How to Set Up a Payment Plan With a Debt Collector

A debt collector knows you wouldn't be speaking to them if you could simply pay off your debt. They're usually willing to set up a payment plan to lower your monthly payments or forgive part of your debt because they know they could risk getting even less if you file bankruptcy. If you offer enough, the collector might be willing to wipe your slate clean and withdraw negative information they've put on your credit report. Though settling a debt through negotiation appears on your credit report, it's still better than paying late or not paying at all.

Instructions

1

Determine what you can afford to pay. Before you speak with your debt collector, prioritize your bills, review your budget and determine what you can realistically pay. This is important because it prevents you from promising more than you can actually handle, and gives you a reference point when bargaining. Don't forget that some expenses, like rent and food, simply can't be avoided.

2

Get in touch with your collector. Answer the phone when the debt collector calls, or call the number provided in a written statement. Debt collectors can call you at home between 8 a.m. and 9 p.m., can call you at work if they don't have your home number and can even contact your relatives. It's tempting to just let the phone ring, but sometimes the hardest step is to pick it up and initiate the conversation.

3

Make a lump sum offer. Even if your collector makes an offer first, make an offer of your own to pay off the debt in full at a lower level. Give yourself room to negotiate by offering less than what you can actually pay, and as little as 40 to 60 percent of the total debt. The collector is more likely to agree to a lump sum payment than other collections, but might not accept your initial offer.

4

Request a lower monthly payment. If a lump sum offer cannot be negotiated, request a plan that lowers your monthly payment. This will probably extend the life of the debt, but can be worthwhile if the creditor agrees not to add additional interest. Another option is to request a temporary grace period where you don't have to make payments, which can be helpful if interest is not added to the debt during this period.

5

Get it in writing. If you do reach an agreement, inform the collector that you will not make a payment until you get the terms in writing. This protects both of you, and makes the agreement easier to enforce. If possible, record the phone conversation and take notes.

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How to Reduce a Home Equity Line of Credit

Home equity lines of credit can be used like credit cards. Credit is available when you need it -- but the easy availability can lead to excessive spending. The Federal Trade Commission reports that you should use home equity lines only for really important purposes, such as college tuition for your children or emergency medical expenses for which you are uninsured.

Instructions

1

Review the credit limit on your home equity line by checking your statement after it arrives in the mail. Or access your statement from the lender's website.

2

Decide how much you want to lower your home equity credit line. The line cannot be lower than your current balance on the account.

3

Call the customer service number on your home equity line statement. Tell the representative that you have reviewed your account and wish to lower the credit line. Tell her your requested new credit line.

4

Follow-up in writing by sending a letter. Send it to the address for the customer service department as listed on your statement.

5

Check your next billing statement to confirm that your request was granted. Send a second letter if the credit line was not reduced.

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How to Use a Line of Credit to Pay Off Your Mortgage

Using a line of credit to pay off your mortgage works like any other cross-application of credit. Depending on your lender, you can set up a direct transfer of balance or get funded and pay off the mortgage yourself.

Instructions

1

Confirm that the terms of your line of credit are advantageous in comparison to the terms of your mortgage. Consider most seriously interest rates and term of payment. In many cases, the line of credit terms will be a much worse deal than your mortgage.

2

Ask the lender for your line of credit if they arrange direct balance transfers. This means they pay your mortgage off directly and add the cost to the balance of your loan. Also ask what the fee for doing this is. Many lines of credit will incur balance transfer fees of up to 6 percent, which is a lot when it comes to a mortgage.

3

Choose direct funding if your line of credit lender won't directly transfer balances or charges too high a fee. Arrange to make a withdrawal of the balance on your mortgage. Depending on your line of credit, you will do this through a service check or via a direct deposit to a bank account you designate.

4

Wait for funding to hit your checking account, whether that funding comes from a direct deposit or the clearing of your service check.

5

Write a check out to your mortgage company or use automatic bill pay for the balance of your mortgage. If you can deliver this check in person, for example at a bank office, you may want to do so.

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A Personal Loan With a Bad Credit History

When a person takes out a loan, the lender will want some assurance the person will be paying him back. This is because, if the borrower does not pay the lender back, then the lender may lose money on the transaction. This can complicate taking out a personal loan for a person with a bad credit history -- a person who has a history of not paying loans back on time.

Bad Credit History

There term "bad credit" is relative. Credit is usually measured by credit score, a numerical grade issued by credit reporting agencies to borrowers that indicates their relative creditworthiness. All lenders have different standards for who they will lend to and under what conditions. While some lenders may not be willing to lend to a borrower with a bad score period, others will be willing to do so, although under special terms.

Collateral

There are two main types of loans: secured and unsecured. A secured loan is one in which the loan is backed up by collateral of approximately the same value as the loan. This collateral will be put up by the borrower as a form of security. If she defaults, then the lender is allowed to seize the collateral to compensate herself. Many people with bad credit will be required to put up collateral to get a personal loan.

Interest Rate

When a person has a bad credit rating, he can also expect to pay higher rates of interest on the loan's principal than people with better scores. This is because creditors will want to receive additional compensation for the risk they are running in issuing a person with poor credit a personal loan. To make the risk worth their while, lenders will charge risky lenders more money in interest payments.

Income & Assets

Credit score is not the only piece of data used by lenders in determining whether to lend to a person. Many creditors will also examine the person's income and assets. If the person is making a lot of money and has a large amount of savings or investments, then the lender may believe that the loan is likely to be paid back. Therefore, the lender may be willing to offer the loan at a lower interest rate than she would usually charge a borrower with bad credit.

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How to Reduce Credit Card Debt Responsibly

Smart, responsible decisions about paying credit cards can result in thousands of dollars in savings over a lifetime. Making only the minimum payment on credit cards can lead to a lifetime of debt. For example, the University of Illinois reports that paying $50 a month on a $3,000 balance at 18.9 percent interest would require you to make payments for 15 years and six months, with $6,279.85 in finance charges. But increasing the payment by just $10 a month to $60 would reduce the length of the payments by nearly half: eight years and four months, with finance charges reduced to $2,947.

Instructions

1

Make two lists of all your credit card accounts. On one list rank them by balance, from the highest to the lowest, and another list rank them by interest rate, from highest to lowest. Check your billing statements for the most recent balances and interest rates, or call your card company using the number on the back of the card.

2

Make larger monthly payments against the balances with the highest interest rates. Paying down those credit cards will significantly reduce finance charges. Always make more than the minimum payment on cards with the highest interest rates.

3

Apply for new credit cards with lower interest rates that offer balance transfers. Transfer large balances from your high-interest rates cards to the new cards. For example, some card companies may offer cards with no interest for a promotional period of six months or even a year. However, carefully read and evaluate offers. Missing a payment or exceeding your balance could void the interest-free promotional period and result in a higher interest rate than you have currently. Also, the interest rate at the end of the promotion could exceed your current rate. Call the card company before applying and ask detailed questions about balance-transfer fees and interest rates during and after the promotional period. Put away or cancel current credit cards after transferring balances to new cards.

4

Identify some cards on your list with smaller balances that you can pay in a lump sum or over just a few months. Strike a balance between making larger payments on high-interest cards and paying off cards with small balances. Commit to not carrying balances once you pay the cards off. Using the cards is fine, but manage your budget so that you can afford to pay new balances in full each month.

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Debt Relief & Cures

When you're in debt, you may feel like digging yourself out is an impossible task. However, there are several methods for eliminating debt -- which method you choose depends largely on how much debt you have and how you have been able to handle it up to this point. No matter which debt elimination method you choose, you must be completely committed to keeping your debt paid off to avoid ending up in the same situation down the road.

Debt Consolidation

For those who have multiple debt payments each month, a debt consolidation loan may help to alleviate some of the stress by bundling the debt under one loan. The loan pays off the current balances, allowing you to make a single monthly payment. However, although debt consolidation loans are often advertised at very low interest rates, those rates are usually reserved for those with extremely high credit scores. If you are having problems with debt, it's unlikely that you'll qualify for these rock-bottom rates. Check with both your bank and local credit unions to compare rates for the best deal.

