October 2006 ~ Credit And Debt Management

Tuesday, October 31, 2006

Emergency Debt Relief Options

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When you are struggling with debt, every month gets harder and harder to make those ever-increasing minimum payments. Do you have any options? Is bankruptcy your only choice? If you are facing a debt emergency, it is time to learn about emergency debt relief options and how they may apply to your situation.

If you find yourself in a debt emergency, which is a situation where you absolutely cannot pay the minimum payments on your debts, you have some options. One is to declare bankruptcy. This will allow you to unload some of your debts, but it will greatly damage your credit rating. Another option is to work with a debt relief company to negotiate with your creditors to lower the amount you owe. Another option is to consolidate your debt into one loan that has a lower monthly payment.

Many consumers mistakenly think that bankruptcy is their only option when facing an emergency debt situation. While some consumers may have to declare bankruptcy, many can negotiate with their creditors in order to lower the amount they have to repay and avoid bankruptcy. Most creditors realize that consumers who owe thousands upon thousands of dollars are never going to be able to repay the amount, so they are willing to negotiate a lower amount in order to get some money, verses having the debt removed in bankruptcy court.

If you are facing a debt emergency, the first thing you need to do is consider your budget. Are you spending more than you make on a regular basis, or was the debt the result of unexpected and unusual expenses? If you are regularly spending more than you make, no amount of emergency debt relief is going to help, because you are going to remain in this cycle. You need to adjust your spending or income. If the debt was a result of unexpected circumstances, debt relief may help.

There are many websites and companies who are willing to prey on consumers who are facing a debt emergency. Before you sign up for emergency debt relief help, make sure you know what you will receive. Do not pay a lot of money for someone to help you file bankruptcy. Instead, look for a company that offers credit counseling in conjunction with debt relief options like creditor negotiations or consolidation loans. This will help you avoid repeating your mistakes while you dig your way out of debt.

Emergency debt relief is not for everyone who has debt. Most companies offering these services only take on clients who have more than $10,000 in consumer debt, not including mortgages. If you are struggling with your debt but do not qualify for these programs, try to take some steps on your own. You can find a consolidation loan or negotiate with your creditors on your own and save money in the process. Also, make sure you are not paying a debt relief company to do what you can on your own, even if you qualify for their services.

Alternative Debt Solutions

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Often you can develop and follow a debt repayment plan to solve your debt problems. This involves budgeting and selling some of your assets to cover your debt over a certain period of time. If you can't afford to repay your debt, you may have to explore alternative solutions.

Some organizations offer debt management programs that provide professional help in solving your debt problems. This involves enlisting the aid of a counselor to review your debts and other financial detail. After the review, the counselor may try to negotiate with your creditors to obtain lower payments, lower interest rates and/or fee waivers. The counselor sets up a payment schedule that matches your budget. You make regular deposits with the debt management organization, and the organization distributes the money to your creditors.

With a debt settlement, the creditors agree to accept less than the entire amount owed as payment in full and will close the account. You may be able to pay only 25 to 50 percent of your outstanding debt to clear the entire debt. However, creditors are unlikely to agree to a debt settlement unless your account is severely delinquent. You also must pay the debt settlement amount in a lump sum. You can seek assistance from a debt settlement organization, which requires fees for its services, or you can negotiate with your creditor directly.

If you can obtain a loan that has a lower interest rate compared to your current debts, it may help solve your debt problems. However, if your debt does not accrue interest, an interest-accruing loan may make your problems worse. For example, medical bills don't usually accrue interest. If you are not certain you can pay off the new loan, you should not collateralize your assets because you may end up losing them.

Bankruptcy has serious repercussions, and you should only consider it as a last resort. If you file a bankruptcy, the court may help make your debt easier to repay or even eliminate some of your debt. There are two common forms of bankruptcy for individuals -- Chapter 7, which involves liquidation of your assets to pay off creditors, and Chapter 13, which produces a repayment plan to pay off debts over three or five years. You may want to consult an attorney before filing a bankruptcy, so you fully understand what the process entails. A bankruptcy stays on your credit record for up to 10 years, making it difficult for you to obtain loans in that period.

How Much Credit Card Debt Can I Be Sued For?

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When a person takes out a credit card account, he is taking out a line of credit with a finance company. In all cases, the debtor will be required to sign a contract outlining the terms under which the contract is taken out and how the debt is required to be repaid. If the debtor fails to abide by these terms and the debt becomes delinquent, the company may choose to sue the debtor for the amount owed.

Credit cards allow an individual to draw against a line of credit to pay for purchases. When an individual pays for a purchase with his card, he is essentially taking out a loan with the card. Like all loans, this loan drawn from the line of credit constitutes a legally binding agreement between the borrower and the lender. If the borrower fails to pay back the loan, the lender may sue for breach of contract.

A debt that is not paid back on time will generally not incur a lawsuit immediately. In general, credit card companies will first assess penalties against the debtors, such as fees and increases in interest payments. It is only after the debt has become severely delinquent -- exactly what constitutes severe delinquency will vary by company -- that the company may consider filing suit against the debt in a civil court.

Lawsuits stemming from unpaid debts are usually filed on the basis of a breach of contract. The credit card company will generally sue the individual for failing to abide by the terms of contract that specified how and when the debt was to be repaid. When and if the credit company will bring a suit against the debtor will depend on the company's policies. However, any breach of the contract can trigger a lawsuit.

Technically, a credit card company can bring a lawsuit for any amount of money that the debtor legally owes but is delinquent in paying. However, realistically, a credit card company will only file a suit in situations in which it finds it financially beneficial to do so. Exactly how much it will cost a company to file a suit will vary, meaning that the exact amount of debt that will trigger a suit will vary by company, as well.

Credit History & Background Checks

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A person's credit history and background information may affect his ability to borrow money, and sometimes even to obtain a job he is interested in. Understanding what information is contained in their credit history and background report and how it is recorded will help people improve their credit and overall financial situation.

A person's credit history is made up of information about money she has borrowed in the past as well as how she has gone about repaying borrowed funds. The three major credit bureaus--Equifax, TransUnion and Experian--keep track of people's credit history in the United States. When lending agencies such as banks and mortgage companies are considering giving a person a loan, they review her credit history by running a credit check before they make a decision.

Basically, any information related to personal credit will be show up in a person's credit history. Applying for, obtaining and using credit cards are all recorded, as well as the remaining balance on credit lines and payments made. When a payment is late or missed, this is also included in the credit history. The same is true for bank loans, home mortgages and any other debts. Closed accounts remain as part of a credit history for several years, as do bankruptcy filings. A background check examines a person's criminal records, commercial records and financial records. A background check may search municipal, state and federal court records and sex offender databases.

A person's credit history is used in a variety of ways. His credit score, for instance, is calculated based on information found in his credit history. Credit score is a number between 300 and 850 that sums up an individual's use of credit and reliability. It is calculated using details of credit history such as the number of credit cards an individual holds, the balance on them, and whether or not payments have been made on time on credit cards and loans. A lender may not extend a loan to an individual who has negative information on his credit report.

Businesses and other organizations conduct background checks on a person's credit for several reasons. For instance, some companies have adopted the habit of running background checks on all individuals applying for jobs, especially if those jobs involve working with money or sensitive information. Landlords often check the background of a potential tenant, since she will be entrusted with the care of the property.

It is important that people do everything they can to make their credit history as clean as possible. One of the worst things a person can do to his credit history is file for bankruptcy. The problems that lead to bankruptcy, such as missing payments on credit cards, will also damage credit scores and histories. Making sure to make all loan and credit card payments on time and keeping debt under control is the best way to keep a clean credit history.

What Can Happen to Your Credit If You Have a Late Fee on a Credit Card?

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If you are late in paying your credit card bills, you may get hit with late fees. Even worse, the credit card company can report your late payments to the credit bureaus, lowering your credit score.

If you are late in paying your credit card bill, your credit card company may charge you a late-payment fee. This fee will increase both your balance and your next monthly card payment.

While the late fee itself won't affect your credit, most credit card companies regularly report your payments to the credit bureaus. If a payment is late, this can affect your credit score. Late payments can also cost you a lot of money aside from fees: Your other creditors may periodically review your credit history, and raise your interest rates if they see that you missed a payment.

