December 2006 ~ Credit And Debt Management

Sunday, December 31, 2006

When Is a Judgment Placed on a Credit File?

2:35 AM No comments

A judgment is placed on a credit report, or file, after it is recorded in court records. Major credit bureaus such as TransUnion, Experian and Equifax subscribe regularly monitor court records and automatically add credit-related information to credit reports. The agencies review court records for judgments, bankruptcies, tax liens and more.

A judgment is a legal decision signed by a judge. The judgment requires you to pay a certain amount of money to a person or company that filed a lawsuit against you. Judgments are common in credit card debt, with judgments ordering people to pay the balance remaining on the account plus court costs and attorney fees. The amount due and the date of the judgment will be listed on your report.

The credit bureaus will place the information on your credit report as soon as they receive it. The judgment could be added in a few days or a few weeks. The lawsuit leading to the judgment is not added, although it is also a part of the public record. However, for credit reporting purposes the lawsuit is just an allegation, and the credit bureaus are focused on recording the most factual information possible.

Judgments can cost a big drop in your credit score. Multiple judgments are even more damaging because they indicate that you are having severe credit problems. This will make it difficult or impossible for you to obtain new credit at competitive rates. Rushing out to add new credit before the judgment appears on your credit report may not work either. Chances are your credit is already poor if debt collectors are seeking judgments against you. Lawsuits are usually a last resort for debt collector and by the time a lawsuit is filed you may have already missed multiple payments causing your credit score to plummet. Failing to make payments usually results in the account being closed and listed on your credit report as charged off -- another very negative credit event that labels you as a high-risk borrower.

There are few options for removing judgments, which can be listed on your credit report for seven years. One possibility is returning to court to ask the judge to vacate or remove the judgment because you were unaware of the lawsuit or did not owe the money. Paying the judgment will result in your credit report being updated to show the listing as a "paid judgment." By this time your credit score is already damaged and paying the judgment will not provide an immediate boost to the score. However, a paid judgment allows you to resolve the debt and start rebuilding your credit.

Old Debt Laws

9:49 PM No comments

An old debt that you forgot about years ago--maybe even from your college days--can pop up on your credit report at the most inopportune time. You may be coasting along with a great credit score in the 700s as you prepare to buy a new house. Then the old delinquent debt pops up and sinks your score. The only way to avoid situations like that is to pay your old debts, because legally debt collectors can chase delinquent debts for as long as it takes to collect.

Negative entries on your credit report can remain for a minimum of seven years, and statue of limitation guidelines determine how long debt collectors have to sue you in court. But that doesn't make the debt go away, even if the statue of limitations for legal action has expired. In many states the statue of limitation for legal action is six years, and after that the debt collectors lose the right to sue you for your delinquent debt. They can still file suit, but it will be dismissed by the judge if you appear and point out that the statue of limitations has expired.

You can force debt collectors to prove that an old debt is valid by responding in writing after the debt collector first contacts you. The Fair Credit Debt Collection Practices Act, a federal law, requires the debt collector to send you a letter stating the amount of the debt and the original creditor. The law also gives you the right to respond with a letter of your own, in which you should ask the debt collector to prove that the debt is valid by sending you acceptable documentation, such as a copy of the promissory note that you signed, or a copy of the final statement from the original creditor before the account was charged off. The debt collector does not have a legal right to collect from you if he cannot prove that the debt is valid.

You're virtually certain to be subjected to continued collection efforts once the debt collector validates the debt. If the statue of limitations has expired--eliminating the possibility of a successful lawsuit against you--you could continue to ignore the debt although it will remain on your credit report. Better yet, you could offer to pay the debt in exchange for the debt collector removing the negative entry from your credit report. That would put the issue behind you and get your credit scores moving in the right direction again.

Statute of Limitations in Ontario for Debt

11:24 AM No comments

The statute of limitations for debt collection, in both the United States and Canada, is the period of time during which a debt collector or creditor may file a lawsuit against a consumer for an overdue debt. After the statute of limitations expires, the debt becomes "time-barred" and the creditor loses the right to sue for the balance the consumer owes.

In Ontario, the statute of limitations for debt collection is two years. This law was established by the Ontario Limitations Act in 2002. The act states when a plaintiff can initiate a legal claim against an individual for various types of infractions and isn't restricted to consumer debts.

The Ontario Limitations Act contains exceptions for creditors when an original business contract exists in which the consumer waives his right to a statute of limitations in the event the debt falls into delinquency. In these cases, the creditor may legally pursue the consumer for the full amount of time stipulated in the original contract.

The legal case Ontario Inc. vs. Chorny indicates that the statute of limitations in Ontario begins on the day the consumer's account first falls into default and not on the day the creditor initially demands payment from the individual.

How to Make an Anonymous Payment

4:53 AM No comments

Making an anonymous payment is not difficult, but may require some research and legwork. Getting the appropriate account to make the payment to is probably the most difficult task, because companies will not usually give you account information unless they are authorized to by the account holder. You must also remember not to use a check or credit card because they both leave paper trails. Cash is also risky because it requires you to either chance being identified when you pay in person or risk losing cash in the mail. For true anonymity, a money order is your best and safest bet.

Instructions

Identify the account number to which you want the payment applied.

Purchase a U.S. Post Office money order. Buy with cash to assure complete anonymity. Write the account number on the money order. Use the address if the payment is a rent or mortgage payment.

Mail the money order to the appropriate payment address. Do not include your return address on the envelope.

Help for Debt Problems

9:34 PM No comments

According to the United States Federal Reserve, 45 percent of households in America spend more each month that what they earn. This cycle has created a debt problem for many American families, who are often unable to keep their heads above water. Getting out of debt, or even managing it, is difficult. It requires financial discipline and patience.

Strict budgeting will usually take care of debt problems, provided they are not too severe. Create a workable budget for your household, and dig deep for hidden money pits. Money pits are usually small but frequent transactions that together cost a substantial amount of money. Common money pits are alcohol, soft drinks, cigarettes and fast food. Making a strict budget can help you identify negative spending habits that you cannot afford when in debt. Eliminate these items from your budget, or replace them will less-expensive alternatives.

The more money you can trim from your monthly budget, the more money you can put towards paying down your debt and removing the black cloud over your head.

Credit counselors can help you make a workable budget for your household, or help you enroll in a debt management plan if you cannot afford your expenses.

Be selective when dealing with credit counseling agencies. Only work with agencies approved by the federal government. Just because an agency claims to be non-profit, does not mean its services are free or reasonably priced. See the Resources section below for advice regarding credit counselors from the Federal Trade Commission.

Bankruptcy is the last alternative to debt problems. It should only be done after every other alternative has been tried. Bankruptcy will help you liquidate your debt through asset sales (Chapter 7) or help you consolidate and repay your creditors (Chapter 13).

Bankruptcy will negatively affect your credit for 10 years. While it is not impossible to recover from bankruptcy, it is difficult. The bankruptcy filing also becomes public record, and the details of your case are available to anyone. Nevertheless, bankruptcy is a way to get out of debt and get a fresh start.

I Co-Signed for a Student Loan: How Do I Eliminate the Loan?

7:18 AM No comments

Co-signing a student loan makes you fully liable to repay the full debt if the primary borrower fails to do so. The student loan account appears on your credit report and any mistakes on the part of the borrower, including missed payments, can hurt your credit score. In addition, lenders consider the monthly payment as one of your liabilities in your debt-to-income ratio, which can impair your ability to qualify for a mortgage or another type of large loan. There are a few ways to have yourself removed as a co-signer, but they all require the cooperation of the student and lender.

Instructions

Call the lender and ask what the co-signer release conditions are. These are the requirements that the primary borrower must meet before the lender will release you from the loan. For example, the primary borrower might have to make 24 consecutive on-time monthly payments and pass a credit check. If the borrower has met these conditions, proceed to the next step.

Ask the lender to send you a copy of the co-signer release form. Alternately, you might be able to download and print it from the lender's website.

Fill out the release form with the help of the primary borrower and submit it to the address on the form.

Remind the primary borrower to continue paying on time each month until the co-signer release goes through. A late payment while the lender is processing the application for release could cause it to be rejected.

Tell the student that you would like to be released from your responsibility as a co-signer and ask the student to refinance the loan.

Help the student find someone else to be a co-signer in your place. A friend or relative might be willing.

Research student loan lenders online and select one that refinances student loans at low interest rates.