Debt Management Plan

Debt management plans (DMPs) are reserved for those who have already been delinquent on payments to their debt. You may only take on a DMP if one has been recommended to you by a credit counselor. Under a DMP, your credit counselor will negotiate with your creditors for lower interest rates and/or lower payoff balances. Then, your counselor will create a timeline so that you know exactly how long it will take to pay off your balances. Instead of making payments to your creditors, you'll make payments to the credit counseling company. The Federal Trade Commission recommends using the Association of Independent Consumer Credit Counseling Agencies or the National Foundation of Credit Counseling websites to make sure your credit counseling company is reputable.

Bankruptcy

When you declare bankruptcy, your debts may be wiped out; however, your entire credit history will be scarred and may be erased. That means that you have to start from scratch with a big negative mark on your record. While this may be a "cure" for your debt, it could create other problems for you for the 10 years that the bankruptcy stays on your credit report. In addition to lenders, landlords and prospective hiring managers may be wary of pushing your application through if they check into your credit history. Before declaring bankruptcy, it's vital to explore all of your options with a credit counselor.

Considerations

You may find that the true cure for your debt is to take matters into your own hands by budgeting and doing your own negotiations. Create a budget by comparing your current expenses with your income, and see where you can cut back to contribute more to your debt each month. Also, you may be able to get a lower interest rate on your credit cards simply by asking. Collect any credit card offers you're receiving in the mail to get an idea of what kind of interest rates you might aim for, then call your current creditors and ask for a reduction. You may be able to get lower rates through this method than you would on a consolidation loan.

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How to Fight Old Debt Recovery

Debt collectors may attempt to collect on a debt regardless of how old it is. Because of this, it is possible to receive collection calls on a debt that is ten or even fifteen years old. Although debt collectors may attempt to recover a debt at any time, you may not still be legally liable for the amount they say you owe. It is important that you fight old debt recovery efforts rather than ignore them lest you be sued or suffer damage to your credit history.

Instructions

1

Call your state attorney general's office and ask what the statute of limitations for debt collection is in your state. The statute of limitations places a time limit on how long a debt collector has to seek legal recourse against you for the debt. If the statute of limitations has expired, you still technically owe the debt, but you are not legally obligated to pay it.

2

Pull your credit reports and review them to ensure that the collection agency is not reporting the old debt as a recent account. The Fair Credit Reporting Act states that a collection account can only appear on your credit history for 7 years following the last payment you made to the original creditor. If the debt in question first went delinquent more than 7 years ago, it should not appear on your credit report.

3

Notify the debt collector in writing that your state's statute of limitations has expired on the debt. The Fair Debt Collection Practices Act also gives you the right to demand that the debt collector not contact you again concerning the debt. If the debt collector is reporting the old debt on your credit report, you may include in your letter that doing so is against the law and if the notation is not promptly removed, you will file a lawsuit for a violation of the FCRA.

4

Send a letter to each credit bureau notifying it of the inaccurate report if the account does appear on your credit report and the debt collector does not promptly remove it. Request a full investigation into the item. The FCRA gives the credit bureaus 30 days to investigate disputes and notify consumers of the results.

5

File a lawsuit against the debt collector if it validates the accuracy of the report with the credit bureaus. Usually just filing the lawsuit will be enough to convince the debt collector that it is in its best interest to remove the illegal notation from your credit report.

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Can Bank Accounts Be Frozen Over Medical Bills?

Medical bills are an unsecured debt, just like credit cards or personal loans. If you don't pay them, or attempt to work out payment terms with the person or organization that you owe the money to, they will probably turn your account over to a debt collector. Debt collectors typically follow a process to give them the best chance to collect the debt, which may eventually end with frozen bank accounts.

In House Collections

The collections process with credit card and other debt starts with letters and phone calls from the collections department of the creditor. The process works much the same way with medical bills. You'll begin to get mailed statements and letters requesting payment of the bill. Phone calls will probably start about this time, as well. Most communication at this time is from the original doctor's office, and they are usually pretty civil in their communications.

Collections Agency Contact

If you don't pay during the in-house collections process, then the creditor can transfer, or sell your account to an outside collection service. Many times, these companies stand to make a considerable amount of money by collecting anything on the debt at all, so they can be very aggressive. Phone calls will usually become more frequent, and the collectors will become more aggressive and demanding on the phone and by mail.

Lawsuit

Medical bill collectors can file a lawsuit, just like any other creditor can. There's no definite time frame for a creditor to file a lawsuit, and you may never be sued, but it's an option. If you're sued, the sheriff will bring a summons to you and deliver it personally. This summons will have a court date listed. It's important that you attend court to answer the suit, and you might need to file a response in advance. The staff at the courthouse can help you with this process. If you miss your court date, you'll lose the lawsuit by default.

Judgement

If you legitimately owe the debt, you'll probably lose the lawsuit. The judge may encourage you and the creditor to work out a settlement. If you can't, the judge may issue a judgement against you. Once this judgement is in place, the creditor can enforce the judgement, and seek garnishment of your wages, if that's legal in your state. The creditor may be able to place a lien against your home, or other property that you own. You may have an attachment filed on your bank account, freezing it so that you can't access your money. None of this can happen until a creditor wins a lawsuit in court, and a judge orders this as part of the judgement.

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Do You Have to Put All Unsecured Debt Into Debt Management or Can You Choose?

Deciding to participate in a credit counselor's debt management plan is a prudent step in the right direction toward financial stability. Although it's tempting to consider keeping one credit card to use in case of emergencies, the likelihood of the agency approving that course of action is slim. However, you may be allowed to keep a corporate card if losing the card materially affects your ability to work.

The Debt Management Plan

The debt management plan allows a struggling borrower to negotiate better terms with his lenders using the resources of a credit counseling agency. The lenders agree to the new terms, which often include reduced or eliminated interest rates, provided that the borrower agrees to close the credit line and include all eligible lines of credit in the debt repayment plan. In this way, the borrower reassures the lender that it's being treated fairly.

The Corporate Card Exception

Certain counselors allow a corporate-sponsored credit line to remain open if the borrower must use it for work purposes. This is only permitted if the card's balance is paid in full every month and the balance is 100 percent reimbursable to the borrower by her employer. Even with this caveat, it may be difficult to find a counselor that agrees to leave it out of the debt management plan. Simply not including the card on the borrower's list of debts isn't an option, as the counseling agency may request a credit report when she applies for the debt management plan.

Violating the Rules

If the borrower violates the debt management plan's rules, the counselor has the right to kick the borrower out of the plan. If the borrower decides on his own to go off the plan because he needs the credit, the borrower should prepare for stiff rate hikes and undesirable terms on the old cards. If the borrower wants to establish a new line of credit, he should first speak with his credit counselor to determine the best course of action.

Completing the Plan

Once the borrower has made all scheduled debt management plan payments, the borrower is released from the plan. It's up to the creditor whether or not an account can be reopened. Successful completion of a debt management plan goes a long way toward improving credit, especially if it's been a number of years since the borrower's last delinquent payment. At that point, the borrower can usually open a new credit card account; hopefully, she'll have learned from the experience and will monitor her finances more closely in the future.

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How Long Does it Take to Switch My Student Loan Payments From Standard to Income Contingent?

One way to reduce the monthly payment on your student loans is to switch to a different repayment plan. The income contingent repayment plan usually caps your monthly payments at 20 percent of your discretionary income, based on last year's tax return. If your family is close to the poverty level, you will have little discretionary income and very low payments. However, the process of switching repayment plans is not instant.

Timeframe

Most loan servicing companies will take less than two months to switch you from a standard repayment plan to ICR, although the exact length of time will vary depending on the company. The reason the process can take so long is because ICR requires proof of income to calculate the monthly payments. You will need to send in forms for the lender to process manually and calculate your payment. Depending on how close you are to your due date when you submit your application, you could have to make up to two more regular payments before your payments under ICR begin.

Expediting the Process

Your lender needs to have a copy of your most recent tax return to calculate your payment amount under ICR. The process will likely go faster if you can provide a signed copy of your tax return with your application for the repayment plan. For example, Sallie Mae takes seven to 10 days to process an application with a signed tax return, but up to 30 days to process an application without a tax return.

Making Payments

Make your regularly scheduled standard payments until you receive notification from the lender that your payment amount has changed. If you have a Direct Loan serviced by the Department of Education, your initial payment amount under ICR will be the accrued interest for the month. The payment will adjust after the Department of Education processes your tax return to calculate the payment based on your income. If you cannot afford payments while you wait for the payment plan to switch, apply for a forbearance. However, this might take almost as long to go through as your repayment plan application.