Mail your credit card payments in early to prevent late payments. Many credit card companies offer payment by phone or online payments, though they may charge an extra fee for these services. If you are going to be late with your credit card payment, contact the credit card company to see if they can give you a short extension.

Credit Score Calculation and Debt Reduction

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Any consumers who have used credit have a credit score. Various companies calculate credit scores, and each uses its own formula. While there is no precise way to calculate your score without knowing the exact formulas used, you can get an approximation of how debt influences your score by reviewing the factors used to calculate credit scores.

The purpose of a credit score is to provide current and potential creditors a means to gauge the risk you represent. Lower scores mean you are more likely not to repay a debt, while higher scores mean you are more likely to repay, making you a less risky investment. How much debt you carry plays an important role in determining your credit score.

With credit cards, the number of times you use the card is not as important as the balance you carry. Every credit card has a credit limit, and the amount of the balance you carry relative to that limit is known as your credit utilization ratio. A low credit utilization ratio improves your credit score. According to Kiplinger, borrowers with a utilization ratio of 25 percent or lower are viewed more favorably than those with higher ratios and generally have higher credit scores as a result.

Paying off your credit card debt completely or keeping the credit-utilization ratio low generally increases your credit score. However, canceling a credit card often has a negative effect on your score, although that may seem counterintuitive. When you cancel a credit card account, you remove that card from your list of open credit lines, and it no longer gets included in the average length of time you've had each credit line. This factor makes up 15 percent of your score, and decreasing the average history length can decrease your score. Also, closing an account lowers your available credit, which raises your credit utilization ratio.

About 10 percent of your credit score comes from the kinds of debt you use. In general, having a variety of credit types, such as a car loan, mortgage and credit card accounts, is preferable to having only one or two kinds of accounts. If, for example, you only have credit cards (which are revolving debts), obtaining a car loan (which is an installment loan) can improve your credit score. Even though you owe more, your creditors can better evaluate how you handle different types of credit, and thus give you a better score.

How to Start to Clean Up My Credit Report

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Cleaning up a credit report requires patience and effort, and it can take several months to notice an increase in your credit rating. The contents of your credit report affect your rating, and certain factors such as late payments or debt can lower your credit score. Boosting your rating involves fixing or improving the information reported to the credit bureaus. This entails a measure of responsibility and learning how to manage credit better.

Instructions

Go online to request a free credit report. Reading your credit report is the only way to identity mistakes that can lower your credit score. Get a copy of your report from the Annual Credit Report website and check the contents (see Resource). Look specifically for reporting errors and signs of fraud, such as unknown accounts.

Write the credit bureaus and ask them to investigate errors. If you don't recall a creditor listed on your report or you detect signs of identity theft, write a letter to all three major bureaus (Equifax, Experian and TransUnion) challenging the information on your report. They'll investigate the claim and remove erroneous information. Bureau contact information is listed on credit reports.

Speak with your creditors to remove reported information. If a legitimate creditor fails to update your credit information, or if it reports inaccurate information such as late payments or higher balances, contact the creditor and ask it to correct the errors or update your account information. Removing negative errors can help improve your rating.

Pay on time to improve payment history. Late payments bring down credit scores. Sign up for online account management and begin paying your creditors online to avoid late payments and late fees. Open statements and write down due dates, or if you have difficulty paying on a certain date, ask your creditor to alter your due date.

Decrease debt and control your spending. Creditors report maxed-out accounts or higher account balances to the credit bureaus, and high debts will hurt your rating. Plan to pay down debts to clean up your credit. Make higher payments, stop buying with credit cards and, if necessary, take credit cards out of your wallet and leave them home.

Can a Creditor Change the Terms After Closing an Account?

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A consumer retail or revolving credit card account is a legally binding contract between the consumer and the issuing card company. When a consumer opens a credit card account, he signs a customer or account agreement that defines the essential and material terms of the contract between the parties. When the card company closes the account, it cannot unilaterally change any of the material terms and conditions of the original agreement.

With common law three essential elements are required for the formation of a binding legal contract: an offer that unequivocally states the material terms of the agreement, acceptance of the offer as stated and something of value, e.g., interest paid on credit advanced, that is exchanged between the parties.

In the case of a credit card account, the card company makes its offer in the card agreement which states all the material terms of the contract: interest rate that will accrue, penalties and other fees as well as the payment schedule. Once the cardholder communicates his acceptance by signing the account agreement, a binding legal contract is formed.

The card company cannot later add new conditions or revise any of the original material terms of the agreement without the acceptance of the cardholder. When the card company closes an account, the original terms of the contract still apply. Any additional penalties or fees added by the creditor beyond those permitted pursuant to the terms of the original card agreement are legally unenforceable.

Just because a change is onerous and financially burdensome doesn't necessarily mean that the change wasn't made in accordance with the original terms of the contract. For example, many card agreements allow the creditor to raise the interest rate, with or without notice, in the event the prime rate or some other stipulated interest rate index increases.

One of the most common terms contained in credit card agreements is the right of the creditor to assign (sell) the account to a third-party purchaser. It is important to note, however, that the assignee (company who purchases the card account) obtains no greater rights than that of the assignor (credit card company who sells the account). At law, the assignee stands in the shoes of the assignor, which means it cannot impose any additional obligations or terms on the cardholder that were not part of the original card agreement.

Some card companies may send existing cardholders a revised card agreement that changes one or more of the material terms and conditions of the original card agreement. If the cardholder indicates his acceptance of these revised terms by signing the revised card agreement, he is bound by the new or revised terms.

Do Creditors Need to Contact the Collection Agency If You Paid?

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Dealing with collection agencies is seldom a pleasant experience, but it is often unavoidable if a consumer owes an old debt. However, once a consumer pays off the creditor, the collection activities should stop. While a creditor should contact a collection agency to notify it that the consumer paid the debt, this does not always happen. If the collection agency's calls and letters continue, a consumer needs to take action to make certain the creditor properly reported the payoff of the debt and to get the collection activities to cease.

When a consumer pays off a debt, she should make certain the debt was properly marked as paid on her credit reports. Though the failure to update a credit report may not influence whether collection calls continue, the calls may be a sign that the creditor has not properly updated its internal records and has not notified the collection agency or credit reporting bureau of the payment. A consumer should check her report from all three major credit reporting bureaus: TransUnion, Experian and Equifax. A consumer can obtain a free credit report each year through the AnnualCreditReport website.

A consumer receiving debt collection letters or calls for a paid debt should notify the original creditor of the collection contacts. She should call the creditor and send the creditor a letter requesting that the creditor have the collection agency stop making contact. The consumer should provide information to the creditor on both the paid debt as well as the contact information for the collection agency. She also should provide information on the collection activities. For example, a consumer should send copies of collection letters and dates and times of phone calls.

In addition to providing information to the creditor, a consumer should send information regarding the payment of the debt to the collection agency. She should be careful not to disclose any new personal information to the collection agency, as this could make the problem worse. Once the collection agency receives the letter, it must send verification of the debt to the consumer before making any other collection efforts.

If the consumer's credit report does not show the paid debt as paid, the consumer should follow the credit reporting bureau's policy for correcting information. A consumer should report continued collection calls about a paid debt to her state's attorney general as well as the Federal Trade Commission. In extreme cases, a consumer can sue a collection agency that continues to contact a consumer about a debt that has been paid. The original creditor also may have a legal liability for failing to notify the collection agency of the payment of the debt. The Fair Debt Collection Practices Act allows a consumer to sue and obtain financial compensation as well as recover legal costs even if there were not any actual damages.

How to Fix Your Credit to Buy a Home

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When you begin shopping around for a mortgage loan, potential lenders will each review your credit report to determine if you are eligible for a mortgage and, if so, what interest rate you should pay on the loan. If your credit score is too low, it may be nearly impossible to secure financing to buy a home. There are, however, basic methods of credit repair that you can use to successfully improve your credit score and qualify for a mortgage.