Ask the student to apply for a refinance with the new co-signer. If the student has been managing credit for at least a few years, she could first try applying alone to see if she can qualify without having to drag a new co-signer into the loan.

Is It Possible to Get a Loan While Being Garnished?

3:11 AM No comments

Loan approvals are based on your credit history. While a wage garnishment does not appear on your credit history, the lawsuit preceding your wage garnishment does. This can affect your ability to get approved for a loan.

If you stop paying down a debt, your creditor may sue you and request a wage garnishment. A portion of each paycheck will be withheld to pay the debt.

Any lawsuit that results in garnishment leaves a judgment on your credit report. Judgments adversely affect your credit score and can cause you to be turned down for a loan.

Garnishments for federally owed debts, such as taxes and student loans, do not require lawsuits. You may be garnished for these debts while maintaining decent credit, which increases your chances of a loan approval.

Even if you are still being garnished, you may get a loan approval if the judgment did not occur recently. As credit report entries age, they have less of an impact on your score.

Not all judgments result in wage garnishments. Because of this, a lender has no way of knowing that you are being garnished unless you volunteer the information.

Can I Negotiate a Medical Bill Turned Over to a Debt Collection Lawyer?

7:31 AM No comments

A medical debt turned over to a debt collections lawyer is a serious issue. Usually, many months or even years pass before the account reaches this point. The hospital or doctor's office tries to collect at first, with the account possibly languishing for a while before assignment to an attorney. Negotiations with the attorney are usually possible, but the attorney is not obligated to participate and could file a lawsuit for the entire amount.

Medical debt is unsecured debt -- the same as credit cards. No collateral is posted for the debt, leaving the filing of a debt lawsuit as the most powerful option for collecting. Illinois Legal Aid reports that people sued for unsecured debt are sure to lose in court if the lawyer filing the case is prepared with records showing the debt is valid and unpaid. There are no suitable court defenses for medical debt. Billing records will clearly show that the debt is yours, ruling out an identity theft challenge. The judge will not consider excuses such as unemployment, continued illness or divorce.

Using the threat of filing for Chapter 7 bankruptcy is the best option for negotiating medical debt because it creates leverage -- even if you really do not intend to file. Chapter 7 is one of the simplest forms of bankruptcy and can completely eliminate medical debt in three or four months. A person with say, $75,000 in medical debt, theoretically could pay nothing in bankruptcy or legal fees and completely wipe out the debt. Chapter 7 allows a waiver of the $299 application fee, as of 2011, for people who cannot afford it, and they are allowed to file without the assistance of an attorney. Also, the American Bankruptcy Institute reports that some attorneys and organizations offer pro bono assistance, or free help, for people who need to file for bankruptcy but cannot afford an attorney.

Eligibility for Chapter 7 bankruptcy usually forces the attorney for the debt collector to negotiate. After all, the attorney knows he will receive nothing if you file for Chapter 7. However, not everyone is eligible for Chapter 7. Eligibility is determined by income, which varies by the state. Only those with low incomes qualify. However, that is sometimes the case for people who are out of work or unemployed for long stretches because of illness.

People who cannot qualify for Chapter 7 are automatically eligible for Chapter 13. However, Chapter 13 requires a payment plan lasting three to five years. The courts allow reasonable expenses for living, along with monthly payments on secured debts such as a home mortgage. Money remaining enters the payment plan to pay medical debt and other unsecured accounts. Under the plan the medical debt attorney may collect the entire balance due, a percentage -- or none of it. It all depends on the amount of disposable income after after expenses.

Hiring an attorney of your own is a smart move when negotiating medical debt. The best option is a consumer affairs attorney who also has experience in bankruptcy cases. The attorney for the debt collector will realize you are no pushover once your attorney calls. Your attorney can make a case for filing for Chapter 7 or Chapter 13 if a settlement isn't possible, and then negotiate a deal. You could handle the negotiations yourself, and that's fine if the medical bills total only say, several thousand dollars. However, more experience is usually necessary for negotiating really large medical debts. The attorney for the debt collector may have excellent negotiating skills and experience that are far superior to yours.

Settlement of medical debt is possible for around 50 percent of the balance, according to Bills.com. Consider negotiating only in writing if you choose to handle it yourself. Do not reveal information about income or assets while insisting you will consider filing for bankruptcy if a fair settlement isn't reached.

Definition of Discharge of Debts

1:21 PM No comments

A discharge of debt occurs in a bankruptcy case, when the case is finalized and debts are legally terminated. There are specific federal laws governing the process and the behavior of debtors and creditors in handling discharged debt.

The obligation to pay a debt can be enforced by a civil action in a court of law. A creditor can seize certain assets, if necessary, to satisfy the debt.

Filing for bankruptcy legally stays (suspends) all collection action. The bankruptcy proceeds as creditors file their claims in court, and a hearing takes place before a bankruptcy judge.

At the end of the process, all debts are discharged, except for those that, by law, cannot be discharged, such as federal income taxes and student loans. In a Chapter 13 case, the discharge occurs after the debtor has completed scheduled repayments.

Discharge means the debt is canceled and non-collectible. The borrower is no longer liable for repayment. The creditor must end collection action, including any court suits.

Liens used to secure loans before the bankruptcy remain in force. A car loan, for example, can still be satisfied through seizure of the property that is used to secure the loan -- the car.

How to Stop the IRS From Taking Money for a Student Loan I Am Paying On

7:35 AM No comments

Individuals often use student loans to pay for college, but one of the pitfalls of borrowing money before you complete your education is that you cannot be sure you will make enough in your career to pay it back. Most federal student loan programs work with borrowers to make this less of a concern. In some cases, though, student loans fall into default status because borrowers fail to make satisfactory payments on their loans. When this happens, it is possible that the U.S. Department of Education or a guaranty agency will request that the Internal Revenue Service intercept all or part of a borrower's income tax refund. The money is applied toward the student loan debt.

Instructions

Pay your loan payments on time. By never falling into default status, you do not have to worry about the IRS intercepting your income tax refund. Of course, this assumes that your account is currently in good standing.

Contact the lender and ask about loan rehabilitation. If you have a Federal Direct Loan or an FFEL loan, you qualify for a rehabilitation program that allows you to make nine payments for an agreed upon amount for nine straight months. At the end of the nine months, the loan is returned to good status and is removed from collections. By agreeing to a rehabilitation program, you can assure that the lender will not seek to intercept your income tax return. You will need to complete, sign and return loan rehab agreement forms in order to participate in a rehabilitation program. If the U.S. Department of Education or a guaranty company already requested that the IRS intercept your taxes, you will need to ask to have the lender or guaranty to contact the IRS to cancel the request. Be aware that it takes up to six weeks before the tax offset cancellation can be processed.

File a hardship claim. If you can show that the tax offset is likely to have a severe financial impact on you, the IRS might agree to release your tax refund rather than intercept it. You will need to send your hardship request to the guaranty agency. Include an explanation of why the offset will cause an extreme hardship. You also must include a copy of your income tax form and other proof of income, copies of monthly bills and copies of non-monthly bills that also prove your hardship.

Request a hearing. If the guaranty company fails to accept your prior attempts to stop the tax offset, your last option is a hearing. The IRS will hear your case. You must file a hearing request form. On the form, you must indicate whether you want the hearing to take place in person, by phone or via the mail. When you request the hearing, you must include in your request the reason that the tax offset should not take place. To place the tax offset on hold until the hearing is concluded, you must file a request for review at the address written in the offset notice. You must file the request for review within 65 days of the date of the notice.

The Tax Consequences of Debt Settlements

4:28 AM No comments

Debt settlement is the process of negotiating with a creditor to settle your debt for a fraction of what you owe. By agreeing on a debt settlement amount, the creditor avoids the possibility that you will default on the full amount, and you get part of your debt forgiven in exchange for paying the rest. However, the Internal Revenue Service considers forgiven debt to be a form of income, so you may have to pay income tax on the amount your creditor forgives.

When you are drowning in debt, debt settlement may seem like an ideal solution. You simply pay what you can afford, and the creditor forgives the rest of your debt. Some people negotiate debt settlement themselves, while others go through specialist companies. In some cases, your creditor may even call you to make an initial settlement offer. Once you formally agree on a settlement amount, and make the required payment, you no longer owe the debt.

