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Saturday, November 29, 2008

What Is a Charge-Off Date?

The charge-off date is the date on which a creditor writes an uncollectible debt off its books. The charge-off date falls 180 days after the last payment made by a delinquent debtor. At that point, the creditor has determined that it will no longer receive any payment from the debtor. A charged-off account is forwarded to a collection agency or third-party debt collector for additional collection attempts. Charged-off accounts are severely delinquent and can be damaging to a debtor's credit report.

Credit Rating/Reporting

    When a creditor charges an account off, it is reported to the credit reporting agencies as a bad debt. The account will be rated as "9", which is the code or designation for charge off. If the account is an installment loan such as an automobile loan, the rating will be, "I-9. The "I" stands for installment. Revolving accounts such as credit card accounts are rated as, "R-9". This information may not show up on the records of all three credit reporting agencies.

Time Frame

    Charge-off accounts will remain on a debtor's credit file for approximately seven years. After this time, they are supposed to be removed from a credit file automatically. Accounts that are not removed can be disputed with the credit reporting agency in writing. Charge-offs can lower a credit score significantly, making it difficult to receive credit in the future. The longer a charge-off remains on a credit file, the less damaging it becomes to the credit file.


    When collection agencies receive charged-off accounts, they can pursue legal action through the courts and receive a judgment. A collection agency can get a bank levy or wage garnishment or even place a lien on any real estate owned by the debtor. These practices can vary from state to state. Bank levies allow collection agencies to take money from a debtor's bank account, and wage garnishments allow them to take a portion of the debtor's income from each paycheck.

Statute Of Limitations

    A collection agency can continue to collect on an outstanding debt indefinitely. However, it cannot pursue legal action beyond the statute of limitations. Each state has its own time frame for the statute of limitations, which also depends on the type of debt. The primary types of debts are oral contracts, written contracts, promissory notes and open-end accounts. After the statute of limitations has passed, collection activities are limited to phone calls and written correspondence.

Paid Charge-Off

    When a debtor pays off a bad debt account, it remains on his credit file until the seven-year time frame has passed. The account is then rated as a paid charge-off.

Taxes Write-Off

    Corporations use charge-offs and bad debts as write-off expenses for taxes when they file their profit and loss statements. Tax deductions are received when the taxes for an organization are filed each year.

Help With Financial Problems

These days, no one wants any more financial problems. It's hard enough with a slumping economy and a work force frozen with fear. It's hard enough keeping your head above water praying you avoid any health problems or that your car doesn't break down. Many times, people fall prey to circumstances out of their control. Financial help is not easy to come by, so you have to take advantage of financial resources whenever you can.

Places to Go for Financial Help

    If you are a single mom, there are websites where you can get financial help to get you through tough times. At the very least, you may qualify for help with some of your medical expenses or get some financial aid to help you through college so that you can look forward to a brighter future.

    There are also several financial advice websites that offer free help for anyone (not just single moms) and will answer any questions you may have about what to do next.

    Please see Resources below for links to some of these websites.

Things You Can Control

    While there may be a lot that is out of your control, there is just as much that is within your sphere of influence. Budgeting, wise spending and making extra money are steps you can take to vastly improve your financial situation.

    Budgeting is a simple but powerful concept. A budget is simply a spreadsheet (or notepad) in which you fill in your monthly expenses and your monthly income. The difference between them is your discretionary income or the money you have left over after paying all the bills. If you have discretionary income at the end of the month, then you are doing fine. If your discretionary income is a negative number, then you have some work to do.

    You can cut back on your spending to make your budget look better. Expenses such as entertainment, dining out and cable TV (additional movie channels) can be cut so that your budget improves.

    Unless you are physically disabled or have no transportation, there is no reason you cannot work a few extra hours a week to help pad your budget. Even in this economy, part-time jobs are available. Just working five to 10 hours extra per week could help you keep your budget looking positive. However, keep in mind that your health is important too, so do not overdo it!

Maintaining Your Credit Rating

    Getting help from your bank can be a tremendous boost. Banks can help you consolidate high interest debt into something that is far more manageable. But before you can even think about getting financial help from a banking institution, you have to make sure your credit is clean. This means making your payments on time and doing whatever it takes to keep your credit in good standing. That effort alone could be the difference between staying in debt and breaking free in the future.

Can a Lender Garnish My Wages If I Am Retired & Have No Income?

Wage garnishment occurs when a creditor receives permission from a court to seize a portion of an individual's wages before the individual has been issued them. The practice of garnishment is regulated by both state and federal law, dictating the process that creditors must use when garnishing wages and from whom they may garnish them. A person who has no income cannot have their wages garnished, as there is no cash flow for creditors to divert.

Wage Garnishment

    To garnish wages, a creditor must first receive a civil judgment against a debtor and then receive an order from the court compelling the debtor's employers to withhold a portion of the debtor's wages. These wages will then be transferred to the creditor. If a person is retired and has no income, a judge will not approve a garnishment, because there is nothing to garnish. He can, however, order a debtor's bank account frozen and its contents seized.

Exemptions to Garnishment

    There are a number of different sources of income that federal law protects from garnishment. These include most types of federal benefits, including Social Security benefits and disability payments. While some retirement benefits, such as pensions, can be garnished, others are exempt depending on state law. Also, unless the debtor owes child support, generally, a maximum of 25 percent of a person's income can be withheld.

Means Testing

    In addition to federal restrictions placed on garnishment, many states require that debtors pass a means test before they can have their wages garnished. This means that if a debtor does not make more than a certain amount necessary to purchase basic necessities, such as housing and food, he cannot have his income garnished. Similar means tests are usually applied to debtors who may have their bank accounts frozen. If a person is retired and has no income, his bank account might be ineligible for freezing.

Illegal Garnishment

    Under no circumstances is a creditor allowed to garnish the wages of a debtor without first receiving the permission of a court and presenting the employer with a court order. This is a violation of U.S. federal law and prosecutable as a criminal offense. The Federal Trade Commission, which is responsible for protecting consumers, has sought cases against several lenders who attempted to garnish wages directly from debtors' employers, sidestepping the courts.

Thursday, November 27, 2008

Does Making a Settlement of Less Value Than a Person Owes Harm a Person's Credit Score?

Debt settlement may stop dunning calls from creditors and collection agencies, but it also reflects badly on your credit score. The Equifax, Experian and TransUnion credit bureaus show that you made a settlement rather than payment in full, which is a negative status. Sometimes you can negate the negative credit score effect if you negotiate the settlement to include the account's credit-reporting status.


    A settlement is an agreement between you and a creditor that allows you to pay less than the full amount owed. The company agrees to accept this sum as payment and full, and it ceases collection efforts. The settlement is reported to the Equifax, Experian and TransUnion credit bureaus, which add an appropriate notice to your three credit reports. Settlements are part of your payment history, which is 35 percent of your total credit score, according to FICO, the major scoring firm. Your score drops because settlements are viewed negatively, since they show you did not pay all that you owed on the bill.


    Debt settlement terms are negotiable, so you can often convince your creditor to change the account status in your Equifax, Experian and TransUnion files in exchange for your payment, as well as reducing the original owed amount. The creditor's main interest is getting some money from you, according to Bankrate.com columnist Steve Bucci, so it is usually open to altering the way it reports your account if that is what it takes to get you to pay. Insist on "paid as agreed" status, with no indication that you paid less than the full balance, and get a written copy of the agreement before completing the settlement.


    Always get credit report copies after making a debt settlement agreement that includes a reporting status change. Equifax, Experian and TransUnion must give you free reports once every year under the Fair and Accurate Credit Transactions Act, the Privacy Rights Clearinghouse explains. Use AnnualCreditReport.com to place your orders. Complain to the creditor if your reports still show the account as open and delinquent or reflect a settlement instead of the agreed-on positive status.

Time Frame

    A negatively reported settlement does not stay on your three credit reports forever. It gets wiped out in seven years, along with most other negative data, the Federal Trade Commission explains. Outdated data loses all credit score impact as soon as the bureaus erase it. Your credit score rises whenever negative information gets removed from your reports.

The Length of Time on a Credit Card to Collect Debt

Credit card debt is among the leading causes of excessive debt, with some people unable to pay their accounts because of divorce, job loss or illness. Eventually the credit card company closes the account and sells or assigns it to a debt collector. The collections process can last for a lifetime, as credit card debt does not expire. There are state statute of limitation laws that prevent court action on credit card debt, but debt collectors can use other methods to collect, including phone calls and written correspondence.