Instructions

Pull your credit reports. You can do this by visiting annualcreditreport.com and pulling a free copy of your credit report from each of the three major credit reporting agencies. If you have recently been turned down for credit, you may also request a copy of your credit report from the lender.

Check your credit reports for negative entries. Negative entries on your file include late payments, charge-offs, bankruptcies, tax liens and collection accounts. Make copies of your credit reports and highlight each negative item that you find. Highlighting the entries will ensure that, when you dispute them, the credit bureau representative who reviews your claim will not have to dig through your report to locate each item you refer to.

Dispute the negative entries with the credit bureaus. You can do this by phone, mail or online. However, most credit repair professionals will tell you that sending in disputes via mail with a letter explaining why you are disputing is the most effective method for having derogatory trade lines removed.

Wait for a written response from each credit reporting agency. The credit bureaus legally have 30 days to investigate consumer disputes. After 30 days, they must provide you with the results of the dispute and, if your credit score has changed, an updated copy of your credit report.

Send a debt validation letter to any collection agencies whose trade lines were not removed in your original dispute. The Fair Debt Collection Practices Act grants you the right to demand proof that you owe the debt. Many collection agencies are unable to provide proof. If this occurs, inform them that leaving the debt on your credit file without proof is a violation of the FDCPA and that you are within your legal rights to file a lawsuit.

Write goodwill letters to any current creditors that are reporting late payments to the credit bureaus. Because a current creditor has no incentive to delete a late payment, a goodwill letter is merely a kind request that the company assist you in creating a fresh start. Many creditors will be willing to delete one or more late payment notations after receiving your request.

Dispute any charge-offs that are more than two years old with the original creditor. Request that the creditor provide proof that you ever had an account with the company and that your account was charged off due to nonpayment. Few creditors will maintain consumer records for very long after an account is closed, and if they are unable to verify the information, they are legally required to remove it.

Pull your credit reports again 30 to 60 days after you have completed your credit repair efforts. Not all of the negative entries will have vanished, but enough should be gone for you to qualify for your mortgage loan.

How to Get Caught Up on Payments

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Falling behind on your payments can put you into a dangerous cycle, with late fees and interest charges making it even more difficult to get caught up. Failing to get current on your bills may cause the company to cut you off, or you may even lose your home. It's important not to turn away from your problems, even if you fear the worst. Doing so will only dig you deeper into the hole.

Instructions

Gather all of your monthly statements to determine where you stand. You may only be behind on one bill, or you may be behind on all of them. Go through each account and figure out how much you owe and how much your next payment should be to help you know how much you really owe.

Contact every company to which you owe money. Explain your situation and what you are able to do about it. Companies want to work with you. They may create payment plans for you, help you to refinance or create a forebearance plan, where you pay less right now, catching up on your payments after your situation changes.

Cut back on your nonessential spending. For example, you may be able to cancel cable service, get on a less-expensive cell phone or Internet service plan, go out less or spend less on groceries by planning your meals. You can then use the extra money to help you get caught up.

Look for opportunities to earn more money. You may be able to increase your hours at work or have a garage sale to sell things around your home that you no longer need. Again, use the extra money to get caught up.

How to Avoid Being The Victim of a Fraud

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No one is invincible to fraud, and if you're not careful, someone can get a hold of your personal information and steal your identity. Regrettably, some victims aren't aware of a problem until they're turned down for a loan due to credit issues. Rather than delay a loan process to clear your name, take steps now to protect your identity and avoid fraud.

Instructions

Run bill statements and other documents through a shredder. Anyone can easily obtain your credit card bills and bank statements if you toss them in the trash. Destroy items with a shredder before discarding.

Know the location of your wallet and credit cards at all times. If you don't plan on shopping with a credit card, leave the card at home to avoid someone stealing your wallet or getting a hold of your account number. Keep wallets and purses locked in a drawer while working, and don't leave personal belongings unattended.

Check your mail closely. If a credit card or bank statement doesn't arrive in the mail, pay extra attention to your account. Enroll in online bill pay to easily monitor account activity online. Report unauthorized use immediately. In many cases, your credit provider will require you to file a police report.

Shop online with care. Only buy from websites with a security logo -- usually a padlock -- to reduce the risk of hackers breaking into the site and swiping your information.

Keep credit card numbers private. Never give someone your personal information through email or over the telephone -- regardless of who they claim to represent.

Get your credit report yearly. Annual Credit Report lets every consumer review his personal report each year. Access all three reports free by visiting the company's website. Regular monitoring helps you detect fraud early and dispute unauthorized accounts.

Are Social Security Payments Attachable Assets in a Lawsuit?

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Once you reach the age where you become eligible for Social Security benefits, you start receiving a monthly check that will help supplement your income. If you're involved in the lawsuit and a judgment goes against you, the Social Security benefits that you receive typically won't be compromised by your creditors.

If you're sued in a civil lawsuit by a creditor, the money from your Social Security benefits shouldn't be subject to attachment. For example, if you don't pay your credit card bill and the credit card company sues you and gets a judgment against you, your Social Security benefits can't be touched. Section 207 of the Social Security Act makes it impossible for these types of creditors to access your Social Security benefits.

Although traditional creditors can't access your Social Security benefits due to a judgment, certain exceptions apply. For example, if you owe child support or alimony payments, the Social Security Administration garnishes your wages for this. Your Social Security benefits can also be garnished if you have to pay restitution to a victim. If you owe unpaid federal taxes, money from your Social Security benefits can also be garnished. Money can also be taken from your Social Security benefits to pay other government agencies to which you owe money.

If you have a judgment placed against you by a civil court, a creditor may try to levy your bank account. In this situation, it's your responsibility to notify the court that the money in your account comes from Social Security. In most areas, you simply have to fill out a form that notifies the court that you have exempt income. Once you complete the necessary paperwork, the court notifies your creditors that they can't take this money out of your account.

In May 2011, a new rule emerged that made it more difficult for creditors to garnish money from your account even if you don't complete the appropriate paperwork with the court. The United States Treasury rule requires banks to look at their customers' accounts to determine if they have any protected funds in them. When creditors try to garnish accounts, the bank must look back 60 days to see if any Social Security money or any other protective income was deposited into the account.

What Happens When You Are Overdue on Payday Loans?

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If you find yourself in need of money between pay periods, a payday loan could help you bridge the gap. Payday loans are high-interest loans that span a short period of time -- typically two weeks or less. You must pay off any payday loans you take out when you receive your next paycheck. Neglecting to pay your payday loan balance on time carries considerable financial consequences.

When you apply for a payday loan, most payday lenders will require that you provide the company with a check for the full loan amount, including interest and any additional fees the company charges for its services. The payday lender holds your check until your next payday. If you do not pay off the loan by that date, the lender cashes your check. If you do not have the funds in your checking account to pay off your debt yet have overdraft protection through your bank, the check will clear, but you will owe your bank the full check amount, plus an overage fee. If you do not have overdraft protection, the check will bounce. Payday lenders often charge an additional fee if your check bounces.

If you know ahead of time that you will not be able to pay off your payday loan when you receive your paycheck, you have the option to extend the loan for another term. Should you postpone repayment, the lender has the right to charge another service fee and apply interest to the debt until the next payment is due. Repeatedly extending your payday loans will result in you owing the lender considerable fees and interest charges -- sometimes more than the amount you originally borrowed. Payday loans are illegal in some states, such as New York, to protect consumers from falling dangerously into debt.

You can only renew your payday loan a certain number of times. Each state has regulations regarding renewals. Once you reach the maximum payday loan extension, however, you must pay the loan. If you do not, the lender can file a lawsuit against you for nonpayment. In some states, this gives the payday lender the right to seize assets, such as wages, without your permission.

Because of the high interest and fees payday lenders charge, taking out a payday loan is risky business. The Federal Trade Commission recommends that consumers who need money consider applying for a small loan with their credit union or bank. Credit unions and banks are more likely to offer you a reasonable interest rate and more flexible payment terms. Credit card cash advances are yet another alternative to payday loans that you might consider. While credit card companies charge higher interest rates on cash advances than on regular purchases, the interest rate is sometimes lower than that of a payday lender. In addition, you can repay a credit card cash advance slowly over time rather than all at once.