As of 2010, the IRS treats forgiven debts totaling more than $600 as taxable income. It may not seem fair at first, but it does make sense. If you owe $10,000, and your creditor forgives $3,000, it's as though the creditor has given you $3,000. Therefore, the creditor must send you IRS Form 1099-C (Cancellation of Debt). At the end of the tax year, you must pay income tax on the forgiven debt, just as you do on other forms of income. One exception to this rule is forgiven mortgage debt. From 2007 to 2012, the Mortgage Forgiveness Debt Relief Act makes up to $2 million of forgiven mortgage debt tax-free. You may also be able to avoid paying taxes on forgiven debt if you are insolvent (i.e., your debts total more than your assets).

In addition to creating a tax liability, debt settlement will seriously damage your credit score. Debt settlement stays on your credit report for seven years, making you a high-risk borrower in the eyes of prospective lenders. If you demonstrate consistent financial responsibility after settling your debt, the settlement will eventually have less of an impact on your score. However, it will remain on your credit report --- and affect your creditworthiness --- until it expires automatically.

Debt settlement is usually a last resort for people facing bankruptcy. If you have reached this point, it's likely that your credit score is already quite low. Debt settlement will hurt it, but not nearly as much as it would if you had a clean credit history. For this reason, debt settlement is often preferable to bankruptcy, which does greater damage to your credit score and can stay on your credit report for up to a decade. However, you must also consider the amount of tax liability debt settlement will create, especially if you are not already insolvent. In some cases, this additional "income" may even push you into a higher tax bracket. The IRS does not view debts discharged through bankruptcy as taxable income, so for some debtors, bankruptcy may be a better option.

Can More Than One Company Garnish a Check?

5:16 PM No comments

Wage garnishments benefit creditors who wish to collect on an unpaid debt. Some debtors stop paying on loans or credit cards, which force creditors to take legal action in order to recover overdue funds. But while wage garnishments help creditors collect, there are limits to garnishing a debtor's wages.

Creditors who seek a wage garnishment approach the court in order to have a percentage of a debtor's income withheld from his check. If the court agrees to the wage garnishment, a sheriff approaches the debtor's employer with an order to garnish his check. By law, employers must adhere to these orders and withhold up to 25 percent of the debtor's disposable income. These funds pay down the outstanding balance, and the garnishment remains in place until satisfying the overdue balance.

Creditors can approach the court at the initial hearing and request a wage garnishment. The process involves first suing the debtor in court for the balance and acquiring a judgment against the debtor. Only after a debtor doesn't pay a judgment can a creditor request a wage garnishment from the court -- usually after 30 days. A court hearing also provides debtors with the opportunity to challenge a lawsuit or dispute a debt. Failing to appear at a lawsuit hearing results in an automatic win for the creditor.

While a creditor may have the legal right to garnish a debtor's check, the law protects the debtor, and only one company can garnish his check at a time. Exceptions to this rule include judgment orders for alimony or child support payments, wherein the debtor can have money withheld to pay these balances despite already paying another creditor through a garnishment. In addition, if the first creditor takes less than 25 percent of the debtor's disposable income, another company can possibly acquire a garnishment order from the courts.

Creditors typically notify debtors of impending garnishment orders, and this notification usually gets a debtor's attention and can move him to pay a debt or at least work out some sort of payment plan with the creditor. Once a garnishment takes effect, withholdings continue until creditors receive all funds owed. However, creditors can stop garnishing wages if the debtor decides to repay the balance in full or establish other payment plans. Debtors can also file an appeal with the court to stop a garnishment if unable to afford basic living expenses after losing 25 percent of his income.

Is It Better to Pay Your Debt Off Through a Creditor?

6:12 PM No comments

Paying off a debt through the original creditor is usually a good idea but often is not possible. For example, the original creditor may refuse to accept payment for a delinquent account it has already placed with a debt collector. In some instances, the original creditor may refuse to even discuss the account, and instead refer the debtor to the debt collector.

Creditors use internal collection teams to begin the collections process but eventually turn accounts over to debt collectors after collection efforts fail. The creditors turn over the accounts after about six months, although they can do so earlier. The debtor remains responsible for full payment, however.

Debt collectors notify debtors of the new status of the account by contacting them by telephone or mail. Some debtors may react by calling the original creditor to work out a payment plan or a settlement. What happens next depends a lot on if the original creditor sold or assigned the account to the debt collector. A debt assigned to a debt collector means the creditor still owns the account, with the debt collector working on commission. However, an account sold means the original creditor no longer owns the account. Some lenders sell delinquent accounts to so-called "junk debt buyers" for as little as pennies on the dollar. The accounts are usually delinquent by several years, with the original creditor finally giving up on collecting. Junk debt buyers usually purchase bad debt in bulk, and then begin collecting on individual accounts. In these situations the original creditor could not accept payment because it no longer owns the debt.

People receiving notices from debt collectors should contact the original creditor. The creditor can offer important information, such as if it still owns the debt and if so, the name of the debt collector collecting on the debt. The debtor should ask the creditor if direct payment through the creditor is still possible. Creditors who still own accounts placed with debt collectors may or may not accept payment depending on their business relationship with the debt collector.

The Fair Debt Collections Practices Act, a federal law, gives debtors the right to force debt collectors to prove that they have the right to collect on a specific debt. After first receiving written notice from the debt collector, the debtor has 30 days to dispute the debt by writing a letter. Disputing the debt protects the debtor's rights and stalls the debt collection process. By law, the debt collector must suspend debt collection efforts after receiving the letter disputing the debt and requesting verification of the debt. The debt collector can provide verification by sending the debtor proof of the debt, such as a recent billing statement or signed credit card application.

Negotiated Credit Card Debt & Tax Implications

12:51 PM No comments

The Internal Revenue Code considers the monetary amount of canceled debts to be taxable income, subject to certain exceptions and exclusions. The negotiated reduction of credit card debt is a type of canceled debt. The Internal Revenue Service (IRS) requires the creditor that reduces your credit card debt to report it on Form 1099-C.

Forgiven or canceled debt is considered to be taxable income. For example, if a debtor negotiates to pay off a $5,000 credit card balance for $3,000, the $2,000 difference is considered to be taxable income. Certain exceptions and exclusions are discussed below.

All canceled debt is to be added to the debtor's gross income on the appropriate year's tax return. The IRS requires that all canceled debts in the amount of $600 or higher be reported by the creditor on Form 1099-C. The amount of canceled debt reported usually includes any unpaid balance, including principal, interest and fees. In addition to the taxes due on that amount, the debtor's tax bracket could be pushed up, resulting in a higher tax rate.

Any part of the canceled debt consisting of what would have been tax-deductible interest is not counted as taxable income. Credit card debt canceled due to bankruptcy is not counted as income. Debtors who demonstrate financial insolvency immediately before the canceling of a debt to exclude that amount from taxable income.

The debtor has a right to ask for a corrected Form 1099-C if it is incorrect. The debtor must include canceled debt on his tax return whether or not he receives Form 1099-C. The debt is not considered canceled for tax purposes if the creditor charges it off. Debt amounts actively in collection, including from an entity that buys bad debt, are not considered canceled.

What Is a Revolving Account on a Credit Report?

1:10 AM No comments

Each individual's credit report reflects his history of accruing and paying debt. When a consumer applies for a revolving account and is approved, his creditor will report the new account to the credit reporting agencies. The account's information will then update periodically on the individual's credit file as he makes new purchases and payments.

A revolving account is a line of credit with a pre-set credit limit. A borrower may make purchases against her revolving line of credit up to the spending limit. Every time the individual makes a payment, the amount of the payment is deducted from the balance she carries on the account. Thus, the debt "revolves" as the consumer makes purchases and payments. Two common examples of revolving accounts are home equity lines of credit and credit cards.

Credit scoring formulas take the balance an individual carries on his revolving accounts into consideration when determining his credit score. The credit scoring formula developed by the Fair Isaac Corporation, known as the "FICO score," is the most common credit score pulled by lenders. The amount of debt a consumer owes comprises 30 percent of his FICO score. In order to maintain the best credit score possible, consumers should carry low balances on their revolving accounts, even paying off those balances each billing cycle if possible.

Once a creditor reports a revolving account to the credit bureaus, the account will remain on the individual's credit report indefinitely if she keeps the account open and continues to accrue debts and pay them off. If the borrower opts to close the account voluntarily, the entry may remain for seven to ten years, depending on the credit bureau. Should the credit provider close the account due to nonpayment, the debt will have a negative impact on the borrower's credit rating and must be removed from the debtor's credit file after seven years.