Statute of Limitations

    State statute of limitation laws offer protection from lawsuits on old debts, including credit cards. The laws vary by the state, but on average debt collectors have about six years to win court judgments on defaulted credit card accounts. A judgment is a monetary award signed by a judge in a civil lawsuit. Debt lawsuits are popular with credit card companies because of their effectiveness. Debt collectors usually win in court because they can easily show the judge that the credit card account was not paid as agreed.


    Credit card debts beyond the statute of limitations are barred for collection through the courts. However, The New York Times reports that the burden of proof rests with the person sued. The Times reported in 2010 how one man was sued for a credit card debt that was not eligible for legal action. The judge granted a dismissal after receiving a handwritten note from the man informing her that the statute of limitations on the debt had expired.


    Card companies usually close accounts and list them as charged off after the account becomes 180 days past due. It is then placed with a debt collector, and can bounce around from one debt collector to another for years. Really old credit card debts beyond statute of limitation laws are often sold for pennies on the dollar. With such a small investment in the accounts the debt collectors realize impressive profits even if they collect only a portion of the balances.

Frivolous Lawsuits

    Some debt collectors file lawsuits although they know the statute of limitations on the debt has expired. The Times reports that the debt collectors realize that some people will not respond to the lawsuit, leading to an automatic victory for the debt collector called a default judgment. It is possible for a debt collector to pay around $100 for an old credit card debt with a balance of $10,000. The debt collector may hope for a default judgment allowing collection of the entire balance through a payment plan or bank or wage garnishment.

What Applies to Your Credit Score?

Credit scores are an important aspect of overall financial well being. A credit score is a number that attempts to encapsulate the risk you present to lenders when seeking debt. A strong credit score can help you qualify for loans and credit as well as lower interest rates on debt. Credit scores are calculated using a variety of personal credit information. Understanding the factors that influence credit scores can help you make wise financial decisions.

Credit and Debt Levels

    The amount of credit and debt you carry is one of the most important factors in determining your credit score. In general, the more debt you have compared to the credit lines you carry, the lower your credit score will be. Taking on a large debt like a mortgage, car loan or personal loan may result in a lower credit score. The higher your credit limits and the lower your credit balances, the better your credit score. For instance, having a $10,000 credit limit and a $1,000 balance it is better than having a $1,000 balance on a card with a $2,000 limit.

Debt Payments

    How you pay off your debts also impacts your credit score. Making late debt payments or missing payments is a signal to lenders that you might miss payments in the future. This can make it difficult to secure loans. Make payments on time to maintain a good credit score. If you make a late payment, your creditor might be willing to exclude the event from the information it sends to credit reporting companies if it was an isolated incident and you are normally a good customer.

Credit History

    The length of your credit history is another component of credit scores. Creditors typically look more favorably upon those with longer credit histories. Those with short credit histories -- like students, teens and young professionals -- may have more difficulty securing loans and credit than older workers with a longer history of borrowing money and paying it back.

New Credit

    The amount of new credit you receive can impact your credit score. According to MyFico, a website for consumers sponsored by the company that created the credit-scoring formula, recently opened accounts and recent inquiries from creditors can harm a credit score. The negative impact of a new account on a credit score will decline over time, but if you plan to take out a large debt, such a mortgage or auto loan, you may benefit by avoiding new credit and credit inquiries in the short term.

Wednesday, November 26, 2008

Why Would I Want to Consolidate My Debts?

Why Would I Want to Consolidate My Debts?

For any number of reasons, people may rack up debts from a variety of sources, such as credit-card debt, car loans and student loans, that they are having trouble repaying . These loans may have high interest rates, high monthly payments or be hard to manage, causing people to seek a simpler, cheaper way to repay the money they owe. One option is to consider a debt-consolidation loan.

Lower Payments

    Consolidating debt may allow you to make lower monthly payments than you currently pay, if your consolidation loan is spread out over a longer repayment period. For example, if you have multiple short-term personal loans or auto loans and you consolidate them into a loan that has a 15- or 30-year repayment period, the monthly payments would be lower. However, you would pay more interest over the life of the loan.

Lower Interest Rates

    A debt consolidation loan may offer you a lower interest rate than you are currently paying on your outstanding debt. For example, credit cards are notorious for the high interest rates that they charge because they are unsecured loans. If you use a secured loan, such as a home-equity loan, to consolidate your debt, you will save money on the interest payments each month. According to MSN Money, even personal loans from credit unions or banks that have interest rates more than 10 percent may save you money if your credit cards are charging you more than 20 percent.


    When you have debt from a variety of different sources, it can be difficult to make sure that you are making all of your monthly payments on time. If you make a late payment, your interest rates can go even higher in addition to being charged late fees and other finance charges. By consolidating your debt, you can have one monthly payment to worry about rather than balance multiply payments with different due dates.


    Debt consolidation can take a variety of forms. One of the most common is a home-equity loan. With a home-equity loan, you are borrowing against the value of your home, so you will be able to get a lower interest rate and make only one payment each month. You may also be able to do a cash-out refinance, where you refinance your mortgage for more than you currently owe and you use the extra money to pay off other debts. However, you should be careful because if you fail to repay a home-equity loan or a cash-out refinance, you could lose your home.


    Because of the allure of a magical debt consolidation loan that people expect to save them money and reduce the amount they owe, the debt-consolidation industry is ripe with scams and companies looking to make an easy dollar at your expense. MSN Money warns to beware of debt-consolidation companies that promise to take care of everything, so you have to only make one payment. Those companies often tack on an additional fee to your payments for themselves, and, if they fail to pay your creditors with the monthly payments you make to them, you are still on the line for those loans.

How to Refinance Long-Term Debt

How to Refinance Long-Term Debt

Refinancing any debt will likely incur some fees and costs. Finance companies, banks, credit unions and loan brokers make their income through these fees as well as the interest charged on the loans. If you have a long-term debt (such as a mortgage, equity loan or lengthy car loan) that you need to refinance, you need to approach lenders with a certain amount of scrutiny. There are a number of factors to consider before you jump into the application process.



    Pull a copy of your credit report. You can access a free report at Annual Credit Report. You should also pay for your FICO score. This three-digit number between 300 and 850 represents your overall credit standing. Scores higher than 720 are very good; scores below 600 are poor.


    Find the long-term debt on your credit report. Find out when the account was opened. Also, find out what the existing balance on the account is, and if the account has any delinquencies in the past.


    Review the payment history on the account. If the account is currently well overdue (collections or charged-off), you have a couple options. First, review the statute of limitations laws for debt in your state. If you haven't paid on the debt in many years, you may be able to expunge the debt altogether. Review the laws for your state (see Resources).


    Research lenders based on your credit score if you cannot remove the debt through the statute of limitations. If you have great credit, you will want to apply only at prime credit companies, such as local banks and credit unions. However, if you have less-than-perfect credit, you'll need to also research finance companies, too.


    Apply at only three or four lenders. Too many applications may begin to drag down your credit rating. Provide all loan officers with copies of your income documents and your existing loan paperwork. This will help the underwriters reach a speedy pre-approval.


    Review all loan offers against your existing loan. Make sure any new loan will meet your financial needs and goals, such as saving money, getting out of debt faster or moving from an adjustable rate to a fixed rate.


    Choose a loan offer and proceed with the loan officer. Make sure to contact the other lenders and turn down the pending applications. Make sure to carefully follow the loan process to stay abreast of any changes regarding rate, payment and fees.

Will Items Included in a Bankruptcy Lower My Credit Score?

All debts must be listed in bankruptcy, with the filing causing a sudden drop in credit scores once the bankruptcy appears on credit reports. Major credit bureaus such as Equifax, TransUnion and Experian report bankruptcy information for 10 years, making it difficult to obtain credit at reasonable rates. The impact lessens over time, however. MSN Money reports that some people emerging from bankruptcy build excellent credit scores after a few years.

Poor Credit

    Lenders use credit scores to evaluate creditworthiness. Credit scores of 720 or higher are considered excellent, with overall scores ranging from 350 to 850. Many people start bankruptcy with poor credit because of excessive debt, late payments and other adverse credit events such as charge offs, court judgments, liens and accounts assigned to debt collection agencies. Each negative entry on a credit report potentially causes a drop in score.