How to Get Help To Pay Bills

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There is financial help available for families and individuals to help buy food, pay overdue mortgages, housing costs, emergency home repair, utilities, transportation, medical expenses, student loan payments and old debt that is piling up.

Instructions

The fist thing to do if you need help to pay a mortgage is to try to contact the lender before your payment becomes overdue or at least within a reasonable amount of time. A mortgage lender given a heads-up might defer a payment.

Housing assistance programs are available through the U.S. Department of Housing and Urban Development, which helps families and individuals with low income or have had a financial hardship to pay housing expenses such as rent, emergency home repair, and mortgage payments.

Financial help is available for utilities. The help given is determined by income, but usually comes in the form of reduction of your heating bill and/or a set amount based on your income to be paid each month. The best way to find government and community-based programs that receive grant funding and other funds to help is to contact the office posted on the bill. The Low Income Home Energy Assistance Program is another potential source of help.

For help with public transportation cost, contact your local transportation office to determine if you meet income qualifications for reduced or free ticket program hosted by many government programs.

For help to pay for food and groceries you have several choices. Local food banks can be found by contacting local city offices or churches. The Salvation Army may be able hot meals during the day and help with clothing.

To get help to pay for health insurance for kids go to insurekidsnow.gov for more information. To get help to pay big medical bills contact your hospital's financial office, many offices have grant funds to help pay bills, but will not offer them unless asked directly.

If you need help to pay for daycare or child care services while you are at work or undergoing training, contact the department of social services in your county or municipality. Most states offer child care assistance programs that help families pay for care on a sliding fee scale, depending on the amount of income they make.

The best way to avoid being delinquent in paying student loans is to ask for a deferment. Many lenders have programs set up for student loans that allow the loan to be deferred for up to six months. Many government and privately funded programs are also set up to help those who accept employment in an undesired location. Part or all of certain students loans may be erased in return.

Help to pay for past debt packed into credit cards is available. You must apply for a hardship through your credit card issuer. You may be required to document your circumstances in order to qualify for such programs.

The Disadvantages of Refinancing

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There are clear advantages to a mortgage refinance, such as the possibility of acquiring a lower interest rate and a lower monthly payment. But before contacting your mortgage lender and completing a home mortgage refinance application, it is wise to consider the possible disadvantages of a refinance.

You can choose to refinance with your current lender or select a new lender for your mortgage loan. However, having a prior mortgage loan doesn't automatically qualify you for a mortgage refinance. A mortgage refinance creates a new home loan, wherein your new lender pays off your old mortgage loan. Even if you've had a good relationship with your existing lender and never missed a payment, you'll have to complete a new home loan application and requalify for the mortgage. Thus, you can expect lenders to review your credit and income. A drop in credit rating or income can result in a loan denial.

Refinancing and acquiring a lower interest rate on your mortgage can reduce your monthly payment. However, some homeowners refinance with the purpose of obtaining cash from their equity. Money from a cash-out refinance often is used for home improvements, debt consolidation and college tuition. Although lenders take this money from your equity, you're expected to repay the loan, and lenders wrap the loan into your new mortgage balance. Taking cash from your equity increases your mortgage balance. And depending on the amount borrowed, you can anticipate higher monthly payments after completing the refinance.

Refinancing requires on-hand cash to close on the new mortgage loan. Aside from closing or settlement costs, which are about 6 percent of your mortgage balance, you'll need money for a home appraisal and application fee. You might be able to avoid paying your closing cost out-of-pocket if you ask your lender to attach this payment to your mortgage balance. But again, adding money to your mortgage balance increases your monthly payment.

What to Do When IRS Drafts Your Bank Account

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Refuse to pay your federal income taxes and the IRS can obtain a court order to draft or levy funds from your bank account. A bank draft for unpaid taxes can cripple your personal finances, and these drafts can continue until the IRS recovers the owed funds.

Not to be confused with tax liens, which place a claim on personal property such as a bank account, IRS tax levies involve the agency actually removing funds or seizing funds from your account to satisfy past due or unpaid tax bills. The IRS notifies your bank of the levy, and by law, your bank must adhere to the levy or draft order and take funds from your account. The bank removes up to the amount owed in taxes.

Prior to levying or removing funds from a bank account to pay a tax bill, the IRS sends a final notification urging the debtor to resolve his tax bill. Debtors are given 30 days to contact the agency and make payment arrangements. The IRS sends this notice to the debtor's last known address or business. But if the debtor refuses to communicate with the agency, the IRS will enforce the levy order. The IRS can search records to see if there's a bank account on file or conduct a skip trace and contact local banks to see if a debtor holds an account.

Once a bank removes funds from the debtor's account, these funds aren't immediately forwarded to the IRS. Instead, the bank holds these funds for a period of 21 days. This holding period provides debtor's with the opportunity to resolve issues arising from the draft. For example, the debtor may not own the account and disputes the levy. In the event that a debtor doesn't challenge his ownership of the bank account, the bank forwards funds to the IRS after 21 days.

Responding to IRS notices is key to avoiding a bank levy. Early communication provides the opportunity to dispute a debt or provide evidence that you paid the tax bill (supply canceled checks or bank statements). You can set up a payment plan and pay off the tax bill in installments or notify the agency of a bankruptcy filing, which temporarily stops collection attempts. If the IRS levied the account, but couldn't recover all owed funds from the initial bank draft, the agency will likely order additional drafts. Satisfying your remaining tax debt following the initial levy can alleviate future bank drafts.

How to Manage and Pay an Orchard Bank Credit Card Bill Online

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The Orchard Bank online website was created to help users manage their credit card information and pay their bills. The online bill-pay service uses state-of-the-art features to protect its online customers. The features include SSL, which guarantees that your information and connection are secure from outside viewing. It also uses encryption to make sure the information is not readable as it passes over the Internet. Using OrchardBank.com to access your credit card information will make managing and paying your bill online a simple process.

Instructions

Access the website. The Orchard Bank website was created to help people apply for credit and manage their accounts. Once you access the site, you can view available credit cards, card member benefits and fill out an application. You can also access your already existing account so you can manage and pay your bill.

Register your account. Click on the "Register" button in the top right corner of the page. You will then be prompted to enter the last four digits of your Social Security number, your account number, the signature panel code, card expiration date and a login and password. Answer the security questions, enter your email address and click on the "Continue" button to complete registration.

Log into your account. Once you are registered, log into your credit card account by entering your login name and password. The secure login box is located in the top right corner of the Orchard Bank webpage. If you forget your login name or password, click on the link in the box and enter the required information to retrieve it.

View the account information. When you are logged in to your account you will have access to all of the account details, statements, payment history, customer service and your personal profile. You can edit your email address, view recent transactions and view offers and discounts. Click on one of the many available options to manage your credit card account.

Pay your bill. Before making the payment you need to enroll for online bill pay by selecting that option in the "Make Payments" box. Once your payment account is enrolled you can complete your payment. To pay your bill click on the "Pay My Card Bill" button located in the center of the screen. You will then be directed to the payment page where you can view the due date and choose the payment type, amount and processing date on the bill pay service.

Statute of Limitations for Debts on a Phone Bill

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The statute of limitations for debts on a delinquent phone bill refers to the time limit that a creditor may file a lawsuit. Each state has its own time frame, ranging from 3 to 10 years for open account debt.

Damages may include extra charges for late fees, interest and collection costs.

If a legal judgment is awarded against you for the nonpayment of your phone bill, the total damages, depending upon the state of your residency, may include interest, penalties and legal fees. The judgment usually allows the creditor, in lieu of nonpayment, the right to seize a portion of your wages or bank accounts and place liens against your personal property.

Lawsuits against you must be filed within the statutory time limit.

If the creditor does not initiate legal proceedings within the time allowed under the statute of limitations in your state, you may claim the statute of limitations defense and file for dismissal.

Delinquent phone bills may be shown on your credit reports for up to seven years.

Even if your phone bill is older than the statute of limitations for the filing of a lawsuit, the phone bill debt may still be reported to all major credit bureaus for up to seven years from the date of delinquency, as per the time limits specified within the Fair Credit Reporting Act.