Revolving accounts on a credit report serve to inform future lenders of a borrower's ability to successfully manage his financial obligations. Any late payments a debtor makes to his credit provider will be reported to the credit reporting agencies. Although a 30-day late payment has an adverse effect on credit scores, a 60-, 90-, or 120-day late payment has a much greater impact. Lenders review balances and payment histories when evaluating new credit and loan applications to determine whether the applicant meets the company's qualifications and, if so, to assign each applicant an appropriate interest rate.

Should a borrower fail to pay off her revolving debt, the creditor may write off the balance she owes and sell the account to a debt collection company. The debt collection company may then add fees to the account, report the account as a collection to the credit bureaus and even sue the debtor. Collection accounts are significant derogatory notations within consumer credit files. Should the debt collection company sue the consumer and win, a record of the court's judgment will appear on her credit report, damaging her credit rating even further.

Ways I Can Help My Credit

8:19 AM No comments

Good credit gives you access to lower interest rates on loans and reduces your overall payment throughout the life of the loan, thereby saving you money. It can also help you establish your level of responsibility when you are looking for a job or trying to rent an apartment. You can help your credit by remaining consistent with your bill payments and by managing your existing credit responsibly. Over time, your discipline will translate to better credit.

Monitoring your credit is one of the most important steps to take toward helping it. You can get free credit reports from each of the three credit bureaus once a year at AnnualCreditReport.com. Since credit reports usually contain the same information, you can stagger the reports you receive so that you get three of them at different points. Monitoring your credit helps you know when changes happen and also when inaccuracies are posted that you may need to dispute.

Paying your bills on time can help your credit because it shows that you are less of a financial risk. You should also try to pay most or all of your bill to improve your credit or keep it consistent. To help you pay your bills on time, set up automatic payments at your bank or with your creditors.

Reducing your debt is also an important factor when thinking about helping your credit. Having a high balance on your credit cards or too many open accounts with a balance can indicate that you have problems managing your credit and adversely affect your score. You may think about consolidating your debt and paying down some of your installment loans to help your credit.

Having too many credit inquiries at one time can also negatively affect your credit score. If you want to help your credit, keep your applications for new credit to a minimum. Credit bureaus usually are able to distinguish between the opening new credit accounts and shopping for the best rate for one account and keep the impact on your credit minimal.

Can a Cosigner's Wages Be Garnished?

5:02 AM No comments

While you may think you're doing someone a favor by cosigning on a loan or line of credit, you may be setting yourself up for financial failure. When you sign your name on the dotted line, you're guaranteeing the lender that you will be responsible for the debt if the primary borrower is unable to pay. In some cases, creditors may seek to garnish your bank account or wages for the unpaid debt.

To pursue garnishment of your wages, the creditor must first file suit against you in civil court. The creditor may sue you independently of the other debtor or file suit against both of you. If the creditor wins its case, it may file a writ of execution or garnishment order with the court that granted the judgment. The time frame for filing a writ of execution varies from state to state. You must be given the opportunity to object to the garnishment or file claims for exemption prior to its enforcement. If you are unable to reverse the garnishment, your employer must begin withholding your wages as specified by the order.

The Consumer Credit Protection Act determines how much of your wages can be garnished. As a cosigner, the judgment creditor can pursue garnishment for a portion of the debt or for the full amount. Under federal law, a creditor can garnish a maximum of 25 percent of your net income each pay period or the amount by which your weekly net income exceeds 30 times the hourly minimum wage. Depending on your state's laws, the percentage used to calculate a garnishment limit may be lower. Federal law requires creditors to use the calculation that results in the lower garnishment amount.

Under federal law, you can exempt certain types of income from garnishment. According to the Federal Trade Commission, these include Social Security or Supplemental Security Income benefits, veterans' benefits, military survivors' benefits, student assistance and federal retirement and disability benefits. Income you receive from a qualified retirement account, such as an IRA, is also exempt. Depending on the laws in your state, you may also be able to claim an exemption for child support or alimony payments you receive, worker's compensation pay or unemployment payments. You must file your exemption claim within the time frame specified by the writ of garnishment in order to exempt your income.

Read the terms of any contract carefully prior to cosigning for someone else. The Federal Trade Commission requires creditors to provide specific details as to the obligations for which a cosigner assumes responsibility if the primary borrower defaults. Ask the creditor to notify you immediately if a default occurs on the account. Filing bankruptcy can halt collection or garnishment actions against you; however, this protection does not apply if you cosigned for someone's student loan. If you pledge any property as collateral to secure the loan, such as your car or home, the creditor can potentially pursue a lien against these assets if the primary borrower defaults.

What Can You Do About New Credit Card Fees?

9:08 PM No comments

New credit card fees increase costs, raise your total debt and make credit more expensive to use, but you can limit your loss. New fees introduced by a credit card company often include an annual fee for being a cardholder and fees for not being an active credit card user, referred to as "inactivity" fees.

You can contact the credit card company by phone and request the removal of a new annual fee or an inactivity fee you were charged. Some credit card companies will waive an inactivity fee or suspend an annual fee for an account holder with a good payment history to keep the holder as a customer. Checking your history with the company, such as how many years you've had the credit card and your payment record, before you call helps you present information to support your good standing as a customer.

A phone call is not always direct enough to get your credit card company's attention. Not all representatives have the authority to reverse imposed fees, and you may not be able to get the reason for the new fees over the phone. You can write a letter to the "customer service" address for your credit card company and ask for the reasoning behind the new fees on your account. Your letter should highlight your history as a good customer with the company and your dissatisfaction with the new charges.

Another credit card company may be willing to offer you better rates and lower fees than your current creditor to get your business. Some types of perks cards, such as "reward" cards, are more likely to carry annual fees to cover the cost of the rewards, so read any offers of new credit you get carefully. Multiple requests for credit over a short period of time negatively impact your credit score, so limit your applications to avoid harming your score.

You should consider contacting the federal regulatory department responsible for your credit card company if the company is assessing new fees in amounts that exceed federal or state laws or if it is calculating the fees incorrectly. The Federal Reserve Board has a list of federal regulatory agencies categorized by the type of institution regulated available for viewing on its official website.

How Much for a Credit Report & FICO Score?

11:27 AM No comments

The Fair Credit Reporting Act directs the nationwide credit reporting agencies to furnish you with one free copy of your credit report every 12 months, upon your request. You can work this option to your advantage by ordering one credit report several months apart from each of the bureaus, but note that your free reports will not include your credit scores. All three bureaus offer an add-on option to purchase your credit score when you obtain your free annual report.

You can get your Experian Credit Report & Score online for $14.95. You will be able to access your report instantly and continue to view it for thirty days. If you wish to continue viewing updated reports and scores, the company offers a credit monitoring service, Triple Advantage Credit Monitoring. This service will cost you $14.95 per month and affords you unlimited access to your Experian report and score, and daily monitoring of your reports from all three national credit bureaus.

The TransUnion personal credit report is $11.00. When you attempt to purchase your personal credit report, you will note an option to purchase your personal credit score. Note that this is the Vanguard score, a credit score developed by the three bureaus. It is not the Fair Isaacs Corporation or FICO score. TransUnion also offers a three-in-one credit report for $29.95. The three-in-one report includes data from all three national credit bureaus, along with your credit score which is based on the TransUnion data. TransUnion also offers a credit monitoring service, TrueCredit, which affords you access to your report and score from the three credit bureaus. Subscription to the service is free for the first seven days and $14.95 after the seven-day period.

You will pay Equifax $15.95 for your report and score. The Equifax report includes a score simulator which shows you how your score changes when you take certain actions, such as paying off a high-balance credit card. Equifax's version of the credit monitoring service, Equifax Complete, will cost you $16.95 monthly. Equifax Complete includes credit report and scores from all three bureaus, a score simulator for each bureau and emailed notices when your credit score changes.

For $19.95, you can purchase your choice of TransUnion or Equifax credit report and score through MyFICO. Experian discontinued its agreement to furnish reports and scores to MyFICO as of February 2009. Like the national credit reporting agencies, MyFICO offers credit monitoring services. For $4.95 per month, or $49.95 per year, you can view your TransUnion report and score four times per year. Opt for Score Watch to get a more frequent look at your report and score. Score Watch allows you to monitor your Equifax credit report daily, and your credit score weekly. The cost of Score Watch is $14.95 per month or $149.95 per year.

Military Debt Help

3:19 AM No comments

Military members' debt adds to the stress of deployments, frequent moves and training. The Servicemembers Civil Relief Act, Armed Forces Legal Assistance Office, Installation Support Centers, and Military Relief Organizations are valuable resources to help manage and get out of debt.

