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New offers options to American consumers who need an effective debt reduction plan. We have settled over 150 million dollars worth of unsecured, credit card debt while saving clients thousands of dollars. AmeriGuard believes it is important to make an informed decision especially when it affects your financial health. Understanding your options can be overwhelming; that’s why we offer experienced, knowledgeable guidance along the way. provides the information you need to participate in creating a better future..

Monday, April 30, 2007

Fastest Way to Repair Credit After a Consumer Proposal

Fastest Way to Repair Credit After a Consumer Proposal

Your credit score is determined by a number of factors, such as your payment history on credit debts, the amount of your debt, what your credit availability is, the length of your credit history and any new credit. If you've made a proposal or request for more or increased credit, this can negatively affect your credit score. The algorithm by which your credit store is determined is complex and depends on the above factors to varying degrees. There are several actions to consider in getting your credit score raised after a credit request.

Decrease Amount of Credit Debt

    In general, the less credit debt you carry, the less a risk you are (thus, the higher your credit score). Reducing your credit debt to less than half of your total available balances will help raise your score. Sometimes having a little credit debt is advantageous to your score. Credit simulators available online from credit agencies such as FICO, TransUnion and Equifax can help you determine how much, if any debt, is optimal.

Credit History

    There's not much you can do to change the length of your credit history. The longer you've had good credit, the higher your score will be, but it takes many years to move the needle significantly, so just keep up with your payments. Over the long haul, this will work in your favor.

Payment History

    Having a good record of on-time payments is an important component of your credit score. If you have an outstanding late payment, or if you have a bad debt on your record, clearing that up will help a great deal. If the lack of payment is due to an error or misunderstanding, see if the bill holder will ask to remove it from your credit-reporting history. Most derogatory items are stripped from your credit history after seven years. Removing derogatory items, if you have any, is an immediate way to increase your score. You should examine an up-to-date credit report to see if there are any errors; if so, appeal that they be removed. You are eligible for a free credit report every 12 months by law.

New Credit Requests

    Constant requests for new credit will cause your score to dip. Refrain from credit requests, and if a vendor or other party (such as a landlord) requests a credit check and you agree to it, make sure they do a "soft credit check," which allows them to view your credit history without it counting as a request for more credit.

How to Refinance Private Student Loans

How to Refinance Private Student Loans

Private student loans are often offered to students who need extra financing for higher education--like law school. Private student loans should not be confused with federal loans, like Stafford and Perkins loans. Instead, private student loans are offered by traditional lenders such as banks and finance companies. While it's more difficult to refinance private student loans than federal loans, it is still possible. However, you must take extra caution as you're wading into the for-profit loan market.



    Obtain a free copy of your credit report from AnnualCreditReport.com, the only free site authorized by the three major credit reporting agencies. You should also pay for a copy of your FICO score--a three-digit number between 300 and 850 that represents your creditworthiness. Private student lenders will look very carefully at your prior credit performance on student loans.


    Assess your chances of receiving a refinance. FICO scores below 600 are poor and scores over 720 are excellent. If you have a poor credit score and poor payment history on your existing student loans, you should attempt to clean up your credit before applying for a refinance--especially a private lender refinance.


    Research private student loan lenders. While there are large banks, like CitiFinancial and Bank of America, that offer student loans, do not discount local financial institutions, too. Your credit union or local bank may offer more competitive student loan offers.


    Research all potential lenders. The Federal Trade Commission recommends that you "check out the track record of particular private student lenders with your state attorney general, your local consumer protection agency, and the Better Business Bureau."


    Reach out to resources available for help. This includes: the financial aid department at your school (or former school), the Department of Education and your personal accountant or attorney. Referrals are often the best way to start new financing.


    Collect all of your income documents, your credit report and copies of all private student loans. Apply to at least two, but no more than five, lenders. Excessive inquiries (more than six in six months) may negatively affect your credit.


    Ask your current lender for a reduction in interest rate, if affordability is your top concern. They may be willing to do it rather than lose you to another lender.


    Compare student loan offers. While federal student loans often come with the lowest interest rates and most favorable fees, your private loan refinance offers should not come with excessively high interest rates or fees. For peace of mind, opt for a fixed rate loan over a variable interest loan.


    Compare the average student loan interest rates at several lenders. For example, if Sallie Mae--a leading student loan lender--offers an annual interest rate of 9.11 percent on a $10,000 private student loan, your loan offers should be in the same ballpark. If they are much higher, consider waiting or choose another lender.

How to Deal with Credit Card Debt Collectors

How to Deal with Credit Card Debt Collectors

Credit cards are a convenient way to make purchases when you don't have cash on hand. Unfortunately, the economic downturn has forced many people to rely on credit cards to get by. The problem with using credit cards to meet your living expenses is that you eventually end up with too many bills. You continue to fall deeper into debt, and, before you know it, debt collectors are ringing your phone off the hook. You can put a stop to the constant calls and harassment once you know your rights.



    Read the Fair Debt Collection Practices Act, or FDCPA. Do this before you talk to any debt collector on the phone. The Fair Debt Collection Practices Act prohibits debt collectors from using abusive tactics to collect from you. There are rules under the FDCPA that debt collectors must adhere to. These rules state what a debt collector can and cannot do when collecting a debt, as well as debtors' rights. For example, a debt collector cannot threaten you with legal action, nor can he pose as an officer of the law, an attorney or any other legal authority.


    Let calls go to your voice mail or answering machine. Caller ID can save you a lot of stress. You can let unknown or unfamiliar phone numbers go to your voice mail. Don't take calls from a debt collector unless you're in a position to pay the debt. Taking a debt collector's call to tell him you are unable to pay will only give him the ammunition he needs to pressure you into making payment arrangements you may not able to keep.


    Request debt validation. Debt collectors are required to send debtors what is known as a dunning letter. Usually you receive a dunning letter before you start getting phone calls, but that's not always the case. The dunning letter should contain your correct name and address, the name of the original creditor, the account number and the total amount owed. You have 30 days from the date of the letter to dispute the debt. Respond to the dunning letter in writing, requesting proof that the debt is yours, especially if it's an older debt. If you don't receive a dunning letter and a debt collector calls, you have the right to request that he send written proof that the debt is yours. The collector has 30 days to honor your request or he has to cease collection activity. Validation should include the same information as a dunning letter, as well as a breakdown of charges if you are disputing the amount you owe.


    Stay calm and document everything. Don't let a debt collector provoke you into losing your cool. Some use fear and intimidation to scare people into paying them, or making a promise to pay that they can't keep, just to get off the phone. Write down the name, company and phone number of every collector you speak to, as well as the terms of any payment arrangements. Ask for written confirmation of any payment arrangements. Politely hang up on any debt collector who becomes abusive, uses offensive or profane language or starts threatening you. By law, it's your right not to tolerate such behavior.


    Don't make promises you can't keep. Most debt collectors will work with you and work out a suitable payment arrangement. Don't let a debt collector pressure you into paying more than you can afford. State firmly what you can afford to pay and stick to it. Your relationship with a debt collector will go much smoother if you make the agreed payments and let the debt collector know if problems arise.

Debt Management Program Requirements

Debt management programs are known for their ability to help customers get out of credit card debt. However, debt management programs are not for everybody. Here are some ways to tell if a debt management program is right for you.

Debt Management Programs

    Debt management programs are heavily advertised on television and radio, with their claim of reducing your interest rates being their main selling point. Another perk of debt management programs is that they can rebuild your credit while lowering your balances. The bad part about debt management is that you can't use your credit cards anymore, which usually requires a lifestyle adjustment as you learn how to live without credit.

Balance Requirements

    There generally is no minimum amount of credit card debt required for joining a debt management. According to Christian Debt Free Counseling of Ohio, the goal of credit counseling is to assist customers regardless of how much they may owe. However, if your balances are low and you only owe one or two creditors, you may be able to work out a payment plan without the help of a debt management program.

Timeliness Requirements

    While past due balances are a requirement for debt settlement, you don't have to be behind on your bills to enter a debt management program. However, if you are behind, a debt management program can help you re-age your accounts so that they appear as current instead of past due. In addition, debt management can reduce or eliminate some of the late fees that have been charged to your accounts.

Length Requirements

    Most credit counselors will put you on a debt management program that will have you out of debt within five years. However, you have no obligation to stay on the program any longer than you'd like. If you want to cancel your plan, just notify your counseling agency; however, you will lose the interest rate break you acquired when you joined the program. In addition, if you miss payments to your counseling agency, you may be removed from the program; many creditors will drop you after just one missed payment.