Unsecured Credit Cards to Rebuild Bad Credit

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Most consumers who have a credit card have an unsecured credit card. An unsecured credit card is one in which the lender does not require the borrower to provide a security interest, such as collateral or security deposit. People with bad credit usually have a much more difficult time of getting an unsecured card, though having such a card can help you increase your credit score.

If you're like most Americans with credit cards, you didn't have to give your credit card company any money when you applied for your card. This is because most credit cards are forms of unsecured credit. A secured form of credit, such as a car loan, requires you to give up collateral or security interest. For example, when you take out a car loan, the lender typically requires you to give it a security interest in the car that would allow it to repossess your car if you ever default on the terms of the loan.

Your ability to get an unsecured credit card usually depends on two factors: your income and your credit score. If in the past you've had problems repaying your debts, you probably have a bad credit score and will have a harder time getting an unsecured credit card. However, if you do get an unsecured card, that card usually comes with a lower credit limits as well as higher interest rates, two factors that will impact your ability to rebuild your credit.

To rebuild your credit score with an unsecured card, you need to pay attention to two factors: your bill payments and credit utilization. Paying your bills on time every month is the single most important action you can take to raise your credit score. Apart from that, you should not carry a balance on your credit card that is more than about 25 percent of your credit limit. This is known as your credit utilization ratio, and the higher this ratio is the more negative the impact on your score.

Apart from the manner in which you use your unsecured credit card, you may also rebuild your credit score by taking other steps. For example, part of your credit score is based on the average length of all your open lines of credit, so by opening new lines of credit, you lower the average length and therefore lower your credit score. To keep your credit score high, you should generally not open any more lines of credit than you need.

Will Fraud Alert Affect My Ability to Get Credit?

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If you have reason to believe that you may be the victim of identity theft and you live in the U.S., you can place a fraud alert on your credit report via any of the three nationwide credit reporting agencies. Creditors who attempt to access your report will be informed that they must contact you to confirm your identity before extending credit.

Two types of fraud alerts exist, as of January 2011. When you suspect fraud and call a credit reporting agency, an initial 90-day fraud alert appears on your credit report. At the end of those 90 days, you may contact the credit reporting agency again and ask them to extend it. Once you have gathered evidence and filed an identity theft report with local, state or federal authorities, you can request that an extended fraud alert be placed on your record. This type of alert lasts for seven years, and you must file a copy of your identity theft report with the credit reporting agency when you request it.

For the duration of whichever type of fraud alert you file, all creditors and potential creditors are directed by your credit report to confirm your identity before extending any new credit. While it does lengthen the process of obtaining new credit, it does not prevent you from getting new credit. Instead, it prevents thieves who have somehow gained access to your personal data from obtaining credit with your details, and ruining your credit history.

More and more employers are checking credit histories of people they interview for open jobs. A good credit history is seen as a sign of reliability and trustworthiness, especially in positions involving fiscal responsibility. Be advised that those potential employers will see the fraud alert, too, and will be advised to contact you to confirm your personal details.

Neither type of fraud alert is the same as a security freeze, which is another option in some states, including Washington and New Jersey. A security freeze does just that: it freezes your credit history so that no one can obtain credit with your details simply by applying for it. To obtain credit while your history is locked in a security freeze, you must contact credit reporting agencies and lift the freeze temporarily. This also holds true for employers or insurers attempting to access your history while it is frozen. Also, unlike a fraud alert, security freezes require you to contact each of the credit reporting agencies individually.

What Will Debt Counseling Do?

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Consumer credit counseling agencies help people find a way out of their overwhelming debt situations. Seek out agencies connected with the Association of Independent Consumer Credit Counseling Agencies or the National Federation for Credit Counseling for services, because counselors must be accredited and must offer service regardless of clients' ability to pay, among other reasons. These agencies take information about your income, expenses, debts and spending and devise a plan for tackling debt.

Consumer credit counselors from reputable agencies are trained to take a holistic view of your finances. They will be able to tell you from vast experience whether you're just needing to tweak your budget, in way over your head, or ready for bankruptcy court. They'll be able to spot some of the areas where you're making mistakes with finances that are creating your problems. And they might be able to pinpoint some underlying issues that you weren't aware of that are contributing to your debt.

The first counseling session with the agencies connected with AICCCA or NFCC are generally free, either in person or on the phone. With the information you provide, the counselor will help you craft a budget plan complete with a plan to pay down and eradicate your debts. The counselor may propose a much stricter budget than you've been using or suggest ways to negotiate down fees with creditors. She may suggest money saving ideas you hadn't thought of. You should leave with a written analysis of your situation and a plan for going forward.

If your situation warrants, and you agree, you and the counselor will enter into a debt management plan. With a DMP, you pay the counselor a certain amount each month and the counselor pays your unsecured creditors from that pot. Often the counselor will negotiate down fees and interest. You must cut up your credit cards and adhere to a, sometimes rigorous, budget until the debt is paid. For this service, counseling agencies usually charge a fee up to about $50 a month.

The U.S. Bankruptcy Court often requires people to have credit counseling before declaring bankruptcy. Usually that's what counselors do. Other times, an addiction, like a gambling problem or alcohol, will make it impossible for credit counselors to help and they may refer the client to social services. Usually a third of clients can handle their own finances after one session; a third enter a DMP, of which almost half drop out; and a third are in too deep, according to information from the National Foundation for Credit Counseling, cited in the Aug. 10, 2009 MSN Money article "Why Credit Counseling Often Fails."

What Happens When You Borrow Money on Credit?

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Remaining debt-free in today's society is almost impossible for most people. Homes, automobiles and other expensive items cost more than the typical person can afford without acquiring a loan. There are positive and negative consequences when you finance purchases. You can mitigate negative consequences by only borrowing what you need, and by paying your bills on time.

Lenders typically report your loans to the credit bureaus. Credit bureaus keep files on individuals, which provide information to lenders about your credit habits. The bureau assigns you a credit score that lenders use to help decide how much credit to offer you, and to determine the interest rate for loans. Individuals with high balances on their accounts can find it difficult to receive new loans, because high balances lower your credit score even if you make your payments on time. Your balances can account for as much as 30 percent of your overall score, according to the Fair Issac Corporation.

Lenders make money by charging you interest on your account balance. The amount of interest you pay depends on the lender, the type of loan and your credit score. Mortgages typically have lower interest rates than open-ended accounts because they give the lender a longer amount of time to collect payments and, since your home serves as collateral, there is less risk to the lender.

When you borrow money, you obligate yourself to paying it back. Lenders will typically work with you on your payments if you suffer a financial setback and temporarily cannot make your payments. However, lenders will eventually place your account in collections if you do not pay. Read all of your loan documents and lender disclosures before accepting the loan, so you know your obligations. If you find that the terms of the loan are not acceptable, think twice before accepting the money.

Loans provide consumers with the means to buy things they cannot afford at the time of purchase. The problems begin when you accept more loans than you can easily repay. The Fair Debt Collection Practices Act contains the regulations that debt collectors must follow when attempting to collect a debt. Collectors who violate FDCPA regulations, such as contacting you between the hours of 9 p.m. to 8 a.m., harassing you or making false statements, are subject to court judgments and fines.

Should I Pay Off My Credit Card Debt First or Save Money?

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A savings account is useful when people are faced with an emergency, such as unemployment, unexpected car repairs or costly medical bills. Having money in savings in these circumstances helps people survive the crisis and keeps them from relying on credit cards to bail them out.

Consumers pay interest on credit card debt and earn interest on their savings. However, these two types of interest don't come close to canceling each other out. Interest rates on credit cards are far higher than savings rates, meaning credit card debt can cost consumers money in the long run.

Debt guru Dave Ramsey recommends people set aside a small emergency fund of $1,000. Then, The Motley Fool website suggests consumers should aggressively pay off their credit card debt.

How to Stop Wage Garnishing

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Some creditors are relentless in their attempts to collect on an unpaid debt, and some pursue lawsuits against debtors in order to garnish their wages. Wage garnishments can severely impact your personal finances. If a sheriff presents your employer with wage garnishment papers, your employer has the obligation to deduct payments from your check. However, you can stop a wage garnishment.

