfer offers, debt consolidation loans or working with a credit or debt counselor that consolidates all your accounts into a single bill.

Use Less Credit

An accumulation of debt only worsens as you continue to use credit cards to purchase items. Stopping credit card use helps you eliminate and manage your debt. Thus, you're able to pay down balances without re-accumulating charges, which is counterproductive to progress. Carry cash in your purse or wallet, or save for items instead of using credit for instant gratification.

Debt Payments

Timely payments help with debt management because you avoid interest rate increases and late fees, which are typical with late or missed payments. To help reduce the amount of interest you pay on the account, ask your creditor to reduce your rate either temporarily or permanently; or start making half payments every two weeks instead of once of month. Bi-weekly payments reduce the amount of interest charged by your creditor and helps lower your balance quicker.

Modify Lifestyle

Depending on the amount of debt you owe, managing excessive balances might call for a complete lifestyle overhaul. Living way beyond your means can contribute to debt problems because there isn't enough income to pay your living expenses. Assess how much you spend on housing and transportation, and look into ways of cutting these expenses to save money each month and pay down debt. Move into a cheaper home or apartment, or trade-in your automobile to save money on the monthly payments. Saving $500 a month with a lifestyle change could possibly pay off $15,000 in credit card bills in approximately 30 months.

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Will a Student Loan Deferment Affect a Credit Score?

Student loans can be a gift and a curse. Many students are unable to afford college without the help of loans, but after graduation learn that monthly loan payments may be higher than they can afford. Luckily, there are deferment options available depending on your personal circumstances. Student loan deferments can help or harm your credit score, depending on how the debt is managed.

Deferments

Student loan deferments happen for a variety of reasons, including military service, unemployment or economic hardship. During a period of deferment, you are not obligated to repay your student loan debt as agreed. "You are responsible for paying your education debt even when granted deferment. Deferment is temporary and limited to specified time frames," explains Sallie Mae. There are also limits to the amount of times you can defer your student loans. The impact your deferment has on your credit is contingent upon the type of loan deferment you request.

Interest

While your loans are in deferment, the interest on your loan continues to accrue. However, whether you are responsible for the interest depends on whether you have an unsubsidized or subsidized loan. On subsidized loans, the government pays the interest during your deferment period. You are responsible for the interest that accrues during your forbearance if you have an unsubsidized loan.

Payments During Deferment

Some students request the option of making these interest payments each month while their loans are in deferment to help mitigate the added loan balance. If you are not sure which option works best for your circumstances, contact your lender. Alleviating the debt as soon as possible is a priority, but selecting the wrong option on your own after rushing through the application can lead to delinquency.

Pay any agreed interest payments by the the assigned due date. Falling behind on your interest payments can result in a decrease in your credit score.

No Payments

If you choose not to make any payments during your deferment period, or if your loan package does not offer this option, your credit score will not be negatively affected. During a deferment period, your account is reported in good standing with the credit bureaus, which can help to increase your score. Make a note of the date your deferment ends. If you miscalculate the length of your deferment, you could miss a future statement and fall behind on your payments. Late payments lower your credit score.

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How to Respond to a Writ of Garnishment in Maryland

If you fail to repay a debt, your creditor can sue you in civil court to recover what is owed. If the court issues a judgment against you, the creditor can then take steps to garnish your wages or bank account. In the state of Maryland, writs of garnishment are issued by the district court. If you've been served with a garnishment order, learn how to respond properly, while protecting your rights.

Instructions

1

Carefully read the writ of garnishment to determine which type of garnishment order you are being served with. The state of Maryland permits creditors to seek garnishment of your wages under Rule 3-646 of the legislative code or garnishment of your bank account under Rule 3-645. The garnishment order will notify you of the date the judgment was entered, the name and address of the judgment creditor, the amount of the judgment and the requirements for submitting a response.

2

Choose your defense. For example, if your bank account contains deposits of income that are exempt under federal law, you may use this defense to prevent these funds from being seized. You can also claim financial hardship as a defense if a wage or bank account garnishment would place an undue burden on you and/or your family members.

3

File a motion for hearing with the district court to object to the garnishment if your wages are being garnished. State law allows you to file this motion within 30 days of receipt of the original garnishment order. You can obtain a general motion form from the Maryland district court website. On the form, you must include your name and address, the name and address of the judgment creditor and your reasons for objecting to the garnishment.

4

File a motion to exempt property from execution if your bank account contains exempt deposits. You also have 30 days from the date of receipt of the original garnishment order to file this motion. Under federal law, you may claim an exemption for Social Security benefits, veterans' benefits, Supplemental Security Income, student assistance, federal retirement or disability benefits, military survivors' benefits, FEMA disaster assistance and railroad workers' benefits.

5

Attend the scheduled court hearing. When you attend the hearing, you may present evidence to support your claim for exemptions or financial hardship, e.g. direct deposit receipts, pay stubs, copies of your monthly bills or a monthly expense statement. If you cannot prove your claim, the court will deny your motion and the garnishment will proceed.

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