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Saturday, September 30, 2006

Laws on Consumer Debt in Kansas

Consumers who acquire debts in Kansas are protected by specific laws that not only limit when a creditor can sue you, but also limits how long a creditor has to collect money from you and how it must behave as it does so. You should speak with a Kansas attorney if you need legal advice about the consumer debt laws that apply to you or need assistance with a debt issue in Kansas.

Types of Debts

    Consumer debts are generally placed into four main categories: oral contracts, written contracts, promissory notes and open accounts. A written contract is a contract in which the parties record the terms in a document, while an oral contact has no such writing to accompany it. A promissory note, while also made in writing, is not a contract because it only extends a promise from one party to pay the other. An open account, which is also usually made with an accompanying document, extends credit on an ongoing basis, such as a credit card agreement.

Statutes of Limitations

    Kansas has different statutes that limit how long a creditor has to sue you for an unpaid debt based on the kind of debt you've incurred. For example, Kansas Statutes Annotated section 60-512 states that a creditor must bring an action-based on a contract that is expressed or implied but not in writing -- an oral contract -- within three years. A promissory note, on the other hand, has a five-year statute of limitations associated with it, according to K.S.A. 60-511.

Judgment Limitations

    If you live in Kansas and are sued by a creditor, that creditor has a limited amount of time to collect the money from you if it wins in court. Once a creditor wins a lawsuit, it receives a judgment from the court stating how much money you have to pay. Kansas Statutes Annotated section 60-2403 states that a judgment creditors have five years to recover on a judgment, though a creditor can also file for renewal of the judgment within 10 years from the date the court issues it.

Debt Collections

    Kansas residents are also protected by the federal Fair Debt Collection Practices Act. This law protects Kansas consumers from aggressive debt collectors by offering specific rules with which collectors must abide. Once protections, according to the Kansas Attorney General's office, states that collectors are not allowed to contact you before 8 a.m. and after 9 p.m. unless you specifically agree otherwise. If you have a complaint about an aggressive debt collectors, you can contact the Attorney General's Office of Office of Consumer Protection by calling 1-800-432-2310, or by contacting the Federal Trade Commission at 1-877-FTC-HELP.

Debt Settlement & Repair

Debt settlement is a popular debt management and credit repair strategy. It is considered an alternative to bankruptcy and allows you to pay off delinquent credit accounts for less than the full balance. The strategy works well with unsecured credit accounts such as credit cards. Secured accounts, such as automobile loans and mortgages, cannot be resolved through debt settlement. Those loans are secured by the automobile or home, which serves as collateral. Rather than negotiate a settlement the lender will repossess or foreclose on the property.

Missed Payments

    Credit card companies and other creditors will consider debt settlement after your account becomes several months past due. The exact point in time varies with the creditor, but generally settlement offers are available sometime before the six-month mark. MSN Money reports that at six months creditors generally close accounts and list them internally as charged off. That's an internal accounting term that allows the creditor to consider the account a write-off for tax purposes.

Liability Continues

    You remain liable for the debt even if it is charged off. The creditor may assign the account to an internal collections department or assign it to an outside agency. Or the creditor may sell the account to a debt collector, often for pennies on the dollar. Settlement is possible before or after charge-off, but MSN Money reports that the threat of a debt lawsuit increases after the debt is charged off.

Settlement Process

    You can settle a delinquent account by contacting the creditor or debt collector directly. Asking for a settlement in writing creates a paper trail and allows you to clearly state your position without being bullied over the telephone by an aggressive debt collector. However, you can negotiate over the telephone if you like. The SmartMoney website reports that creditors and debt collectors often will settle for 20 to 75 percent of the balance. Once you have decided on debt settlement, your goal should be to settle for as little as possible.

No Guarantees

    Creditors and debt collectors are under no obligation to agree to debt settlement. They can refuse all your requests for settlement and continue collection efforts which could eventually lead to filing a lawsuit against you in civil court. However, settlements are common.

Impact On Credit

    Debt settlement does more for allowing you to put the past behind you than increasing your credit score. Experian, one of the major credit reporting agencies, reports that delinquent debts resolved through debt settlement will be updated on your account to show that they were "settled" rather than paid. That could actually hurt your credit score, according to Experian. However, paying off old debts -- even for less than the full balance -- is an important part of credit repair as it allows you to end the debt obligation and start rebuilding.

Pay-For-Delete

    Another possible settlement option, pay-for-delete, could help your credit score. Some creditors or debt collectors may consider deleting negative payment information from your credit report in exchange for full payment on the delinquent account. Any removal of derogatory information from your credit report can give a boost to your score. However, creditors and debt collectors are under no obligation to accept pay-for-delete offers.

Tax Implications

    The Internal Revenue Service may require you to report forgiven debt as income, adding to your tax bill and reducing savings gained through settlement. Credit card companies, banks, collection agencies and others accepting at least $600 less than the balance owed are required to send you 1099-C forms indicating cancellation of debt. The IRS will allow you to skip reporting the settlement savings as income if you can prove that you were financially insolvent at the time of the settlement. IRS form 982 allows you to apply for the exception. Insolvency means your total debts are greater than your total assets at the time of the settlement.

How to Reduce Interest Rates on Credit Card Debt

How to Reduce Interest Rates on Credit Card Debt

High interest rates on credit cards are a reality for many consumers who have been late on even a single payment, had promotional rates expire or had the card issuer raise the rate as part of a standard account review. Higher interest rates make it more difficult to pay down credit card balances. Fortunately, these high default rates or notices of interest rate hikes do not have to be accepted.

Instructions

    1

    Ask. Sometimes, obtaining a lower interest rate is just a phone call away. Every credit card issuer posts its customer service toll-free number on the back of the card. Simply call up and ask for a lower interest rate. Credit card issuers need your business and often have customer-retention programs that reduce interest rates upon request.

    2

    Negotiate. If your request to lower your interest rates is turned down, start negotiating with your credit card issuer. Focus particularly on card accounts where you are in good standing and have a history of good credit management. You will want to focus on your long history of being a good customer. Take note of card offers with low promotional interest rates that you receive in the mail --- it is best to have an actual offer in your hand so you can be specific with details. You can offer to transfer balances from your other cards or even threaten to close the account.

    3

    Transfer balances. Another option is to research credit cards offering introductory balance-transfer offers or low fixed interest rates for new customers. Identify the cards that make sense and transfer your existing, higher interest-rate balances to these new cards, provided you can get approved. Some credit cards, especially ones geared toward people with less than stellar credit, may assess annual or transaction fees. However, these upfront fees may be well worth it if there will be interest savings from getting the lower rate.

    4

    Take out a new loan. Consider applying for a debt consolidation loan, using a peer-to-peer lending network or even borrowing from family members. Any of these approaches should combine all of your credit card debt into a single loan with a single monthly payment, and they almost always come with rates lower than what you are currently paying. Peer-to-peer lending networks may be an option, as you can set your own interest rate and then pool small amounts of loans from individuals all over the world.

    5

    Get credit counseling. A credit counseling program almost always obtains significantly lower rates for the credit cards you put on the plan. If your interest rates and balances are so high that your finances are unmanageable, a program like this could help you reclaim control of your finances.

Friday, September 29, 2006

How Are Credit Ratings Being Affected by the Economic Crisis?

How Are Credit Ratings Being Affected by the Economic Crisis?

United States consumers' credit ratings have been affected by two key developments: the Credit Card Accountability Responsibility and Disclosure Act of 2009 and the national economic crisis that began the recession in December 2007.

The economic recession, which has caused more than $75 billion in foreclosure actions, has also hurt individual credit ratings, with the rate of individuals seeking employment lingering around 10 percent, while the more inclusive measure of people who are seeking work, or have given up looking for work, or are underemployed) remained at 16 percent or more in the first fiscal quarter of 2010.

AAA Credit Rating

    The ballooning of the federal deficit by record spending led Moody's Investors Service to warn the government in 2010 that if spending continues to disproportionately leverage against the Gross Domestic Product, the United States' AAA rating (also referred to as a bond rating) would be downgraded to AA. Few investment services and market analysts see this as likely. But it had a profound trickle-down effect on consumer credit ratings, because lending institutions took on greater risk of insolvency among sliding credit markets.

    Rising deficits without economic growth impeded new foreign investment dollars, and the U.S. dollar weakened on foreign exchanges. With the dollar losing some of its worth, credit ratings for individuals dropped as credit card account balances rose when investment funds lost gains.

2009 Credit Card Act

    The Credit Card Accountability Responsibility and Disclosure Act of 2009 was a series of new regulations on credit card companies and banks. It requires credit card companies to inform cardholders of any significant account changes within 45 days, and it limits interest rate increases. Credit card companies and banks enacted many of the prohibited measures ahead of the act being signed into law. Consequently, some consumers saw huge interest rate hikes, new fees, reductions in credit lines, or outright account cancellations, all of which harmed their credit ratings.