Sunday, April 29, 2007

What Will a Hospital Do When I Don't Pay the Bill?

What Will a Hospital Do When I Don't Pay the Bill?

Sixty-two percent of bankruptcies in 2007 involved medical debt, and most medical bankruptcies involve middle-class families with homes and college-educated breadwinners, reports a study by Harvard and Ohio University researchers published in "The American Journal of Medicine" in 2009. Bankruptcy, however, is not always necessary when tackling a hefty medical bill. Most hospitals will work with patients to make their charges more affordable.

What if You Just Don't Pay?

    Hospitals can pursue an unpaid bill like any other creditor or service provider would. Most commonly, hospitals send unpaid bills to debt collectors or initiate litigation, which can result in a lien on your house or wage garnishment. Jail time can also be a consequence, though it's rare.


    Most hospitals have moved away from the heavy-handed tactics employed by most bill collectors. Hospitals run for profit can deduct unpaid medical bills from their taxes, and nonprofits, which make up the bulk of hospitals, can use unpaid bills in marketing campaigns for more federal assistance and fund-raising efforts. Nonprofits are legally required to go after any bills, but the law does not detail what actions they must take.


    If the hospital sends your bill to a collection agency, the collector will pursue it for as long as the statute of limitations allows -- usually four to six years. After this time the bill is no longer valid. In the meantime, however, this could wreck your credit rating. In the unlikely scenario that a hospital sues to obtain payment, you must appear before a judge or the hospital will automatically win its judgment.


    Always attempt to negotiate with your hospital if you cannot pay a bill. Being in a bad financial situation will give you better bargaining power. Hospitals often accept reduced payments, because unpaid bills are common. Hospitals lost $34 billion in unpaid bills in 2007, according to "Bargaining Down the Bills," a March 2009 article in "The New York Times." If you know of your hospital stay ahead of time, strike a deal beforehand. Ask for the lowest price the hospital would charge an insured person.

Saturday, April 28, 2007

Credit Card Settlement Vs. Chapter 13

Credit Card Settlement Vs. Chapter 13

You have several options if you are seriously delinquent on credit card payments. One option is to negotiate a settlement with your card company, or, if that is not possible, you can file for Chapter 13 bankruptcy. However, filing for bankruptcy should be viewed as a last resort. With an out-of-court settlement, you avoid having to make financial disclosures and save yourself court and legal fees.

Card Settlement

    As an unsecured lender, your credit card company may be willing to work with you if you are late on payments. You should can contact your credit card company immediately to explain your financial situation. You can attempt to make an arrangement to reduce the rate of interest. Doing so will help lower you monthly bill and allow you to pay down more of the principal balance.

Chapter 13

    A Chapter 13 bankruptcy filing is essentially a payoff plan between you and your creditors. It is similar to a consolidation loan. The process begins with submitting a list of your financial obligations, tax filings, income and expenditures. You meet with your creditors to develop a payment plan and schedule, which must be approved by the court. Once approved, you will be held to the requirements of the plan. A court-appointed trustee receives your payment and is responsible for distributing it among your creditors. The cost to file Chapter 13 is $274 as of 2010.


    Once you file for Chapter 13, you are given an order of protection from your credit card company from pursing collections action. However, there is no guarantee you will be granted protection from all your creditors. Your credit card company may attempt to block having its debt included in the petition if it suspects card abuse on your part prior to filing. Your credit card company can pursue collections action against you if the court rules in its favor.

Using a Debt Settlement Service

    You may want to consider using a debt settlement service to negotiate with your credit card company on your behalf. Doing so may help reduce the principal balance, allowing you to pay off your credit card quicker. If you don't qualify for debt settlement, you may choose credit counseling, which may lead to an interest rate reduction on your credit cards. Most third-party negotiators offer both settlement and credit counseling services. The fees charged vary depending on the state in which you live. Fees are collected when your debt has been settled.

Credit Reporting

    If you settle with your credit card company for less than the amount owed, the information will show as "Settled" in your credit report for seven years, and that will count against you with other creditors. A Chapter 13 filing also stays on your credit report for seven years; however, potential creditors are likely to view a bankruptcy filing more negatively than resolving your debts out-of-court.

Friday, April 27, 2007

Statute of Limitations in Kentucky for a Judgment & Lien on Real Property

Like other states, Kentucky established a statute of limitations period for the enforcement of judgments. Once the limitations period expires, the holder of the judgment can no longer collect on the judgment and any writs of attachment or liens secured by the judgment holder dissolve.

Consequences of Judgment

    A plaintiff who prevails in his civil action against a defendant receives a judgment by the court in the amount of the money damages awarded. Once an entry of judgment is recorded by the court on its docket, the plaintiff becomes a judgment creditor and the defendant, the judgment debtor. A judgment creditor can initiate post-judgment collection procedures authorized by law to obtain satisfaction for his judgment. Kentucky allows a judgment creditor to obtain a judgment lien against the real property of the judgment debtor.

Kentucky Statute of Limitations for Judgments

    Kentucky Revised Statutes establishes a 15-year limitations period for judgments. The statute of limitations period commences on the date the courts issued the judgment.


    After the courts issue a judgment, a judgment creditor may request that the court issue an execution on the judgment. An execution is an official court document that states the judgment creditor can levy against the real and personal property of the judgment debtor. Under Kentucky law, a judgment creditor may request an execution 10 days after the entry of judgment.

Statute of Limitations for Filing Suit

    The statute of limitations for enforcing judgments is different from the statute of limitations for filing certain legal causes of action. A creditor who seeks to obtain a judgment lien against a debtor must first file a civil action in court within the time period for breach of contract actions specified by Kentucky law. If a plaintiff files the civil action beyond the applicable statute of limitations period for filing breach of contract actions, the court may dismiss the case. If the courts dismiss the case for failing to comply with the statute of limitations, the plaintiff would have no further legal recourse against the defendant.


    The lien of a judgment creditor levied against the real property of a judgment debtor is subordinate to the lien of any mortgage holder(s). As a practical matter, unless the judgment debtor has sufficient equity in his home, a forced sale by a judgment lien holder will not generate sufficient funds with which to satisfy his money judgment after the claims of other more senior lien holders are paid.

Thursday, April 26, 2007

When in Severe Debt, Can Wages Be Garnished?

Finding yourself in debt can be a very discouraging financial position to be in. If you have a large amount of debt that you cannot pay, one of the remedies that your creditors may have is to garnish your wages. Whether or not the creditor can do this depends on a few factors like state laws and the status of your debt.


    A wage garnishment is a process that involves taking money directly out of your earnings to pay a debt. When this occurs, a creditor will work with your employer directly and you will never see that portion of the money. Your employer will take the money out of the money that you earn and give it to the creditor before you even have a chance to spend it. This can lower your take home pay significantly and can make it difficult to meet your other financial obligations.


    Even though it is possible for creditors to garnish your wages, they cannot simply do it randomly. To garnish your wages, the creditor has to have a judgment against you. This can only be done when you refuse to pay your debt and the creditor files a lawsuit against you. Then after going to court, the creditor can get a judgment against you by the court. At that point, the court could help them set up a wage garnishment on your pay.


    Whether or not your wages could be garnished will also depend on which state you live in. Some states do not allow any garnishment whatsoever regardless of the situation. Other states have a limit on what types of debts can be garnished. All states have rules associated with how much money can be garnished from your paycheck. You can check on your state laws to determine if there is a chance that your wages could be garnished.


    Even though garnishments can put a damper on your financial situation, you could potentially find a way to stop them. The easiest way to stop a garnishment is to file for bankruptcy. By filing for chapter 7 bankruptcy, you can stop all collection actions by your creditors. Your debts will be forgiven and you can start fresh. If you have a significant amount of debt to deal with, you may consider bankruptcy as the easiest way out.

How To Rebuild Your Credit History After Foreclosure

How To Rebuild Your Credit History After Foreclosure

Rebuilding a credit history after foreclosure could be a daunting task. With foreclosure, your FICO score typically dips anywhere from 250 to 280 points. The dip is recorded in your credit history, reflecting poor financial health and stability. Despite the magnitude of the hit, there are ways to rebuild your credit history to the point where you can again expect to find the best loans and interest rates.



    Analyze the situation. You can start to rebuild your credit history only after the reasons for the foreclosure are evaluated. What went wrong? Did you borrow more money than you could afford because you failed to budget effectively, or because a short-term setback such as a job loss or a health problem got in your way? Is the setback over and done with, or do you need to create a budget that will match your new circumstances?