    Credit scores lose significance during bankruptcy. Lenders are likely to consider the debtor an extremely poor credit risk because of the bankruptcy -- no matter what the credit score. Chapter 13, a popular form of bankruptcy, takes three to five years to complete. It allows people to pay all or a portion of their debts through a court-ordered payment plan. Chapter 13 helps people reorganize their debts and take on additional credit during the bankruptcy if needed. A debtor needing a used car to commute to work could petition the court for permission to take out an auto loan, for example. However, people in bankruptcy usually must accept exorbitant interest rates because of their poor credit standing.


    Borrowing while in bankruptcy can present problems. Chapter 13 requires monthly payments to be made to the court, with the trustee sending checks to creditors. In some instances, debtors must make direct payments to a secured lender while also paying separately into a court-ordered payment plan. The secured lender can repossess the secured property, such as an automobile, if the debtor fails to make payments as agreed. Theoretically, credit scores can rise and fall in bankruptcy. However, each individual credit situation is different. That makes it impossible to predict precisely how an active bankruptcy will affect a debtor's score.


    Alternatives to bankruptcy should be considered. Programs such as debt settlement can quickly eliminate debt and are not as harmful to credit as bankruptcy. Debt settlement allows credit cards and other unsecured debts such as credit cards to be paid for less than the full balance. Settlements range from 20 to 70 percent of the balance depending on the age of the debt. Debt settlement is available only on unsecured credit such as credit cards. The Federal Trade Commission strongly recommends self-directed debt settlement because of abuses by for-profit firms. MSN Money reports that credit card companies will usually discuss settlement offers after accounts are about 90 days past due.

Tuesday, November 25, 2008

Preauthorized Debit Definition

Preauthorized Debit Definition

For many consumers, preauthorized debit transactions are an important part of personal money management. However, while having money automatically withdrawn from an account prevents missed payments, it can also put consumers at risk of overdrawing their account or being scammed.


    A preauthorized debit is an arrangement to withdraw funds directly from a bank account at predetermined intervals, such as monthly. Depending on the payment agreement, the amount withdrawn can be fixed or fluctuate over time.


    Automatic debit transactions are typically used to pay ongoing bills, such as loans and utilities. Preauthorized debits also can be used for one-time payments, such as taxes, or for payment plans, in which money is debited periodically until the full balance is paid.


    Using preauthorized debit services to pay bills is convenient and faster than sending checks by mail. It also ensures that you won't forget to pay a bill and end up with unnecessary fees. Also, many companies offer discount incentives to automatic debit enrollees.


    The initial debit arrangement cannot be made without the written (paper or electronic) or recorded consent of the account holder. It is against the law for a company to withdraw money or the bank to authorize a withdrawal without the consumer's permission.


    The U.S. Federal Trade Commission warns against fraudulent telemarketers and businesses that use dishonest means to obtain consumers' account information and authorize withdrawals. Even when an initial debit arrangement was made, charging unexplained or misrepresented fees to a consumer's account is illegal. Consumers can protect personal accounts by asking the bank to reject any future debit attempts.

Overdrawal Concern

    If you authorize a debit arrangement, you are responsible for making sure there is money in your account to cover the withdrawal. If there is not, you can overdraw your account.

Monday, November 24, 2008

Five Steps to Tackling Debt During Unemployment

Five Steps to Tackling Debt During Unemployment

If you are unemployed and in debt, it's best to deal with the problem head on. Ignoring it will only make things worse. Facing the situation may not be as bad as you would think. You may have to adjust your spending habits and temporarily rethink your priorities, but lenders may be surprisingly willing to help.

Pay the Minimum Payment

    If at all possible, keep on making at least the minimum payments on your credit cards and other debts. If you pay the minimum on time every month, you will come out of this period of unemployment with your credit record unblemished.

Contact Your Creditors

    If you are unable to pay the minimum every month, don't just ignore your bills. Call your creditors and explain that you are unemployed. Many creditors are willing to be flexible and will work with you on payment plans, as long as you have reached out to contact them. The worst thing you can do is to stop paying your bills without saying anything. You may have every intention of paying again as soon as your situation turns around, but your creditors have no way of knowing this unless they hear from you.

Cut Expenses

    To free up more money to pay your bills, cut your nonessential expenses. Learn to distinguish between what you really need and what is pleasant, but a luxury. If you are someone who thinks of shopping as a recreational activity, be creative and find other ways to entertain yourself. If you haven't been in a public library in a while, take a look -- you may be surprised at the resources available now. Seek ways to substitute free or cheap alternatives for some of your ongoing expenses. Think of it as a challenge to get back to basics.

Avoid Getting Further Into Debt

    If you keep on taking on more debt, you will only make the problem worse. Put away your credit cards -- hide them, if necessary -- so that you won't be tempted to use them to pay for everyday expenses. You may need to use them if you have an emergency, but for routine expenses, try to rely more on budgeting and creative ways of saving to make your money stretch further.

Beware of Scams

    You may get phone calls from people claiming they will negotiate with credit card companies to reduce the amount you owe. These are almost always scams. Unfortunately, a lot of con artists prey on people who are in financial distress. To find a legitimate credit counselor, ask for referrals at your bank or credit union, through your school or military base (if either applies to you), or at a consumer protection agency. Check names with the Better Business Bureau and your state Attorney General's office.

Sunday, November 23, 2008

Credit Guarantee Agreement

Credit Guarantee Agreement

A credit guarantor is named in a guarantee agreement as being responsible for payment in the event that the named borrower in the agreement defaults on payments. This is more commonly referred to as a co-signer.


    A credit guarantee agreement is normally supplemental to other loan documentation that outlines the co-signer's rights and obligations. The agreement is written to encourage credit be extended to the borrower, using the guarantor as financial security.


    The most common guarantee agreement is in relation to applications for student loans. However, guarantee agreements can be used for cars, homes or even credit cards. A credit guarantee agreement can be used in any facet where credit could be revoked or extended.


    Signing a credit guarantee agreement holds the guarantor (co-signer) liable for the debt in the event of non-payment. The debt will also appear on the guarantor's credit report and file which can negatively affect the amount of debt he is shown to carry. This can hinder more credit being extended until debts are paid off.

The Effect of an Additional Credit Line on a Debt to Income Ratio

The Effect of an Additional Credit Line on a Debt to Income Ratio

The debt to income ratio for a borrower is the percentage of monthly debt obligation in relation to his monthly income. The lower the debt to income ratio, the better a borrower's chance at gaining additional debt or loans.


    The debt to income ratio is used by lenders to determine a borrower's management of debt and his ability to repay additional debt. Most lenders like to see a debt to income ratio of less than 40 percent after a new debt is added to the ratio.


    A line of credit allows a borrower to borrower funds as needed, and pay down the debt on a revolving basis. The existence of a line of credit itself does not affect the debt to income ratio, however, the minimum monthly payment is added to the debt side of the ratio.


    If the line of credit is not used by the borrower, it will not have a monthly payment and will not affect the borrower's debt to income ratio. However, if the line of credit is extended to its limit, the payment will have a great impact on raising the borrower's debt to income ratio.


    Lenders do not look at just a borrower's debt to income when considering his ability to repay, especially if there is a line of credit in his name. The lender will look to see if there is a large risk of the borrower extending his line of credit to its limit and then becoming unable to pay.


    To keep the line of credit at a minimal effect on the borrower's credit score and debt to income ratio, he should keep his balance at less than 30 percent of the limit.

Will My Bad Credit Freeze My Spouse's Bank Account?

Will My Bad Credit Freeze My Spouse's Bank Account?

Married couples face challenges when a spouse runs into trouble with bad credit. Every consumer has an individual credit report, a record of the person's use of credit. While there are not joint credit reports for married couples, your spouse's bad credit can affect your credit in certain situations.

Credit Reports

    A credit report is a document maintained by different credit reporting companies that contains a history of your behavior as a consumer credit user. The report details, for example, how long you've had a credit card, how often you've been late with a payment or whether you've gone though bankruptcy. Your report does not contain your spouse's credit information, though it does contain information about any joint accounts you both have, such as joint credit cards or mortgages.


    If your spouse has fallen so far behind on a debt, his creditors may sue him in court. If they win, the court gives them a judgment stating a specific amount of money your spouse owes them. The creditors can then use this judgment to "freeze" your spouse's bank account. Known as a bank levy, a bank account freeze can only happen after the creditors win the lawsuit and take specific steps as required under state law.