Credit Freezes

    In February 2008, President Bush signed into law the Economic Stimulus Act, designed to make solvent or prop up lending institutions and investment firms to curb the recession. The stimulus money given to banks was supposed to be passed on in the form of personal loans, installment loans, and business loans. But banks froze credit lines, fearing loan defaults.

    Because banks did not lend the money, individuals relied on established credit lines and/or credit cards for funds, hurting their debt-to-income ratios.

Pre-Recession

    Until the recession of 2007, investor and consumer credit was freely granted. And from 2004 through 2006, the Federal National Mortgage Association and the Federal Home Mortgage Corp. were politically pressured to loan to people who did not qualify for traditional mortgages. Real estate investors and developers also took advantage of easy credit. Both conditions set prices artificially high, and home values fell when the boom collapsed.

    Consequently, in 2007 many homes were valued at less than their outstanding mortgage balances. Homeowners were paying mortgages out of line with the market value of their houses.

Consequences

    Consumer credit ratings began to decline in earnest as the recession continued through 2008 and 2009. As the U.S. federal debt climbed, banks and investment institutions began restricting credit access. Businesses began downsizing or froze expansion plans. Unemployment rose, and people had less money. Many consumers made just minimum monthly payments on their credit cards, paying only interest without amortizing the principal balance, weakening their overall creditworthiness.

Can a Lien Be Placed on the Property of Unsecured Debit Cards?

Can a Lien Be Placed on the Property of Unsecured Debit Cards?

Although unsecured debts are defined as those that don't give a lender the right to confiscate property if the borrower doesn't pay the loan back, the reality is that a judgment lien can be placed against the property of the borrower. Liens are frequently placed against property, and although the lender won't be paid until the borrower attempts to sell or refinance, the borrower must pay off the lien before he can do so.

Liens: Slow But Effective

    Credit and debit lenders (if the debit is attached to an overdraft line of credit) begin the collection process by hounding the borrower with phone calls and notices; if the borrower ignores them, then the lender will secure a judgment against the borrower in the amount of the balance due. The judgment permits the lender to place a lien on your property, including your home. When you try to sell or refinance, you'll be forced to pay the lien before you can close the deal.

Lien Priority

    Borrowers who are encountering severe financial difficulties may yet escape the lien by the rules governing lien priority. For example, a borrower who is selling his residence will have other debts to pay first; this is called lien priority, and some debts, like first mortgages and property taxes, have priority over unsecured debt liens. Property taxes get paid first, then (usually) the first mortgage. After that, the date on which a lien was recorded determines when the debt gets paid, with the oldest liens having the greatest priority.

Bankruptcy

    In bankruptcy, unsecured debts are usually wiped out -- meaning, they are eliminated entirely. Chapter 13 permits the borrower to work out a repayment arrangement, sometimes for a negotiated settlement, over a three- to five-year period. Some debts, like loans that secure a home and car, must be paid in full. Chapter 7 usually forces a liquidation of assets, including the home. Whatever proceeds are left from asset sales are used to pay creditors. If there aren't enough assets to pay the unsecured debit lien, which is at the bottom of the pile, it will be eliminated.

Unsecured Liens and Foreclosure

    Although an unsecured lender may put a judgment lien against your home, it may not foreclose. Only lenders that have a secured interest in the property, like a mortgage lender or property tax authority, can foreclose. Other types of unsecured liens, such as those brought because of unpaid utility or home improvement bills, work the same way: they cannot foreclose but can place a lien. If an unsecured lender is threatening to foreclose, it has violated the law. The Fair Debt Collection Practices Act requires debt collectors to abide by strict rules regarding delinquent accounts.

Thursday, September 28, 2006

Goals for Getting Out of Debt

Goals for Getting Out of Debt

Even though debt is the norm in the United States, you do not need to be obligated to creditors forever. The key to getting out of debt is formulating goals, because goals permit you to measure your financial success. However, sometimes people aren't sure what goals they should have or what is reasonable. Everyone's situation is different, but some basic goals apply to everyone.

Goal 1: Set Up Plans

    Your first goal in eliminating your debt should be to formulate both a budget and debt repayment plan. These two plans are intertwined because debt repayments are part of the monthly expenditures you include in your budget. To make these plans, take all your financial records for the last six months and average what you are paying to each agency. Then look at your pay stubs and any other reliable income sources to determine your income. Subtract your expenditures from your income. Whatever is left is discretionary -- divide this money for non-essentials like entertainment, being sure to set some aside for savings. Usually, when formulating your debt repayment plan, you should figure out which creditor has the highest interest rate and concentrate on that debt. Figure out approximately when you'll eliminate each debt.

Goal 2: Track Your Spending

    To stick to your budget, you have to track everything you spend. This makes you more aware of where you're overspending and shows you where you may need to adjust the budget.

Goal 3: Slash Your Debt-to-Income Ratio

    A high debt-to-income ratio is a bad thing in personal finance because it severely limits your eligibility for additional credit should you need it. Eliminate the expenses you can, and be consistent about your debt payments so that your debt-to-income ratio is 30 percent or less. This is the cut-off limit for many creditors' programs.

Goal 4: Name Your Alternatives

    Sometimes people get trapped in a cycle of debt simply because they don't see the other options available to them. Look at your standard of living and assess how you can make small changes to save. For example, if you order pizza every Friday, try a frozen pizza from the grocery store instead.

Goal 5: Be Informed

    Too often, debt accumulates because people don't read the fine print on their credit contracts, or because people don't take the time to ask questions and acquire multiple quotes. Never purchase or sign anything unless you are familiar with all the terms and conditions. Shop around and know your rights.

Goal 6: Don't Hide

    Debt can be embarrassing, particularly if you owe a lot. Even so, if you try to hide the debt, you essentially cut yourself off from sources of assistance. Be proactive about seeking debt counseling and don't shoulder all the financial responsibility for your household alone.

Considerations

    It is normal to make some mistakes as you try to modify your existing financial systems and rectify your debt, but the more consistent you can be with your new habits, the sooner you will reach the goals you set. That said, all goals invariably take time to reach. Be patient and look back at the progress you've already made if you feel discouraged. Lastly, reassess often. As your circumstances change, your debt goals may have to change, too.

Wednesday, September 27, 2006

How to Find Out the Original Collection Date on a Collection Account

The original collection date on a collection account is known as the date of last activity. This date marks the beginning of the statute of limitations for debt collection in every state and the reporting period of the debt on your credit report. Although the reporting period for collection accounts is set by The Fair Credit Reporting Act at seven years for any debt, the statute of limitations is different depending on your state of residence. If a collection agency attempts to sue you after the statute of limitations on the debt expires, you may use the expired time frame as an impervious legal defense. Knowing the date of last activity will also help you keep up with when the debt is scheduled to be removed from your credit report.

Instructions

    1

    Calculate the date of the last payment you made on the account to the original creditor prior to the account being charged off. If you do not remember the date of your last payment, check with your bank to find the date that your check to the company was cashed or the payment was debited from your account.

    2

    Add 180 days to the day the original creditor processed your last payment. This will be the original collection date for the account. It is also the date that most creditors will charge off the debt and sell it to a collection agency.

    3

    Pull a copy of each of your credit reports from TransUnion, Experian, and Equifax if you are unable to discover the date your last payment was processed by evaluating your bank records. It is important to pull all three formal credit reports as different creditors may not report to each credit bureau.

    4

    Locate the entry on your credit report for the original creditor of the account.

    5

    Locate the charge off date for the account. The charge off date will be located in either the top left or bottom right corner of the entry depending on which credit bureau's report you are viewing. This date should coincide with the date of last activity.

    6

    Verify that the charge off date and the date of last activity are the same by reviewing the payment history of the original account on your credit report. Add six months to the last month that your credit report reflects a payment on the account. This will not give you the exact date, but if the original creditor charged off the debt six months after your last payment, you can be sure that the charge-off date is also the date of last activity.

What Documents Do I Need to Dispute Items Off My Credit Report?

What Documents Do I Need to Dispute Items Off My Credit Report?

Mistakes on your credit report can happen for a variety of reasons. While disputing accurate information on your report won't get it removed, you may be able to get an item removed or amended if there is a real mistake. Depending on what the error is, there are several types of documents you might need to effectively question it. By law a credit reporting agency must dispute an error on a credit report within 30 days of being notified.

Dispute Letter

    One of the most important documents you need to dispute a mistaken item on your credit report is the dispute letter. This is the letter you send to the credit reporting agency that published the mistake. The letter should clearly describe the mistake so it can be identified and understood. The letter should explain why the item is mistaken and how the credit reporting agency can correct the information.