    Create a budget and stick to it. Once the reasons are evaluated, consider creating a budget and sticking to it.


    Take specific steps to rebuild your credit history. Start using a prepaid credit card. This is a card that allows you to spend only up to an amount of money that you have placed on deposit with the credit card company. Even though you are effectively only spending your own money, using a prepaid card gives you a chance to establish a record of making payments on time -- an important factor in your credit score. In addition to this, if you still have outstanding debts, clear them off. Make extra payments every month beyond the minimums required. In the case of credit card debts, the lower your debt level in relation to the credit limits on your cards, the more positively your credit rating will be affected.

    Do not close out your credit accounts once you have paid them off, though. The length of your credit history also plays a positive role with your credit rating, so keep cards that you have had for awhile, even if you carry zero balances on them.


    Remain positive. Foreclosure is emotionally draining. It typically takes three years of consistent payments to rebuild a credit history after foreclosure and to reach a point where one is able to get a new mortgage and a decent interest rate. It's essential for families to work together as a team, to remain positive and try and make wise decisions.

How to Get an Unsecured Loan at a Low Fixed Rate

Unsecured loans are personal loans with no collateral. These loans are usually granted at higher interest rates than secured loans, such as mortgages or car loans. It is possible to obtain an unsecured loan at a low interest rate if you are credit savvy and follow these steps.



    Know your credit score. Customers with higher credit scores are offered better rates. Several websites exist to help you understand your credit worthiness.


    Start with your local bank. Banks offer preferred rates to existing customers. Ask if they can reduce the rate further if you are using direct deposit with them.


    Call your credit card company, especially one that you have been with for a long period of time. They want to keep you as a customer by giving you a premium rate.


    Use your credit card's "cash advance" checks to write a check to yourself. Cash advance fees and higher rates apply. However, you will be transferring this balance to a low fixed rate in Step 5.


    Select another credit card from a separate bank which offers a low fixed rate for the life of the loan. Immediately arrange a balance transfer to the card with the low fixed rate. Maintain this transferred amount as the only balance on the card.

Can Credit Counselors Help You After a Debt Has Been Turned Over to a Collection Agency?

Once a credit account becomes delinquent, the lender may hand the account over to a collection agency. Debt collectors then attempt to collect the total amount due. If you've fallen behind in payments and negotiations with collection agencies fall through, credit counseling may help. Credit counselors work with consumers by offering budgeting advice and negotiating with creditors.


    Depending on your financial situation, credit counselors provide budgeting advice and explain your options in detail. When credit counseling involves a debt management plan, a counselor negotiates with your creditors to lower monthly payments and amounts owed by reducing interest rates and applicable penalty fees. Debt collectors are not required to work with or agree to a repayment plan, but most will. Charge-offs, bankruptcy or costly lawsuits are often the alternatives to repayment plans, and creditors are in the business of making money, not losing it.


    Under a debt management plan, you make monthly payments to the credit counselor, who then pays the debt collection agency. A payment plan is negotiated only after a careful examination of your budget. Under most plans, you sign a contract detailing how much you owe, your monthly payments and the repayment time frame. Failure to make payments under a debt plan may result in penalty fees, interest hikes and a resumption of debt collection attempts and calls.


    Most credit counseling services are not free and even nonprofit agencies may charge a fee. Shop around and look for agencies that provide services for fees based on your income rather than the amount you owe. Get credit counseling agreements and debt management plans in writing before you make payments. Investigate an agency's creditability by checking the Better Business Bureau and your state attorney general's office for consumer complaints. Compare the total cost of the program to your current financial obligations to make sure you're not adding to your debt.


    When you work with a credit-counseling agency, it may appear on credit report. Your credit report will show that the account was paid when the repayment plan ends, but repaying debt does not erase accurate negative marks on your credit report. You can request that a lender remove or change the information such as delinquencies or discharges once you pay the total amount due. The decision is entirely up to the lender, but a credit counselor may help negotiate credit-reporting changes as part of the repayment plan.

What Happens When a Creditor Files a Judgment?

Creditors may go through the courts to get you to pay what you owe if your account becomes delinquent. Once a creditor files a complaint or motion for judgment against you, you must address the complaint. You have some options during this process, but unless the creditor withdraws the complaint, you likely will lose some of your assets.


    When a creditor files a complaint against you, you have the legal right to know about it. The court sends you a summons asking you to come address the complaint. The summons tells you that the court has scheduled a hearing for your case and provides the hearing date and time. After you receive the summons notice, you typically have a month to respond and let the court and the creditor know what you'd like to do. If you don't want to contest the complaint, you can just write a letter to the court acknowledging the complaint and the right of the creditor to collect from you. If you want to contest the complaint, your letter should state this and briefly explain your reasons for wanting to contest. You can ask the court to reschedule the hearing, although the courts may not be able to do so.

The Hearing

    At your hearing, you can present the judge with any evidence you have such as financial records that show the creditor's claims are not accurate. You also can explain how your debt came about and why you cannot pay currently. Sometimes it is possible to negotiate at the hearing to work out a payment deal, but if this doesn't work, the judge has to make a ruling on the complaint. If you don't show up to the hearing, the judge will consider you in default and rule in the creditor's favor, so it's important you go to the hearing.


    If the judge in your case finds that the creditor's claim was unfounded, he rules in your favor and dismisses the case against you. This is the best-case scenario. If the judge finds in favor of your creditor, he orders you to pay your balance.

Writ Request

    If the creditor receives a favorable judgment in your case, the next step is for the creditor to ask the court to place liens or levies on your property and assets. A lien means that the creditor has a right to the property and you can't sell it unless you pay your debt. A levy is similar but usually involves funds like money in your bank account -- you can't spend money in a levied account until you honor your debt. Creditors may ask the court for permission to garnish your wages, as well. They get a formal writ of judgment from the judge indicating what liens, levies or garnishments the court has prescribed. They then file the official writs with the court.

Contact of Third Parties

    Once your creditor has filed any issued writs, it contacts any third parties involved in collecting the debt. For example, the creditor may contact your employer to garnish your wages. The third party then complies with the writs according to your state laws, halting activity on your account or withdrawing the money you owe and giving it to your creditor.


    Generally, a creditor loses the right to file six years after writing off your debt -- that is, six years after the last account activity. However, the statute of limitations is anywhere from two to 15 years, depending on the state in which you live. You may use the statute of limitations as a defense if a creditor files a complaint outside of the statute for your state.

    Usually, after a creditor gets a judgment against you, your creditoscore goes down. The judgment can stay on your credit report for up to seven years.

Wednesday, April 25, 2007

What Is Considered Heavy Credit Card Debt?

Credit cards give you the option of paying the full owed amount every month or making smaller payments and accruing interest. Your choice is reflected on your TransUnion, Experian and Equifax credit reports and affects your credit score and lenders' decisions when they review your applications. Modest credit card balances do not hurt your credit rating, but heavy debt means a lower credit score and problems getting more accounts.


    A heavy credit card debt load means owing more than 30 percent of your total credit lines, according to MSN Money writer Liz Pulliam Weston. For example, your debt is not considered excessive if you have credit limits totaling $30,000 and owe $9,000 or less. The ideal amount of credit card debt for an excellent credit score is 10 percent or less of your available credit limits.


    Your debt may be too heavy for your personal situation, whether or not it affects your credit score, according to Stef Doney of the Bankrate financial site. You should have the financial ability to pay all your credit cards off within 12 months, even if you choose not to do so. Your debt load is excessive if you can only afford the minimum monthly payments on all of your cards. Regularly paying for necessities like utility bills and groceries with your credit cards is another red flag, unless you are doing so to earn airline miles or other rewards and are paying the balance in full every billing cycle.


    Confirm the debt-related information on your credit reports regularly because mistakes might make you look more financially unstable than you really are. TransUnion, Experian and Equifax sometimes overstate your owed balances or understate your open credit lines, which makes your ratio of available credit to owed balances look too high. Your reports are available yearly for free through AnnualCreditReport.com, according to the Federal Trade Commission. Get one report at four-month intervals, check your balances and credit lines and fill out the appropriate credit bureau's dispute form online to get the data corrected.


    Pay down your credit card debt if it is high enough to hurt your credit rating. One of the most effective methods of reducing bills fast is to tighten your budget by cutting out optional items and put the money you save toward your highest interest credit card bill, according to the Motley Fool financial website. This tactic increases the amount of money that gets applied to the balance, since much of the minimum payment require goes toward interest.