SCRA helps deployed servicemembers and those entering the military or called to active duty. This law protects servicemembers from eviction due to nonpayment of rent that is $1,200 or less a month. Interest rates on credit cards cannot exceed 6 percent on any cards established before active duty. Soldiers should contact their credit companies via a certified letter explaining their active duty status along with their orders.

The Armed Forces Legal Assistance Office on military installations can help any U.S. military ID card holder. The JAG officer gives legal advice and assistance in dealing with debt collectors, credit card companies and landlords. The information shared with the JAG is confidential and, unless they have your permission, will not be reported to your supervising officer or your chain of command.

Military relief organizations are nonprofit organizations that can provide grants, interest-free loans, tuition assistance, and other financial help to military families in times of financial crisis. They give grants and loans for one-time financial emergencies such as emergency travel, rent and medical expenses, not for purchasing a home, vehicle or other nonessentials.

Military installations offer support centers that assist members of the military and their families with financial counseling and advice. The Navy has the Fleet & Family Support Center, and the Army has Army Community Services Center. Depending on the installation, the programs offered can include budget counseling, debt management, financial classes, and information regarding financial assistance programs. To get information about these programs, search the website of your closest military installation for its support center's contact information and list of programs. These programs are offered free or for a nominal fee for all Department of Defense cardholders.

Everything You Need to Know About Liens

10:00 PM No comments

Liens are a tool used by creditors and government agencies to secure payment for any outstanding obligation. Liens allow the creditor to make a claim on property that the creditor can then sell in the event that a debtor is unwilling or unable to meet his obligations. Liens are also useful in prioritizing creditors in the event of a default.

Liens prevent property from being sold by the owner. Because there is an additional interest in the property, the owner is now prevented from liquidating the property.

A lien enables the creditor or government agency to seize and sell the property in the event the debtor defaults.

A lien prioritizes creditors in the event there is more than one interest in the property. For example, if a home has a traditional mortgage and a home equity line of credit, both creditors have an interest in the property as the property has been pledged as security against the loans. In the event a lien is filed, the creditor filing the lien has the right to seize and sell the property before the other creditor.

A properly filed lien may not be enough, in certain instances, for the creditor to be able to sell a property. At times, certain improvements to a property must be made before a lien can be enforced.

Government entities are exempt from making improvements to property. Government entities can file liens against tangible property, as well as bank accounts and other sources of income, in order to satisfy outstanding tax debt.

Can I Get a Grant to Pay Off My Credit Debt?

3:36 PM No comments

It's unlikely you will find a grant to pay off your credit card debt. As of 2011 there are no taxpayer-funded grants for paying off credit card debt, and no major foundations or nonprofit groups offering grants. The government can help indirectly by allowing you to eliminate credit card debt through bankruptcy, while nonprofit groups such as the Urban League and Salvation Army may offer workshops and classes on managing credit card debt.

Public and private money grants to pay off personal credit card debt are considered personal bailouts and viewed as an improper use of funds. People who are burdened by credit card debt can seek other grants that indirectly help credit card problems. Grants for housing, child care and employment are available from various organizations and can help your overall financial stability. By obtaining legitimate grants for other purposes you can free up more discretionary income to pay off credit card debt.

Some credit card companies issue what amount to grants by accepting less than the full amount owed on delinquent accounts. The SmartMoney website reports that banks will accept as little as 20 percent of the balance on a delinquent account, although the range is 20 to 70 percent. Even settling for half the amount owed offers a huge savings and may as effective as a grant.

Bankruptcy is a very effective bailout for credit card debt. Chapter 7, the simplest form of bankruptcy, can be completed in just a few months and completely eliminates credit card debt. The drawback is that it also ruins your credit, with the bankruptcy remaining on your credit report for 10 years. The Federal Trade Commission lists bankruptcy as the most extreme form of debt management and recommends that you avoid it if at all possible. However, some people see it as their only option after their credit card debt spirals out of control.

Debt management plans directed by nonprofit credit counselors are another option. The plans allow government-certified counselors to contact your credit card companies to discuss payment plans, including the waiving of some fees and finance charges. Enrollment in a debt management plan requires you to allow the counseling agency to take control of your monthly budget and make payments directly to credit card companies on your behalf. You will be charged a monthly management fee and must send the counseling agency a lump sum payment each month covering your minimum monthly payments. Local charitable organizations such as the United Way can direct you to nonprofit credit counseling in your area.

Can a Creditor Put a Lien on My House?

1:36 PM No comments

Placing a lien on real estate is an option for many unsecured creditors. Provided the debtor's state of residence allows the practice, a creditor can record a lien against the individual's home--securing the previously unsecured debt and making payment more likely.

Unless the creditor is the federal government, it must sue the consumer in his local court and obtain a civil judgment before it has permission to record a property lien. Once it has a civil judgment, it may file that judgment with the land records office in the debtor's county or the secretary of state's office. Doing so activates the lien.

A lien gives the creditor the power to foreclose on the consumer's home, but it must pay off any previously filed liens with the sale proceeds before it receives any funds it can put toward the delinquent debt. If the value of the liens against the property exceed that of the property itself, foreclosing isn't in the creditor's best financial interests.

Although a homeowner can sell his home without first paying off the judgment lien, he can only do so if the buyer pays him in cash. In this case the lien would remain with the property until the original judgment expired. If a buyer needs financing to purchase the home, the finance company will require that the seller pay off the lien before it will agree to the new mortgage loan.

Letter Explaining Credit Problems

1:20 PM No comments

Credit problems are generally a sore topic of discussion. However, if you are seeking a loan or an extension of new credit, your lender will need to clarify whether you are prepared to make timely monthly payments. A letter that describes your prior credit hurdles and the corrective actions that cleared your financial obstacles could explain derogatory marks on your credit report.

A credit letter should describe specific credit issues or challenges that impact your financial situation. Your credit issues may include past-due credit cards, late mortgage payments, medical bills, student loans or late auto loan payments. Your issues may involve a combination of credit problems that a well-written credit letter should mention.

The reasons for your credit problems may stem from a medical emergency that required a surgical procedure and caused a gap in your regular payroll earnings. You may have lost your job due to an employer that decided to downsize and the loss of income caused a financial hardship. Your savings or financial reserves may have been exhausted in an attempt to better manage your obligations. A credit letter should include an explanation of the circumstances that led to your credit problems.

Credit problems can have a huge impact on an individual's financial situation. As credit gets progressively worse, it might become more difficult to receive help. The impact of some credit problems could lead to the closure of revolving credit card accounts, foreclosure for severe mortgage delinquency, an automobile repossession, judgments or bankruptcy. A letter that details the hardships that you have endured as a result of credit problems might give the recipient a better understanding of your situation.

Credit help could provide assistance toward managing your debt. You can provide a letter that enables a credit counselor to review some options for improving your situation. In some cases, a credit counselor could help you prepare a letter that provides an overview of your credit problems.

A credit letter should explain the method used to restore your credit or provide your plan for resolving outstanding credit issues. Your credit letter should detail information that may better prepare you for future obligations, such as increased earnings or a financial cushion that covers several months of your expenses.

How to Trade in a Car That Is Under Bankruptcy

12:28 PM No comments

Chapter 13 bankruptcy allows people to incur debt during the process --- including trading in a car. The courts have little choice because Chapter 13 takes so long to complete: three to five years, with debtors sometimes needing credit for necessities like reliable transportation to get to work. Car payments on a trade-in are an additional debt not covered by the Chapter 13 repayment plan. This means you must make your regular monthly payment to the bankruptcy court and also make a separate payment for the trade in. If you fail to make the car payments the car will be repossessed.

Instructions

Find a car dealer willing to accept your car as a trade-in and arrange for financing despite your bankruptcy credit status. Because of the active bankruptcy you will not qualify for standard financing through a bank or credit union. So-called "bankruptcy financing" through a dealer is your only option.

Choose a car to buy from the dealer and get the terms in writing. Ideally the trade-in allowance should be enough to cover any remaining balance on the existing auto loan, if there is one. If the trade-in allowance is less than what is owed, consult your attorney or the bankruptcy trustee about surrendering the car to the lender to eliminate the debt. Then buy a car from the dealer with a new loan after receiving permission from the court.

Obtain a legal bankruptcy form called a "Motion To Incur Debt." Get the form from your bankruptcy attorney or a bankruptcy court clerk. Fill out the form to include required details of the trade in and financing, such as the anticipated monthly payment.