Supporting Documentation

    You should include a copy of any document that supports your description of events. If the amount or date of a charge is incorrect, you might want to send a copy of the receipt or of your credit card statement. If the item is a bankruptcy, judgment or lien, you may need to provide a copy of the court documents that prove your side of the story. When providing documentation, always use copies, not originals. Keep originals for your records in case you need them later. Keep records of when you sent your dispute letter and what documents you included.

Notice to Information Provider

    You will also want to inform the entity that reported the erroneous information to the credit reporting agency, if possible. This is more of a courtesy notice than a required step, but giving the information provider notice of your dispute can speed up the credit reporting agency's investigation into your dispute and may prevent it from reporting additional erroneous information to the same or other reporting agencies. Provide a copy of any documents you sent to the credit reporting agency and keep a record of all your correspondence with information providers.

Other Correspondence

    If, after an investigation, the credit reporting agency determines that your dispute is valid and the item was indeed in error, it must remove or correct the error in your report. At your written request, you can direct the credit reporting agency to provide notification of the correction to any person who received a copy of your credit report containing the error. To do this, send a brief letter to the reporting agency requesting this additional action. You will also be entitled to receive an additional free copy of your credit report after the error is corrected.

Tuesday, September 26, 2006

How to Stop a Debt Collection Agency

How to Stop a Debt Collection Agency

If debt collection agencies are calling non-stop and sending you letter after letter on official-looking stationary, you can make them stop. If you don't have the money to pay your bills, someone constantly harassing you isn't going to make the money suddenly appear. However, the original creditor sold your debt to a collection agency that is now hot on your trail. You have the right to tell them to "Stop Contact" and leave you alone. By writing this simple letter, you assert your right under the law to make them back off.

Instructions

    1

    Compose a "Stop Contact" letter that will let the collection agencies know in no uncertain terms that you are tired of their harassment. The legal way to do this is to request that they turn your account back over to the original creditor who is unlikely to pursue the matter further.

    2

    Write or type your name and your address at the top of the letter, flush with the left side. Below that, insert the date. All correspondence with any debt collection agencies must be dated. Type in the account number and the name of the original creditor who held your account just below the date. All of this goes on the left margin.

    3

    Enter the heading - "Dear (Full Name of Account Representative), or if no name is identified, enter, "Dear Sir or Madam," By starting your letter professionally, you let them know that you mean business.

    4

    Write a couple of sentences such as, "This letter is to request that you immediately cease and desist from sending me any further correspondence concerning the aforementioned account. I am within my legal rights to issue this request and I will pursue federal and state sanctions against your agency if you disregard this request."

    5

    Next, add another short paragraph of only one sentence that reads, "Please inform (the name of the original creditor) that I request that they personally handle all correspondence with me from this point forward."

    6

    Finish your "Stop Contact" letter by typing spacing down four spaces and typing "Regards," and then below that, type your name and sign the paper beneath your typed name.

How to Calculate a Loan Payment at 7 Percent Per Annum

How to Calculate a Loan Payment at 7 Percent Per Annum

Calculating a 7-percent per annum loan rate is easy to do. It involves converting the interest rate to a decimal and then multiplying that figure times the value of the loan.

Loan Value as Number

    Write the loan value as a number. For example, a $50,000 loan should be written as 50,000.

Decimal Conversion

    Change the 7-percent per annum rate to a decimal by writing it as 0.07.

Annual Interest

    Multiply 0.07 times 50,000 to get 3,500.

Change to Dollars

    Write 3,500 as $3,500.

Interest Per Year

    Read the loan as having an annual interest due of $3,500.

Total Interest

    Multiply $3,500 times the number of years. For a five-year loan, the answer would be 5 times $3,500 = $17,500.

Monday, September 25, 2006

Can I Deduct a Loan Made to a Family Member to Start a Business?

Most financial professionals recommend people avoid giving loans to family members. Relationships become messy when the borrower misses a payment or does not pay the loan back. However, many people do give loans to family. The family member who provides a loan to someone to start a business should treat it like an investment. This should be a business decision made after the person lending the money writes out the terms of the loan in a contract. The IRS may require this documentation if the investor has to write off the losses from that debt.

Contract

    When lending money to a family member, always have a contract signed that sets all of the expectations clearly. The Internal Revenue Service (IRS) may ask for copy of a signed contract to prove the loan even existed. This contract should include the loan amount, interest rate, repayment terms and list any collateral securing the loan. Additionally, you may want to list late payment and default clauses in the contract, even if you do not plan to enforce them.

Missed Payments

    You should keep a detailed record of the loan's payment history. If the person you lent the money to makes the payments on a regular basis, but then begins to miss payments, this could work in your advantage if you deduct the loss and the IRS audits you. When you do not receive a loan payment on time, document your attempts to collect the debt. The IRS will only allow you to deduct the losses if you can prove it was a loan and it is uncollectable

Total Loss

    If the person who you lent the money to goes out of business and cannot pay you back, then you may write off the loan as a short-term capital loss. The IRS may want proof it was a loan and not a gift. The IRS will only allow you to write this off as a non-business bad debt if you are related to the person you lent the money to. The IRS allows you to deduct the loan from your taxes in the year you determine it is a bad debt and not repayable; you do not need to wait for the entire loan term to expire prior to making this decision.

Deducting the Loss

    Deducting the bad debt requires filling out a schedule D with your IRS form 1040 in claiming the debt as a short-term capital loss. You must attach a statement that describes the debt's purpose, amount and Its due date. You must also disclose your name and the business or family member you lent the money to. You must describe the efforts that you went through to collect the debt and how you determine the debt is now uncollectable. This should be included as an additional statement along with the schedule D.

How to Contact the National Credit Bureau

There are three national credit bureaus. These institutions monitor and track the credit standing for all Americans with active credit reports. There is no one "National Credit Bureau," but getting in touch with the three major bureaus -- Equifax, Experian and TransUnion -- is relatively simple.

Instructions

    1

    Determine the reason for the contact. If you have general questions relating to creditworthiness, borrowing history, FICO scores and codes, you can contact each bureau by mail (the preferred method for non-urgent inquiries). Each mailing address is listed on the Federal Trade Commission's website (see Resources).

    2

    Call an individual bureau with complaints and urgent requests to correct a credit report. Before you make the call, make sure you have all the information pertaining to your complaint. This includes the account in question (account number and any statements you have), any prior correspondence with a lender or bureau, and an account's payment history.

    3

    Contact the Federal Trade Commission directly if you think you've been a victim of identity theft. Follow the link listed in Resources to quickly fill out the complaint form. Save all records (there is an option to print the form), and contact the credit bureaus that are reporting fraudulent charges. Make sure to also contact the lender directly and cancel the affected account. Save all correspondence.

    4

    Visit the Annual Credit Report website. This site allows all consumers a free copy of their credit report. Each credit bureau must supply one report per year. Make sure to review these reports for inaccuracies, and contact each individual credit bureau to report erroneous information.

Iowa Garnishment Laws: Can Your Checking Account Be Garnished?

Creditors may use a variety of strategies to collect from Iowa debtors who've fallen behind on payments. In most cases, if you haven't made your debt payments as agreed, your creditor will attempt to collect by phoning your residence or workplace, or by sending collection letters to your home address. If you don't respond or can't bring your account current, Iowa law permits more aggressive strategies, including garnishment of your bank accounts.

Authorization

    A creditor cannot garnish a bank account belonging to an Iowa debtor without legal authorization. The creditor must file a civil suit against you in the municipal court in your county. The court will give you an opportunity to demonstrate that the suit is invalid by showing that you've already paid the debt, or by showing that the suit was filed improperly. If you cannot provide a valid defense, the court will award a judgment against you, which allows the creditor to file for authorization to garnish your bank accounts.

Process

    After winning a judgment against you, the judgment creditor may file for a writ of garnishment, which allows the creditor to order your bank to freeze your accounts. After receiving a writ of garnishment, the creditor will contact your bank. The bank will freeze your accounts, typically within three days, and forward any non-exempt funds in the accounts to the court for payment against your debt. If the non-exempt funds in your accounts aren't sufficient to satisfy the judgment, the bank will continue sending deposited funds to the court until the debt is paid in full. During bank garnishment, you cannot access your account to withdraw non-exempt funds.

Exemptions

    Iowa law permits an exemption of $1,000 to keep a judgment creditor from taking all of your assets. The $1,000 may be in the form of cash, investments or funds in your bank accounts. If a judgment creditor garnishes your bank accounts, you can apply to the court to deem $1,000 in your account exempt.