Tuesday, April 24, 2007

The Statute of Limitations on Debt & Changing Residency

When you're delinquent on a debt, the creditor that you owe may attempt to collect the debt from you in court. Each state has its own laws regarding how long creditors can collect debts, and the rules vary depending on whether or not the debt is from an oral or written agreement, promissory note or open-ended contract.

Types of Contracts

    Four types of contracts exist that states consider enforceable and collectible in court. Oral contracts, also known as "handshake agreements," are the most difficult to prove because nothing in writing establishes the loan's details or even if it occurred. Written contracts are enforceable because they're signed by both parties; they're similar to promissory notes, which go one step further than written contracts because a payment and interest schedule is included. An open-ended account is a line of credit where the outstanding balance varies. Credit cards are usually considered open-ended accounts.

Statute of Limitations

    Knowing what type of contract you have is important because each state's statute of limitations varies based on this fact. For example, in Delaware, creditors have three years to sue a debtor who's delinquent on an oral, written or open-ended contract, but six years to sue for a promissory note debt. Rhode Island lets creditors sue within 15 years of oral or written contract default, and 10 years for promissory note or open-ended contract default. Virginia has a three-year lawsuit statute of limitations for oral contracts, while allowing five years for written, six years for promissory notes and three years for open-ended contracts.

Changing Residency

    If you are being chased by creditors and decide to move to a different state, the creditor may decide to sue you in the state with friendlier lawsuit terms. For example, if you move from Virginia to Rhode Island and have credit card debts, then the creditor may sue you in Rhode Island, even if the Virginia statute of limitations has passed. However, MSN Moneycentral columnist Liz Weston recommends fighting that lawsuit because your state of residence should determine what statute of limitations applies. Weston also states that just because the statute of limitations has run out, that doesn't mean a creditor won't still try to sue you. If this happens, you'll need to go to court to fight the suit based on your evidence that the time limit expired.

Restarting the Clock

    Many debtors accidentally restart the statute of limitations clock. In other words, the time limit on the statute of limitations begins from the date of your last payment or transaction. Some states permit creditors to restart the clock by getting the debtor to acknowledge the debt or agree to a payment plan. Finally, keep in mind that even if the creditor can't sue because you've moved to a different state or the time limit passed, the debt still exists, and the likelihood that the creditor will continue its collection efforts is high.

How to Refinance a Sallie Mae Loan

If you took out a student loan to pay for collage or graduate school, chances are you're looking down the road at years of endless, consistently large payments--or are you? For loans serviced by the Sallie Mae company, there are a variety of payment plans that can help tailor your repayment to your life and goals. Here's how to get started.



    Log onto the Sallie Mae Web site at http://www.salliemae.com/ and click "Manage your loans." If you have not used the site before, you may have to enter or confirm some personal information such as your birthday, phone number and address.


    From the top bar on the loan management web page (showing your current balance), click "change your payment plan" and then "lower your payments."


    When you see the "repayment options" section, click "check eligibility." You will be asked to enter some very basic information, such as your monthly income and the date your loans were disbursed.


    Choose whether you wish to increase or decrease your monthly payments, and click on the appropriate link.


    If you are increasing your payment, use the calculator that's provided to evaluate payment amounts, the total amount to be paid over the length of the loan, and the time to full repayment. When you are satisfied, click "submit." If lowering your payments, choose from among the payment plans that are offered, and click "apply."

Monday, April 23, 2007

How to Stop Harassing Debt Calls

Defaulting on your credit obligations and failing to pay can result in your account being written off and the balance being sent to a collection agency or debt collector. Collection agencies can call you about your debt to try to get you to pay. The Federal Trade Commission regulates debt collectors' actions through the Fair Debt Collection Practices Act (FDCPA). If a debt collector or agency harasses and repeatedly calls you, you can take action -- with the FDCPA on your side -- to get the harassing debt calls to stop.



    Talk with the debt collector or creditor at least once to determine if you can resolve the matter. Ask if you can make payment arrangements or somehow settle the debt if you believe that you actually owe the amount the collector is demanding. Sending in monthly payments to a debt collection agency or past creditor may get the calls from that particular creditor to stop.


    Type a letter to the debt collection agency or creditor requesting that they stop communications with you regarding the debt. Cite the FTC's Fair Debt Collection Practices Act in the letter, stating in your letter that this Act requires that the collector honor your request to cease communications.


    Make a copy of the letter and keep it for your records. Mail the original letter to the collection agency that has been harassing you. Send the letter via certified mail and pay for a "return receipt" so that you have proof and confirmation that the collection agency received your letter.

Negotiating a Lump Sum Payment of a Credit Card Debt

Negotiating a lump sum payment with your credit card company isn't necessarily difficult, but it can be a lengthy process. It may also be embarrassing to admit that your finances have gotten out of hand, but for the sake of your credit and future, it's important to push past that and address the problem. Before calling your credit card company, or the collection company if it's gotten that far, collect your most recent statements and your bank account information. It's also a good idea to call when you have plenty of time and the house is quiet, to minimize distractions.



    Assess your financial situation before calling your credit card company. See how much you could realistically offer to cover your debt. Lump sum payments are usually made in either one or three installments, so you won't have a ton of time to come up with the money needed. Be realistic. Don't agree to settle $5,000 of debt in one payment of $3,000 if you have $1,200 in the bank and not much money coming in.


    Call your creditor. Be polite and ask for help. If there are extenuating circumstances that have caused your financial difficulty, feel free to explain them, but don't embellish or make excuses. Ask what percentage of your debt they would be willing to settle for in a lump sum payment. This may vary depending on the size of the debt and whether you made timely payments for a period before falling behind. If one sizable payment might be tough, ask if the company would be willing to allow you to make the lump payment over two or three months. If you aren't getting anywhere on the phone, don't argue. Stay friendly and ask to speak to a supervisor.


    Follow through with whatever payment arrangements you make. When negotiating your payment, ask if the company will consider removing the bad marks from your credit report once payment is made.


    Keep track of any paperwork you receive from the credit card company or collections agency, especially the letter they send you when your debt is satisfied. If you want you can send a copy of that letter to the three major credit reporting agencies. Also keep your canceled checks when they arrive in the mail, just in case there should ever be a question about whether or not you paid.

What Happens When Your Name Is Sent to the Collection Agency?

Creditors periodically sell non-performing accounts to collection agencies in bundles. This minimizes the creditor's losses since the collection agency pays for each delinquent account it receives. The creditor may then claim the remaining unpaid balance as a tax loss. Although creditors attempt to collect debts before selling them, you can expect more aggressive collection efforts from a collection agency than your original creditor.

Skip Tracing

    When creditors turn over account bundles, some accounts contain complete information on the debtor while some may contain little more than the individual's name and how much he owes. A collection agency needs more personal information about you other than your name in order to contact you about the debt.

    Collection agencies research debtors through a process known as "skip tracing." The goal of skip tracing is to locate individuals who do not wish to be found. Debt collectors have the option of hiring an outside agency to locate you or of conducting the skip tracing themselves by searching pubic records databases and telephoning your friends and family members in an effort to obtain your contact information.

Collection Activity

    Once the collection agency has your name and address, debt collectors will begin sending you payment notices through the mail and calling your home. Even if the collection agency's primarily contacts debtors via phone rather than through collection letters, the Fair Debt Collection Practices Act requires the collector to send you written notification specifying the amount you owe and notifying you of your right to request proof of the debt and the name and address of the account's original creditor.

Credit Reporting

    Once the collection agency has your personal information, such as your name, date of birth and address, it can report the account to the credit reporting agencies at any time. This leaves a record on your credit report of the derogatory debt that federal law mandates can remain there for up to seven years. Reports from collection agencies damage your credit scores.


    Some creditors merely hire collection agencies to collect debts on a contingency basis and award the collector a portion of the recovered balance. Should this occur, the original creditor still legally owes the debt. Depending on your original creditor's policies, you may be able to make payments directly to your original creditor rather than dealing with the collection agency. Once a creditor sells your debt, however, it no longer legally owns the account and cannot accept payments from you.

Sunday, April 22, 2007

What Happens When I Don't Pay a Collection Agency?

What Happens When I Don't Pay a Collection Agency?

Creditors often hire collection agencies to help them collect debts from individuals who have previously defaulted on payment obligations for a loan, credit card or other form of debt. Collection agencies focus solely on collecting delinquent debts, making them more efficient at recovering funds than the original creditor, which must focus on aspects of consumer accounts other than collecting payments.