Tips

The sooner you apply for ICR, the sooner your monthly payments will decrease. If you anticipate that you will not be able to afford standard repayments, put in an application for ICR right away. When you apply during the grace period on your loans, you might be able to complete the switch before your first payment is even due. If a standard payment is due and you cannot afford it, call your lender and explain the situation to see if the lender can help you delay the payment without damaging your credit score or incurring late fees.

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Tips to Get Out of Debt Fast

Debt can easily and quickly overpower a family's budget. While it is easy to get into debt, it can be hard to get out of it. With a combination of discipline, budgeting and planning, a family can get out of debt and get back on the road to financial stability. Not every method will work for every family. Each family should tailor debt reduction tips to fit their financial needs.

Reduce Expenses

The first and most important step in the debt reduction process is to reduce your overall expenses. Review your checking account statements for the last few months. Identify ways to reduce spending. Bundle utilities, such as telephone, internet and cable into one bill to reduce costs. Turn off unnecessary features, such as movie channels on your TV or internet on your cell phone. Ask yourself before you purchase something: Is this a want or a need? Shop for groceries instead of eating out. When shopping for groceries, use coupons and purchase sale items. Simply restructuring the way you shop could save you a lot of money.

Avoid New Debt

Stop all new debt accumulation. Place your credit cards in a desk drawer and use cash for purchases. Stop spending once you have run out of cash. Make a vow to yourself and to your family that you will not procure any new debt until you have completed the debt reduction process.

Increase Income

Take on extra shifts at your job or get a second job to quickly earn more money for debt repayment. Sell unused household items in a garage sale. Find ways in your neighborhood to make extra money by babysitting or doing basic household or car repairs for neighbors.

Budget

Create a family budget. Use the last few months' checking account statements to create a workable budget for your family. Categorize and monitor your spending. Funnel any funds saved to debt reduction. Request input from family members when making the budget. The more input from the family, the more likely the family is to join you in the debt reduction process.

Repayment Plan

There are two different methods of debt repayment. In both, the debtor needs to list all debts to be repaid. With each debt, he lists the amount owed, the monthly payment and the interest rate. One method recommends paying down the debt with the highest interest rate first, while making the minimum payments on all other debts. Once it is paid in full, tackle the next lowest interest rate debt and so on.

A second method is known as the snowball method. Touted by Dave Ramsey, a financial expert, the theory is that by quickly paying off a small debt, the debtor has motivation to continue the process which makes full debt repayment much more likely. Look at the debts listed. Tackle the debt with the smallest monthly payment first with extra payments, while paying the minimum payment on all other debts. Once it is paid in full, continue paying that same amount on the next smallest monthly payment debt, and continue to snowball the payments until all debts are paid in full.

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What Effect Does Being a Cosigner Have on My Credit Report?

In some situations, a cosigner may be required in order to approve an application for a loan or line of credit. You may need a cosigner if you do not have established credit that would allow you to qualify for a loan. You may also be asked to act as a cosigner for someone else if you have good credit. Either way, being a cosigner can have both positive and negative effects on your credit.

Negative Credit Marks

One major factor in making the decision of whether you should agree to become a cosigner is the possibility that being a cosigner could negatively impact your personal credit report. You should carefully consider the character of anyone you cosign with, notes Bankrate.com. Should you cosign for someone who is not responsible about making regularly scheduled payments on time, late payments and nonpayment may be reported on your credit report, even if you are not directly responsible for the loan payments. Over time, these negative reports can lower your credit score and affect your ability to apply for credit in the future.

Credit Availability

Cosigning a loan or line of credit for someone else can also affect your own debt ratio. If you attempt to refinance a loan or apply for new credit loan in your name, you could run into complications when the bank analyzes your debt levels relative to your income. Since any loan you cosign appears on your credit report, the payment amount may be automatically included in your debt ratio. If your debt ratio is too high, you may not qualify for new credit unless you can provide canceled checks or other proof that you are not personally responsible for the loan payments.

Taking Over Payments

If you do choose to cosign a loan for someone else, you should consider whether you would be able to afford the loan payments if the main borrower is unable to fulfill the financial obligations. Even when you take care to cosign only for someone you consider to be financially responsible, unforeseen events like job loss or injury can render anyone incapable of meeting financial responsibilities. In order to protect your own credit rating, it may become necessary to take over payments yourself until your cosigner is able to recompense you.

Building Credit

Cosigning a loan or credit card can also have positive effects on your credit report. Whether you already have good credit, or you need to build credit in order to get your scores up, cosigning can sometime help. Choosing a cosigner with a solid credit history and good credit scores can help boost your own credit rating when you make your payments on time for a car loan, student loan or credit card, according to Experian.

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How to Negotiate a Bank Payoff

A good step toward becoming debt-free is to reduce your interest payments by negotiating the payoff of your bank accounts. Perhaps you are trying to pay off your mortgage or car or other lines of credit. Maybe you are receiving a lump sum payment to satisfy this debt, losing a job or will be experiencing a reduction in income or facing a divorce and want to settle your bank account as a means of reducing your debt load. You can negotiate with your bank directly or seek the assistance of professional debt counselors to do this on your behalf.

Instructions

1




Compute the possible payoff figure.

Review your current balance. Use a finance calculator to compute payoff figures that you may be able to use as part of the negotiation process.

2

Contact your banker and ask for a reduced payoff figure for paying off an account in a lump sum. If the figure is higher than you calculated, discuss another amount and explain the circumstances surrounding the request, i.e., you are losing your job and want to reduce or payoff all current debts. Remember that a creditor does not have to negotiate a settlement or early payoff of a legitimate debt, but most are willing if they can receive a lump sum payment. Obtain the quote in writing and the due date.

3




When making lump sum payments on debt, make sure to pay the one with the highest interest rate first.

Complete the application, form or other paperwork the bank requires for paying off your reduced accounts. Have your funds available at the agreed-upon settlement or payoff date.

4




Credit counseling is available to help with debt reduction.

Contact a Credit Counseling Agency should you need assistance with this process. The nonprofit counseling agencies cost much less than for-profits.

According to Bank of America's website, there are differences between debt management and debt settlement companies:

Debt Management Agency characteristics generally include the following: nonprofit status, they provide professional credit counselors for financial education, many agencies are approved through HUD to offer mortgage counseling and can enable clients to pay off entire balances within five years and creditors are provided to work with accredited debt management agencies to negotiate payment arrangements.

Debt settlement company characteristics include: for-profit status, charge fees up to 15 percent of total balances, they offer little or no financial education and accounts are often allowed to fall further behind or be written off before a settlement is finally negotiated. It is possible that your credit may be negatively impacted for up to seven to 10 years and you may owe additional taxes if they do work out a settlement and, lastly, creditors often refer customers working with debt settlement agencies to their attorneys, who may initiate legal proceedings.

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How to Remove Negative Information From a Credit Report

If you have negative information on your credit report, you know that it makes it harder to get a mortgage or other types of loans. You will probably have to pay higher interest costs on any money you borrow, including on credit cards. Don't let negative information cost you money. Identify that negative information, get if off your report and start replacing it with favorable information so you can enjoy the advantages of a good credit report.

Instructions

1

Get your credit reports and identify the negative information. According to Bankrate.com, (See Reference 1) you can get reports by the three major bureaus--TransUnion, Equifax and Experian. All US consumers are allowed one free report each year from all three bureaus or consumers can turn to sites like Mycreditreport.com or FreeScore.com (See Resources). With the reports in hand, locate the negative information.

2

Contact the credit bureaus in writing to dispute false negative information. Make sure you attach proof of payment or other information to back up your claims. Contact your lenders or creditors for additional documentation or help if necessary. According to Bankrate.com, the credit bureaus have 30 days to investigate after you complain. They must remove any information proven false. (See Reference 1)

3

Ask the credit bureaus to also remove negative information that has expired. According to Jane Bryant Quinn, in "Making the Most of Your money Now," (See Reference 2) most negative information expires after 7 years.