Debtor Examination

    If you've made check or automated clearinghouse payments to your creditor, it may use this information to identify your bank accounts. However, if you've never used a bank account to pay the creditor, it may be difficult for a judgment creditor to locate your account to execute a bank garnishment. Iowa permits a judgment creditor to require a debtor examination hearing, which requires you to divulge information about your assets, including your bank accounts. It can then use information you provide during the debtor examination to contact your bank and garnish your funds.

Saturday, September 23, 2006

Can Creditors Garnishee My Short Term Disability Checks?

Disability payments enjoy larger protections against creditor wage garnishment orders than other sources of income, including wages from working and gains from investments. A debtor's short-term or long-term disability payments are usually exempt from garnishment except in cases involving the federal government or a state government as the creditor. A government agency has the power to garnishee just about any source of income, including disability or retirement pay.

Unsecured Creditor Garnishments

    Federal and state laws bar a creditor or debt collection agency attempting to recoup an unsecured debt, including a credit card or medical bill, by exercising a wage garnishment order against disability pay. According to Debt Settlement Lawyers.com, short-term or long-term disability pay financed through private disability insurance, an employer, the federal government or state government is exempt from wage garnishment. A debtor should still appear in court when sued by a debt collection agency or creditor to provide the court with proof of disability income.

Secured Creditor Actions

    A secured creditor, including a mortgage lender or car lien holder, cannot legally pursue a debtor's temporary disability payments to pay a debt. The creditor or collection agency may still execute a garnishment order for any eligible wages earned from working, though the easiest means to recoup the debt is to repossess the property tied to the debt and auction the property to the highest bidder. A debtor's short-term disability is still exempt if a mortgage lender attempts to sue the debtor for the remaining balance on a mortgage after such an auction.

Delinquent Federal Taxes

    A debtor owing delinquent taxes to the IRS could have her monthly disability payments seized by the federal tax agency to satisfy the debt. The IRS may move to seize all or a portion of the debtor's disability income regardless of the source. This means a disabled taxpayer receiving benefits from the Social Security Administration or Veterans Affairs could have payments garnisheed to pay back taxes. A debtor owing taxes to the federal government should remain in regular contact with the IRS to work out a payment plan and minimize the likelihood of a garnishment order.

Child Support Payments

    Courts across the country consider domestic support obligations, including child support payments, as priority debts over all other financial obligations. State laws permit child services departments to seize a portion of debtor disability payments, regardless of the source or length of disability payments, to satisfy delinquent child support balances. These agencies may continue to seize these funds for as long as the back balance exists. Debtors refusing to pay back child support balances can face other legal complications outside of garnishment, including jail time and the suspension of professional certifications and licenses.

The Effects of Credit Card Debt on Students

The Effects of Credit Card Debt on Students

Credit card debt is the accumulation of unsecured consumer debt that is accessed through credit cards. Debt can accrue in this way via interest and penalties and there can be major credit score repercussions and interest rate increases for defaulting on the debt. Students who build up a credit card debt during college must deal with several repercussions with regard to their spending habits and payment neglect.

Potential Employment

    According to author Sanyika Boyce, more than 70 percent of employers currently are looking into credit history when you are considered for employment (Reference 1). If a student has a long history of bad debt and a low credit score, this may lead to less consideration for a job. This can include jobs that a student applies for during school and for jobs down the line years after school. This is part of the consistent theme that credit card debt can have impact years after it is obtained.

Health

    Research compiled by William Francis Galvin, Secretary of Massachusetts shows that student credit card debt can lead to various health problems associated with stress and mood (Reference 2). Debt issues may lead to depression, which can negatively affect information retention, academic performance, grade point average and study habits. Debt stress can lead to more chronic conditions later in life like insomnia, explosive emotions and heart attacks. Students who have higher credit card debt may be more likely to drink more, smoke more and commit suicide.

Interest, Penalties and Bankruptcy

    According to the Adventures in Education Group, a college freshman who has a credit card tends to double the amount on the card by the time he has reached his senior year (Reference 3). Interest rates that increase astronomically after the first year and the missing of payments can lead to a large increase in the total debt amount over time. Bankruptcy filings are trending younger and younger, according to Secretary Galvin's site, which shows a 50 percent increase for bankruptcy filings under the age of 25 in the 1990s (Reference 2).

Lifestyle

    Credit card debt mixed with the debt of student loans has caused graduating students to have to continue to live a student lifestyle. This means that students are less able to purchase permanent furniture and participate in social activities like networking groups and attending high-class restaurants and bars. A student who has a large amount of debt may have to spend several years living with less after graduation due to overwhelming interest rates and monthly payments. Students who have high debt may even find that they are unable to do some of the things they did for fun in college (because they were charging those activities on their credit cards) due to debt payments.

How to Fill Out a Statement With Late Fees

How to Fill Out a Statement With Late Fees

Businesses providing goods or services often sell to their customers on account. This means their customers receive a product or service now and pay for it at a later date. The terms of credit sales vary by businesses and customers. Credit lines also vary based on businesses and creditworthiness.



When a sale is made, the company sends an invoice to the buyer stating the amount due and the due date. If a customer does not pay, the business will send a reminder statement.

Instructions

    1

    Determine which customers have outstanding invoices with the company. When all customers with outstanding invoices are found, statements can be generated and late fees added. Businesses have different terms when it comes to charging late fees on accounts. Terms are usually disclosed on the original invoice a business issues.

    A statement does not show details of the sale, but rather a summary of the sale and the amount due. Statements typically are generated at the end of each month and are sent as a reminder of an outstanding debt.

    2

    Fill in the customer's name and address, as well as the date, at the top of the statement. All monthly activity should be included on the statement so that the customer can see a summary of all transactions that occurred during the month.

    Because statements are generated at the end of each month, all transactions from the first of the month are included. This includes all sales made by the company to the customer and all payments the company received. The customer's balance is recorded at the bottom of the statement.

    3

    Calculate late fees. Late fees are calculated based on the terms agreed upon between buyer and seller. Typically fees are calculated as a percentage of the outstanding balance. The late fees are then written below the customer's balance and a total is recalculated. The statement is then sent to the customer.

Thursday, September 21, 2006

What Happens When a Loan Balance Is Charged Off?

A charge-off on a loan balance is very damaging to your credit. The creditor will list the charge-off on your credit report by sending the information to major credit bureaus such as TransUnion, Exquifax and Experian. As a result, your credit score could fall, and other creditors may reject your applications for new credit or charge high interest rates because of the charge-off.

Timing

    Creditors such as credit card companies will usually close accounts and list them as charged off after the loan account is six months past due. Some charge-offs occur sooner than that. Creditors try to avoid charge-offs by making repeated attempts to contact the borrower as the account falls behind. Some lenders offer to reduce payments for a while as the borrower works through a temporary financial hardship, and other lenders may also agree to lower interest rates temporarily. If the borrower continues to miss payments the lender will eventually list the account as charged off.

Definition

    A charge-off is an accounting term used by creditors. It does not end the borrower's responsibility for paying the loan. After charge-off, the debt never dies or expires, although some states have statutes of limitation that restrict how long debt collectors have to pursue the debt through the court system. However, the laws do not prohibit the debt collector from pursuing the debt in other ways, such as sending notices by mail or contacting the debtor by phone.

Process

    After charge-off, the original creditor usually sells or assigns the charge off to a debt collector. The debt collector begins the collections effort by sending the debtor a written notice about the debt. Some debt collectors may attempt contacting the debtor by phone first, but the delivery of the written notice officially starts the collections process. After receiving the notice, the debtor has up to 30 days to dispute the debt collector's right to collect. The Fair Debt Collection Practices Act gives debtors the right to request that the debt collector prove that it has the right to collect the debt and that the debt is valid. The debtor must send the request to the debt collector in writing. After receiving it the debt collector must verify the debt by sending the debtor documentation such as the original credit application or a copy of the final billing statement.

Options

    Debtors have options following the sale or assignment of the charge off. Many debtors elect to settle the debt with the debt collector. SmartMoney reports that debt colletors sometimes settle unsecured debts, such as credit cards, for 20 to 70 percent of the balance. Most debt collectors also offer payment plans. The most severe option for debtors is bankruptcy. One form of bankruptcy, Chapter 7, eliminates charge offs and other unsecured debt in just months.

Can Collecting Unemployment Affect Your Credit Rating?

If you lost your job, you probably have a lot on your mind. One bit of good news, though, is that unemployment doesn't show up on your credit report. Receiving unemployment benefits can even put you in a better position to negotiate with your creditors. Still, it's important to keep an eye on your credit report, as potential employers often use credit reports in their hiring decisions.

Credit Report

    According to Maxine Sweet, vice president of public education at Experian, your credit report does not include the fact that you are receiving unemployment benefits. Instead, your credit report lists your creditors, how much you owe them, your credit limits and your payment history. It also includes public records such as lawsuits, judgments and tax liens.