Submit the form to the bankruptcy court with copies to all your creditors listed in the bankruptcy. Creditors have a legal right to object to you taking on new credit during the bankruptcy, and a hearing before the bankruptcy judge will be scheduled if they do object. The car you wanted could be sold by the dealer in the interim.

Address issues raised by the court or the bankruptcy trustee. The trustee may have concerns about your ability to make the car payment while continuing with your court-ordered payment plan to creditors. Consult with your bankruptcy attorney or address the issues on your own. Once the trustee agrees with the purchase she will forward the motion to incur debt to the judge for his approval.

Take the signed motion to incur debt to the dealership and complete the transaction. Select another car if the one you wanted is no longer available.

How to Transfer Money Using a Credit Card into Your Bank Account

11:56 PM No comments

Money transfers used to be time consuming and expensive due to the detailed involvement of a bank having to wire money. If you're in a situation where you need to transfer money using a credit card into your bank account, you can transfer online, use an online service such as PayPal or an ATM machine.

Instructions

Visit your online banking website and inquire about transferring money using your credit card. Many online banks allow the customer to use a credit card to transfer funds into his or her account or make a deposit into another person's account.

Select the option to send money. You can either send money to yourself or to someone else.

Follow the prompts and use your credit card to complete the transaction.

Use www.paypal.com if your bank does not offer this service.

Set up a PayPal account and send yourself an invoice or money request. You will receive an email requesting money.

Open the email and follow the directions. At the payment screen, put in your credit card information and you will see the funds deposited in your PayPal account within seconds.

Choose to withdraw your PayPal money by requesting a wire transfer into your bank account. You must firm confirm your checking or savings account information. PayPal does this by wiring you a few cents. PayPal then asks how much it sent. Look at your online bank account statement to confirm this information.

Use the ATM to take out a cash advance on your credit card.

Place you credit card in the ATM. Use your PIN and withdraw cash from the machine.

Deposit the cash into any account you want.

Unsecured Debt Settlement Vs. Bankruptcy

12:24 AM No comments

Unsecured debts, such as medical bills and credit card debts, are not directly tied to your assets. Through debt settlement, an unsecured creditor accepts only a portion of the debt you owe as payment for the full balance. Bankruptcy either wipes away your obligation to your unsecured debts or requires you to pay them off via a payment plan. Which solution is best for you, however, depends upon your circumstances.

Debt settlement programs only apply to the creditor with which you negotiate the settlement. Not all creditors will agree to accept a settlement in lieu of payment in full. An unsecured debt settlement does not impact your secured assets, such as a mortgage or vehicle loan.

Bankruptcy is all-encompassing. Once you file for bankruptcy, the court notifies all your creditors, both secured and unsecured. Creditors have the option to deny you a settlement, but they cannot deny you bankruptcy's protection nor can they disregard court orders.

Both debt settlement and bankruptcy have a negative effect on your credit scores. Creditors report your settlement to the credit bureaus, and it appears within your credit history. Not only does settling a delinquent debt for less than you owe look bad to future lenders, it causes the debt to "update" on your credit report. Because your most recent activity has the greatest effect on your credit rating, updating a derogatory entry by settling it brings your credit score down. A record of the settlement can remain on your credit report for up to seven years.

Bankruptcy is one of the worst notations a credit report can have. Each individual's credit score suffers to a different degree after a bankruptcy, depending on the other information the credit report contains. In general, however, a bankruptcy notation is worse for your credit than settling a debt. According to the Fair Credit Reporting Act, the credit bureaus will report your bankruptcy for up to 10 years.

Your income and savings should help you determine whether debt settlement or bankruptcy is a wiser option. Do not expect your creditors to settle your debts for pennies on the dollar. If a creditor agrees to a settlement, it expects you to pay as much of the debt as possible. Typically, the older the debt, the less your creditor will accept.

Chapter 7 bankruptcy requirements vary by state, but, if you qualify, the court liquidates your assets--paying off as much of your debt as possible--before discharging your liability to your creditors. Chapter 13 bankruptcy requires you to repay your debts, but your payment plan is based on your income. Thus, if you do not have the income necessary to pay what your creditor demands, bankruptcy may be a wiser alternative.

Unsecured creditors cannot seize your secured assets, but the bankruptcy court can. Whether the bankruptcy court will seize your property depends on your state's exemptions and the type of bankruptcy you file. Consumers who own considerable assets yet only carry unsecured debt stand to lose their secured assets by filing for bankruptcy rather than negotiating a settlement.

Debt settlement also poses a potential for loss. Hiring a third-party company to negotiate your settlement rather than doing so yourself places you at risk, because debt settlement companies often charge high fees without guaranteeing results. If you choose to terminate your agreement, the company can still pursue you for unpaid fees, leaving you another unsecured creditor to deal with.

Can a Merchant Sue You for a Chargeback?

4:11 PM No comments

Consumers who dispute a credit card charge can open a file with their card issuer. When the credit card company rules in favor of the customer, the merchant for the disputed charge will be debited for funds already paid. This process is called a "chargeback." Despite the card company's finding in favor of the card holder, however, the card holder isn't entirely in the clear -- the merchant usually retains the right to sue.

When a credit card company finds ample cause to reverse a paid credit transaction -- reasons can range from outright fraud to simple processing errors -- the card holder's bank will debit the merchant's account for the amount in dispute. This chargeback usually follows a consumer-initiated investigation of a disputed transaction. Banks do not issue chargebacks lightly; in addition to fees, merchants with high chargeback rates (often more than 2 percent of total transactions) may have their merchant account limited or even terminated.

If a merchant disputes the chargeback, the merchant may file its own grievance process involving the customer's credit card company and sometimes the network that cleared the transaction, like Visa or MasterCard. It is possible the chargeback could be reversed, in which case the customer again is liable for the charge.

If the merchant's dispute is not successful, the merchant can sue the original customer. Simply winning a chargeback doesn't absolve the customer of any lawful debt he may owe to the merchant. If the merchant acted within the scope of law and honored its contractual obligations, the merchant can sue the customer for any loss of income or merchandise associated with the chargeback. In most states, the merchant can also sue to recover expenses and interest.

In addition to a lawsuit initiated by the merchant, the merchant could turn the matter over to a collections agency. The agency will then create a derogatory credit record and attempt to collect on the debt -- and such activity could result in the collector filing a lawsuit, and pursuing more aggressive methods of collection like garnishments and levies.

Do Debt Collectors Need a Signed Contract From the Lender in a Repo Lawsuit?

1:17 PM No comments

If you can no longer afford your car payments, losing the vehicle to repossession isn't always the end of your financial woes. You are legally responsible for paying off the loan balance you originally agreed to. If your lender is unable to sell your repossessed car for what you owe, it will pursue you for the difference between the sale price and your remaining debt. Leaving this deficiency unpaid often results in the lender turning the debt over to a collection agency for recovery. Collection agencies sometimes sue debtors who do not pay their debts voluntarily.

Should a collection agency sue you over an unpaid repossession deficiency, the burden of proof lies with the collector. Not only does the collection agency have to prove that you actually owe the debt but also that the company possesses the legal right to collect the debt on behalf of the lender. The collection agency must also demonstrate how it arrived at the amount it claims you owe.

If the collection agency has a copy of the contract you signed when you initially applied for the auto loan with your original lender, your signature serves as proof that the debt belongs to you. Not every collection agency has the documentation necessary to back up its case.

If you received the court summons notifying you of the collection agency's lawsuit yet chose to ignore the summons rather than filing an answer with the court and building your defense, the collection agency has the advantage. If you are not there to demand that the company back up its claims, the judge will not do so in your stead. The judge will instead assume that the collector's allegations are correct and sign off on a judgment against you by default. Thus, a debt collector does not need a signed contract proving your liability for the debt if you do not appear in court and contest that liability.

Collection agencies make a profit by purchasing nonperforming accounts for a low price and collecting the full balance. The lower the price a debt collector pays for a debt, the greater its potential for profit.

Lenders price debts based on how much documentation comes with the account. Naturally, if a lender devotes its time and resources to including the original signed contract, monthly account statements and other information with the debt it can charge the collection agency a higher price. In an effort to keep costs low, many collectors purchase "bare" accounts that carry no documentation whatsoever. If the collection agency purchased your unpaid repossession deficiency as a bare account, it will be unable to provide the court with your original signed contract upon request.