4

Don't waste time with credit repair companies. Jane Bryant Quinn states that no one can legally remove true, current information, and you can remove false reports yourself. For difficult disputes with creditors, she suggests finding a lawyer specializing in credit cases through the National Association of Consumer Advocates or NACA (See Resources for link).

5




Use credit responsibly to replace bad credit with good.

Replace negative information with positive information over time by practicing better financial management. Make a plan to live below your means and pay all your bills on time. If necessary, call your lenders or collections bureaus to negotiate terms you can fulfill. Bankrate.com suggests starting a savings account to show your financial stability (See Reference 1). After you have removed mistakes from your credit report, use credit responsibly and replace negative reports with positive information over time.

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How to Pay Off Bills and Credit Card Debt

A large amount of debt and overdue bills can be overwhelming, especially if you are struggling to make minimum payments each month. However it is possible to pay off your bills and your credit card debt. It is essential to create a plan that will pay off your debts and follow a budget if you want to succeed. The budget will help you find extra money and track your expenses. The only way to stop the debt cycle is to be in control of your money.

Instructions

1

List all of your credit cards and unpaid bills, the total amount you owe and the minimum monthly payment on a piece of paper. Order the list from the smallest amount you owe to the largest amount you owe.

2

Create a budget by listing your income and your expenses. This should include things such as your house payment, monthly utility bills, your minimum monthly credit card payments and entertainment categories such as eating out, shopping and fun money. Track your money by writing down every purchase for a month to see where you are spending your money. This will give you a good picture of which areas you can cut. Then make the adjustments and cuts necessary to find more money to put toward paying your bills each month. Your expenses need to be less than your income to make this work. If they are not, you need cut your expenses. Begin by cutting things in your fun categories.

3

Find extra money in your budget to put toward your unpaid bills and credit card debt. The more money you find the more quickly you will pay off your debt. Making sacrifices now will benefit you in the future. Consider canceling your gym membership and cable TV and lowering your cell phone plan to find the extra money. Groceries and eating out can usually be cut.

4

Put all of the extra money toward your smallest debt until it is paid off, while continuing to make minimum monthly payments on your other debt. Move on to the next debt on your list and add the money you were paying on the first debt to the minimum you were paying on it. Continue doing this until your debts are completely paid off.

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Common Debt Traps

Every day, people are bombarded by messages from banks, consultants and private businesses promising to help reduce their debt. While these promises may sound attractive on the surface, many are indeed debt traps that can drag your credit rating down and add more debt to your financial burden. Other debt traps result from poor choices people make for themselves. Know how to avoid debt traps by being an informed consumer.

Low/No Interest Rate Credit Cards

Banks actively send solicitations by mail, e-mail, phone call and cell text message promising low or no interest when you open a new credit card account. If you have little or no debt, it might come in handy to have a low rate credit card for emergencies. If you already have credit card debt, however, these offers can be dangerous. These cards usually carry stiff penalties. The attractive initial offer becomes null and void with the first late payment or overage, leaving you with a very high interest rate that is difficult to reduce later.

The Balance Transfer Game

Many credit card offers entice you to transfer balances from your higher rate cards to a new lower rate one for a set period. This initial rate also disappears with your first late payment or overage. Some people are successful with the balance transfer game, keeping these cards paid up through the low interest period, then transferring the remaining balance to yet another low interest card later. However, if you aren't able to adhere to the restrictions, you could wind up in a bigger debt trap by accepting such an offer.

Upside-Down Car Notes

Many car dealerships offer tempting deals to help move new models off their lots while offering you a "top value" trade-in incentive. However, if you're still making payments on the car you have and are "upside down," owing more than it's worth, understand that the dealership will calculate the difference between what they offer you for your car and what you still owe on the car note. They'll then add that to the price tag of your new car, making you even more upside down than you were before.

Shopping the Sales on Credit

Shopping the clearance sales on anything from clothes to housewares is fun for the thrifty shopper. However, if you're using a credit card to shop the sales, unless you play to pay it off in a month, that top or the new towels you picked up for 75 percent off are now racking up 25 percent interest every month until you pay in full, turning that great sale into a big debt trap.

Contracting with a Consolidation Service

Some debt consolidation services promise to work with your creditors on your behalf to lower your interest rates and your monthly pay-out and, in turn, improve your credit rating. Many of these services, however, can change the terms of your plan if the creditors' terms change, while others may require sizeable set-up fees before allowing you to enter the program. Use caution when entering one of these programs as they can put you into further debt than you were before you started.

Payday Loans

Your bank account may be running short of funds between paydays, or you may have an emergency occur and you need quick money to tide you over until you get paid again. Companies offering "payday loans" prey on people who fall into this situation, charging what amounts to 200 to 400 percent interest on such loans. Even using this service one time can throw you into a debt trap from which it'll be hard to recover.

First Credit Cards for College Students

Many banks and other creditors craft special offers for college students. Banks encourage students to get off to a good start and to build their credit ratings by securing their first credit cards. These students don't have credit ratings established yet that enable them to qualify for special rates, so these first cards often have annual and initiation fees, sometimes as much as $200 or $300, charged as soon as the account is opened. This drastically reduces the available credit, putting the student in a debt trap from his first day as a credit card holder.

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How to Write a Free Debt Settlement Letter Sample

Writing a debt settlement letter can free you of your debt situation and correct your credit rating when negotiated properly. These free ideas will help you write a proper debt settlement letter sample.

Instructions

1

Write in your name, address, and zip code followed by today's date at the top.

2

Put the collectors name, address, and zip below followed by your account number for reference.

3

Address the letter to the person most cooperative by phone if you can.

4

Explain or reiterate your previous debt situation and your current resolutions. List your debt dollar amount and any improvement to ability to pay such as new job or source of income.

5

Write your proposed debt settlement amount and your terms. Make sure to include maximum amount you are free to pay and only when you recieve letter agreeing to change your credit terms.

6

Write your name, signature, and current date followed below with your printed name and printed date.

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Am I Responsible for Marital Debts That I Am Not the Co-Signer on in Colorado?

Colorado's statutes include an antiquated law, on the books since the late 19th century, that makes a husband responsible for his wife's separate premarital debt once they purchase property together. But according to Andrew Oh-Willeke, a Denver attorney, the law has never been called into play, and one spouse is not usually liable for the separate debts of the other if he didn't co-sign for them. Loopholes exist, however.

Creditors

If your spouse runs up exorbitant credit card debt in his own name, and you own property together, his creditor can place a lien against the property if he doesn't pay, even though you own half of it. The creditor can't pursue you personally for the debt, it can't garnish your wages and it can't seize bank accounts in your sole name, but it can get a judgment against any property you co-own.

Bankruptcy

If your spouse files for bankruptcy in Colorado, it usually has no effect on you. If debts are in her name alone, and if she discharges them in bankruptcy, her creditors can't come after you for payment instead because you're married. Co-signed debts are an exception, however. If you co-sign on an account with her and she discharges her responsibility for it in bankruptcy, the creditor can then look to you for payment.

Divorce Court

As long as you're married, you have no responsibility for your spouse's debts, except for these loopholes. But that changes in the event of a divorce. Colorado is an "equitable distribution" state. This means that both of you are responsible for all debts contracted for after the day you got married, no matter whose name they might be in. When a marriage ends, the court allocates all this marital debt between the spouses for payment. So although the law bars a creditor from coming after you for debts in your spouse's separate name, if you part ways, a judge can assign the debt to you anyway. Because Colorado is an equitable distribution state, a judge can consider which of you signed for or ran up the debt in the first place, but the law doesn't obligate him to do this. He can assign more debt to a spouse that earns more, even if the spouse didn't co-sign for the accounts.

Tips

Colorado has a law called the "family car doctrine." If your spouse causes a major collision that results in financial liability and a judgment is taken against him, you might be jointly responsible for that judgment. It's not something that you would co-sign for or voluntarily agree to pay, but you would be partially responsible for it anyway.

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Do You Have to Pay Back a Charge-off From Creditors?

If you have an account that's been charged-off, it doesn't mean that you don't owe the debt; it only means that the lender now considers your loan a business expense instead of an asset. Charged-off accounts are usually turned over to collection agencies, which then will contact you repeatedly for repayment. Having a permanent charged-off account damages credit severely, so making good will keep your score respectable.