Credit Score and Rating

    Unemployment doesn't affect your credit score. However, potential creditors use criteria other than credit scores and reports in determining credit worthiness. Many creditors are nervous about lending money to someone who doesn't currently have a job. In addition, late payments or a high debt-to-income ratio (even if you make your minimum payments on time) can hurt your credit score.

Employment and Credit

    Many employers review credit reports as part of the hiring process. If being unemployed is keeping you from paying your bills, the damage to your credit can make matters worse by keeping you from getting a good job. You have a right to a free copy of your credit report from all three major credit bureaus if unemployed and looking for a job. (This is over and above the one credit report everyone can receive during a 12-month period.) It's a good idea to check your credit report while job hunting to make sure there are no errors on the report and that you can explain derogatory information to a potential employer. Contact each credit bureau for a copy of your credit report if you've already claimed your free credit reports for the year. If you have not claimed your free credit reports, visit annualcreditreport.com to do so.

Garnishment Exemption

    One silver lining for the unemployed is that creditors cannot garnish your unemployment checks for most types of debt. If a creditor sues you and wins a judgment, inform the creditor and the court that your income is from unemployment benefits.

Negotiating Debts

    Contact your creditors and explain that you are unemployed, and be prepared to show proof that you are receiving unemployment benefits. Because they can't garnish your unemployment money, your creditors may settle your debts for less than you owe, reduce your interest rate or put you on a payment plan.

How to Pay a Collection Agency

Dealing with a collection agency is rarely easy and it is certainly never fun. If you ever find yourself communicating with a collection agency, knowing how to handle it will help make your life easier. Working with a collection agency does not always have to be stressful or time consuming.

Instructions

How to Pay a Collection Agency

    1

    Document all of your monthly expenses prior to speaking to the collection agency. You do not want to be pressured into agreeing to a repayment plan that you will not be able to maintain. Knowing your expenses before getting on the phone will help you avoid making promises that you cannot realistically keep.

    2

    Get a notebook to be used only when communicating with the collection agency. Start using this immediately and always be sure to document the dates and times you talk to the collection agency along with the name of the agent helping you. Also, be sure to write down any arrangements that are made so that you can reference them quickly in the future.

    3

    Find out if there is a settlement plan available for you. Some collection companies are willing to reduce the total amount owed if you are able to pay one lump sum or make two or three large payments. If it is at all financially possible try to take advantage of these settlement programs.

    4

    Insist on making all payments through the mail using personal checks. Some collection agencies will try to insist that you pay using Western Union, MoneyGram, or other bill payment methods that will cost you money. Other collection agencies will encourage you to sign up for automatic payments which could leave you owing overdraft fees if you miscalculate your finances.

    Mailing your payments monthly will help you avoid additional fees and using personal checks will help you build a record of your payment history. If you do not have a checking account consider asking a close relative (parent or sibling) to write and mail checks on your behalf.

    5

    Keep copies of all letters, checks, and documents concerning your collection account filed away in a safe place. Having documents verifying your payment history and debt amount will help you keep track of what you have paid and what you still owe. These documents will also help you if, in the future, your debt is sold to another collection agency or if you need to dispute information on your credit report.

Tuesday, September 19, 2006

How to Request a Loan Extension

How to Request a Loan Extension

Its not unusual to have lean times when you cant quite make ends meet. When you need some breathing room from creditors, a proactive approach is most effective for resolving your financial struggles. Request a loan extension from the creditor connected with the loan. Most financial institutions have a process in place for helping customers request additional time for paying back a loan. Read the small print in any additional agreements you make to ensure that you understand the additional requirements of the extension.

Instructions

    1

    Check a recent balance statement from the loan to get the customer service telephone number for your financial institution.

    2

    Call the financial institution to get details about the process of requesting a loan extension. Ask about the timing of your extension request as it relates to the due date of your next payment to ensure that you submit the request in time to skip your next payment, if applicable. You may be able to initiate the process over the telephone, or you may be able to access an online request form or download the form from the banks website.

    3

    Complete the form to apply for the extension. The form generally includes specific request for the number of payments you wish to skip, your account number, your name and your complete contact information. Sign and date the form. The bank may also require references, information about your monthly income and expenses and copies of recent bank statements to provide information that supports your claim of financial hardship.

    4

    Submit the form with the financial institution, timing it so that you should receive a decision from the bank in time to enable you to skip your next payment, if desired.

    5

    Contact the bank before your next payment is due to inquire about the status of the deferment, if you do not receive communication from the bank about the extension.

How to Repair Your Credit in Six Months

How to Repair Your Credit in Six Months

Negative entries on your credit report hinder your ability to get credit cards, a mortgage or a car loan. With bad credit, you pay a higher interest rate on the credit you get. The credit repair process is not quick, but with some hard work your credit score can rise in six months. If negative entries are accurate, you may have to charm your creditor into removing the information from your report. When the account goes to collection, you'll have to negotiate with the creditor to remove the entry.

Instructions

    1

    Pull all three of your credit reports. You get a free credit report from each credit reporting agency each year from Annual Credit Report. Go over your credit report to look for inaccurate information.

    2

    Make consistent, on-time payments to all open credit accounts. These payments build your credit history, pay down your balance and show responsible credit usage.

    3

    Pay down your current credit balances. Your utilization ratio takes into consideration your credit limits in comparison with your current balance. The lower your credit balances, the better your credit score.

    4

    Get a secured credit card if you don't have any open credit lines. A secured credit card is one for which you place a money in a savings account as collateral. The card limit typically matches the amount in the savings account. Make on-time payments to develop a good credit history.

    5

    Write your creditor and request that a late payment entry on your account be removed. Creditors are not required to comply with your request, but if you ask nicely they may remove the entry. Explain in the letter your circumstances or hardship that led to the late payment.

    6

    Limit the amount of credit inquiries on your credit report by not applying for credit. Excessive credit inquiries negatively impact your credit score. These inquiries stay on your report for two years.

    7

    Contact any collection agencies to whom you owe money. Agree to pay the debt in full in exchange for removal of the entry from your credit report. Get the agreement in writing before you send the payment. This technique is called a pay-for-delete.

    8

    Dispute inaccurate information on your credit reports. Each credit reporting agency provides a dispute resolution process for removing inaccurate information from your report. You may also dispute out-of-date entries. Most entries stay on your report for seven years and then drop off. If they don't drop off, the dispute process removes them.

Monday, September 18, 2006

Should I Use Savings to Pay Down a Mortgage or Pay Off Debt?

Having debt can be overwhelming at times. When you are paying high interest rates on credit cards and getting only a 2 or 3 percent return on investment from your savings account or certificate of deposit, it seems logical to pay off debts rather than put money aside. However, according to Liz Pulliam Weston an author and finance columnist for MSN Money, while the impulse to own your home outright is strong, paying off your mortgage early might not be in your best financial interest.

First Steps

    Before deciding what to do with your savings, Philip Brewer, a personal finance writer for Wisebread.com, suggests establishing an emergency fund. Use your savings to give you a cushion of three to six months should something catastrophic happen.

    Compared with paying off a low-interest debt (like a mortgage), putting your money in a company 401k or even a mutual fund with at least an 8 percent overall return on investment would be preferable, according to Weston. A 401k with a company match is not only investing money but giving you money for free, and if you're not maximizing your contribution, you are leaving free money on the table.

Tackle the Plastic

    If you're getting less in interest on your savings than you are paying in credit card debt, then tackling your plastic is probably the best choice to make, according to Weston. However, if you don't have credit card debt and you are looking to pay off your mortgage, consider putting that plan off until you are sure you have an adequate emergency fund, adequate life and medical insurance and disability coverage. The Bureau of Labor Statistics reports that fewer than 50 percent of all Americans have adequate disability insurance.

Keep the Cash

    Weston and Brewer both suggest stockpiling your cash in retirement accounts, college funds and emergency funds rather than paying off your mortgage too soon. It's better to keep that money working for you.

How to Find an Apartment With Bad Credit

When you apply for credit, potential lenders look for certain things in your credit report in order to assess the risk you present as a borrower. Landlords have a somewhat different set of priorities. When a landlord sends your information to a tenant checking service, your rental history is checked as well as your credit record. Most landlords place more emphasis on rental history. For many people this makes it much easier to find an apartment with bad credit.

Instructions

    1

    Know what landlords look for when they check your credit. Most will accept a low credit score if there are other factors in your favor like a rental history with no serious black marks. If you have been evicted within the last three to five years be prepared to explain why. The reality, however, is that many landlords will not rent to someone with an eviction record.