Bank Accounts

    If you and your spouse have a joint checking account, that account may get frozen because of either spouse's bad credit. However, a creditor cannot freeze a bank account that is solely in the name of the spouse not in trouble. For example, if a creditor wins a judgment against your spouse for $10,000 and you and your spouse have a joint checking account with $5,000 in it, the creditor can take all the money from the account to satisfy the debt. It cannot do so if the account is in your name alone.

Other Impacts

    A spouse's bad credit alone cannot result in a bank levy for either spouse. However, if a spouse's bad credit behavior negatively impacts both spouses' credit histories, any loans that either spouse have can be affected. For example, if a spouse gets sued by her creditors or has judgment against her, other creditors may raise the interest rates on her other loans. If her husband is a joint holder of these loans, he too is subjected to the increased rates.

Consumer's Rights For an Old Debt

Consumer's Rights For an Old Debt

If you have worked hard to clean up your credit report, there is nothing more frustrating than an old debt that suddenly reappears on your record. Fortunately, you have rights under federal and state law that can help remove old debts from your credit report and stop any ongoing collection activity on debts that are outside the statute of limitations.

Statute of Limitations

    Most states have a statute of limitations on how long a creditor has to collect a debt, including filing a lawsuit against the debt, which in some states can be as little as three years or less, depending on the type of debt. Debts that are no longer legally collectible are sometimes called out-of-statute or time-barred debts.

Types of Debt

    The statute of limitations on debt collection in your state will often vary depending on the type of debt. For example, your state may set the statute of limitations on credit card debt at five years, written contracts at 10 years and judgments at 15 years or more. You should be aware that the statute of limitations on judgments can be renewed at a judge's discretion, making this one type of debt that is hard to escape.

Credit Reporting

    Just because a debt is no longer collectible does not mean that the creditor can't continue to place negative information on your credit report. Negative information can be placed on your credit report for seven years after your account became delinquent and never became current again. However, it is illegal for a creditor or collection agency to "renew" the date of your debt so as to keep negative information on your report for more than seven years. You have the right to have this "re-aged" information removed from your credit report.

Zombie Debt

    Some debt collectors specialize in collecting debt that is no longer collectible. They do this by buying up old time-barred debt and then harassing and intimidating debtors into paying up. You don't have to pay this debt, and you can use your rights under the federal Fair Credit Reporting act, as well as state law, to stop their collection action against you.


    If you receive a communication about an old debt from a creditor or collection agency, do not ignore it. While it may not be a collectible debt, this won't stop unscrupulous collectors from placing negative information on your credit report or even filing a lawsuit against you. Respond immediately to any attempts to collect an out-of-statute debt by sending the creditor or collection agency a request that they validate the debt and inform them that you believe that the debt is outside the statute of limitations in your state.

Can a Credit Card Company Garnishee My Bank Accounts Without First Giving Me Notice?

Can a Credit Card Company Garnishee My Bank Accounts Without First Giving Me Notice?

A consumer who has purchased items with a credit card is obligated to make payments on time every month. If he falls behind or stops making payments, the credit card company will try to get the money owed. If the consumer ignores all attempts at contact, the credit card company has the right to file a lawsuit and request a court order, which can result in garnishment of the consumer's bank accounts. However, until you get a letter from the bank notifying you that your accounts are being garnisheed, the credit card company cannot freeze those funds.

Court Order Requirement

    Credit card companies and collection agencies usually try to contact you and get payment for what you owe before they resort to garnisheeing money from your bank accounts. If you have ignored earlier contacts from credit card companies or collection agencies, they have the right to resort to a lawsuit against you.

    During the lawsuit, the credit card company's lawyers present evidence showing how they contacted you and tried to get you to pay your overdue balance and how you ignored them. At this point, the credit card company believes it is out of options and has no choice but to garnishee your accounts. It cannot do so without winning the lawsuit and getting a court order from the judge to freeze your bank accounts and taking the money in them.

Payments Exempt From Garnishment

    Your payments from the government, such as Supplemental Security Income, Social Security benefits, railroad retirement benefits and veterans' benefits, are exempt from garnishment by your credit card issuer. If you owe delinquent alimony, taxes or child support, these payments can be garnisheed.

Bank Notification

    When your bank receives a legal court order allowing the credit card company to access your bank accounts, freeze them and remove any funds they contain, the bank will usually send a letter to you letting you know garnishment is imminent. Some banks do this as a part of their business practice with their customers; in other instances, the laws in some states require that they notify you of impending garnishment.

Preventing Garnishment

    Once you receive written notification from the bank that your accounts are going to be garnisheed, you have one final opportunity to prevent this. You can stop it by contacting your credit card company and making arrangements to negotiate a payment arrangement or repayment plan. The letter you receive from the bank has a response deadline included.

    If some of the money in your account has been deposited by a federal agency, you need to alert the bank about this before that deadline. If you do so, the bank should verify the origin of the money in your account. If it contains exempt funds, the bank has to notify the credit card company so the garnishment attempt can be halted.

Reasons Why High Debt Could Be a Problem

Reasons Why High Debt Could Be a Problem

Accumulating large amounts of debt can be relatively easy, especially if you have access to credit cards with high spending limits. While going into debt can offer immediate rewards and gratification, the long-term effects may not be so enjoyable, Heavy debt can have a severe impact on your personal and financial health and even the state of the economy.

Reduced Credit Score

    Even if you make timely payments toward your debt, heavy debt can have a negative impact on your credit score. An important factor used to determine your three-digit FICO score is your credit utilization ratio, which measures your amount of used credit in relation to your total available credit. A credit utilization rate of 30 percent or less is generally considered to be favorable while a rate of 60 percent or higher could result in a drop in your score.

Increased Stress

    Carrying a high amount of debt can be stressful, especially if you have difficulty making the minimum payments each month. Lingering stress can affect your mood, your ability to sleep and your relationships with family members and coworkers. If your debt situation does not improve and the stress continues for months or even years, you could suffer health consequences such as ulcers, high blood pressure, depression and heart disease.

Impact on Business

    If you decide to deal with your debt by reducing your spending, doing so can have an adverse effect on business. Cutting back on spending reduces the amount of money that flows into the coffers of locally owned businesses such as dry cleaners, restaurants and small specialty retail shops. If debt reduction occurs on a wide scale, the loss of revenue can impact the economy in the form of job cuts and possible business closings.

Filing Bankruptcy

    If your debt accumulates to the point where you can no longer make the minimum payments toward your obligations and you're being harassed by bill collectors or threatened with lawsuits or wage garnishments, you may have to resort to filing for bankruptcy protection. While bankruptcy may reduce or eliminate debt, allow you to keep important assets like your home and car and protect you against creditor actions, there are long-term implications. A bankruptcy remains on your credit report for up to 10 years, making obtaining credit in the future more difficult.

Saturday, November 22, 2008

What Is a Credit Card Hardship Program?

What Is a Credit Card Hardship Program?

Many credit card companies have hardship programs. These programs are designed for people experiencing financial stress due to unemployment, serious illness, divorce or other problems. Hardship programs can provide some relief from your debt.


    If your credit card company has a hardship program you may be able to get your interest rates lowered and your fees waived. Some credit card companies will reduce your account balance to have a zero percent interest rate. Interest rate reductions reduce your monthly payment.


    Once you enter a hardship program the information can appear on your credit file. Other creditors will be reluctant to extend credit to someone in a hardship program.


    Credit card companies typically dont make it known that they have hardship programs. If you are past due and experiencing a hardship, you may have to speak to a customer service representative or a collection correspondent for details.


    The hardship program may be temporary. They are designed to help while you recover from the situation and are able to make your monthly payments again.


    Reducing your account balance is not a part of the hardship program. Anyone trying to get his balance reduced may run into resistance from the credit card company.

Friday, November 21, 2008

How Do I Create a Credit Freeze to Protect Identity Theft?

How Do I Create a Credit Freeze to Protect Identity Theft?

Over the past decade, identity theft has become one of the fastest-growing and most dangerous types of crime that can happen to someone that has good credit standing. One way to protect your identity is to monitor your credit report for lines of credit that have been opened in your name without your consent. The best way to stop someone from opening a credit account in your name is to put a security freeze on your credit report. Under a security freeze, if someone other than you tries to open a line of credit in your name, it will automatically be declined.