Instructions

1

Call the lender or collector and ask for a debt validation letter. The debt validation letter will contain the lender name, the amount you owe, contact information and instructions on how to proceed if you don't think you owe the debt.

2

Review the debt validation letter and contact the collector if you owe the debt. If you don't owe the debt, follow the instructions on the letter to resolve the dispute.

3

Work out a repayment plan with the collector. Be polite, brief, firm and honest. Tell the representative how much you can afford to repay; you may be surprised at how flexible a repayment plan can be. The collector should send you a written confirmation of the payment arrangement.

4

Contact the Federal Trade Commission if the collector violates the Fair Debt Collection Practices Act. The collector may not threaten or harass you repeatedly. It may only call you at certain times and not at your office if you request it.

5

Repay the debt per the collection agreement. Do not default; the collector has the right to take you to court. If the collector wins in court, it may garnish your bank account or wages.

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The Best Credit Repair

One mishap can destroy your credit rating and stop you from getting a mortgage, credit card or auto loan. But there are ways to quickly repair your credit and achieve an A-plus credit rating. With any credit repair strategy, patience and effort are key to success. You can't add 200 points to your credit score in days or weeks, but you can reverse a bad rating in as little as six months to one year.

Don't Ignore Reporting Errors

One mistake on your credit report can decrease your personal rating, and some lenders won't approve you for a loan. But you can avoid this hassle by checking your report once or twice a year and disputing errors---regardless of how minor they may seem. Order reports directly from the credit bureaus, or request an online report from annualcreditreport.com. Everyone's entitled to one free report a year.

Pay Your Bills

Along with correcting major and minor reporting errors, it's imperative that you pay your creditors on time---every month. Missing payments or sending late payments can quickly reduce your FICO score, and it isn't always easy to recoup these points. Maintain a high score by signing up for automatic bill pay or mailing payments at least seven days before their due date.

Get Out of Debt

Maxing out your credit cards and carrying high credit card balances are detrimental to your credit score. To repair your credit, stop using it for purchases and pay down your balances. Use personal savings to eliminate debt, or take advantage of your home's equity and use this money to reduce high balances.

Apply for a Secured Credit Card

You need credit to have a high credit score. If you're looking to repair bad credit, you'll need to open a line of credit and maintain it. Since credit card companies and other lenders are less likely to approve your application, contact banks and inquire about secured credit cards. Pay your security deposit and begin using the card. Use the card for emergencies and pay off the balance every month.

Stop Applying for New Credit

Credit inquiries also reduce your score, so if you want to repair bad credit stop applying for new lines of credit. Inquiries appear on your report, and they remain for up to two years. In addition, each inquiry knocks points off your score. There's nothing wrong with seeking credit for an auto loan or mortgage. However, excessive inquiries are enough to severely damage your credit and impede credit repair efforts.

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How to Calculate an Outstanding Balance

Calculating the outstanding balance on a loan is necessary for those who are trying to understand how much more principal they need to pay on the loan before it is paid off. When calculating the outstanding balance, you do not need to factor in the amount of interest paid or the amount of interest that will be paid in the future. The outstanding balance refers to principal only.

Instructions

1

Write down the initial amount of the loan. For example, if you borrowed $10,000 to buy a car, write "$10,000."

2

Write down the amount of money you have paid toward the principal of the loan. For example, if you have paid $2,755 in principal, write "$2,755."

3

Subtract the number in Step 2 from the number in Step 1. For example, if you subtract $2,755 from $10,000, you would get $7,245. This means that $7,245 is your outstanding balance.

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Wisconsin Statute of Limitations for Debt Collection

Collection agencies sometimes buy old debts for a fraction of their value in hope that they can persuade debtors to pay, or settle, the account. However, if a debt is past the statute of limitations, and the collector tries to file a lawsuit, you can ask the judge to dismiss the case.

Types

Wisconsin law sets the statute of limitations on collecting most consumer debt, such as credit cards and written contracts, at six years. If a creditor does get a judgment against you, it has 20 years during which it can pursue you for the debt.

Solution

Never agree to pay a debt just because a bill collector calls and says that you owe it. If you do this, you could possibly restart the statute of limitations on the debt. Instead, invoke your rights under the federal Fair Debt Collections Practices Act (FDCPA) and send the bill collector a debt validation letter that requests information about the debt.

Misconceptions

The statute of limitations on filing a lawsuit or collecting a judgment is different from credit reporting. In Wisconsin, even though the statute of limitations on suing someone to collect a debt is six years, the debt can remain on your credit report for up to seven years.

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The Way to Be Debt Free

Consumers struggling to make bill payments, find a home loan or those facing foreclosure can feel as if they will never be able to get free from the crushing weight of debt payments. While getting out of debt requires planning and discipline, there is nothing that prevents you from developing your own debt payment plan and sticking to it.

Finances

To become debt-free, you must first have a good understanding of your financial position. You should gather all your financial information together and carefully determine how much you owe and how much money you have to spend. Only by knowing exactly what your obligations are and what funds you have available to pay your debt can you get a better understanding of the tactics you will need to employ to become debt-free.

Habits

A key part to understanding your debt is knowing what your spending habits are. The only way to make money is to either increase the amount of money coming in or decrease the amount of money going out. If you can't, for example, get a new job with a higher salary, you can effectively increase your salary by spending less. Determine where your money goes every month and how much of that you can reduce by saving or cutting back on discretionary spending.

Payments

Far too many borrowers get by every month simply by paying the minimum monthly payments on their credit card or other loan obligations. Paying only the minimum amount required each month will leave you with less money available in the long run. Only by paying more than the minimum required amounts can you get out of debt sooner and have more cash in your pocket.

Payment Strategy

"The Motley Fool" recommends consumers pay off the debt with the highest amount of interest first. For example, if you have three credit cards, you should make the minimum monthly payments on the two cards with the lowest interest rates and use the rest of your discretionary funds to pay off the highest interest rate card first. Once you have one debt paid off, you can then use the additional money to address the next highest debt and so on.

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What Is the Best Way to Eliminate Debt?

Dealing with large amounts of debt can be stressful. Debt takes a toll not only on your consumer credit file, but also on your wallet. You lose money every time the majority of your minimum monthly payment goes toward interest instead of principle. When eliminating debt, start with a plan of action and continue your efforts until you are debt free.

Interest Rates

One of the best ways to eliminate debt is to pay off higher interest credit accounts first. Financial expert Suze Orman suggests putting your credit accounts in descending order from highest to lowest interest rate and paying off your debts accordingly. As you pay down one account, make payments on your remaining accounts. After you completely pay off a card, apply the money you normally would pay toward that account to your next account. Continue this pattern until you are debt free.

Debt-to-Income Ratio

The best indicator of how well your debt reduction efforts are progressing is the rate at which your debt-to-income ratio is shrinking. Debt-to-income ratio is a comparison between the amount of money coming into a household and the amount going out for debt payments. To calculate your debt-to-income ratio, add the total amount of your debt. Divide this result by your monthly income. As you start the debt repayment process, your debt-to-income may reach as high as 15 to 20, which is least favorable; however, as you pay down debts, your debt-to-income ratio could dip as low as 15 percent or less, which is the most favorable.

Debt Relief Programs

Credit counselors and debt management firms offer numerous programs to help debtors climb out of debt. If debt consolidation or loan modification is not right for you, speak to a credit counselor about negotiating a lower interest rate, so more of your debt payments go toward principal, not just interest. The National Foundation for Credit Counseling estimates credit counseling fees at $50 for a set-up fee and $25 for a monthly service fee.

Debt Settlement

If you cannot budget a way to repay your debts, enter into a debt settlement agreement with your creditors. Debt settlement offers a legal way to settle debts at 20 to 90 percent of their original value. Creditors typically do not accept debt settlement offers for accounts that are less than 90 days old. When negotiating, start low and work your way to a settlement offer you can reasonably afford to pay. One of the consequences of debt settlement is a drop in credit score. Barry Paperno, consumer operations manager at FICO, says, "It is considered negative to the same extent as a charge off or an account included in bankruptcy or repossession or something of that nature in which the lender took a loss on the debt."