    Collection agencies primarily use telephone calls and written demands to notify debtors that payment is due immediately. Not paying a collection agency will result in more frequent calls and letters. The Fair Debt Collection Practices Act (FDCPA) makes it illegal for debt collectors to use abusive language or threats when collecting debts. Unfortunately, this does not mean that the practice wont occur should you refuse to submit a payment. If a collection agency cannot convince you to repay the debt, it may eventually sell the debt to yet another collection agency.

Time Frame

    Although collection agencies may pursue you for a debt for an indefinite length of time, a company may only pursue a legal remedy until your states statute of limitations for debt collection expires. Thus, a collection agency possesses the right to sue you, but only for a limited amount of time. The statute of limitations varies by state, but begins as soon as your payment to the original creditor goes 180 days delinquent. If you make a payment on the debt, however, this restarts the statute of limitations--giving a collection agency the right to file a lawsuit against you even if it did not previously enjoy that right.


    Collection agencies can damage your credit by reporting evidence of the debt to the credit bureaus. Not only are collection accounts derogatory entries, but lenders inspecting your credit history will see the collection account and consider you a higher risk. By paying a collection debt immediately, you can sometimes avoid a collection report ever appearing in your credit files. Once a collection agency reports your debt to the credit bureaus, paying it wont secure its removal or negate the negative impact it has on your credit score.


    If you did not incur the debt in question, you arent legally obligated to pay it provided you demonstrate that the debt isnt yours. The FDCPA allows all consumers to demand that collection companies validate a debt by providing proof that the individual owes the debt and that the collection agency in question is authorized to collect the debt. Not paying a collection agency is permissible if you never accrued the debt in the first place.


    If you ignore the debt and it's still within your states statute of limitations, the collection agency may seek legal help collecting by filing a lawsuit against you. If you do not contest the lawsuit, the court will grant a default judgment against you whether or not the debt is even yours. In many states, judgments give debt collectors the right to garnish your paychecks and bank accounts. Judgments also appear on your credit report and tarnish your credit history.

Debt Repayment Options Prior to Bankruptcy

Bankruptcy is a legal procedure consumers use to get out from under crushing debt and try to get a fresh financial start. However, bankruptcy can negatively affect your credit score for up to 10 years and prevent you from getting auto or home financing, according to the Federal Trade Commission website. Before you file for bankruptcy, investigate the other debt repayment options available to you.

Debt Consolidation

    Consolidating debt means combining your debt into one account and one monthly payment. You can use a personal loan, a home equity loan, a mortgage refinance loan or transfer your debt to a new credit account. If you need help consolidating your debt, consider speaking to a debt consolidation professional. You may be able to find debt consolidation assistance through a professional debt consolidation firm, your local bank or lending institution, or a certified public accountant.

Credit Counseling

    A credit counselor may be able to help you put together a plan to pay off your debt without having to file bankruptcy. The credit counselor creates a plan for you and you pay your debt through an account set up by the counseling firm, according to the credit experts at the Loan.com website. The credit counseling company may add a service fee each month to your payment and there may be fees to set up the account. Be sure you understand the fees before signing an agreement.


    You can contact all of your creditors and negotiate lowered payoff amounts and monthly payments that will allow you to pay your debt off without filing bankruptcy. Explain your situation to your creditors and ask them to work with you on paying off your obligations. Your creditors may realize that negotiating with you now is a better alternative than possibly having the debt lost to a bankruptcy filing. As with other debt repayment options, you can contact a debt negotiation professional if you do not feel comfortable negotiating with your creditors.


    You can try to save money on your monthly installment loan payments by refinancing your loans. Contact your loan companies and let them know that you are considering filing for bankruptcy. Ask them about the possibility of refinancing your loan to lower your monthly payment. You may be put on a long-term financing arrangement, but you will only be financing what is left on your loan. For example, say you paid $10,000 for a car three years ago and currently owe $5,000 on the loan. If you refinance that $5,000 with another five-year loan, you can lower your payments significantly.

How to Close a Spouse's Charge Account

Credit card debt can be a financial burden on a married couple who wish to decrease their debt load. If one spouse desires to close the other spouse's charge account, it is a difficult process without the consent of the card-holding spouse. Most banks honor only the primary cardholder's request for termination.



    Contact customer service at the bank or credit company by telephone. If you are the primary account holder, customer service will give you the requirements for removing your spouse and discuss the steps for closing the account. As long as your spouse is not a joint account holder and is only an authorized user, you can remove your spouse from the account. The customer service number is usually listed on your credit card and often begins with an 800 prefix.


    Pay off the credit card balance. If you want to permanently close the account, it is advisable to pay off the entire balance before you do so. If you don't pay off the balance first, the credit card company might increase your interest rate on the outstanding balance. As the primary cardholder, you can remove your spouse from the account before you pay off the balance.


    Cancel the credit card account. Contact the credit card company by telephone and request to cancel the account. If your balance is zero, you may be able to cancel the account using the automated system. Some credit card companies require a representative to formally discuss the account closing with the cardholder. You do not have to give the agency a reason for closing the account unless you choose to do so. If the account is a joint account, either owner can close the account to prevent future purchases even if the balance is not paid off.


    Send a letter to the bank or credit card company verifying the account closure. Some companies require written confirmation to close the account. Even if a letter is not required, send one for your own benefit. Ask the the customer service agent for the address to which you should send the request for account closure. If you are the primary account holder, your spouse does not need to sign the letter. If it is a joint account, your spouse should also sign the cancellation letter.


    Verify the account closure. Call the credit card company back after a few days to ensure that the account was officially closed. Four weeks after you call to request that the account be closed or send the letter, request a credit report from one of the credit bureaus. The credit report should verify that the account is closed. If not, contact your credit card company to determine why the account is still open.

Saturday, April 21, 2007

New Jersey Collection Agency Laws

New Jersey Collection Agency Laws

New Jersey is not a particularly debtor-friendly state, though in 2009 it took steps to change that. Statutes control who can attempt to recover a debt you owe as well as the process, but in general, almost anything you own and a portion of what you earn is susceptible to a collection agency under New Jersey law. Once a collection agency gets a judgment against you for money you owe, it can petition the court for a writ of execution and potentially seize your bank accounts, your personal property and in some cases, even real estate.

New Jersey Fair Debt Collection Practices Act

    The state legislature passed the New Jersey Fair Debt Collection Practices Act in 2009. Under the terms of the new act, debtors are entitled to validation of any debt a collection agency pursues them for and it levies substantial fines if the collection agency doesn't comply. The agency must supply the debtor with written notice that includes the name of the original creditor and what he can do to dispute the debt if he thinks he doesn't owe it. Collection agencies must post a $5,000 bond with the state to operate in New Jersey. However, the new law pertains only to collection agencies. If the creditor hires an attorney instead to try to collect the debt, the attorney is exempt from many of the provisions of the act. Banks and trust companies are also exempt.

Statutes of Limitations

    New Jersey gives creditors a certain number of years to pursue you for a debt. If a creditor misses the deadline and the statute of limitations expires, it can no longer attempt to collect from you. On most credit card debt and car loans, the creditor has six years to file for a judgment against you for the money you owe. Once it gets the judgment, however, it has 20 years to enforce it by applying for a writ of execution.


    Writs of execution allow a collection agency to garnish your wages and your bank accounts for repayment of your debt. New Jersey law mandates that a wage garnishment must leave you at least $154.50 per week for your living expenses. If your net take-home pay is $154.50 per week or less, you are exempt from wage garnishment. Otherwise, garnishment is limited to 10 percent of your gross pay before taxes. If you earn $600 per week before taxes, a collection agency can garnish $60 per week, leaving you with $540 to pay your other bills. The law protects a creditor from two agencies garnishing him at the same time. The creditor with the first judgment against you gets priority; any other creditors must wait until that first debt is satisfied before another garnishment can go into effect.

Personal Property

    Collection agencies can also seize and sell your personal property to satisfy your debt, including property someone else is holding for you, your automobile and any bequests left to you in a will. New Jersey law prohibits an agency from taking any of your real property until and unless it has seized all other personal property, has auctioned or sold it to repay your debt, and you still owe a balance.

Do Company Cards Show Up on Your Personal Credit Report?

Some company credit cards show up on your personal credit report, and some don't. However, a card that shows up on your credit report is one for which you are personally responsible to some degree. It's important to understand what responsibilities and risks come with each type of company card. If you pay the card yourself and are reimbursed by your company, you and your company are most likely jointly responsible for that debt. How you use that card can affect your credit score, and any charges the company will not pay become your responsibility.

Company Cards

    A company card is not the same as a small business card. Rather a company card is issued by an employer to employees who need to pay for business-related charges, such as plane tickets, hotel rooms, rental cars and office supplies. Some company card debts are paid directly by the company, but others are the responsibility of the employee, who is then reimbursed by the company. This means that the way you use your card affects not only your company's credit, but can either benefit or hurt your credit as well.