Place a Security Freeze on Your Credit Report


    Research to find out if your state has a law allowing consumers to place a security freeze their credit reports and what that law entails. Most states will have a start-up fee for this service ranging between $3 and $10. The cost to unfreeze your account is typically $10.

    According to the Consumers Union, the following states have passed laws giving consumers rights to a security freeze: Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Indiana, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, New York, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin and Wyoming.


    If you find that you live in a state that has not passed a security freeze law, contact the three major credit reporting agencies, Equifax, Experian, and TransUnion, to find out how you can use their security freeze option.


    Decide if you wish to write the credit reporting agencies a letter or apply for a security freeze online.

    See the next section for how to write a letter requesting a security freeze and send it in the mail.

    If you are going to apply for a security freeze online, skip the next section, and go directly to all three of the credit reporting agencies' websites, and follow their directions on how to apply online for a security freeze.

Requesting a Security Freeze By Mail


    Write a letter requesting a credit freeze. Begin with the following information:

    The date

    Your address

    Address of the credit reporting agency


    Give your current address and any addresses where you have lived in the past 2 years. Write down your date of birth, then your social security number below your address(es).


    State how you are going to make the payment for the security freeze fee. According to TransUnion, acceptable forms of payment are check, money order or credit card. The credit card can be American Express, Discover, MasterCard or Visa.

    If using a credit card, give the full name on the card, the card number, expiration date and card id number (CID). The CID is either located on the back or front of the card.


    Enclose photocopies of documents required to apply for a security freeze. Each state has different requirements, so be sure to get the correct documents.

    Enclose a photocopy of a utility bill in your name and your driver's license. You may have to enclose a copy of your Social Security card, but for your protection, do so only if your state requires it.


    Send a copy of the letter to each of the following addresses, and be sure to keep the original copy for your records. A response letter and your PIN will be sent to you. A PIN is required to temporarily lift a security freeze, which you may need to do if you wish to apply for a credit card.

    Equifax Security Freeze

    P.O. Box 105788

    Atlanta, GA 30348

    Experian Security Freeze

    P.O. Box 9554

    Allen, TX 75013


    Fraud Victim Assistance Department

    P.O. Box 6790

    Fullerton, CA 92834

Wednesday, November 19, 2008

Can I Refinance My Mortgage If I Have Poor Credit?

If you have bad credit and you're in the market to refinance your mortgage, you need to consider what kind of deal you can get in light of your low credit score. Your credit score is a numerical representation of your ability to manage credit. Lenders use this number as one factor in determining whether to give you a loan. While having a bad credit score may not prevent you from refinancing, it will make it harder to get the loan.

Bad Credit

    One of the most commonly used credit scores, the FICO score, ranges from 300 to 850. The Federal Citizens Information Center reports that a person with a score of 700 or more generally has good credit, while those with scores lower than 600 or so have bad credit. If you have a bad credit score, you're much less likely to get a loan, though it is up to each individual lender to determine who they want to give loan to.

Lender Requirements

    Lenders establish different criteria when giving loan. While creditors may consider a 600 score as bad credit, you may still be able to get a refinancing loan. For example, the Federal Housing Authority, or FHA, requires borrowers to have a minimum credit score of only 580 before it will give the borrowers a low down payment loan, though it still gives loans to those with lower scores, but it requires a larger down payment, according to CNN Money.

Refianance Terms

    If you have bad credit and find a lender willing to give you a mortgage refi, that doesn't mean you should take it. A refinance loan, like any other, comes with interest rate terms. While the average refinance rate may be lower than your current mortgage, lenders typically offer higher interest rate loans to borrowers with bad credit than they do to those with good credit.

Other Concerns

    If you're considering a mortgage refinance, your credit score is not the only factor you need to keep in mind. Lenders will also evaluate your current debt obligations in light of your income level. Known as a debt-to-income ratio, lenders typically prefer that your total debt obligation payments make up no more than about 36 percent of your income, according to lendingtree. Even if you have a good credit score, a high debt-to-income ratio may make it harder to get a loan.

How to Eliminate Medical Bills

How to Eliminate Medical Bills

Sometimes an individual has no health insurance or medical copays and deductibles add up. Medical bills can become overwhelming for people who lose their jobs or see their income reduced. Options to eliminate medical bills include working out a payment plan, using your home's equity, loan consolidation and bankruptcy.



    Contact the medical facility or provider to whom you owe money. Ask for a payment plan that will work for you and the provider. Do not wait until the account goes into collection.


    Get a home equity loan or a cash-out refinance loan on your home. Use the equity you have in your home to pay off the medical bills.


    Take out a consolidation loan if you have good credit. This type of loan allows you to consolidate all of your medical bills into one monthly payment. Depending on the lender, you may be able to receive a loan with no collateral.


    Use a credit card with a low interest rate or an introductory zero rate to consolidate medical bills. Make the payments and pay off the card before the finance charges accumulate.


    Negotiate with the medical facility or provider. If you are able to offer a lump-sum payment, ask for them to discount the total amount of the bill.


    If the medical bills are more than you will be able to pay, consider filing for bankruptcy. This option hurts your credit for several years, so make sure there is no other way for you to eliminate your medical bills.

Tuesday, November 18, 2008

Statute of Limitations for Debt in Arizona

Statute of Limitations for Debt in Arizona

Every state has laws that limit how long people have to take certain actions. These laws, known as statutes of limitations, apply to everything from how long the state has to prosecute someone for a crime to how long creditors have to collect on unpaid debts. Arizona's statute of limitations imposes different limits on different kinds of debts.

Statute of Limitations

    A statute of limitations on debts limits how much time a creditor has to file a lawsuit against a debtor who has failed to pay back a loan. Arizona's statutes of limitations on debts starts as soon as a debtor fails to pay back a debt. For example, if you get a credit card and make payments on your bills for two years and only then fall behind on your payments, the statute of limitations starts as soon as you fail to pay, not when you take out the credit card.

Debt Types

    Arizona has different statues of limitations that apply to various kinds of debt incurred. There are four kinds of debt a consumer can enter into: open accounts, written contracts, promissory notes and oral agreements. Credit cards are the most common form of an open contract, a type of loan where the amount changes over time. A written contract is a written loan agreement, while a promissory note is a note given from the borrower to the seller that provides an unconditional promise to pay. An oral agreement is a verbal contract between parties, that is not accompanied by written documentation.

Statutes of Limitations

    Arizona limits actions on open accounts to three years, written contracts to six years, promissory notes to five years and oral agreements to three years. However, written contracts that were entered into outside the state are limited to four years, according to BCS Alliance. The state also limits judgments on debts. The state has a five-year statute of limitations on domestic judgments, though these can be renewed indefinitely.

Loan Terms

    You've no doubt heard it before, but when it comes to loan terms and statutes of limitations, reading the fine print is especially important. Lenders often include terms and conditions in the loan agreement that make Arizona's statute of limitations irrelevant in your loan. These provisions, known as "choice of law" clauses, change what laws apply to your agreement. A car loan company, for example, can choose to have Delaware's state laws apply to the terms of your agreement.

Monday, November 17, 2008

Financial Advice on Getting Out of Debt

Financial Advice on Getting Out of Debt

Living in a state of chronic debt can cause severe stress and have a detrimental effect on family relationships and physical health. If the debt is the result of unsustainable spending patterns, you won't solve the problem until you change the spending patterns and learn to spend less than you earn.

Write Down Everything

    The first step in understanding your debt issues is to have all the information. The best way to do this is to write down every penny that you spend and what you spent it on. After a few months, this simple act, which takes some discipline but isn't difficult to do, will provide you with a insight into your spending habits, and may surprise you. You might discover that you've been spending far more than you thought on small items that don't cost much and that you forget about as soon as you buy them. Over time, these things can add up to a substantial amount of money. Eliminate them, and that's money in your pocket.

Visualize Being Debt-Free

    The discipline that is required to go from being in debt to being debt-free requires some motivation. To gain this motivation, spend some time seriously imagining and visualizing what it will feel like to not owe a penny to anyone. For someone who has been in debt for years, this can be a difficult thing to imagine. If you can bring up the sense of joy and liberation that you will feel in an intense way, it can help you to resist the urge to spend all your money and more today, in favor of financial solvency in the future.