    2

    Avoid preventable problems. If you have any rent in arrears with a current or previous landlord, pay it. Do not break a lease and be sure you give proper notice that you are moving.

    3

    Look for apartments rented by individuals rather than apartment rental companies. It's not uncommon for someone renting out a single apartment or with just a few units to skip the tenant check. Some caution is in order, however. Many such apartments are located in neighborhoods you may not want to live in.

    4

    Arrange for a co-signer on your lease if possible. A family member or friend who has good credit may be willing to help you out if you can show them you are able to meet the financial commitment of renting an apartment.

    5

    Make sure all your creditors are paid up to date. If your credit report shows you are now current on all your bills and handling your obligations responsibly it makes a much better impression and improves your chances of finding an apartment with bad credit.

    6

    Be prepared to pay a larger than normal deposit if you have a recent bankruptcy or record of slow payments on your credit report.

Stopping a Savings Account Lien

If you do not repay a debt, a creditor can legally place a lien on your savings account. The creditor must first go to court and sue you for the unpaid debt and win the case. The creditor may then place a lien on your bank account and seize the funds directly from it, to cover the unpaid debt. If you currently owe a debt and you have a savings account in your name, there is a way to protect your funds from being garnished. Learn the proper way to stop a savings account lien.

Instructions

    1

    Contact the creditor to discuss your options. Try to negotiate a settlement offer or payment plan with the creditor. Depending on your current financial situation, the creditor may reduce the amount of debt you owe or allow you to pay off your debt over an extended period of time. Be honest with your creditor and let him know exactly how much you can afford to pay toward your past due debt.

    2

    Get the agreement in writing. Ask the creditor to send you a formal confirmation letter describing the terms and conditions of the payment arrangement. The letter should include details about your current balance, due dates and guidelines for the agreement.

    3

    Submit the appropriate payments to the creditor. It is important that you make every payment by the scheduled due date. If you fail to make your payments on time or if you skip payments, the creditor may proceed with a garnishment and place a lien on your savings account.

    4

    Pay your balance in full. Once you send the creditor your final payment, your account is paid in full and the creditor cannot seize the funds from your savings account. Make sure the creditor provides you with a letter confirming that your debt is paid in full.

    5

    Verify that the creditor updated your account information with the credit bureaus. Order your credit report online at AnnualCreditReport.com. You will need to obtain your credit report from all three major credit bureaus-Equifax, Experian and TransUnion. Review your credit reports and make sure that the creditor reported your payment information to each credit bureau. Please note it may take up to 30 days for the creditor to update your account information with the credit bureaus.

Sunday, September 17, 2006

Help to Manage Debt

Help to Manage Debt

Having a lot of debt can be overwhelming, but there are practical steps to climbing out of debt. You need to become educated about approaches to debt, get tools that help you organize your finances and plan a strategy for getting out of debt, and work on self discipline. There are many online tools, software and counseling agencies to help you.

Online Resources

    There are a lot of online resources: advice and calculators for people who need to know how to manage debt. MSN Money, for example, suggests creating a budget and reducing monthly necessities to 50 or 60 percent of your income and relegating the rest to "wants" and debt payments. Vertex42 has a calculator you can download to an Excel program whereby you list all debts and their interest rates and calculate how various payment options would reduce the debt most quickly and incur the least interest. Bankrate has a debt consolidation calculator to help ascertain how much it would help to consolidate your debts.

Budgeting Software

    There are a number of budgeting software applications to help you keep track of your finances. The key to paying off debt, according to MSN Money is to know where your money goes and developing a strategy accordingly. Among the top budgeting software programs. on the website Top 10 Review were Quicken Starter, AceMoney, Moneydance and YNAB. AceMoney costs about $30 while YNAB costs $60. All of them can download transactions from your bank, so you see exactly where your money goes. All but Moneydance let you split transactions between different categories. YNAB has a tool that limits your spending in an area one month if you overspent last month.

Consumer Credit Counseling

    Many companies provide consumer credit counseling, and the best ones do it for free. Counselors are certified through a national program and look at your income, expenses, debts and underlying reasons for your financial woes. Then they come up with a plan to help you dig out. Counselors can meet in person, over the phone or via the Internet. MSN Money recommends using counselors affiliated with the Association of Independent Consumer Credit Counseling Agencies or the National Federation for Credit Counseling to ensure quality help either for free or very low fees.

Debt Management Plan

    Under some circumstances, consumers may decide to enroll in a debt management plan with the consumer credit counseling agencies. With this plan, counselors add up all the unsecured debts such as credit cards and tell consumers a certain dollar figure they must pay the agency each month. The agency then negotiates down interest rates and fees and pays the debts on behalf of the consumer. For this the agency usually charges a small fee, no more than $50 per month. Counselors usually require that clients destroy their credit cards during this process to avoid getting into further debt.

What Is the Meaning of a Credit Rating Score?

Modern economies run on credit; that is, the forwarding of money for investment or consumption on the basis of the borrower's ability to be productive and repay the debt. Lenders need to be certain the people who are borrowing from them have a good credit history and are most likely to pay the lender back with interest. The result of this need for assurance is the credit score.

Features

    A credit score is a statistical summary. Its maximum is 850, but a good credit score is roughly 700 to 750, according to Kiplinger's financial magazine. In essence, a computer program is used to compile the statistical regularities in as many of the prospective borrower's credit activities as exist and are open to public review. This includes nearly all important economic activity of the prospective borrower. However, there is no accounting for demographic data or even the age of the prospective borrower. It is purely quantitative credit and economic data.

Identification

    The most important aspect of the credit score concerns the nature of the variables that are used to figure it. There are five variables and they are weighted as percentages of the total score. The most important is payment history, which accounts for 35 percent of your score. The next important variable is the total amount you owe, which is 30 percent of the score.

Types

    There are three remaining variables, but they less important to the overall result. They are the length of one's credit activity, which is 15 percent of your score, and new credit inquiries and types of credit used, which are 10 percent each. The actual meaning of the 0 to 850 score numbering system is generally not released to the public by the designers and users of the software that computes the score.

Function

    The main purpose of the score is to see who is the most credit worthy. A score in the 800s is rather rare, and would be stellar, qualifying for the best interest rates on loans. Commonly, good credit is considered a score in the 700s, and these borrowers too qualify for the best rates. Under 700 is where problems begin, and if credit is granted, interest rates will be higher.

Effects

    When a bank wants to determine if a borrower is credit worthy, it will contact a major credit rating firm and request your score. The score is then used to compute your interest rate and even whether or not you qualify for the line of credit or loan. The credit score is a, if not the, mark of your economic viability in credit matters.

Proper Credit Management

Proper credit management is key to building and keeping the best credit score possible. Credit scores determine approvals for different types of financing. People who practice good credit management often receive lower insurance premiums. Know the factors that affect credit and then take steps to improve your habits.

Pay More Than the Minimum

    Credit card debt can impact personal finances and credit approvals. Debt accumulation can follow compulsive shopping or cash-flow problems. Even with past mistakes, you can conquer credit card debt and improve your credit score. The amount of debt you have accounts for 30 percent of your credit score, but paying more than your minimum on credit cards each month and paying a little more towards other debts can help pay down balances quicker and improve your present score.

Pay Off Balances

    Another method for proper credit management is paying off credit card balances completely each month. This method helps avert high balances. If you've recently paid off a credit card, this method helps keep your balances to a minimum and prevents future issues. For this technique to work, only charge what you can afford to pay off in a month's time. If it helps, give yourself a spending budget for your credit cards and don't exceed this budget.

Pay Bills On Time

    Payment records with your creditors and lenders make up 35 percent of your credit score. Keep this fact in mind and always pay your creditors by the due date -- even if you're only able to forward a minimum payment. The minimum is better than nothing, and missing payments will result in late fees and possibly negative information on your credit report.

Know Your Credit History

    Don't ignore your personal credit report. This document reveals your past and present credit patterns, and this is what lenders and creditors use when deciding to extend credit to you. Mistakes on your report can trigger mortgage, credit card and auto loan rejections. Check your reports annuallly from Annual Credit Report and contact your creditors to get errors removed and outdated information updated.

Comparison Shopping

    Shopping around for new credit accounts helps you secure the lowest interest rate and the best financing package on loans. Before agreeing to an auto loan deal or a mortgage loan, compare the offer with offers from two or three other financial institutions. Take into consideration the interest rate, the loan term and the monthly payment.

Saturday, September 16, 2006

How to Deal With a Collection Agency Regarding a Hospital Bill

A hospital bill can put you in debt fast. If your health insurance doesn't cover it all, or if you don't have insurance, you can be facing an enormous bill that you have no idea how to pay. If your hospital bill goes to a collection agency, don't panic. Follow some logical steps to work with the collection agency in a fair and reasonable way, and get the bill paid,.