Instructions

Contact the creditor and discuss plans to pay off the debt in full. Write a check payable for the full balance owed, and then make a copy of the check for your personal records. Ask the creditor to provide you with written proof that you paid the debt.

Visit the courthouse and request a form to file a claim of exemption if you can't meet everyday needs due to the wage garnishing. The court will schedule a hearing. Prepare for this hearing by keeping copies of your income stubs and writing down a list of your monthly expenditures.

File for bankruptcy protection. A bankruptcy filing results in an automatic stay, which legally stops creditors from garnishing your wages or pursuing debt collection.

How Can I Garnish Someone's Wages in the State of Texas?

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Under Texas law, you can't garnish an individual's wages. The state makes exceptions for unpaid child support and student loan debts, but if you're suing someone over a credit card or medical bill, or a personal loan, you're out of luck. You do have two possible alternatives, however; you can garnish a bank account or other source of money, or go after earned wages through another state. Even then, circumstances may make it hard to collect.

Instructions

Calculate the elapsed time of the debt. The Texas statute of limitations for debts varies depending on the nature of the bill you're attempting to collect. Generally, you'll have to take legal action within four years after incurring the debt. If you secure a judgment, you'll have 10 years after the court decision to apply a garnishment.

Sue your debtor in Texas court. The first step in collecting from a recalcitrant debtor is a judgment stating that he owes you the money. To get the judgment, you present evidence that the defendant owes you a debt and that he's consistently failed to pay. The defendant, in turn, can present evidence that he never incurred the debt, or that he paid it off. If you lose the case, you can no longer pursue the debt.

File for post-judgment discovery. As a creditor in Texas, you can ask your debtor for financial statements and other information to determine his income sources, like what bank he uses and types of accounts he has. Although debtors don't go to jail for nonpayment, if your debtor refuses to provide information, a judge can put him in jail for contempt of court until he answers.

Decide what you want to garnish, using your post-discovery information. If the debtor earns money in another state, you can take your judgment to a court there and apply for a garnishment. If the debtor has other income sources, such as royalties and rental income, they are vulnerable to garnishment in Texas. If the debtor has a bank account, you can garnish any non-exempt income he deposits up to the amount he owes. You can't touch deposited wages or other exempt funds, such as Social Security.

Apply to a court for a garnishment. If you've found money you can legally garnish and you have the court judgment in hand, a judge will authorize the garnishment.

How Long Do Charge-Offs Stay on a Credit Report?

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A charge-off occurs when a creditor, usually a credit card company, removes an unpaid debt from its accounting ledger. After charging off bad debts, a creditor has the option to write the debt off as a tax loss or sell the debt to a collection agency. Charged-off debts appear on your credit report and damage your credit rating.

The Fair Credit Reporting Act notes that charge-offs can remain a part of your credit file for seven years from the date the debt was charged off. Although charged-off accounts damage your credit, any late payments you incurred prior to the charge-off also have a negative impact on your credit rating. Late payments, like charge-offs, remain for seven years.

If your creditor sells your unpaid debt to a collection agency, the collection agency then has the right to add a collection account to your credit history. Because the collection account is a direct result of the charge-off, the credit bureaus must remove it at the same time they remove the charge-off -- regardless of how long the collection account itself has been on your credit report.

For example, if a collection agency purchases the charged-off debt but fails to add a derogatory trade line to your credit report until five years after the original creditor charged off the account, the collection account can remain a part of your credit history for only two years rather than the full seven.

Many consumers believe that paying off an old charge-off will help them improve their credit scores or cause the credit bureaus to delete the charge-off from their credit histories. While some lenders, such as mortgage lenders, require borrowers to pay off outstanding debts before approving a loan, paying off an old charge-off will neither remove it from your credit history nor improve your credit rating. It will, however, show up on your credit report as a "paid." Paid charge-offs look better to lenders than unpaid charge-offs.

If your creditor or a collection agency sues you for the debt and wins a judgment against you, the judgment will also appear on your credit history. Although the judgment occurred as a direct result of the charge-off, the judgment's reporting period begins on the date the court awarded it. The standard reporting period for a judgment is seven years. Thus, if your creditor waits three years after the charge-off to file a lawsuit against you, the charge-off will negatively impact your credit for 10 years rather than seven.

A charge-off has the greatest amount of derogatory impact on your credit rating as soon as it occurs. Over time, negative entries in your credit history have less influence on your credit score. Even if your credit score recovers, many lenders pull your full credit history rather than just your credit score. These lenders will see the charge-off and take it into consideration regardless of your credit score.

How to Clear Your Name After Identity Theft

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Once an identity theft occurs, it can be difficult to pick up the pieces of your financial life. The resulting damage can affect your chances of getting credit, cost you more in interest rates and even cost you money directly. After you are the victim of an identity theft, take the necessary steps to build your reputation and good name back up again. While it may take time and effort, it is possible to get things back to normal.

Instructions

Contact each of the three major credit bureaus to place a fraud alert on your credit reports. You will need to contact TransUnion, Equifax and Experian to notify them that an identity theft has taken place. At that point, the credit bureaus will place the alert on your account. When an alert is put on your account, it will be difficult for anyone to further access your credit without incurring problems.

Get copies of all of your credit reports from the credit bureaus. If you have not done so already this year, you can get a free copy of your reports from Annual Credit Report.com (see Resources). If you already accessed your credit reports early in the year, purchase additional copies from the credit bureaus. Once you get copies of your reports, examine them for identity theft activity such as opened accounts or bigger account balances.

Notify all of your financial institutions that an identity theft has taken place. Contact your bank, credit union and brokers to make sure they know an identity theft has occurred. Call credit card companies and any other creditors that need to know. In some cases, you will need to cancel your credit cards or debit cards and have new cards issued by the financial institutions. Once these entities know, it will be more difficult for the thief to access your accounts.

Notify the appropriate government agencies and authorities to report the identity theft, including your local police department and the Federal Trade Commission. In some cases, you may want to contact the Federal Bureau of Investigation as well. If you believe your Social Security number has been compromised, contact the Social Security Administration. You may also want to contact the post office to ensure that your mail is going to the right address.

How to Divide Credit Card Debts in a Divorce in the State of Missouri

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Dividing assets in a divorce can be complicated. Dividing debt can be just as complicated and sometimes even more unpleasant. Missouri is an "equitable distribution" state. In Missouri, the court attempts to distribute marital property in a manner that is fair and just. The court will try to determine who is responsible for the debt, including credit card debt. Credit card debt will be taken from the marital assets after they are divided. If the assets do not cover the debt, the debt will be assigned to you or the other party.

Instructions

List marital debts. Determine what credit card debt is marital. Marital debt is debt that was accumulated throughout the course of the marriage. If you had a credit card before your marriage but charged most of the debt during the marriage, this will be counted as a marital debt. Non-marital debts in Missouri are debts that were acquired before the marriage. If you had a credit card before your marriage and never used it toward family expenses or bills, any charges on it are non-marital debt.

Obtain balance information on all credit cards. Contact the credit card companies to determine the balance on your credit cards at the time of separation. You will need to prove which debt is yours and which debt belongs to your spouse.

Cancel credit cards. Credit card companies are not bound by divorce decrees. They are able to go after you for joint debt if your former spouse does not pay the credit card bill. Make an agreement with your spouse to pay off the debt before the divorce is finalized.

Present the Missouri court with the list of all your credit card debt at your divorce hearing. You will also need to provide other financial information such as proof of income, bank account balances and a list of any other assets. Provide any additional documents or receipts you have that help explain who is responsible for the credit card debt.

How Much Credit Card Credit Should You Carry?

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How much credit you should carry depends on how you use it.

Many people use credit cards to pay for emergency car repairs, medical or veterinary treatment or any number of unplanned expenses. Even if you have an emergency fund for these events, it is often more convenient to pay with a credit card than to access your savings account.

Carrying a small amount of credit puts a set limit on what you owe and helps keep debt manageable. Additionally, when you open many new accounts in a short period of time, credit score agencies may consider you to be a greater risk because more available credit creates an opportunity to accumulate debt.