Start a Garden

    Starting a garden can assist you in your flight from debt in several ways. First, it will provide you with a lot of fresh produce that you can use to feed yourself and your family, rather than buying it at the grocery store. This alone probably isn't sufficient reason to do it, given the amount of work involved. More importantly, gardening can start to change your attitude about how you gain fulfillment. Rather than shopping and consuming during your spare time, you can work the earth and create healthy food. Get some friends involved and make it into a social time. By emotionally divorcing yourself from money-centered activities, you can begin to gain more control over your relationship to money.

Socialize at Home

    Many people who are in debt find it difficult to stop spending a lot of money on bars, drinks, restaurants and travels. This is how many people associate with their friends, and they understandably don't want to give up on their friends. You can keep your friends and your money by socializing at home with potlucks, game nights, and shared projects such as your vegetable gardens. If you can separate your social life from the act of spending money, you will find that money freed up to go toward paying off your debts.

What Is the Limit for Garnishing Pay in Colorado?

If you are a Colorado resident with a past-due debt, and your creditor does not believe that you will voluntarily repay your debt, your creditor may sue you in a Colorado court to obtain a judgment against you. Colorado permits creditors with valid judgments to garnish your wages, which means that they may force your employer to withhold part of your wages for repayment of your debt. However, Colorado law places several restrictions on wage garnishment.

Money Limitations

    Colorado follows federal law concerning the amount a judgment creditor may take from your earnings. If you earn less than 30 times the current federal minimum wage after taxes per week, your wages are exempt from garnishment. If you earn more than this amount after taxes, your creditor may take up to 25 percent of your earnings. However, if the garnishment is for unpaid child support, up to 60 percent of your post-tax wages may be subject to garnishment.

Time Limitations

    Colorado law imposes a time limit on the validity of judgments, which affects how long a creditor can garnish your wages. Most judgment debts, including credit cards and loans made under written contracts, are subject to a six-year garnishment limitation if the judgment is obtained from a county court, and 20 years if obtained from a district court. However, if you have not satisfied a money judgment at the end of the valid judgment period, the creditor may apply to the Colorado court that issued the judgment for a renewal. This gives the creditor another two or three years, depending on the type of debt, to continue garnishing your wages.

Exempt Income

    Certain types of income are exempt from garnishment in Colorado. Under federal law, Social Security income is exempt unless the judgment debt is for unpaid taxes, alimony or child support. Colorado protects disability benefits up to $200 per month, life insurance payments, unemployment benefits and worker's compensation payments from garnishment. Pensions paid to state workers, teachers and firefighters, as well as some IRAs and retirement plan payments, are also exempt.


    Colorado law allows creditors to add interest to judgment debt -- the interest can be garnished from your wages in addition to the debt balance you owe. In most cases, Colorado limits judgment interest to 8 percent per year. However, if the garnishment is for a contract debt, the judgment creditor may add interest at the contract rate.

Can New York State Taxes Garnish Disability?

If you owe property or state taxes, New York -- like other states -- has a legal right to garnish your wages or place a lien on your property or bank account to collect the debt. While some states do not exempt certain types of income from state levies, New York has provisions that protect disability payments from back-tax collection.

Tax Warrant

    The New York Department of Taxation and Finance must file a tax warrant before garnishing wages. It allows the state to take additional steps to collect the back taxes you owe. It creates a lien against you and your assets. It is a public record that remains on your credit report until you pay off the past-due balance. It may have a negative effect on your credit score and prevent you from getting a job, obtaining new credit or renting an apartment.

Tax Levy

    The government may use a bank account garnishment, also called a tax levy, to collect the past-due debt. A levy is an order to a third party -- a bank -- to turn over the funds you have in your bank account to the state to pay the balance you owe. When your bank receives the order, it freezes the funds in your account for compliance procedures and ownership verification. The bank must send you a levy notice by mail by the following business day.

Exempt Funds

    The State of New York protects certain types of income from back-tax collection. Social Security income, disability, public assistance, child support, unemployment, workers' compensation, and public and private pensions are exempt from the tax levy. If you receive disability income, and the state places a levy on your bank account, you should contact the New York Department of Taxation and Finance and notify them of exempt income in your account. You may also need to file an exemption form provided by the bank along with the levy notice.

Negotiating a Settlement

    While the state cannot take an exempt income to pay your tax bill, you may use your disability income to pay it. It is in your best interest to repay what you owe, because the tax lien remains on your credit record for seven years even after it's been paid. If you cannot pay because you are in a financial hardship, New York allows you to negotiate a settlement for less than the amount you owe. You should submit an offer in compromise with a proposed settlement amount and include copies of any documents as proof of your financial difficulties.

How to Lose Your Debt

How to Lose Your Debt

Having large amounts of debt can feel overwhelming, and because of the ease of obtaining credit cards, many people are experiencing debt stress. Acquiring debt doesn't seem to take long in today's economy, but removing it may take many years. There are many ways to lose your debt without having to resort to bankruptcy. With patience, willpower and some financial guidance, you can take the bull by the horns and begin following a path toward being debt free.



    Reduce your debt by creating a budget. Make a list of your monthly expenses and your income. Look at your spending habits and make necessary changes to help you save money. Bring your lunch to work, dine out less and use coupons. Shop at discount food markets and bring a calculator to keep track of what you are spending.


    Contact your high interest credit card companies to ask that they lower your rate. Speak to a supervisor; if he declines your request, try again next week. Let your creditors know your situation. Tell them that if you are unable to renegotiate terms, you'll have to declare bankruptcy. They would much rather receive some payment than nothing at all. Some credit card companies may even offer programs to help get rid of debt.

    Pay more than your minimum payment each month. If you have lower-rate credit cards, take advantage of any balance transfer promotions they may offer.


    Speak to a debt consolidation specialist to help lose debt. There are many nonprofit consumer credit companies that can talk with your credit card companies to reduce your rates significantly. They will assist you to pay off your accounts within five years, however, you will need to close your accounts altogether. If you are spending a fortune on the interest rates of your cards, you will still have a lower payment with more money going toward the principal.


    Bring in more money. Get a part-time job, donate plasma, sell unused items on eBay or Craiglist, and if you love children, babysit for money. You can also organize a garage or yard sale for extra cash to get rid of your debt.


    Sell your new car and find a reliable used car.


    Quit going out to movies; you can rent free ones at your public library. Stay away from the malls and the next time you want to buy something, ask yourself if it's something you really need.


    Shop around for lower car and house insurance. You may be surprised at how much you can save, especially if you've used the same company for many years.


    Cut up your credit cards but keep the ones that are paid down open. You may receive promotional rates later and you can transfer your higher rate cards to get rid of debt.


    Talk to a lawyer about bankruptcy if you have no other options.

Difference Between a Settlement & Charge-Off of a Debt

Difference Between a Settlement & Charge-Off of a Debt

A settlement and a charge-off are both common occurrences in the credit card industry. Settling a debt, however, will require you to pay at least some of the balance and will have a different effect on your credit score.


    A charge-off occurs when a credit card company removes an old, unpaid debt from its accounting books and claims it as a tax loss. The debt is then typically sold to a collections firm. A settlement occurs when either the original creditor or a collections agency accepts less for the debt than the consumer actually owes and considers the debt paid.

Time Frame

    Charge-offs usually occur 180 days after the last payment was made on the account. A debt settlement, however, can be negotiated at any time either with the original creditor before the charge-off or with a collection agency at any point afterward.


    Creditors are more likely to consider offering you a debt settlement if you have recently made late payments and the account is in danger of being charged off. A debt settlement arrangement is almost always preferable to creditors than a charge-off.


    Settling a debt after it has been charged off will not result in a charge-off or ensuing collection account being removed from your credit report. Settling the debt at this point will not improve your credit score at all.


    A charge-off is considered a negative entry on your credit report, but the majority of the damage to your score comes from the late payments that precede it. A settlement also reflects negatively on your report, but looks better to lenders than an unpaid charge-off. Settling a debt with the original creditor before a charge-off can also prevent further late-payment notations.

Sunday, November 16, 2008

What If My Payday Loans Are Three Years Delinquent?

Payday loans -- which typically carry high interest charges and must be paid back within a month -- are structured similar to other loans. A borrower is required to pay back the amount of the loan by an agreed-upon date, along with any interest and fees assessed by the company. If a borrower fails to pay this money back according to the payday loans terms, he will likely face financial penalties and potentially legal action.

Loan Terms

    When a person signs a payday loan contract, he usually agrees to accept the assessment of a number of punitive fees in the event that he doesn't pay back a debt on time. These fees are often applied monthly. Within a single year, a person can end up owing several times as much as the size of the original in penalty fees. So, at the end of three years, the person may owe almost 10 times as much.