Instructions

    1

    Respond to calls from the collection agency. The debt won't go away by you ignoring it. If your account has gone to a collection agency, you've probably already tried that tactic with the hospital, since most of them will work with you if you let them know your situation.

    2

    Make notes. Document each conversation with the collection agency in writing. Get the name of the person you're talking with at the collection agency. Note the date and time. Keep copies of any correspondence.

    3

    Play fair. Don't get angry with the collections agency representatives. They are only doing their jobs. Try to remain calm and work out a solution that works for everyone involved.

    4

    Expect courtesy from a collections agency. The Fair Debt Collection Practices Act (FDCPA) prohibits collection agencies from using abusive collection practices that harass you or invade your privacy. The FDCPA is federal legislation, but about half of the states also have their own laws to protect citizens from unfair collection tactics. If you feel the agency is using abusive tactics with you, contact your state attorney general's office.

    5

    Negotiate a payment plan. Many hospitals give collection agencies the authority to work out a payment plan. Ask the collection agency to put the agreement in writing and send a copy to you.

    6

    Pay the collection agency, not the hospital, unless the agency tell you to do so. The collection agency accepts the payment and keeps a portion of it as part of its agreement with the hospital.

    7

    Ask about credit reports. If your hospital debt has been reported to a credit bureau, you can ask for it to be removed or at least adjusted when you take care of the debt.

What is the Average Debt of the American Family?

What is the Average Debt of the American Family?

Debt is calculated by adding up all of a person's assets (cars, property, real estate) and subtracting the total of all outstanding loans. Americans generally owe one or more types of debt.

Household Debt

    The average American's household debt is nearly $118,000, according to VisualEconomics. This is figured by adding the amount of money they have in the bank to their home's value along with any other property they own and subtracting the amount they owe to the bank for their mortgage or other outstanding loans.

Credit Card Debt

    The average household credit card debt was reported to be $7,394 in February 2010. Since the recession which began in 2007, this amount has gone down, which indicates that most Americans are paying down credit card debt rather than adding to it.

Tips for Paying Off Debt

    Paying down debit can be easier if you use one or more of the following tips. Pay off higher interest debts before lower interest debts. Use a personal or family budget to identify where your money is spent, and reduce or eliminate non-essential spending. Stop taking on additional debt to buy things that you do not need. A full list of these tips can be found under the Resources section at the end of this article.

Thursday, September 14, 2006

The Statute of Limitations on Debt Collection in Maryland

The statute of limitations for debt collection in Maryland gives creditors a finite window of time to file formal legal action against you to obtain payment. Once the statute of limitations expires, creditors may only continue informal collection practices in accordance with the Fair Debt Collection Practices Act and Maryland Commercial Law. Informal collection practices may include contacting you by phone, through the mail or via email.

Civil Actions

    In Maryland, creditors retain the right to sue you in civil court to collect payment for written contracts, including credit cards, for a maximum of three years from the date the account was written off as a bad debt. This means you may use the statute of limitations as a defense in court if your creditor waits until after the three year statute of limitations expires to file a civil suit to collect your debt. This statute of limitations only covers a creditor's right to sue you. A creditor may continue to report your delinquency to credit bureaus and continue contacting you regarding the debt even after the statute of limitations on civil actions has passed.

Reaffirming Debt

    If you reaffirm your debt by making a payment or answering any communication from your debtor including phone calls, emails or written notices the clock on the three-year statute of limitations for debt collection starts over. If you do not have the intention of paying off your debt in-full, it's not a smart financial move to continue reaffirming your debt. All this does is give your creditor more time to consider legal action against you.

Collecting a Judgment

    Once a creditor obtains a judgment against you to collect a debt, the creditor has 12 years to recoup the total amount owed. A civil judgment allows a creditor to garnish your wages up to 25 percent of your weekly earnings, attach your bank accounts and place liens on your property including homes and automobiles. You have the right to petition the Maryland court within 30 days of a creditor's attachment of your assets to file for an exemption. According to Maryland law firm Laura Margulies & Associates, as of March 2011, you may exempt up to $11,000 of value in real property from creditor attachment. You may also exempt personal possessions including household furnishings up to $1,000.

Credit Reporting Limitations

    A collection agency may report your delinquent credit accounts to all major credit reporting bureaus for up to seven years from the date the charge-off occurred. Once this seven year period expires the notation on your credit report must be removed. The reaffirmation rules for debt collection apply to credit reporting as well, meaning if you contact your collection agency the clock on the statute of limitations for credit reporting begins again. This could keep the charge-off notation on your credit report indefinitely if you continue intermittent contact with your creditor or collection agency.

Wednesday, September 13, 2006

Is a Judgment Creditor a Secured Creditor?

Is a Judgment Creditor a Secured Creditor?

A creditor is "secured" when it holds an interest in an asset that belongs to a debtor. The asset the secured creditor owns a security interest in is called "collateral." A mortgage lender is just one example of a secured creditor because it has the legal right to foreclose on the borrower's property if he leaves his loan unpaid. Although not traditionally secured creditors, judgment creditors can secure an individual's debts in certain situations.

Judgment Creditors

    A judgment creditor is any unsecured creditor that obtains a money judgment against a consumer via a lawsuit. Secured creditors have no need to seek a judgment because of their ability to seize the borrower's collateral. If the collateral does not satisfy the borrower's debt, the remaining amount she owes is unsecured because seizing collateral is no longer an option. Thus, a secured creditor becomes an unsecured creditor after calling due its security interest. Judgment creditors are, by nature, unsecured.

Becoming Secured

    Although judgment creditors are unsecured, a creditor's possession of a judgment gives it the ability to secure the debt via a lien. Only creditors with a judgment and federal and state governments can attach an involuntary lien to a debtor's property. Property liens often attach to real estate but a judgment creditor can also attach its lien to a car or boat. Once the judgment creditor attaches the lien, the property the lien is attached to becomes its collateral and the formally unsecured debt is secured by the asset.

Collection Via Collateral

    A judgment's creditor's primary motivation for becoming secured through a lien is that doing so increases the odds that the debtor will pay off the judgment rather than risk losing the asset. Like any secured creditor, a judgment creditor who is also a lien holder can seize the asset to which its lien is attached if the debtor refuses payment.

    Sometimes threatening to seize the asset is not necessary. As a rule, consumers cannot sell or refinance a home or vehicle without first paying any outstanding judgment liens attached to the asset.

Considerations

    A creditor must have a judgment before filing a lien against an individual's personal property. This requires a lawsuit and court ruling in favor of the creditor. The one exception to this rule applies to federal tax debts. The Internal Revenue Service can attach a blanket lien to all of an individual's assets at once should he fail to pay his tax debts. The IRS does not have to become a judgment creditor by filing and winning a lawsuit against the consumer in order to do so.

How to Pay Off Bills With Bad Credit

Paying off debt is a difficult task for everyone these days. Gas prices keep rising. Groceries are costing us more. In fact, just about every bill that consumers have is rising to new levels of "ouch." How is someone supposed to pay off their bills with bad credit attached to their name? No lender wants to extend any more credit to them. The interest charges on existing debts, especially credit cards, keep going higher and higher. And there is no end in sight. Fortunately, a few simple strategies, painful as they might be, can readily help someone pay off their bills and crawl up out of bad credit once and for all.

Instructions

    1

    If you need to pay off bills with bad credit attached to your credit history, don't be fooled into thinking that you can't do it. You can. However, you need to realize that it didn't take one day to get into this mess and it isn't going to take only one day to get out of it. The first step is to stop making any purchases unless they are necessary for survival. All pleasure purchases need to stop for the time being. Yes, it will be difficult, but it isn't going to last forever. Take a pair of scissors and cut up any credit cards that you don't use for necessary purchases.

    2

    Next, always pay your existing bills on time to avoid late fees. The average late fee ranges between 25 and 35 dollars. In some cases, this amount can be larger than the minimum payment due. If any of your credit cards have a universal default clause on them, paying a bill late can lead to higher interest rates on each of your accounts, including installment loans and credit cards.

    3

    If possible, pay slightly more than the minimum amount due on any of your bills. Start with the smallest credit card bill and see if you can pay it off fully. This will free up a bit of cash that you will be able to apply toward another debt. Take a pair of scissors and cut up each card as you pay it off. Call up and cancel the card completely so that you aren't tempted to use it again.

    4

    To get a bit more cash to place on your bills, gather up any items that you have at home but no longer need. Use the Internet to locate local places to sell these items, including websites geared toward your area. One example is a "Links and Exchanges" group that allows members to advertise items that they have to sell free of charge. This particular group is one of the many offered through Yahoo. Plus, these types of groups do not charge any fees to join or advertise.