Joint Responsibility

    Joint responsibility means that the employee is partly responsible for any debt run up on the card. If the company fails to pay it -- for reasons of bankruptcy or because it doesn't approve the charges as business-related expenses -- the employee is held accountable for the charges. A card that shows up on your personal credit report is one for which you are considered responsible, even if the charges are business-related. If the company has sole responsibility, the card should not appear on your report at all.

Risk and Rewards

    A joint-responsibility company credit card can be helpful to your credit. Responsible payment by you and your company can improve your credit score the same way that a personal credit card does. However, for it to do so, you must be jointly responsible for the debt. This is a risk, because companies that go bankrupt can leave you holding the bag for a debt that was incurred on the company's behalf. In this case, you'll need to hire a lawyer.

Handling Your Company Card

    It is important to know what you're signing up for when it comes to company cards. When a card shows up on your personal credit report, you are most likely responsible for that debt to some degree. The way you use that card will impact your credit. Knowing your company's policies on what expenditures are acceptable can help you avoid making purchases your company won't approve, because purchases that are not approved become your personal responsibility.

Friday, April 20, 2007

How to Negotiate Debt With Attorney Summons

How to Negotiate Debt With Attorney Summons

If you have been notified of legal action being taken against you, you've got a tough road ahead. When a creditor files a suit against you in civil court, they are no longer serious about collecting from you simply by contacting you by phone. If you receive an attorney summons, you have several options. The best option, though, is to open negotiations with your creditor(s).



    Verify the validity of the creditor's claim. If the debt is paid in full or does not belong to you, you will need to appear in court to defend yourself. Consider retaining an attorney to help you present your argument. Collect all documents corroborating your claims (paid in full letters, bank statements, cancelled checks). Do not go to court if the debt does in fact belong to you. You cannot stop the legal process if it's already in motion. If the judge finds in favor of the plaintiff (the creditor), you will receive a copy of the decision, the method of collection (wage garnishment, lien) and how to contact the creditor.


    Hire a credit counselor, if you can afford one. These professionals will be able to deftly negotiate a settlement or repayment arrangement for you. Start your search for a credit counselor at the National Foundation for Credit Counseling (see Resource 1).


    Negotiate directly with the creditor if you cannot afford a credit counselor. Collect your income documents and any other documents relating to your default (unemployment receipts, medical bills, disability statements, letters from physicians).


    Offer a one-time, lump sum payment to your creditor. This will show your willingness to negotiate and honor an equitable settlement. Only settle your debts if you are completely unable to repay the debts as they stand. Settlement will negatively affect your credit for seven years.


    Ask for rate reductions, waivers for interest charges, late fees, over limit fees and other penalties. This will reduce the amount owed without officially qualifying as a "settlement."


    Counter any offer from the creditor. Ask for reasonable rate reductions and interest charge waivers.


    Get a copy of a repayment or settlement agreement in writing. Confirm all the numbers and keep a copy for your records.

What Is a Judgment for Nonsecured Credit Card Debt?

A judgment for unsecured credit card debt is an entry entered on a civil court's docket that signifies that a credit card company has prevailed in its lawsuit against the cardholder for recovery of the default balance owed.

Obtaining a Judgment

    A judgment may be obtained either after a trial on the merits or by default if the debtor fails to answer the credit card company's complaint after it is filed in court.

Significance of Judgment

    Once a judgment is obtained, a creditor may avail himself of the postjudgment collection procedures afforded by law. The credit card company is designated as a judgment creditor and the cardholder is characterized as the judgment debtor.

Postjudgment Collection Procedures

    A judgment creditor may initiate, with prior approval of the court, a number of legal remedies in order to enforce payment of the judgment. These include garnishing a judgment debtor's wages, attaching his bank account, and/or placing a lien against the debtor's real property.

Thursday, April 19, 2007

What Happens after a Debt Buyer Enters a Judgment Against Someone on Social Security?

What Happens after a Debt Buyer Enters a Judgment Against Someone on Social Security?

Consumers who do not pay off their debts as agreed are subject to collection activity from creditors, regardless of how much income they receive or the source of that income. Should the creditor's efforts fail, it will sell the debt to a collection agency or "debt buyer" that will then take over collection efforts. Debt buyers sometimes sue consumers for unpaid debts---resulting in a civil judgment. A civil judgment gives the debt buyer additional collection options.

Social Security Exemption

    One common way a debt buyer can use a civil judgment to force a consumer to pay his debt is through garnishment. Judgment holders can garnish wages and sometimes also garnish bank accounts via a bank levy.

    The Federal Trade Commission notes that only government agencies have the right to garnish an individual's Social Security benefits before she receives them each month. Thus, unless the debt buyer is working under contract to collect a debt you owe to the government, such as an unpaid federal education loan, it cannot garnish your Social Security payments.

Credit Impact

    After the court hearing that created the judgment, the debt buyer files the judgment with the court clerk. Doing so "dockets" the judgment---making it a public record accessible by anyone---including the credit reporting agencies that maintain your credit information. The reporting agencies will add the judgment to your credit report as soon as they discover it. Courts do not directly report judgments to credit reporting agencies.

    The fact that you receive Social Security has no effect on how the judgment affects your credit scores. Judgments are derogatory but, because everyone's credit information differs, the degree to which a debt buyer's judgment hurts your credit rating will also differ.

Bank Levy

    The law bars commercial creditors from seizing Social Security benefits. However, that is no guarantee that a debt buyer won't attempt to garnish your benefits after you deposit them into your bank account. To prevent this from happening, notify your bank of the amount of money you receive in Social Security each month via an exemption claim form. Provided you claim your Social Security as exempt funds, your bank will not turn them over to the debt buyer should it levy your bank account.


    All collectors' regulations differ, but they don't typically sue every debtor whose account they hold. Debt buyers weigh the costs of filing and pursuing a lawsuit against the benefits of collecting the full amount. If a debt buyer knows that it cannot force you to pay off a judgment due to your exempt income, it may opt not to sue you or withdraw a previously filed lawsuit before the hearing.

What Are the Three Categories of Consumer Credit?

What Are the Three Categories of Consumer Credit?

Consumer credit is money borrowed for purchases that are immediately used or that decline in value after purchase. Consumer credit is not used to purchase investment items; therefore, a mortgage is not considered to be a kind of consumer credit. The three different categories of consumer credit are based on the terms of when payment is due.

Installment Credit

    Installment credit is when the purchase of an item is paid off in even installments over a set period of time. Interest is also charged. An example would be the equal monthly payment of $463.16 on a $15,000 car loan, assuming a 36-month term at a 7 percent interest rate.

Revolving Credit

    Revolving credit has a preset limit that you can borrow, which remains available to you as long as you make regular payments in accordance with the credit agreement. An example of this is a credit card with a set credit limit. The card can be used as long as the card remains in good standing and at least the minimum payments are made.

Open Credit

    Open credit does not allow you to carry a balance and must regularly be paid off in full. An example is a business expense account carried on a company credit card that must be cleared every month.

Wednesday, April 18, 2007

The General Principle of Credit Balance Transfers

The General Principle of Credit Balance Transfers

The average credit card holder has three credit cards, according to 2010 research by the Federal Reserve Bank of Boston. Based on the number of credit card offers most of us receive, it seems that banks would like us to have many more. Credit card companies often encourage new customers to transfer balances from existing accounts with competing card issuers. As an incentive, they may offer a low- or no-interest introductory rate. However, balance transfer fees and other costs may apply.

Why Do Banks Offer Transfers?

    When a credit card issuer approves you for a new credit account, the balance you owe is zero. Of course, banks can't charge you interest on a zero balance, so they offer you the option of transferring the balance from another bank's card to theirs. That way, you will start paying them interest, instead of their competitor.

How Does a Transfer Work?

    The process of transferring a balance is relatively straightforward. You simply tell your new credit card company how much you owe, and the account number for your existing credit card. The company then pays off the old account, and transfers the balance to your new card. The whole process usually takes a couple of weeks. The banks recommend that you make any minimum payments due during the transfer period, so that penalty charges don't accrue.

Why Transfer a Balance?

    We know why the banks want you to transfer your balance, but why would you want to go to the trouble? One reason is convenience. If you have several cards with a balance, you may wish to consolidate them so you don't have to make several different payments every month. Another reason might be that the new card offers a grace period during which interest is not due. This gives you the opportunity to pay off outstanding debt without accruing interest, which allows you to pay down your debt faster.