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How to Stop Junk Mail and Credit Card Offers

Some companies sell consumer mailing lists to advertisers, so your address likely circulates among businesses many times over. That's why getting your name off mailing lists to stop junk mail and credit card offers may take significant effort. Magazine subscriptions, club memberships and phone book listings can trigger a company mailing of information you don't want. Therefore, you need to use several sources to stop junk mail and credit card offers.

Instructions

1

Prevent credit card and insurance companies from using information in your credit reports to send you prescreened offers to open new accounts. Use the Opt Out Services website managed by the credit-reporting companies Equifax, Experian and TransUnion to stop such offers. Submit your name and address through the site's online form to cut off the solicitations for five years. Stop the offers permanently by filling out and mailing the Permanent Opt-Out Election form to the address provided.

2

Add your name and address to the Direct Marketing Association's online list of marketers to have your contact information deleted from their mailing lists. Submit your information by filling out the mail service form on the DMA website. Expect to stop receiving junk mail from many big companies for five years after you submit the form. Bear in mind that you will continue to receive junk mail from some smaller companies and organizations that aren't on the DMA marketing lists.

3

Look for a customer service number on any junk mail and credit card offers you continue to receive after you place your name on the DMA list. Call that number to get your contact information taken off the mailing list. Ask the customer service representative you speak with to give you the name and phone number of the company that provided your name for his company's mailing list. If you get the information, call that company and get your information removed from that mailing list as well.

4

Contact all companies that you choose to receive mail from, and tell them not to supply your name and address to other companies. Look over any forms you fill out for magazine subscriptions, catalogs and other items and accept offers you find to opt out of having your name shared with other companies. Consider getting an unlisted phone number to keep your address out of phone books and away from advertisers who use phone books to compile customer lists. Ensure that any private organizations where you maintain memberships don't circulate your contact information.

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How Debt Reduction Companies Work

The Basics

Debt reduction companies are firms that specialize in helping clients lower their debts without bankruptcy. These businesses, also known as credit counselors, work closely with their clients to help them develop new strategies for managing their debts. They aid them in creating a new budget they can live by, and also work directly with their creditors to reach an amicable resolution for debt repayment that does not require bankruptcy.

The Process

A representative of a debt reduction company calls each of the creditors on behalf of the client. He works out a payment arrangement that often reduces interest, waives over the limit and late fees, and reduces the amount of monthly payment. Some companies are also willing to reduce, or settle, the balance. The debt counselor does this until each unsecured creditor has been contacted and some type of agreement can be made. Some creditors may require the original terms be met, while others will work with the debt counselor.

Payments

Once the new payment plan is in place, the client makes one monthly payment to the debt reduction company. The company then breaks down the payment into what is owed to each creditor, and distributes it accordingly. The debt reduction firm usually charges an upfront fee to start the plan, and a small monthly fee to administer the program.

Advantages

There are several advantages to using a credit counseling service. One is the debtor does not have to file bankruptcy, which can affect his credit for seven to 10 years. In addition, most creditors will not make deals with individuals. They are more apt to work with companies, especially if it seems the debtor is sincere about working with the debt reduction firm to avoid bankruptcy. The client also saves some money by using the service.

Disadvantages

There are some disadvantages to working with a debt reduction company. Some unscrupulous companies have not managed payments properly, and caused more harm than good to their clients' credit ratings. Doing research in advance can prevent this from happening. Another is that debt reduction does not work for secured creditors, such as those for a car or home loan, because they can simply take back the collateral. In addition, a client's participation in debt reduction does show up on each affected account on a credit report. Most customers also must agree to not get any new credit, even a car loan, while participating in credit counseling programs.

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When Is the Best Time to Check My Credit Report?

Regularly monitoring your credit report can help you to detect potential fraud, identity theft and errors that could harm your credit. To avoid delays and disappointments, check your credit right before you make a major purchase, try to rent an apartment, or apply for a job. Don't worry: You won't damage your credit score by checking your own credit.

Checking Your Credit Report

Under the Fair Credit Reporting Act, you have the right to check your credit and other specialty consumer reports (such as tenant screening or comprehensive background reports) as often as you like. While it is true that credit checks done by potential creditors can affect your credit score, checking your own score won't damage your credit and potential creditors won't even be able to see your inquiry on your report.

Scheduling Credit Report Checks

In addition to regularly monitoring your reports by checking it ever few months, you should check your report right before you think someone else will. For example, if you are applying for a new job, check your report. Many employers base their hiring decisions on what your credit report says. If you are an identity theft victim, check your reports on a monthly basis.

Free Credit Reports

The FCRA entitles you to one free credit report over a 12-month period from the three major credit bureaus. You can get your free reports by visiting annualcreditreport.com and making your request online or by phone or postal mail. Under the FCRA, you can get another free report if you are unemployed or on welfare and plan to look for work, or if you've been turned down for credit based on something in your credit report. To get your free reports under these circumstances, you need to contact the credit bureaus directly through their websites.

Correcting Errors

If your credit report contains errors, you have the right to dispute them. Under the FCRA, the credit bureaus that issue your reports must investigate any errors and must remove negative information if they can't verify its accuracy within 30 days of your dispute. You can dispute inaccuracies online through the credit bureau's websites, or by postal mail.

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How to Opt Out of Preapproved Credit

Creditors can purchase lists of consumer information that meet a certain credit criteria from the credit bureaus. The creditor will use these lists to contact the people with offers of preapproved credit. While some people may find this of value, others find this an invasion of their privacy and would prefer their names not be provided to any creditor. The Fair Credit Reporting Act (FCRA) gives you the legal right to opt out. In doing so, the law prevents the credit bureau from disclosing your personal information to potential creditors.

Instructions

By phone

1

Call the toll-free number the credit reporting agencies have set up for consumers to opt in or out of credit offers. The number is 1-888-567-8688. The process is automated and you will have to "speak" your answers.

2

Listen to the beginning of the recording. Chose the "opt out" option. You will be asked for your home telephone number. Speak your phone number. If they can match it to a home address, you will be asked to confirm the address. If not, you will be asked to speak your address. Provide your name, date of birth and Social Security number to complete the process.

3

Repeat the process every five years. If at any point you wish to opt in and receive the credit offers, you can call and select the option to opt in. Then you will supply your information and be added back into the system.

By website

4

Visit optoutprescreen.com. (See resources.) This website was established by the credit reporting agencies for you to opt in or out of credit offers. You will have three choices: opt in, opt out for five years or opt out permanently. Select the option you wish to choose.

5

Provide your name, address, date of birth and Social Security number. If you are opting out permanently, print the form, sign it and mail it to the address listed on the form.

6

Return to the website if you later decide to opt in to offers. If you selected the five-year opt out, you will need to renew the opt out option in five years by repeating this process.

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Consumer Debt Vs. Spending

The overall health of the economy depends on many factors. These include government spending, inflation, interest rates and export levels. Consumer spending and borrowing trends are also among the most important economic indicators as they represent billions of dollars and give a window into the economic behavior of millions of individuals.

Definitions

Consumer spending represents the money that individuals spend on personal needs. It doesn't include government spending, taxes individuals pay, investments or business expenditures. Consumer spending includes both goods and services from domestic and foreign producers.

Consumer debt, also known as consumer credit, represents how much money consumers owe on loans, including home mortgages and credit cards. Consumer credit is usually measured as a percentage of disposable income.

Relationship

Consumer debt and consumer spending are related, inasmuch as some spending takes place in the form of credit. High levels of consumer debt may be a result of recent consumer spending. While heightened levels of consumer spending bode well for retailers and manufacturers, higher levels of consumer debt mean more money for banks that offer loans and credit card companies that collect interest payments from consumers.

Types

Economists and analysts further divide consumer spending and consumer debt into subcategories. For example, some consumer spending falls into the category or durable goods. These items, which include automobiles, jewelry and appliances, are expected to last for several years or more. Non-durable goods are items that won't last very long or are intended for near-term consumption. Consumer spending in each category of goods gives insight into where people are spending their money, which can be as useful as knowing exactly how much they're spending.

Considerations

Changes in consumer spending and consumer debt result from other changes in the economy. When the Federal Reserve Bank lowers interest rates, it becomes easier for consumers to borrow money. This typically leads to an increase in consumer spending and debt. Rising home values give homeowners the chance to use refinancing and second mortgages to spend more on durable or non-durable goods. Periods of high unemployment are more likely to cause periods of decreased consumer spending, as well as higher debt-to-income ratios.