How much credit you should carry depends on how you use it. Having more available credit helps you plan for the unexpected, and regularly using no more than 60 percent of your available credit improves your credit-to-debt ratio and helps your credit score. However, if you have trouble managing finances, having less credit available will help you keep your debt manageable.

How to Budget for Debt Reduction

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If you find yourself overwhelmed by the amount of debt you have, it may be time to start budgeting more closely so you can allocate more money toward debt reduction. Debt can be incredibly costly, with interest charges alone on a debt of $10,000 at 12 percent interest costing $100 per month. If you have the discipline to create a budget and stick to it until your debts are paid off, you will be rewarded with a surplus of income to put toward things that matter to you, like a retirement account or a special vacation.

Instructions

Calculate your monthly take-home income from all sources. If you are paid every other week, multiply this paycheck amount by 2.17 to calculate your average monthly income.

Track your monthly spending for at least one month, writing down everything you spend money on. This includes not only large expenses like your rent or mortgage, but also small items such as a latte, pack of cigarettes or snack from a vending machine at work.

Add up the amounts you spent in each broad category, such as insurance, utilities, personal care, entertainment, groceries, nongrocery food, gas and clothing.

List all of your debts with the highest interest rate debts at the top of the list. Also write down each debt's current minimum monthly payment.

Add together the minimum payments for all of your debts. This is the amount you are going to budget for debt reduction. Although your minimum payments will decrease over time, continue to put this full amount toward debts in the form of extra payments, starting with the debt at the top of the list.

Subtract the debt payment from your monthly income. Also subtract any fixed expenses that are absolutely necessary for you, such as your health insurance, car insurance and housing costs.

Allocate your remaining monthly income between the other categories in which you spend money during the month. If possible, also allocate at least $50 to $100 per month to put in a savings account for emergency expenses, if you do not already have emergency savings. Your total allocations cannot exceed your remaining monthly income, so you may have to allocate less than you are accustomed to for spending in some categories.

Create an envelope for each spending category. Put your allocated amount in each envelope at the beginning of the month and use only that money to spend in that category during the month. Do not use credit cards at all.

Review your allocations after the first month. If you ran out of money in one envelope and had plenty left in another, consider revising your allocations for the next month by moving money from one category to another.

How to Protect Yourself From Wage Garnishment

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Wage garnishment can put a huge dent in your finances, often making it difficult for you to get by and make ends meet. Many people often find their wages attached after failing to pay back a debt, when the attachment could have been avoided. Wage attachments can go beyond a deduction from your paycheck and may result in liens against your personal property until the debt is satisfied. There are ways you can protect yourself from a wage garnishment, but you must take action immediately.

Instructions

Pay the debt off immediately. Coming up with the full amount owed and paying off the debt all at once can stop garnishment in its tracks.

Renegotiate payment terms with your creditor as soon as possible. Some creditors may be willing to settle for less than the full amount of the debt if you agree to pay in one lump sum. Paying off the debt before the creditor sues you and the court demands a wage garnishment can protect your assets.

Work with a debt consolidator and have your credit debt consolidated. Consolidating all of your debts requires financial assistance granted by a debt consolidation service. The service loans you the money needed to satisfy the debts, and you pay the service one monthly payment, which is often lower than the multiple payments you would make on each individual debt every month. In many cases, you must have a mid-range to high credit score to be considered for consolidation.

File for bankruptcy. When you file chapter 7 bankruptcy, your belongings are sold off and the money earned goes toward settlement of your debts. The remaining debt is then written off. Filing chapter 13 bankruptcy assigns your debt repayment to the court, which orders repayment terms you can afford based on your monthly earnings. Bankruptcy stops wage garnishment.

How Do I Properly Pay a Debt Collector?

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Regardless of what type of debt you owe, if you neglect to make regular payments to your creditor, it has the right to sell the debt to a debt collector to make up for the loss. Debt collectors buy debts that creditors cannot collect and then try to collect the debts themselves. A debt collector has a variety of tools in its arsenal to convince you to pay, such as credit damage, the threat of a lawsuit and incessant phone calls. If you decide to pay a debt collector, doing so properly can reduce damage to your credit score and make the debt disappear for good.

Instructions

Send a request to the debt collector in writing for debt validation as soon as you find out about the debt. The Fair Debt Collection Practices Act states that collection activity cannot commence until a consumer is given 30 days to dispute the debt's validity. It is important to request a validation to avoid falling victim to a collection scam.

Try to work out a debt settlement in exchange for the debt collector's agreement not to report the collection account to the credit bureaus.

Request that the forgiven balance of the debt not be sold to another debt collector. For example, if your debt is for $1,000 and the debt collector agrees to accept $700, you need assurance that the remaining $300 will not be sold.

Request that a zero-balance statement be mailed to you once the account is paid. If another collector attempts to collect the same debt, a zero-balance statement proves that you already paid what you owe.

Ask the debt collector to send you the terms of the agreement in writing before you make a payment. This compels the company to adhere to the agreement.

Make your payments on time and by money order. Do not allow a debt collector access to your bank account. If you were to miss a payment, the debt collector could try to garnishee the payment directly from your checking account.

Will Debt Consolidation Programs Hurt My Credit Score?

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Many consumers turn to debt consolidation programs after struggling with payments and drowning in debt. These consumers usually have a damaged credit score already, so getting help is the first priority, not saving the credit scores. If credit score is a concern for you, then it is best to carefully review each program and ask how the payments are reported to the credit agencies.

Consolidation agents work to find the best options for consumers.

Consumers approaching debt consolidation first work with a counselor who reviews income, expenses and debt to create the best strategy. Reputable companies inform clients if debt consolidation is a viable option for them. The counselor will offer a plan to consolidate high interest credit card payments into one affordable lump sum. Debt consolidators negotiate lower interest rates on the client's behalf in return for a small fee taken from the client's payments. Credit card companies are happy to work with debt consolidators because they will recover most of the debt and can avoid writing it off.

Not all debt consolidation companies are reputable.

While most debt consolidation companies are reputable, there are some that may cause damage to your credit scores. Some companies have been known to take the monthly payments from the consumer without turning them over to the creditor. There is also a problem if they make the payments late. Both scenarios damage your credit even further. A few offer debt consolidation loans that have high interest rates, meaning the consumer will have a lower payment but end up paying more over time.

Debt consolidation can affect your FICO score.

Debt consolidation helps improve credit ratings because payments are made on time and kept current. However, there can be a negative effect if the agency closes the credit card accounts. This is because the overall available credit will decrease, but the debt balance stays the same. The result is a credit portfolio that appears to be maxed out. Closing older accounts is not recommended because they have a longer credit history, and payment history accounts for 35 percent of the FICO score.

If the debt consolidation program negotiates a reduction of debt, there may be a statement on the account reflecting that the balance was paid at a reduced rate. This is viewed negatively by lenders due to the fact that the original balance was not paid in full.

If your debt is not extreme, paying higher minimum payments could help pay down debt faster than using a debt consolidation agency. Debt consolidation companies negotiate with lenders and help pay down high interest debt first, which the average consumer can do himself. Debt counseling is also an alternative to consolidation. Debt counselors help consumers develop budgets and track spending habits to develop a debt reducing strategy.

Consumers can transfer credit card balances to lower interest cards to pay off accounts quickly. It is important to close the old accounts yourself, otherwise it will seem as if the credit card company closed the account and this reflects negatively on the credit report.

If there is equity in your home, obtaining a home equity loan to pay off debt carries many advantages such as low interest rates and a tax deduction. Using a home equity loan means no negative statements on the credit report. A "cash out" refinancing loan offers the same benefits.

Maximum Garnishment of Wages

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Wage garnishment is a process used by a creditor to collect on a debt. Once a court judgment is obtained, the creditor can go to court to obtain a wage assignment, or garnishment. A wage assignment summons is sent to your employer, who must complete the information and withhold the maximum amount of money allowed by law. This money is held until your next court appearance during which you can respond to the garnishment.