Balance Transfer Fees

    Fees add to the cost of transferring your balance, so you must assess these terms carefully. If a fee applies, is it a percentage of the total transfer amount, or a flat fee? Obviously, no transfer fee would be best. However, a flat fee of $25 is preferable to a 3-percent fee on a $10,000 balance, which would be $300. Next best would be a percentage with a cap (e.g., a maximum of $50). By paying 3 percent up front on the total balance, you are adding to your debt rather than reducing it, so you need to take this cost into consideration when calculating your payback.


    Some credit card companies do not offer an introductory 0-percent interest rate on balance transfers. Instead, they offer it only on new purchases. You should also note what the interest rate will be after the grace period. If it's higher than you're currently paying, you may end up in a worse position. Before you transfer a credit card balance, make sure you have a realistic debt-payment plan that specifies how much you will pay each month and the source of the funds. Often, credit consolidation fails because consumers haven't changed their spending habits.

How to Fight a Credit Card Civil Suit Summons

If you've received a civil summons because you're being sued over nonpayment of a credit card debt, don't ignore the summons. Although you'll need to consult your own attorney on your personal situation, knowing how you'd like to proceed in advance can save you time and money with your attorney. Ideally, you'll be able to reach a settlement with the lender on your own; if not, the federal government provides you with rights as a borrower, and knowing those rights will help guide you through the legal process.



    Request a debt validation letter in writing via certified mail from the lender or debt collector. The Fair Debt Collection Practices Act puts the onus on the lender to prove the debt, and the act states that collection activities -- including lawsuits -- must cease while the lender produces the proof. The validation must include the name of the original lender and the balance. It may also contain instructions on what to do if the debt isn't yours.


    File a sworn denial with the court if you don't owe all or part of the debt. Be careful -- if you owe the debt, you can't deny it. However, it may be that the collector or lender is suing you for the wrong amount. The sworn denial should be typed, signed, notarized and filed with the clerk of the court. Send a copy to the collector's attorney. Attorney Andy Nelms says that a good sworn denial states: "I deny that this is my debt and if it is my debt, I deny that it is still a valid debt and if it is a valid debt, I deny the amount sued for is the correct amount."


    File a written Request for Production of Documents. This step forces the creditor to produce a copy of the borrower agreement. If the debt is old, there's a fair chance that the creditor won't be able to produce it. If you're being sued in small claims court, you won't be able to file this request; ask for it at trial instead.


    Attend the hearing and show up for the trial. As Nelms states, it can't get any worse. While you may wish to represent yourself, if the case proceeds to trial it's best to consult an attorney. Consider also that each state has its own statute of limitations on debt collection. If the deadline to collect the debt has passed, the court must dismiss the lawsuit against you.

The Best Debt Settlement Solutions

The Best Debt Settlement Solutions

Taking steps to eliminate your personal debts is key to getting your financial life back on track. Opting to negotiate and settle debts is perfectly legal, although you should be cautious with whom you do business. You should also be aware that your credit rating will take a serious hit; although, if you're late already, chances are it's already poor.

The Best Debt Settlement Resource

    Contact the National Foundation for Credit Counseling to review your options. Their counselors, who are certified in debt and budget management, will give you a free consultation. Sessions are available online or over the phone and are confidential. As the nation's oldest nonprofit devoted to consumer debt management and education, the NFCC enjoys a sterling reputation as the nation's finest resource for debt management and settlement solutions. Fees for management plans are minimal, although settlement solutions are more costly and vary, depending upon how much debt you need to settle and the state in which you reside.

How Debt Settlement Works

    In a debt settlement plan, a consumer who is already considerably behind on payments pays a negotiated sum that's a fraction of the original outstanding debt. Borrowers must be at least three to six months behind before a company will consider settling the balance. Generally, it's wisest to deal directly with the lender before it goes to collection; collection agencies are aggressive and will most likely pursue delinquent borrowers for months. You also won't want it noted on your credit history that the account went to collection.

    Credit cards and other unsecured loans are the best candidates for debt settlement plans. Loans that are secured by assets, such as cars and homes, will be subject to the seizure process (although many homeowners are negotiating their mortgage balances in 2011 as a result of the housing market's downturn).

Your Options

    Borrowers may approach debt settlement several ways. The NFCC will put you in touch with a reputable settlement company. You can attempt to find a local company yourself (always making sure to check their reliability rating with the Better Business Bureau). Alternatively, you can attempt to settle the debt yourself. Doing it yourself will save you money, but it won't be easy.

    Payments to creditors can be made over several months or in one lump sum. Lump sum payments offer the most savings, and if you're planning to settle your debts, begin saving for the settlement as soon as possible. Many settlement companies will suggest putting money into an escrow-style account during the delinquency period to be used toward the settlement.

    Be wary of debt settlement companies that collect their fees in advance of negotiating your settlement; there is little to prevent a disreputable company from walking away with your money before one dime has been negotiated.

An Alternative to Debt Settlement

    Remember that settling your debt will have a profound effect on your credit history (especially if your credit was excellent to begin with). Most of your credit score is comprised of your history of timely payments and debts owed, so delinquencies and high balances hurt. Settlements will not appear as "paid in full" or "as promised" on your report; expect your score to suffer for at least one to two years.

    The NFCC may offer participation in a debt management plan. DMPs pay the debt in full over a predetermined term, less than five years. Interest rates and payments are reduced, accounts are marked "current" and also closed. DMPs do not affect your credit as negatively as settlement does.

    Bankruptcy, another debt settlement solution, is your option of last resort. Counseling will be required, and you will need an attorney. Your credit will suffer for at least 10 years, and it may affect your employment status. Your unsecured debts will be wiped out, but consider your options carefully before proceeding down this path. You may not need it.

Government Help for Credit Debt

Credit cards offer a convenient way to purchase goods and services without carrying cash, but irresponsible spending with a credit card can lead to high balances that are difficult to pay off. It can take years to pay off credit cards even if you never miss a payment. The government offers resources to help educate people about debt management options and offers bankruptcy as an option for consumers that cannot get out of debt themselves.

Debt and Credit Management Information

    The government, in general, does not take a direct role in helping people get out of credit card debt or other types of debt unless a debtor decides to file for bankruptcy. It is up to a debtor to deal with private debts themselves, through budgeting, credit counseling services and other nongovernment debt services. The government does, however, provide a wealth of information that consumers can use to help determine their best options for overcoming debt. For example, the Federal Trade Commission (FTC) has websites dedicated to facts for consumers that list ways to combat debt without resorting to bankruptcy (see Resources).

Bankruptcy Basics

    When an individual or business decides to declare bankruptcy, the government becomes directly involved in the debt management process. The FTC states that bankruptcy is often considered an option of last resort, because it can have a large negative impact on your credit score that can last for many years, making it difficult to get credit and loans in the future. Bankruptcy does, however, have the potential to discharge (eliminate) credit card debt and other types of debts like personal loans.

Common Bankruptcy Types for Individuals

    When you file for bankruptcy, you must choose between several chapters of the bankruptcy code that each have different impacts on debts. Chapter 7 bankruptcy filing involves a discharge of debts and a liquidation of debtor assets; the proceeds of liquidation are given to creditors. Chapter 7 bankruptcy is common among people with few resources and high levels of debt. Chapter 13 bankruptcy is an option available to debtors with a regular income, which allows the debtor to avoid liquidation and pay back debts according to a court-approved plan. Chapter 12 is a section available to family farmers and fishermen that works similarly to Chapter 13 and allows the filer to continue to operate his business during the repayment process.


    If you decide to file for bankruptcy under Chapter 7 to have credit card debt discharged, you may not actually have to liquidate any of your possessions. The U.S. Courts website states that the government makes allowances for assets up to certain minimum levels and that many Chapter 7 cases are "no-asset cases," meaning all assets the debtor owns are exempt from liquidation.

What Happens If You Don't Pay a Pay Day Loan Company in Texas?

Payday loans are short-term, high-interest, deferred presentation loans. Generally, payday lenders require borrowers to post-date personal checks that are redeemable on the borrowers' next payday. Payday loans are regulated by state laws. In Texas, consumer protection laws require licensing to operate as lenders, limit the amount of interest that payday lenders can charge borrowers and limit their collection efforts against borrowers who fail to repay their payday loans.