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How to Cancel Credit Cards to Reduce the Debt-to-Income Ratio

Your "debt-to-income ratio" is a numerical description of how easy it is for you to pay off your debt. Reducing your overall amount of debt by canceling and paying off credit cards will improve your DTI ratio and help to improve your credit score.

Instructions

1

Examine your most recent statements from each credit card. Write down your total amount of debt from each card, along with the interest rate and credit limit.

2

Add up your monthly payments due, multiply by 12, and divide your yearly income by the total payments due this year. The resulting number is your DTI. Canceling credit cards will not automatically improve this ratio, but paying off the balances will. If you know you want to pay off a particular credit card and never use it again, canceling it will prevent you from racking up more debt. You'll probably save the most money by canceling the card or cards with the highest interest rates.

3

Call the credit card companies for the cards you want to cancel and ask them to close the account. They will often try to get you to stay by offering perks, a higher credit limit, or a lower interest rate. If the interest rate is significantly lower, it may be worth it to keep that particular card and cancel a different card with a now higher interest rate. If you're determined to close the account, don't let them convince you with their perks--they'll usually try hard to keep a customer.

4

Cut up the canceled credit cards into small pieces and throw them away into separate trash bags. As you pay off the balance on these canceled and destroyed cards without adding more debt, your DTI should improve.

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Can You Pay Off a Credit Card With Another Credit Card for a Cheaper Interest Rate?

If you have a good credit score, you likely qualify for low interest rate credit cards. After getting a new, lower interest credit card, you can transfer the balance from your higher interest credit card to your new card.

About Interest

When it comes to debt, the higher the interest rate, the more you pay over time. High interest also means it takes longer to pay down the principal balance of your credit card debt because much of your payment goes toward paying off interest charges.

Exchanging Interest Rates

If your financial goal is to get out of, or at least, lower your credit card debt, exchange your higher interest debt for lower interest debt. Doing so will you save money because of the lower interest rate, and you will also pay off the debt sooner because more of your payment will go toward the principal balance.

Transferring Credit Card Debt

Start by getting a credit card with a lower interest rate than your existing card. Once you receive the card, call the company and say you want to transfer the entire balance from your high interest credit card. After the transfer is complete, the high interest card balance becomes zero--close the account and destroy the old credit card.

Considerations

Check the terms of the new credit card. Some credit cards only apply low interest rates to transfer balances for a short time.

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What Happens If You Do Not Pay Credit Cards in California?

Contact creditors if you are unable to make your monthly credit card payment. Ideally, you should contact the company before you miss a payment. Generally, credit card companies will work with you to create a temporary payment plan. Unpaid debt will follow you, and creditors can sue, resulting in wage or bank garnishment and other collection options. California is a community property state, and your spouse may be equally liable for the debt.

Debt Collectors

If creditors cannot reach you or work out an equitable payment plan, a debt collection department or agency may be used. Debt collectors can and will call your home, family and possibly your employer in an attempt to locate you. However, debt collectors cannot harass you or use deceptive means to collect. Within five days of initial contact, debt collectors must provide you with the name of the original creditor, amounts owed and instructions on disputing the debt.

Initial Consequences

Credit card delinquencies result in increased interest rates, late fees and possible over-the-limit fines. As of 2010, credit card companies cannot raise your interest rate until you are more than 60 days late on payments. Your credit report will show late payments. Most accurate negative credit report information remains on your credit history for up to seven years, potentially limiting future lending options.

Lawsuits

When collection attempts fail, creditors may sue you for outstanding debt. Reply to a court summons within the instructed time frame. If you ignore the suit, you automatically lose the case. You may dispute the debt or otherwise defend yourself in the case. Additionally, California sets a statute of limitations of four years from the date of the last action on the account for lawsuits. If your last payment or usage of the card is beyond the four-year period, you may claim the statute of limitations as a defense in court.

Losing a Lawsuit

Creditors may garnishee wages, levy bank accounts and in some cases seize or place liens on property. As with the initial lawsuit, if you receive a court order concerning possible garnishment or seizure, contact the court within the instructed time frame. Some assets may be exempt from seizure, but you must request and claim these exemptions with the applicable court. Federal law protects most government benefits, welfare payments, Social Security compensation, veterans benefits and some retirement funds from garnishment for credit card debt.

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Letters to Remove Collection Accounts From Credit Reports

Writing letters to the credit bureaus can help remove collection accounts from your credit report -- but only in certain circumstances. The Fair Credit Reporting Act -- a federal law -- offers strict guidelines about the reporting of consumer debt, and the credit bureaus are expected to follow the rules to maintain the integrity of the credit reporting system.

Pay-for-Delete

The Bankrate website reports that you may be able to negotiate a "pay-for-delete" arrangement by writing a letter. Pay for delete allows you to have a charged-off or collections item removed from your credit report by the creditor or debt collector in exchange for full payment on the delinquent account. Your letter must be sent to the creditor -- and not to the credit bureau -- to negotiate the arrangement.

Erroneous Information

The Fair Credit Reporting Act allows you to dispute any information on your credit report that is inaccurate. The information must be removed from your report within about 30 days of you filing a dispute. Send your letter directly to the credit bureau to dispute the information. In your letter detail why the information is inaccurate. Include the account number, your Social Security number, address and telephone contact information. Get the mailing address for major credit bureaus Equifax and TransUnion by visiting the websites (see Resources). Experian, another major credit bureau, does not publish a postal address for consumer correspondence, as of 2010. It urges contact through the website (see Resources).

Outdated Information

Most negative credit information that is accurate -- such as collection accounts -- can be reported on your credit report for seven years, according to the Federal Trade Commission. Bankruptcy information can be reported for 10 years. Information that is outdated must be removed if you write a letter disputing the timeliness of the information, or dispute the information online by visiting the credit bureau's website.

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What to Do When Parents Die With Unsecured Credit Card Debt in Tennessee?

In Tennessee, a probate court case must be opened when a person passes away, so that the decedent's estate can be settled and all debts paid. Tennessee probate cases take an average of about one year to settle in full, and a number of specific steps must be taken during that time frame. A decedent's children and heirs are not responsible for his debt, his estate pays off all outstanding debts instead.

Open a Probate Case

Open a probate case with the appropriate court in the county where your parents lived or owned their home. Probate processes are designed to ensure that all assets are accounted for, all debts are paid in full according to the law and all terms of the will are carried out in full. The probate process is also how property is legally transferred in title or deed to an heir or beneficiary.

Administrator

An estate executor or personal administrator is sometimes named by the decedent before her death. If one has not been selected or there is more than one person who wants to serve, the probate judge will make the assignment or selection. In Tennessee, an estate executor has many responsibilities and duties and can be held legally and financially liable if he makes mistakes in handling the estate closure. If you are contacted about your parent's credit card debt, direct the creditor to the estate administrator for handling.

Notify Creditors

One of the estate administrator's primary duties is to notify all interested parties of the decedent's passing. She must immediately post death notices in local Tennessee newspapers and send written notices to all creditors within 60 days of being appointed. Credit card debt must be claimed against the estate along with any other types of secured or unsecured debts.

Liquidate Assets

After the allowed waiting period for all creditors to list their claims against the estate, the executor may liquidate assets in order to pay all debts in full. If need be, the executor will sell real and personal property such as vehicles or collectibles in order to cover all verified debts against the estate. When there are not enough estate assets to fully cover all outstanding debts, debts must be paid according to a priority order designated by law. Creditors must write off all or part of any debt that remains unpaid once all funds and assets are exhausted.

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How to Obtain Grants for Renewable Energy

Grants for renewable energy are becoming more popular as individuals and organizations work to make positive changes for our planet. If you're interested in getting a grant for renewable energy, there are many ways in which you can receive a grant to accomplish your wishes. Below, you will find some more information on how to obtain grants for renewable energy.

Instructions

1

Ask Your electric company. In some places, electric companies have the information you need to obtain grants for renewable energy. Your first place to look should be here - check for flyers or other types of information and if you don't find anything, ask a representative. Since many electric companies advocate renewable energy systems, this is a great way to get the information you need.