The lender's original contract containing your signature serves as sufficient proof of debt in most cases -- netting the collector a judgment. The only exception to this rule occurs if the repossession took place several years ago and the statute of limitations for collection lawsuits in your state has expired. If the statute of limitations has expired, your liability for the debt is irrelevant because the collection agency no longer has the legal right to recover the debt through a lawsuit. It can, however, continue requesting voluntary payments.

Allocation of Debts Among Beneficiaries

8:25 AM No comments

When an individual dies, one of the main questions his family member may have is who is responsible for his outstanding debts. Fortunately, debts may only be allocated to the individual's beneficiaries in certain circumstances.

Unlike assets, debts are not typically inherited by family members when an individual dies. If the deceased individual is the only person legally responsible for paying the debts, they may not get paid at all.

In order for a creditor to receive payment for a debt owed by the deceased, it must file a claim against the deceased individual's estate.

If the deceased individual lived in a community property state, such as California, her spouse may be held legally responsible for paying her debts--even if they are not in his name.

Any debts that were accrued under a joint account that the deceased held with another individual are automatically transferred to the surviving account holder. Whether or not the surviving account holder accrued the debts is irrelevant.

Collection agencies will often attempt to collect a deceased individual's debts from family members who are not legally obligated to pay.

How Does a Judgment I Have in Minnesota Work?

7:17 AM No comments

Like other states, Minnesota allows you to collect on unpaid debts by filing a judgment against the debtor. A judgment doesn't automatically produce the money; it may take a lot of work on your part to locate the debtor's assets and file a lien -- a claim on the assets -- that meets Minnesota law.

In Minnesota you can file for a judgment -- a court decision that someone owes you money -- in either district court or small claims court; the latter is known in Minnesota as a conciliation court. Conciliation courts allow you to file with minimal legal expenses, but only for debts under $7,500. If you win in conciliation court, you must have the judgment recorded with the district court before you can file a lien.

Once you win a judgment and transfer it to district court, you have the legal right to apply a lien to the debtor's property or to garnish his accounts or wages. The lien must be on specific property or bank accounts and the court won't find them for you. If you want to collect, you have to do the research; for example, you can go to the bank that handled any check transactions between you and the debtor to locate his account.

If you can't find any assets, you can apply to the district court for an order of disclosure. File the order with the court and give them the debtor's current home address. The court will mail the order to the debtor, directing him to provide a list of assets. If he refuses, or doesn't respond, you can file a court affidavit requiring him to appear in court and explain his failure to divulge the information.

Once you locate a bank account or identify an employer, you can request the court garnish the debtor's wages or place a levy on his bank account. If you find property, you can place a lien on it -- this doesn't force him to pay you, but it's usually impossible to sell property under a lien. Minnesota law does exempt some assets from judgment collection. You can't garnish needs-based government aid or the salary of someone who receives such aid, for instance.

Canada Credit Card Consolidation Ideas

11:53 AM No comments

The average Canadian adult had more than CDN $40,000 in household credit by the end of the third quarter of 2009, according to Bankruptcy Canada. The household credit includes credit cards, bank loans, and mortgages. Bankruptcy Canada pointed out that in the year 2000, each Canadian had approximately CDN $20,000 in debt, so the amount has doubled in less than a decade. If you are among those Canadians who are carrying a high amount of debt, and you have them spread out in different credit cards, you may want to consider consolidating your debt in order to save on interest payments and to help you manage your finances better (Reference 5).

This is a personal loan that allows you to consolidate all your credit card debt into one loan so you only pay one financial institution instead of making multiple payments. The debt consolidation loan may have an interest rate that is lower than that charged by your credit card companies, so it will help you reduce your interest payments and allow you to pay off your debts faster. Compare the interest rates offered by several financial institutions such as banks, Caisses populaires and credit unions before you choose a consolidation loan. To qualify, you must have an acceptable credit rating and sufficient income (Reference 1 and 2).

You can use the equity in your home to secure a credit line at a lower interest rate. You can apply for this product at financial institutions, and once approved, you can write a check against your credit line to pay off all your credit card debts. This line of credit will, however, require you to pledge your property or home as security, which may endanger your home if you fail to pay your loan (see Reference 3).

Some credit card companies offer a low-interest rate if you transfer your credit card debts to them. The catch, however, is that these balance transfers usually are only for a short period of time, sometimes just a few months, so you may be stuck with a higher rate if you can't pay in that time. But if you think you can pay off your debts during the introductory offer period, you will be able to save on interest payments. But before jumping the gun on the first offer, shop around for the balance transfer credit card that will best suit your financial situation (Reference 4).

You can take advantage of a debt management program being offered by a not-for-profit organization or a private company. If you decide to use one of these services, you have to authorize a counselor to negotiate with your credit card companies on your behalf. The organization will make special arrangements with them regarding your payments. Usually, you will have to make one regular payment to the organization, which in turn will divide the amounts among your creditors (Reference 2). Before choosing your credit counselor, call the Better Business Bureau to find out if there are complaints against the person or organization you plan to deal with (see Resources).

How to Obtain Lease Residuals

8:58 PM No comments

When you lease a vehicle, you reduce its value by using it over time. To calculate the loss of vehicle value during a lease term, vehicle lessors use residual value. Also known as lease-end value, residual value refers to the value of the vehicle at the end of the lease term. The lessor uses this value to determine the amount of payments you make each month and the amount you need to pay if you want to buy the vehicle at the end of the lease term. Residual values may vary from one lender to another.

Instructions

Check the Residual Value Guide, which is released by the Automotive Lease Guide (ALG), to determine the residual value forecast for the vehicle model you want. According to MSN Autos, most vehicle lessors use the ALG values as the standard when determining an appropriate residual value.

Approach several vehicle lessors to find information regarding financing. Specify the model and make of the vehicle, how long you intend to lease it and how much you plan to drive it. Usually, financing companies affiliated with just one vehicle manufacturer offer the highest residual values. Large banks sometimes offer similarly high residual values, according to MSN Autos.

Multiply the residual factor percentage by the price of the vehicle if you were to purchase it now. For example, if a $50,000 car has a residual value of 50 percent after three years, it will be worth $25,000 at the end of a three-year lease.

How Can I Report Harassing Credit Collection Calls?

8:38 PM No comments

Credit collection agencies sometimes use illegal tactics, such as repeatedly calling or threatening jail time over a debt, but you can report the agency to the Federal Trade Commission and the state attorney general's office. The Fair Debt Collection Practices Act forbids collection agencies from using abusive or harassing techniques to collect money. For example, a collection agency cannot call you repeatedly at work when told not to or call you repeatedly on the same day.

Instructions

Keep a log of dates and times the credit collectors called. Include conversation details and the agency's name.

Visit the Federal Trade Commission's website. You can file a complaint about the calls online or by calling the FTC.

Complete the online complaint form. Use the log for reference. Categorize the complaint under "Debt Collection - I am dissatisfied with the practices of a debt collector." Answer all questions about the creditor's identity, location and the calling abuse types. Provide any extra information you have. You can skip lines or sections if you do not know the information requested. Review the complaint a final time before filing.

Call the FTC at 877-382-4357 to report by phone. Have the log and the creditor's business name ready when calling.

Contact the state attorney's general office. Ask for instructions on how to file a complaint against a harassing collection agency. Complaint submission methods vary by state. Use the log for reference when making the complaint. Go to the National Association of Attorneys General website to view contact information for each attorney general by state.

How to Group Debt

5:07 PM No comments

As you accumulate more debt, it can become difficult to manage. If you have multiple obligations to numerous creditors, it can be difficult to keep track of payments and due dates. When this happens, you run the risk of becoming delinquent and harming your credit. One technique to avoid this is to group or categorize your debts. Grouping your debt will make it easier to track, maintain, reduce and eliminate.

Instructions

Compile a list of all your debts. List the creditor, the type of debt and the balance owed.

Group real estate debt together. This include mortgages and home equity loans.

Group auto loans together. These are separate because they are larger secured debts but not as large as real estate loans.

Place the unsecured debt together. This includes credit cards, personal loans and student loans. These are debts that have no collateral.

Arrange each group of debts from smallest to largest. The smaller debts are more likely to be paid off quicker. Total up the balances of each group so you know how much of each type of debt you owe.

Are You Responsible for Your Parents' Debt?