Regulatory Agency

    The Office of Consumer Credit Commissioner regulates the consumer credit loan industry. The office regulates over a half dozen types of consumer loans, including home equity and improvement loans, pawnshop transactions, consumer installment loans and payday loans. The Office of Credit Consumer Credit Commissioner issues a "Deferred Presentation Transaction Rate Chart" limiting the interest rates and annual percentage rates that payday loan lenders can charge, as required under the Texas Administrative Code and the Texas Finance Code, Chapter 342, Subchapter F. According to the Texas Administrative Code, payday loan lenders must first obtain proper licensing to transact business as payday loan lenders in Texas and cannot enter into payday loans for terms of less than seven days.

Texas Loan Laws

    The Texas Finance code establishes the usury laws all payday loan lenders must follow. Payday loan lenders are subject to usury interest limits on their payday loans. If they violate the statutory provisions of the Texas Finance Code, they are subject to double or treble damages. Moreover, the state will cancel the terms of their payday loans, making collection impossible in Texas courts. According to Section 305 of the Texas Finance Code, payday loan lenders are also subject to the state's homestead protection statutes as personal loan lenders, as opposed to commercial loan lenders. Personal loan lenders extend loans for household, personal or family purposes. These types of transactions are governed by the state's homestead protection rules limiting collection of property under collection judgment efforts to non-homestead property.

Contract Laws and Disclosures

    Payday loan lenders cannot enter into oral agreements, but must use written loan documents. Their loan agreements must be signed by both borrower and lender and contain the amount of the loan, the date of the loan, the deferred check amount, a statement of total charges and the earliest date the lender can deposit the borrower's check. Payday loan lenders must issue written disclosures to borrowers notifying them of their total finance charges expressed as an annual percentage rate and as a dollar amount. Payday lenders must also provide fee schedule disclosures and provide the address and other consumer help information for the Office of Consumer Credit Commissioner. Lenders must give each borrower a written disclosure of the pitfalls of obtaining a short-term, high-interest loan and the consequences of being unable to pay the entire debt and renewing a payday loan.

Limited Collection Remedies

    The Texas Legislature passed homestead laws limiting the collection rights payday loan lenders and other creditors have when borrowers default on their loans. The Texas homestead protection laws limit real and personal property from judgment collection efforts. Texas law protects homestead real property that consists of up to 200 acres of land and a home in rural areas and up to one acre and a home in urban areas. The homestead laws allow borrowers to exempt up to $60,000 of marital personal property from creditors and up to $30,000 of a single resident's personal property. In addition to the limitations on personal property, Texas law prohibits creditors from taking specific personal property, including boats and cars, business equipment, children's personal items, food, personal furnishings and heirlooms.


    Because state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.

Tuesday, April 17, 2007

What Happens If I Pay the Creditor & Not the Collection Agency?

The 2009 Financial Literacy Survey revealed that 26 percent of all Americans say that they do not pay all of their bills on time, and that 15 percent of all Americans were late paying one of their credit cards over the last year. Statistics like these add up to big business for debt collectors.

How Long Before Collections

    The length of time a creditor reports an account to collections depends on the creditor. According to consumer advocate group NEDAP, medical providers are some of the quickest to send outstanding accounts to collections, while credit card companies take a longer time to report an account after no payment has been made.

In-House Collector or Debt Buyer

    Just because a debt is in collections does not mean that you can't pay the original creditor. The debt may be held by an in-house collector within that company. If the debt has gone on for longer without payments, the debt has probably been sold to a debt buyer -- perhaps for pennies on the dollar.

How to Find Out

    Contact the original creditor with the account information. If they still have access to your account, then they probably still own the account. If they cannot access the information, your account was probably sold. When in doubt, ask the original creditor if you can send a payment to them.

If You Pay the Creditor

    If the debt buyer owns the account, the original creditor does not have an account with you. They may either return the money to you, or they may forward it on to the debt buyer. Collectors and creditors sometimes lose money, so be careful whom you pay, and document your payment with proof such as canceled checks or money order receipts.

How to Get Help Paying Off Payday Loans

Payday loans are short-term, small-dollar loans known for their high interest rates or high fees that are marketed to low-income workers with few avenues of traditional credit. They are called payday loans because a borrower gives the lender a check for the entire loan balance, plus any associated fees. The lender cashes the check on the borrower's payday. People living paycheck to paycheck often cannot bear the brunt of paying an entire loan balance--usually about $300--in one swoop. To avoid this, they may pay additional fees to extend the term of the loan. This cycle has devastating effects on a person's ability to ever pay back such loans. Consumer credit counseling agencies can negotiate on your behalf to form a payment plan.



    Find a consumer credit counselor. In most areas of the country there typically are several companies and nonprofit organizations whose stated goal is to help people get out of debt. Many of these companies are scams, though. They take fees and do little to help.

    The U.S. Department of Justice maintains a list of approved credit counselors (see References). These counselors offer debtors required credit counseling prior to bankruptcy, but their services may be available to people seeking to re-organize their financial house. The U.S. Department of Housing and Urban Development also maintains a list of counselors that advise people on the financial aspects of home buying (see References). Many of these counselors also work with people trying to get out of debt.


    Contact a counselor near you. According to the Federal Trade Commission, many credit counseling agencies will offer their services at little or no cost to you. When you call to set up an appointment, ask what paperwork and documentation you will need in preparation for the meeting.


    Research options with your counselor. There are plenty of options to repay the loan. If your lender is a member of the Community Financial Services Association, an industry trade association, it should offer you a repayment plan upon request. Filing for bankruptcy may also be an option. In some cases, a counselor may institute a debt management plan in which you write a check each week to the counselor. They, in turn, will pay your bills from the funds you give them. These programs help borrowers live on a budget and cut off access to credit.

Medical Collection Laws in Missouri

Medical Collection Laws in Missouri

Missouri does not have many state laws regarding debt collection practices, so the state primarily adheres to the federal Fair Debt Collection Practices Act, or FDCPA, which can be found in the United States Code at 15 U.S.C. 1692-1692p and on the Federal Trade Commission (FTC) website. Medical debt is classified as consumer debt, which is personal, family or household debt, and not debts incurred by a business. The FDCPA laws only apply to consumer debt.

Address Information

    FDCPA laws protect your privacy.
    FDCPA laws protect your privacy.

    Debt collectors must follow strict guidelines when trying to get information about your location. The debt collector must identify himself to you and state that he is confirming or correcting your address information. He also cannot communicate with any person more than once unless he is specifically asked to do so or if he believes the person is withholding your location information. Collection agencies cannot communicate by postcard or use any language or symbol on any envelope that indicates they are a debt collector, even correspondence to your home. The information that you owe a debt must be kept completely confidential.

Communication with the Consumer

    Written communication is the easiest to verify.
    Written communication is the easiest to verify.

    Debt collectors cannot talk to you at a time or place that is known to be inconvenient for you, such as at work, if you inform them of such. Collectors can make calls to you any time between 8 a.m. and 9 p.m. in your time zone. If they learn you are represented by an attorney, the collection agency is required to get the attorney's contact information and deal with him directly. Debt collectors are not allowed to discuss your debt with anyone but you and your spouse or guardian unless you give them express permission to do so, or a court decides it is necessary to communicate with someone else. If you notify the collector that you are not going to pay the debt and you do not want further contact, the collector cannot contact you again except to tell you that they will no longer be contacting you and to notify you that they may be forwarding your account to the next stage of collections. If such notice from the consumer is made by mail, notification shall be complete upon receipt.

Harassment or Abuse

    Never tolerate harassment or abuse from a debt collector.
    Never tolerate harassment or abuse from a debt collector.

    Collectors are never allowed to harass or attempt to intimidate you because of your debt. Examples of harassing or abusive behavior by a collector are: threats of violence against you or your property; using vulgar or profane language; publishing a list of people who allegedly refuse to pay their debts (except to a credit reporting agency); advertising to sell a debt to try to force you to pay; calling your house over and over to harass you; or calling you without telling you who they are. If you experience this kind of treatment by a collector, report it to the FTC as well as the collector's supervisor immediately.

Other Guidelines

    The Fair Debt Collection Practices Act was created to protect consumers and collectors alike.
    The Fair Debt Collection Practices Act was created to protect consumers and collectors alike.

    The FDCPA covers several more guidelines for debt collectors. Collectors are never allowed to make false claims in order to get payment from you. Collection agencies are not permitted to charge extra interest or fees on a debt unless it was stated in the original debt that it would be allowed. They are not allowed to cash a check that was post-dated more than five days unless they notify you in writing that they are taking the payment (a reminder notice). If you request in writing that the collector verify the debt, they cannot continue to try to collect until they have verified the debt as valid. All of these guidelines are legally enforced by the Federal Trade Commission.