    Depending on the policy of the payday loan company, the company may attempt to pursue collection of the debt for the entire three years that the debt is delinquent. In some cases, the company may sue the borrower in court. In other cases, the company may write off the debt as a business loss. In this case, the company will stop pursuing collection of the debt, but the debt will still exist and may be purchased by another party.

State Laws

    All states have statutes of limitation on debts, meaning that debts cannot be collected after a certain period of time has elapsed. In some states, a debt that is older than three years cannot be legally collected. However, most have statutes that are longer than three years. Some states also have special payday loan laws that cap the amount of penalties or fees that can be applied to a delinquent loan.

Debt Collection Agencies

    In some cases, rather than attempt to collect the debt themselves, payday loan companies will choose to sell the debt to bill collectors, also known as debt collection agencies. These creditors may purchase a debt that is several years old, often at a steeply discounted price, and pursue collection themselves. When this happens, a debt that the borrower believed dormant may reappear as the company takes steps to collect the money outstanding on the loan.

Grants for Financial Debt

Grants for Financial Debt

The federal government offers different types of support programs to citizens with debt obligations. Citizens may avail of different financial debt grants given that they are eligible. Eligibility for financial debt grants depends on the type and scope of the program. For instance, there are grants specifically intended to help farmers fulfill their debt obligations, while other grants provide education and training on financial management. Most grants are available for low or medium income citizens.

Fisheries Finance Program

    The Fisheries Finance Program is under the Department of Commerce and the office of National Oceanic and Atmospheric Administration or NOAA. The grant is authorized under the Merchant Marine Act. The Fisheries Finance program offers direct loan grants to cover particular fisheries costs. The program offers refinancing opportunities to help individuals satisfy and complete their current debt obligations. However, it's important to note that the loans granted under the Fisheries Finance Program do not support overcapitalization initiatives, particularly in the fishing industry. Further, the grant provides funding and loan opportunities to Aqua cultural and shore side facilities. Individuals may also get buyback financing to withdraw or buy fishing facilities and permits from overcapitalized fisheries. Eligible individuals include distributor/processors of fishery products and commercial fishermen. Documentation requirements include tax returns, business history, financial statements and business records.

    Department of Commerce

    1315 East-West Highway

    Silver Spring, MD 20910



Loan Repayment Program for General Research

    The Loan Repayment Program for General Research is a program under the Department of Health and Human Services and the office of National Institutes of Health. The grant is authorized under the Public Health Service Act. The program seeks to provide financial assistance specifically to cover educational loan repayment. Further, the program specifically targets health professionals working in field research under the NIH. If the individual has incurred a considerable amount of educational debt as opposed to their financial capacity, they may qualify for refinancing given that they agree to work as NIH research or laboratory employees for at least 3 years. Student and loan records are required for proof of eligibility.

    U.S. Department of Health and Human Services

    Building 2, Room 2E18

    2 Center Drive

    Bethesda, MD 20892-0230



Nursing Education Loan Repayment Program

    The Nursing Education Loan Repayment Program is a grant under the Department of Health and Human Services and the office of Health Resources and Services Administration. The program is authorized under the American Recovery and Reinvestment Act of 2009. The program helps support professional registered nurses or RNs through the provision of loan repayment grants. The program provides repayment opportunities to RNs in order to encourage retention and recruitment.

    Lisa Walsh Room 8-36

    5600 Fishers Lane

    Rockville, MD 20857


What Are the Laws on Re-Aged Debt?

Credit card debt that's legally re-aged can help consumers who are in financial trouble. However, companies that are seeking to recoup old debts from consumers may attempt to illegally re-age their accounts by collecting all or part of the amount those consumers owe. Re-aging essentially involves removing or moving back the date an account became delinquent.

Delinquent Accounts

    A legally re-aged credit card account can help a cardholder who has fallen behind on payments. A creditor who re-ages an account essentially restarts the payment timetable by reporting a delinquent account as a current account. That stops late-fee charges and allows the cardholder to get a fresh start by making on-time payments. The cardholder still has to pay the money that was previously owed, but the account is no longer considered delinquent.

Federal Regulations

    It's difficult to get a credit card company to agree to re-age an account. However, companies that agree to do so must follow guidelines from the U.S. Federal Financial Institutions Examination Council. For example, as of March 2011, federal regulators won't allow credit card accounts to be re-aged more than two times over five years. Regulators also require that accounts be at least nine months old before credit card companies agree to re-age them to help customers whose accounts are delinquent.

Illegal Re-aging

    State regulations place limits on the number of years that creditors and lenders have to sue consumers to collect delinquent debts. However, some debt-collection companies try to skirt the law by re-aging delinquency dates to extend the amount of time they have to sue consumers to collect old debts.

Credit Ratings

    Debts re-aged illegally can hamper your credit rating. Most bad debts can only be listed in consumer credit reports for seven years under regulations in the U.S. Fair Credit Reporting Act. A debt-collection company that tampers with the date that an account became delinquent can make the account look newer than it is. In such cases, a bad debt can appear on a credit report longer than seven years. Consumers who discover that old accounts on their credit reports have been re-aged can contact the credit bureaus that issued the reports to dispute the re-aged debt.

How Much Does a Chapter 7 Reduce Your Credit Score?

How Much Does a Chapter 7 Reduce Your Credit Score?

Chapter 7

    Filing for Chapter 7 bankruptcy protection is the act of confirming to a court of law that you are unable to pay your bills and meet any financial obligations you may have. Any non-exempt debts (things like child support, student loans, and spousal support) are then absolved during bankruptcy and you are no longer obligated to pay them. However, any non-exempt assets you have (vacation homes, multiple cars) will be sold and the money raised will go towards paying off some of the debts that are being absolved during the proceedings.

Credit Score Reduction

    While filing for Chapter 7 bankruptcy severely hinders your credit score, it does not lower it by any set amount. A Chapter 7 bankruptcy filing will simply be present on your credit report for ten years after the date of filing. This will let any potential lenders know that you were (at least at one time) a severe credit risk. However, as you cannot file for bankruptcy again for eight years after your first bankruptcy, certain lenders may be more likely to extend you credit for this reason. Each lender makes his own decisions on who to grant credit to, so each attempt to get credit after bankruptcy will yield different results depending on the situation.

Life After Bankruptcy

    There are a few things you can do to raise your credit score and simply survive after a Chapter 7 bankruptcy filing. For starters, joining a credit union is the most likely place to get new credit after bankruptcy. The goal of a credit union is to help its members in any way possible during times of financial hardship. They can be a good source for car loans. Another way to repair your credit is to get a single credit card to use often. Then, make sure you pay it off every month. After several months, this will be a good way to show that you are capable of paying your bills on time and now have an established history of doing so.

Saturday, November 15, 2008

Can Collection Agencies Garnish Wages When Less Than the Minimum Payment Is Paid?

There are some general federal regulations laid down for debt collection by the Fair Debt Collection Practices Act (FDCPA). These regulations are designed to protect consumers and cover personal and household debts. In addition to the FDCPA, state guidelines play a big role in what collection agencies can and cannot do, as well as what they may garnish. Debt collection laws vary from state to state, with some states prohibiting garnishments in cases other than unpaid taxes or back child support. Collection agencies often will work with you to come up with a payment plan, including a minimum payment, to avoid garnishment, and those processes are often murkier.

Creditors vs. Collection Agencies

    Creditors and collections agencies are two different things. Creditors are the direct company to which the debt is owed, but creditors sometimes sell off their debts to collection agencies. Collection agencies get to keep a part of the money they collect and so are often more aggressive. Sometimes they threaten to garnish wages when they cannot do so without a lawsuit and a garnishment order, something they typically will not pursue.

Minimum Payments

    Collection agencies are often willing to set up a payment plan because they don't want the trouble of a lawsuit if they can avoid it. How they handle that plan is within their discretion, but it is likely that they will work with someone who is willing to make payments and who stays in contact with them. The amount of debt, the number of missed payments and the agency's policies will determine their reaction. With contact from you and some amount of payment--even if it's less than the minimum payment--they can sue for garnishment, but they're not likely to do so. Consistently missed payments, with no contact from you, will lead them to believe that you are unwilling to pay the debt. If they decide that's the case they may take a number of actions, from selling off the debt to filing a lawsuit.