3:44 PM No comments

By the year 2020, according to the US Census Bureau, the population of 65 and older is projected to be over 54 million. As the general American population ages, many children will inherit their parents' savings and other will inherit their parents' debt. Who will pay for those debts is a question hanging over survivors' heads and, while you are not legally required to pay those debts, you do have responsibilities when your parents die.

If your parents passed on with unpaid bills such as credit cards, medical bills, or loans, you, according to MSN's Money Central, are not responsible for paying those bills. That said, as surviving family, you may hear from aggressive creditors pressuring you to pay. For the most part, you can ignore those calls or letters, with a few exceptions. If you co-signed a loan, for example, you are a joint account holder, say, in an auto or home loan, or if you held the power of attorney over your parents' holdings and freely spent their money, then you are obligated to pay their debts. For all else, you do not need to pay.

If your parents still owed on a house or a car, according to MSN's Money Central, you'll need to find a way to make those existing payments or face the possibility of losing the property. At this point, you will need to make a decision. You can either try and sell the property --- whether it is real estate such as a family home or an auto --- or try to find enough money within the estate to pay for these personal holdings. Selling-off your parents' house might be a painful decision but you've got to find a way to keep the accounts current, or risk having those holdings be taken away.

Death is a painful, sorrowful time, but, as a child, especially if you were the executor, you have some serious responsibilities, according to MSN's Money Central. If your parents were in debt, one of the first tasks is notifying any creditors and lending institutions of the death. With debt involved, these might be uncomfortable calls but they are necessary. You'll also have to think about paying any unpaid medical bills and, of course, the funeral. Settling those payments first will most likely take precedence over an old credit card bill. If you are an executor, you have the additional responsibility of cataloguing all debt and assets as well as finding tax information, banking statements, and other financial statements.

If you have a suspicion that your parents are living in debt, you can take some steps to prepare for the inevitable. According to MSN Money Central, consider having a conversation about burial wishes and, if you have siblings, discuss together how you will pay for funerals and burial services. Also look into financial solutions such as having your parents declare bankruptcy so as to settle debts prior to death. All of these steps are difficult and possibly painful to discuss with people you love, but they can save a lot of grief later when you should be grieving the memory of a parent you loved and not worrying about the financial mess left behind.

How Does Debt Consolidation Affect Your Credit?

7:48 PM No comments

Consumers that are considering debt consolidation should also be asking about the consequences of debt consolidation on their credit scores. By the time a consumer is considering consolidation, credit payments have been late or the consumer is behind by a month or more on payments. The negative effect of missing credit payments on a credit report is widely known. But consumers should also understand how debt consolidation can affect a credit score before signing on the dotted line.

One of the best ways to improve your credit score is to pay your credit debt on time, according to the Federal Reserve Bank website. When you consolidate your debt, you are paying off the balances of your high interest credit card accounts. That means you no longer have minimum payments due on those accounts. No minimum payments mean you are no longer having late payments applied against your credit score, and that improves your credit status by stopping the damage that late payments were doing.

In order to have a high credit score, you need a mix of installment loans and credit accounts, according to the Federal Reserve Bank website. Installment loans are any long-term loans you have with regularly monthly payments such as a mortgage or a car loan. Too many loans, or too many credit accounts, is a bad thing for your credit score. Once you have consolidated your debt, you can choose to cancel your newest credit accounts while keeping the older ones. The more established a credit account is, the more it helps your credit score. This will improve your credit history and balance the mix between installment loans and credit accounts.

Once you have used debt consolidation to pay off your credit accounts, you will have a chance to improve your credit by using your cards responsibly. Even when you have consolidated debt, having activity on your credit accounts that you can pay off each month will improve your credit score, according to Jason R. Rich writing on the Entrepreneur website. For example, set aside your food money each month but charge your groceries to your credit accounts. Then use the grocery money to pay the balance off. You will maintain your credit history without adding any new debt.

Debt consolidation should only be used as a tool to help your financial situation, according to Jenny McCune, writing on the Bankrate website. While consolidating debt has the potential to improve your credit score, it can also lower your score if you do not exercise self-control. If you begin using your credit cards again and run up your balances to the maximum levels, then you are adding debt on top of the debt you have already consolidated. Your debt ratio, which is the percentage of your debt to your income, will suffer and your credit score will drop.

What Do Debt Companies Do for You?

6:40 AM No comments

Debt companies offer financial relief for individuals with outstanding or delinquent debts. Two popular debt-help programs are debt consolidation loans (combining multiple debts into one loan) and debt management programs (lowering monthly payments to creditors). Consult with a financial advisor or credit counselor to evaluate the best option for you.

The focus for most debt companies is to lower monthly bills and combine debts into one payment. This provides immediate financial relief for the consumer. However, this may require a consolidation loan to transfer debt from multiple creditors to the debt company.

Debt companies work with creditors to decrease interest rates and overall debt via debt management plans. Ideally, the payment plan negotiated between the debt company and creditors will allow for faster payoff of the debt.

Since the debt company works with creditors, they will stop collection agencies from contacting the consumer directly.

When individuals use a debt company to negotiate with creditors, they usually have no further direct contact with the creditors. The debt company receives payment from the consumer and then disburses the money to individual creditors.

Reputable debt companies help individuals avoid bankruptcy through credit counseling and budgeting help in addition to debt consolidation or debt management.

Can I Be Sued for Walking Away From a Mortgage?

10:27 AM No comments

If your mortgage payments have become unmanageable, you may be thinking about simply walking away from your mortgage and abandoning your home instead of working with your mortgage lender to bring your account current. However, walking away from your mortgage can result in severe negative consequences, including a lawsuit initiated by your mortgage lender.

Walking away from your mortgage typically involves ignoring letters and phone calls from your mortgage lender, which demonstrates that you have no intention of bringing your account current. Ignoring your mortgage lender will typically prompt the lender to initiate foreclosure proceedings, usually after your mortgage has fallen two or more months behind. In a foreclosure, the mortgage lender takes possession of your home and sells it to recover a portion of your unpaid mortgage balance.

Mortgage lenders typically sell foreclosed homes at public auctions to the highest bidders. Although mortgage companies are required to sell foreclosed homes in a commercially reasonable manner, they are not required to demand a price sufficient to cover the balance of your loan or pay foreclosure costs such as attorney fees, court costs and auction fees. The sale price of your home may be substantially less than your account balance and foreclosure costs.

If your mortgage lender sells your home at a price that is not sufficient to pay off the mortgage balance and foreclosure expenses, the result is a deficiency. Although you no longer own your home after a foreclosure sale, you are responsible for paying any deficiency amount. If you do not voluntarily pay a deficiency, the lender may sue you for this amount in county or district court.

After a lender sues you for a foreclosure deficiency, the court can award a judgment in favor of the mortgage lender. A judgment affirms that you are legally responsible for the deficiency amount. In most states, the mortgage lender may then pursue recovery of the deficiency through garnishment of your wages and bank account balances, as well as through liquidation of your personal property, subject to your state's limitations and exemptions.

Welcome to our website credit and debt managementr.

Sunday, December 31, 2006

Definition

Time Line

Credit Score

Removing Judgments

Saturday, December 30, 2006

Statue of Limitations

Validation

Continued Collection Efforts

Facts

Considerations

Time Frame

Instructions

Friday, December 29, 2006

Develop a Strict Budget

Seek Credit Counseling

Bankruptcy

Instructions

Co-Signer Release

Refinance Student Loan

The Facts

Significance

Types

Time Frame

Considerations

Thursday, December 28, 2006

Obstacles

Chapter 7 Bankruptcy

Eligibility

Chapter 13 Bankruptcy

Legal Advice

Settlement Offers

Wednesday, December 27, 2006

Civil Actions

Stay

Discharge

Collection

Liens

Instructions

Debt Settlement

Tax Liability

Credit Consequences

Considerations

Tuesday, December 26, 2006

What is Wage Garnishment?

Process

Limititations

Stopping a Garnishment

Monday, December 25, 2006

Timeline

Notice

Status

Considerations

Canceled Debts

Tax Consequences

Exemptions and Exclusions

Other Provisions

Facts

Significance

Time Frame

Function

Warning

Sunday, December 24, 2006

Monitor Your Credit

Pay Bills on Time

Reduce Your Debt

Reduce Credit Inquiries

How a Garnishment Works

How Much Can Be Garnished

Claiming Exemptions

Considerations

Saturday, December 23, 2006

Talk to the Credit Card Company

Write to the Credit Card Company

Take Your Business Elsewhere

Contact the Regulatory Department

Experian

TransUnion

Equifax