    5

    Begin a strategy to decrease your spending each week, even if it is just a few dollars here and there. Stop eating out or picking up a cup of coffee on the way to work. Cut back on your phone services. Eliminate your secondary phone, at least until you get your bills paid off. Start buying no frills-brands. Avoid buying snack foods since they usually cost more and provide less nutrition. Use the savings to pay down your bills.

    6

    If you have children, ask the kids to become responsible for their own purchases. This will save you a lot of money and provide them with some new skills. They can get a job babysitting, doing chores for a neighbor, or getting a paper route.

    7

    Check with local lenders and banks to see if you can consolidate your debt and bills into one loan. This type of loan is usually referred to as a debt consolidation loan. Even if the interest rate is higher than some of the interest rates that you are currently paying, the minimum payment due is likely to be much less than the sum total of all of the minimum payments for your current bills.

    8

    Once you have paid off your debts and bills, you can arrange to speak with a representative at your personal or local bank to discuss the acquisition of a new credit card. Start slowly and use the credit card mainly to make necessary purchases.

Steps to Correcting Mistakes on a Credit Report

Mistakes on your credit report can have devastating consequences on your ability to obtain credit to purchase a car, a house or even to find employment. Credit report inaccuracies may range from a minor mistake on a credit card bill to crippling activity due to identity theft. It is important to be proactive when keeping your good name and your good credit in the best possible standing.

Obtain a Copy of Your Credit Report

    Obtain a free copy of your credit report by completing a request form on www.annualcreditreport.com. By law, you are entitled to one free report every 12 months from the three consumer reporting agencies--Equifax, TransUnion and Experian. Review your report for errors at least once a year, if not more frequently. Prior to applying for a large loan, such as a mortgage or car loan, obtain a copy of your credit report to ensure there is nothing inaccurate that may prevent you from securing credit.

Address Errors in an Official Letter to the Consumer Reporting Agency

    If you find errors, dispute the inaccuracies in writing to the consumer reporting agency. Include copies--not originals--of documents that support your claim. Be clear in outlining your dispute and provide as much accurate, factual information as possible. Request an action, which would be to either remove the item in question or provide a correction. The letter should be sent by certified mail with a return receipt requested so you can be certain it arrived at the consumer reporting agency. The agency investigates the claim typically within 30 days and once this is complete, you will receive the results of the investigation in writing.

Send a Letter to the Creditor Disputing the Error

    Follow up a letter to the consumer reporting agency with a letter to the creditor where the error has originated. As with the first dispute letter, provide supporting documentation outlining the inaccuracy, as well as a copy of the credit report reflecting the error. If the investigation by the consumer reporting agency proves in favor or your claim of error, the creditor might not report the inaccuracy again.

Virginia Credit Card Laws

Virginia has a number of laws that apply directly to credit cards and card users. These laws govern both civil and criminal issues, and they can affect anyone using a credit card. You should speak to a Virginia attorney if you need legal advice about the state's credit card laws, especially if you're facing a credit card lawsuit or criminal prosecution for a credit card crime.

Statute of Limitations

    Like all other states, Virginia has laws that limit how long a creditor has to sue you for a credit card debt on which you've defaulted. This law, known as a statute of limitations, requires a creditor to file a lawsuit within three years from the date on which you default on your credit card loan in Virginia, according to Bankrate. This three-year limit applies to all open accounts, the category into which credit cards fall.

Limitations On Judgments

    The Commonwealth of Virginia also limits how long a credit card company has to collect on any debt lawsuit it wins. This limitation, known as a limitation on judgments, requires the judgment creditor to collect on any judgment within eight years from the date the court grants it, according to CardReport. After this eight-year period, a judgment creditor cannot use any method to collect the debt other than to try to persuade a debtor to pay.

Credit Card Agreement Clauses

    As a credit card user in Virginia, or anywhere, you should always read your credit card agreement carefully. Most, if not all, credit card companies include clauses in their credit card agreements that change which laws apply to you and your card. These clauses, either in the form of choice of law or statute of limitations clauses, typically select a state's law other than Virginia's that will apply to the agreement. The state's law the company selects typically extends the statutes of limitations longer than those that would otherwise apply.

Credit Card Crimes

    Virginia punishes various activities involving credit cards as crimes. For example, Virginia Code section 18.2-192 punishes credit card theft, the act of taking a credit card or a credit card number from a person without the card holder's consent with the intent to use it, sell it or give it to someone other than the card holder. This crime is categorized as grand larceny, and punishment may be one to 20 years in jail.

How Credit Approvals Work

Obtaining credit is necessary in a number of areas in everyday life. You may need to borrow money to buy a house, to purchase a car or even to buy smaller items on a credit card. Before you can gain access to credit, you must go through a credit approval process. This process involved determining whether you have the potential to be a solid borrower.

Apply for Credit

    Before you can be approved for some type of credit, you must first apply for it. This involves filling out an application for the credit. When applying for credit, you will need to provide the lender with all of your basic personal information. The credit application will usually ask for your name, your address, your Social Security number, your date of birth, your occupation and your income. When you fill out the application, you may also be asked to provide proof of your income.

Credit History

    A large part of getting approved for credit depends on your past credit history. The lender will pull a copy of your credit report and use it to determine how good of a borrower you will be in the future. The credit report will include your credit score, which is a numerical representation of the important parts of your credit history. The lender will also be interested in how much debt you have and whether you have maintained a good payment history with those accounts.

Collateral

    Depending on the type of credit that you are asking for, you may be required to put up some type of collateral. The collateral that you put up is what will secure the loan for the lender. For instance, when you get a mortgage loan, you are asked to put up the house that you are purchasing as collateral. If the lender does not receive your monthly payments, it can foreclose on your home and sell it to repay the debt.

Completing the Process

    Once you provide all of the necessary information, the lender will give it to an underwriter to review. The underwriter will ensure that you are worthy of extending credit to. Once this determination has been made, the lender will then offer you the credit. If you accept the terms of the credit, you will then have to sign documentation that shows it. At that point, the money you need will be provided to you by the lender.

How to Fix Government Bank Errors

How to Fix Government Bank Errors

Bank errors are a serious problem that can lower credit scores or even result in home foreclosures. The bank's coding puts in the wrong code for an individual, resulting in an error. When there are errors caused by the bank, fixing the problem is a necessary part of keeping a home or credit score.

Instructions

    1

    Contact the government bank and inform them of the problem. In many cases, the problem is technical in nature, resulting in an error due to an inaccurate computer code. If a credit report shows an error or if there is a notice sent due to an error, inform the bank immediately of the mistake.

    2

    Give the bank proof of the error. Proof might include any contracts with the bank, receipts from payments or even past credit reports, if there are regular credit reports available. Only give the bank copies and keep the originals.

    3

    File a complaint with the state attorney general and federal banking regulators. If the bank does not fix the error, getting the attorney general or getting banking regulators involved will usually fix the problem. Show the regulators or the attorney general the proof of the error and allow them to work on the problem. Bank errors are most commonly small mistakes in code or inputting data into the system.

Tuesday, September 12, 2006

Credit & Debt Help

Credit & Debt Help

Many people believe that they are supposed to go into debt so that they can build their credit. With a good credit rating, you're able to acquire more debt in the form of credit cards, a new car or a mortgage. Unfortunately too much debt quickly becomes overwhelming and you may find yourself struggling to make ends meet. One of the best ways to address a credit and debt problem is to re-evaluate your spending habits and make plans to begin paying off existing debts.

Evaluate Your Situation

    Determine how much credit you need, why you need that credit and how deeply in debt you already are. You may have started accumulating credit and debt right out of high school in the belief this would eventually help you buy a home. Circumstances change, however, and the level of credit and debt you require changes with them.

Create a Budget

    Make a budget, or personal spending plan, to take control of your credit, debt, income and expense situation. List all your sources of income and all your expenses -- including current debt obligations. Often this step is revealing because some families discover they actually hold much more debt than they first realized. Sometimes the budget doesn't add up without serious adjustments, because the income is not enough to meet all of the outgoing obligations.

Live Within Your Means

    If your evaluation and initial budget calculation don't add up, you will need to make cuts to expenditures somewhere. Eliminate unnecessary spending such as extra services on your cell phone or TV services and cut back on optional spending areas such as clothing and entertainment. Stop relying on credit to buy things you cannot afford and adjust your budget so that you begin spending less than you earn.

Pay Off Debt

    Make a plan to begin paying off debt and do not allow yourself to add more. Your household budget included your regular monthly debt payments as part of your expenses, so they will eventually be paid off in full if you never add any additional charges. If you can find extra money in the budget, begin paying off one debt faster by sending extra with each payment. Paying off debts saves you money in the long run because you eliminate interest payments, penalties and fees.