Wage garnishment regulations are contained in Title III of the Consumer Credit Protection Act and are administered by the Wage and Hour Division of the Department of Labor. The Act sets forth the maximum amount of wages that can be garnished for debt, judgments, tax levies and child support. It also provides protection for workers by prohibiting employers from terminating a worker specifically because their wages are garnished. The law protects anyone earning a wage and also includes garnishment protection for pensions and retirement programs.

For a judgment, the law sets the amount that can be garnished at 25 percent of the earnings received that exceed 30 times the federal minimum wage in a weekly pay period. Earnings include wages, commission, salary, bonuses and other income, but exclude tips from garnishment. The garnishment amount is figured on your disposable income, which is your gross wages less legally required deductions such as federal and state taxes, required pension contributions, Social Security and unemployment insurance. Once your disposable income is determined, 30 times the minimum wage is deducted and the result is the earnings that can be garnished.

Title III is designed to ensure that you receive compensation for working despite a wage garnishment from a judgment. The minimum amount per week that you are entitled to earn is $217.50. If 25 percent of your disposable earnings would reduce your earnings to below the minimum entitlement, the full 25 percent cannot be taken. For example, if you earned $290 in a week, only the amount above $217.50 could be garnished. If your state's minimum wage is higher than the federal government's, the state wage is used for the calculation. If your state restricts garnishments to less than 25 percent, state law supersedes. Four states do not allow wage garnishments at all.

If you owe child support, up to 50 percent of your wages can be garnished if you support another household, and 60 percent can be taken if you do not support another household. If you are currently garnished for child support and a normal garnishment comes through, the 25 percent rule kicks in for the normal garnishment. If 25 percent of your disposable earnings are already taken, the normal garnishment fails. However, if you have a federal or state tax lien to contend with, or certain bankruptcy orders, the 25 percent rule does not apply.

Pros & Cons of Low Interest Rates

11:55 AM No comments

When the economy stumbles, the government can use interest rates to spur growth. During a recession, the government may lower interest rates significantly to encourage businesses to borrow and consumers to spend more money. But lowering interest rates can have some negative consequences as well, including poor returns on savings.

Lowering interest rates makes borrowing more affordable for both individuals and businesses. Individuals can take advantage of lower rates on credit cards and pay their debts more quickly. Businesses can take out loans to expand their offices and factories and hire more workers. That can in turn stimulate the economy and lead to more growth over time.

Lower interest rates make houses more affordable by reducing the percentage of income buyers must dedicate to mortgage payments. That allows those buyers to purchase more expensive homes than they could otherwise afford, while allowing lower-income shoppers to purchase a first home. That can have a stimulative effect on the housing market, especially during periods of weak economic growth or with an economy just coming out of a recession.

Low interest rates tend to punish the people who should be rewarded for their thrifty ways. When interest rates on home mortgages and credit cards fall, the rates on CDs and other savings vehicles fall as well. That can make it harder for savers, and retired persons, to generate the income they need to pay their bills. When rates are low, investors may also seek out riskier investments than they otherwise would, just to get a higher yield. That can lead to a loss of principal and can punish further those who have saved their money.

Keeping interest rates at a low rate for an extended period of time can reduce the number of options the federal government has to stimulate the economy. Lowering interest rates typically has a stimulative effect on economic activity because it makes money cheaper and encourages corporations to borrow and expand. But when interest rates are already low and the economy is still in bad shape, the government has fewer options to deal with economic problems going forward.

Is a Debt Negotiation Agreement Practical?

11:59 PM No comments

By negotiating the terms of your current debt agreements, you can save money and get out of debt quicker. Provided that you take the necessary precautions to ensure that your credit rating is not damaged in the process, a debt negotiation agreement is always a practical solution to help ease your financial burden.

A debt negotiation agreement is a contract between an individual and a creditor in which the creditor agrees to modify the debt. This is often a good option for consumers who, due to their circumstances, find themselves unable to repay their debts.

You may opt for various types of debt negotiation agreements such as a reduction of the total balance of the debt, a reduction of your current interest rate or the elimination of any excess fees you have accrued.

A debt negotiation agreement not only benefits you by allowing you to repay your debt faster, it also benefits your creditor. By restructuring the debt to make it more manageable for you, your creditor can reduce the risk of you not paying what you owe and being forced to write off the balance as a tax loss.

A debt negotiation agreement and subsequent payments is considered account activity. The longer an account remains inactive, the less of an effect it has on your credit score. If your debt is currently held by a collection agency, making payments will result in the derogatory notation updating on your credit file and reducing your credit score.

If negotiating with an original creditor, you can request that late payment notations be removed from your credit file. If your negotiations are with a collection agency, however, a debt negotiation agreement is only practical if the company agrees to remove any reports it has made regarding the debt from your credit file.

How Long Must You Wait After Bankruptcy Until You Can Get Credit?

10:52 AM No comments

It may be possible to get credit within just a few months after receiving a discharge of bankruptcy. No rules specifically exist to stop lenders from offering credit to bankruptcy filers. It is up to lenders to determine if you meet requirements to obtain credit. Bankruptcy does hurt a credit score, but it does not stop consumers or lenders from establishing new lines of credit.

To get credit, have steady employment. Build up discretionary income, which is income left over each month after you pay expenses. Doing this helps to reestablish your credit worthiness. Lenders want to be sure your income is high enough to repay the money you are borrowing.

Borrowers who have existing loans can use those loans to build credit worthiness. Make payments on any existing loans on time. Pay down these debts. Secured loans such as mortgages and car loans that survived bankruptcy can help to build credit. It may also be easier to qualify for secured loans after bankruptcy. Federal Housing Administration (FHA) loans, for example, are available to bankruptcy filers two years after filing bankruptcy.

Check credit reports to remove old or inaccurate data. If bankruptcy discharged a debt, be sure this is up to date on the credit report. After seven years, credit bureaus will remove most negative credit data. The bankruptcy will remain for up to 10 years. Monitor credit reports at least yearly to ensure data is up to date.

Individuals need to get and use credit in order to build up a positive credit score after bankruptcy. Start with secured credit cards or low balance credit cards. While more expensive and with higher fees, consumers can still use these cards for a few years to build up credit. Some credit card lenders may offer credit to bankruptcy filers within six months of the bankruptcy discharge.

Although bankruptcy remains on credit reports for up to 10 years, individuals can work to build credit worthiness throughout that time. Individuals can see improvements in credit scores by making wise credit decisions. Paying bills on time, keeping balances low and maintaining just a few accounts will build credit over time. Eventually, the interest rates and fees will be lower and credit scores will improve.

Welcome to our website credit and debt managementr.

Tuesday, October 31, 2006

Types

Misconceptions

Considerations

Warning

Expert Insight

Debt Management

Debt Settlement

Borrowing

Bankruptcy

Credit Cards

Delinquent Debt

Civil Suits

Considerations

Monday, October 30, 2006

Function

Contents

Implications of Credit

Implication of Background Checks

Making Improvements

Late Payments and Fees

Credit Reporting

Prevention/Solution

Sunday, October 29, 2006

Credit Scores and Debt

Credit Utilization

Fewer Cards, Lower Score

More Debt Types, Higher Score

Saturday, October 28, 2006

Instructions

Elements of a Contract

Card Agreement

Significance

Permissible Changes

Third-Party Purchasers Of Bad Debt

Considerations

Check Credit Report

Notify Creditor

Notify Collection Agency

Further Action

Friday, October 27, 2006

Instructions

Thursday, October 26, 2006

Instructions

Wednesday, October 25, 2006

Instructions

Typical Creditors

Exceptions

Notifying Creditors

United States Treasury Rule

Tuesday, October 24, 2006

Paying Late

Renewing Payday Loans

Nonpayment

Payday Loan Alternatives

Instructions

Qualifying for a New Mortgage Loan

Higher Monthly Payments

Expensive

Monday, October 23, 2006

What is a Bank Levy?

Notice of Levy

Holding Period

Handling a Bank Levy

Instructions

Sunday, October 22, 2006

Legal Judgments

Statutory Defense

Credit Reports

Unsecured Credit

Bad Credit

Rebuilding Credit

Other Factors

Types

Effects

Considerations

Misconceptions

Clarify Your Situation

Help You Make a Plan