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Check online. The internet is a great resource when you want to receive grants of any kind. There is a lot of information online regarding renewable energy grants and how to get one. However, you will need to proceed with caution because some individuals use the internet as a platform to scam honest individuals like you. There are some reputable websites you can trust, however and a lot of great free information. Here are some ways to check online for grants for renewable energy.

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Visit www.Grants.Gov. This website is an excellent one for getting information about grants - whether they are for renewable energy or something else. Simply visit the site and then select the 'keyword' search. You will be able to type in a few words related to the kind of grant you're searching for (in this case 'renewable energy grant') and you will receive lists of grants that are available for this purpose.

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Read the details. Once you've found one or more grants that you think would suit your needs, read the details of the grants. Since some grants are only available to certain cities and towns or particular types of individuals, you really need to make sure that you can obtain a renewable energy grant with this method first. When you're satisfied that you would be eligible for the grant, you can take the next step.

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Get the application and fill it out. Now that you know you may qualify for the grant, you will need to obtain the application for the grant and fill it out. With www.Grants.gov, you can download the application you need after finding a grant that will work. You can then either fax it or mail it to the address or number provided.

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Review response. After you've done this, you will simply wait to determine whether you have been selected to receive the grant or not. While it can seem very difficult to obtain a renewable energy grant, by following the steps above, you can make it a lot easier. Getting a grant for renewable energy is exciting and fun - and you get the chance to do some good. Use the tips and information above to help you find what you're looking for! Good luck.

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How to Get Out of Medicaid Debt

If you are the heir to a family member who died or is expected to die owing money to Medicaid, you should understand that the estate may be subject to attempts by the state to recover its costs. This is because under the Tax Equity and Financial Responsibility Act of 1982, Medicaid becomes the first lienholder on many assets that otherwise would pass to heirs unencumbered. Each state runs its own Medicaid program, so state laws vary on specific Medicaid recovery procedures.

Instructions

1

Determine the amount of Medicaid debt. If you are an heir to a Medicaid recipient, you may get a Notice of Medicaid Debt from the Medicaid office in your state.

2

Determine if you qualify for an exemption, waiver or deferral. This may apply if you are a surviving spouse or if you or the heir is disabled, blind or a minor child. Waivers may also be available for cases of undue hardship or other extenuating circumstances. These are notoriously difficult to get, and criteria varies widely by state.

3

Determine what assets may have been held in a trust. Under the law, if assets were in a trust and not available to the Medicaid recipient, they may be eligible for a waiver of Medicaid collection efforts, since they were not a "countable asset" to begin with.

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What Is Meant by the Phrase "Consolidating Credit Card Debt"?

You may have heard a lot of promises from companies offering to consolidate your credit card balances. While they offer rock-bottom interest rates and slashed payback balances, in reality you may not qualify for those rates and the consequences of taking on consolidation may not be worth the initial advantages. Make an educated decision about whether to consolidate so that you are fully committed to your plan to get out of debt.

Consolidation Loans

You may consolidate your credit card debt using a consolidation loan, which is a loan taken out against collateral, such as your house. A consolidation loan pays off your credit card balances, bringing them to zero; instead of making multiple payments to your credit cards each month, you make one lump payment to your loan. Often, consolidation loans are advertised at very low rates, but these are usually for those with extremely high credit. Many people also fall prey to using their newly freed credit, continuing the cycle of debt. According to Bank Rate, 70 percent of people who take on a consolidation loan end up with the same or more debt within two years.

Debt Management Plans

Considered the last step before bankruptcy, debt management plans (DMPs) may only be taken on when recommended by a credit counselor. Under a DMP, your credit counselor will contact your creditors to attempt to negotiate lower interest rates and/or balances for you to pay back. The counselor then comes up with a time frame for you to pay off your debts. Usually, those on debt management plans are prohibited from applying for new credit. A debt management plan stays on your credit report for up to seven years.

Balance Transfers

If a card offers very low interest rates, it may be beneficial to transfer your balances; however, you must be careful not to damage your credit further by using balance transfers inappropriately. Opening a new account alone docks five points from your credit score. Also, your debt-to-credit ratio is one of the main factors in determining your credit score; if your new card has a low credit limit, transfers may cause your credit score to drop further, since the credit bureaus don't differentiate between a large purchase and a balance transfer.

Considerations

Simply having a consolidation loan or a debt management plan doesn't cause your score to fall. What determines the effect on your score is the way you manage the consolidation process. However, consolidation loans and debt management plans are seen as blemishes on your credit report. They show borrowers that you've had difficulty making payments in the past, which may make them hesitant to lend to you. DMPs, in particular, cause lenders' hesitation, since you generally don't pay the full amount owed. If you can manage to lower your credit card interest rates, you may get a better deal than through a consolidation loan without the negative impact on your credit report.

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Can Companies Buy Old Debts to Collect on Them?

Some companies specialize in buying old consumer debts to profit off debts they manage to collect. Some of these debt buyers use illegal practices to make their money. Your liability for paying an old debt is partly linked to how you respond to a debt collector. You can help protect yourself from unfair collection practices by contacting your state Attorney General's Office for information on debt-collection practices in your state.

Statute of Limitations

A debt collector no longer has the right to sue you for payment after your state's statute of limitations expires. The statute of limitations is a time limit for filing a lawsuit to collect an old debt. Companies that sue to collect a debt beyond the statute of limitations are violating the U.S. Fair Debt Collection Practices Act. Still, you should always appear in court to explain the situation to a judge, advises the Neighborhood Economic Development Advocacy Project. According to the NEDAP, failure to appear in court can leave a consumer liable for payment regardless of the statute of limitations.

Collection Methods

You may want to seek advice from an attorney if a debt-collection company persists in trying to collect on an old debt. Making a payment on an old debt or acknowledging the debt is yours can restart the statute of limitations in some states, making you liable for full payment of the debt. Some debt collectors will pressure consumers to make further payments on old debts that have been settled or have been discharged in bankruptcy court. Re-aging a debt is another tactic that unscrupulous collectors will use. The practice is illegal, and it involves reporting old debts as new debts to credit bureaus to extend the seven-year limit on reporting negative information in a consumer's credit file.

Legal Notices

It's possible to receive notice of a successful debt-collection judgment against you without receiving advance warning to appear in court. Some lawyers say many debtors don't find out about a collection company's legal action against them over an old debt until it's too late, according to the New York Times. That's because they were never notified about the action so they could respond or appear in court. The article notes that consumers who hire a lawyer to fight such cases usually win.

FTC Actions

The U.S. Federal Trade Commission has sued some debt-collection companies over their procedures for collecting debts. For example, the FTC won a $10.2 million judgment against National Check Control in 2005, according to MSN Money. The company was accused of threatening consumers with lawsuits and jail time over their alleged debts. In some instances, consumers didn't owe the debts the company tried to collect or the amount sought for collection was higher than the actual account balance.

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How to Rebuild Credit

Your credit score can tank in a matter of months. While it is very easy for your credit score to go down, rebuilding credit can take years of hard work. You have to prove that you can handle credit responsibly and pay on time. Follow these steps to learn how to rebuild your credit.

Instructions

Rebuilding Your Credit

1

First, get new credit. Although it may be hard to get approved by the major financial institutions, you may have luck with department stores, gas stations and secured credit cards. Make certain to only apply for a few different cards, rather than trying your luck with every company. Too many applications will place inquiries on your credit report, thus making you even more unattractive to potential debtors.

2

Change your spending habits. Start with only one or two credit cards and keep it that way. Charge immediately to begin building your credit, but only charge what you can afford to pay. Carrying a balance is acceptable as long as you are paying more than the minimum payment and your balance remains at a reasonable level.

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Keep only a small amount of credit and use that small amount to build your credit. Maxing out your cards can make you a bad credit risk and get you into financial trouble, because you most likely cannot afford to completely pay off a maxed-out credit card. Try to stay at or below about 30 percent of your credit limit at all times.

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Make all payments to creditors as soon as you get a bill. While creditors may not report years of on-time payments, they certainly will report one or two missed or even late payments. Paying the bill immediately ensures that it will be on time, and will most likely save you a little interest if you choose to carry a balance.

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Finally, obtain a copy of your credit report at least once per quarter. Get a copy from each of the three major credit bureaus (see Additional Resources). Make certain that everything on it is correct; if not, dispute any inaccuracies. Check inquiries and keep them at a minimum.

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