The Process

    Creditors and debt collectors may sue you to collect on a debt they believe you owe. The case then goes to court and if they win they'll get a judgment that declares how much you owe. If you receive a summons to appear in court regarding your debt, it is vital that you don't ignore it. The court hearing is a chance to argue your case and fight a garnishment order.

Garnishment Order

    A judgment against you allows creditors to get a garnishment order. Such an order can be used to file a lien against your home, to direct your bank to turn over funds or to require your employer to withhold part of your wages, which is wage garnishment. There is also a chance that state and federal law may differ on the amount that can be garnished, in which case the court is required to enforce the lesser of the two. If the amount being withheld for your paycheck causes you hardship, you have the option of filing with the court to have your garnishment payments reduced. However, the time limit for filing could be short--as little as 10 days--so it pays to know your options quickly.

How to Figure Out How Much I Owe Collection Agencies

How to Figure Out How Much I Owe Collection Agencies

If you have unpaid debts, your accounts may be handed over to collection agencies who are charged with retrieving the outstanding balances from you. Collection agencies will contact you by mail and telephone seeking payment. You may not have a record of how much money you actually owe to the collection agencies. It is important to determine your outstanding balances so you can manage your finances.



    All collection agencies are required to send debtors a "validation notice" stating the amount they owe within five days of making contact. If you have not received such notices, ask the collection agencies that contact you to send them immediately.


    Collect and organize your debt statements. Include credit card statements, loan statements and any other debt statements that displays your outstanding balance.


    Identify the debts the collection agencies are trying to collect. Even if you have multiple debts, it does not mean that all of them have gone to a collection agency. For example, if a collection agency is calling only about your unpaid credit card debt, you can set aside your car loan statement and other debts.


    Determine your outstanding balances on whatever debts the collection agencies are seeking to collect. Compare this number to the amount of money the collection agencies have cited in the validation notices.


    Look for discrepancies. If your records indicate that you owe less than what the collection agencies are seeking, call them to ask how they reached the amounts they stated.


    Request a free credit report from one or all of the major agencies. Your credit report should provide accurate outstanding balances on what you owe.


    Negotiate with the collection agencies. Some are willing to make a deal to get their money. You might be able to negotiate a lower total balance reduction if you pay the lower amount in full, or if you agree to make three large payments.

Can a Mortgage Company Collect the Difference in a Foreclosure?

Foreclosure can be a traumatic experience, and it doesn't necessarily end when the lender takes the home. Your house will be sold at auction, with most states allowing the bank to file a lawsuit against you for any difference between the mortgage balance and the sales price at auction.

Deficiency Judgments

    Many people assume their foreclosure is over once the bank takes the property. However, serious repercussions could remain, with laws in more than 30 states allowing mortgage companies to seek court judgments to collect any remaining balance after foreclosure. A legal order called a deficiency judgment is signed by a judge if the mortgage company wins its lawsuit. Example: The balance on your mortgage at the time of foreclosure is $150,000. The home sells at auction for $85,000. The mortgage company files a civil lawsuit against you for the difference---$65,000. A judge sides with the mortgage company and signs a deficiency judgment ordering you to pay the money.

Collecting The Judgment

    After winning the lawsuit the mortgage company can ask the court for the right to garnish your bank account or wages. This can result in regular payments being deducted from your paycheck and your bank accounts until the judgment is paid. Employers and banks must comply with the court orders. Your employer will notify you about the garnishment, but banks are not required to notify you that your checking or savings accounts have been garnished.

Filing For Bankruptcy

    Many people file for bankruptcy after receiving large deficiency judgments. The judgment is considered an unsecured debt, meaning there is no collateral backing the amount owed. The unsecured status means the judgment could be eliminated, or discharged, through Chapter 7 bankruptcy in just a few months. However, all of your debts must be included in the bankruptcy. Another form of bankruptcy, Chapter 13, requires a payment plan of three to five years, based on your income. After that period all unsecured debts, including the judgment from the foreclosure, will be eliminated. Chapter 7 has income limits that vary by the state, and generally only those with low incomes will qualify. Others can choose Chapter 13.

Good Legal Advice

    Hiring an experienced real estate attorney could help you avoid having a mortgage company collect from you after foreclosure. First, the attorney can tell you if laws in your state allow mortgage companies to sue after foreclosure. Without the right to sue, the companies are powerless to collect from you. If the laws do exist in your state, the real estate attorney can negotiate an alternative to foreclosure, including a signed agreement from the bank that it will not pursue legal action. Alternatives such as short sales and deed-in-lieu of foreclosure can include promises not to sue. Short sales allow your house to be sold for less than the balance remaining on the mortgage. A deed-in-lieu of foreclosure allows you to voluntary surrender the house to the lender with no further obligation.

Can I Be Sued for the Balance of a Repossessed Car in Texas?

A car repossession can cause severe difficulties in your financial life -- it negatively impacts your credit score, which can make it difficult to purchase another vehicle or obtain loans or credit cards. If you do not have another vehicle, a repossession can also prevent you from commuting to work, which can cost you your job. However, if you are a Texas resident, a repossession can impact your finances in another way: you may be responsible for amounts your lender cannot recover by selling the vehicle.

Auction Process

    After a lender repossesses your car, Texas law allows you to reclaim possession of the vehicle by paying the full balance of your loan or lease, plus repossession costs, within 10 days of repossession. If you do not exercise this option, the lender will typically sell the vehicle at a public auction. Your lender is not obligated to demand an auction price sufficient to cover your loan balance and expenses; it may sell the car for less than you owe.


    If a lender sells the repossessed vehicle for less than the loan balance and repossession costs, it will hold you responsible for the difference, which is called a deficiency. Under Texas law, the lender may pursue collection of the deficiency to recover the remainder of the loan balance, as well as repossession, storage and auction fees. The lender will send you a letter itemizing these costs, listing the auction price of the vehicle and demanding payment of the deficiency. It may also call you at home or work to collect the unpaid balance unless you have sent the lender a letter requiring only written communication.

Deficiency Judgment

    Failure to pay the deficiency or agree on a repayment arrangement can prompt your lender to take legal action to recover the deficiency. The lender may file a civil suit against you in your county's court to obtain a judgment against you for the money you owe. A judgment affirms your legal liability for the deficiency.

Post-judgment Recovery

    After the lender obtains a legal judgment against you for the deficiency on a repossessed vehicle loan, it may employ aggressive strategies to collect the deficiency balance. Texas does not permit wage garnishment for collection of a deficiency judgment balance; however, it may attach your bank accounts and force your bank to send non-exempt funds in your account to the court for payment against the deficiency. A judgment creditor may also place a lien on your real estate property, which prevents you from selling your property to satisfy the deficiency.

Should Old Debt Be Paid Off?

There's no one-size-fits-all answer to whether a person should pay off old debt. People who make payments on old debts can unknowingly create legal problems for themselves. Your best option may be to consult with an attorney before speaking with any debt collectors who are trying to recoup money owed on old debts.

Old Debt Limitations

    Debt collectors can pursue money owed on old debts even if the debts no longer fall under a state's statute of limitations. State statutes restrict the amount of time creditors and others have to file a lawsuit to collect a debt. The statutes vary from state to state, but they give creditors and lenders two to 15 years to sue debtors to collect the money they owe for credit-card accounts and other forms of debt. Collection companies are breaking the law if they sue or threaten to sue to collect debt for which the statute of limitations has expired. However, they can still contact debtors to pursue payments.

Reviving Old Debts

    A "New York Times" article titled "Old Debts That Won't Die" says collectors probably won't tell you that making a partial payment on an old debt can restart a statute of limitations that has already expired. Therefore, debtors can unwittingly risk being sued by giving a collection company as much as five additional years to file a lawsuit to recoup a debt. Consumers who make a payment that restarts a statute of limitations also risk having the associated delinquent debt appear on their credit reports.

Debt Settlements

    Some people may think they settled an old debt long ago because they made an agreement with a company to pay a lump sum on the debt. However, debts aren't necessarily erased when consumers pay a lump sum that's less than the total amount owed. In some circumstances, the unpaid amount could be sought by a collection company at a later date. Consider seeking legal advice before you agree to pay a settlement that is less than you owe a creditor or lender.


    Credit-card companies, health-care providers and other businesses are selling consumers' old, unpaid debts to debt-buying companies that profit from getting debtors to fork over what they owe. It's usually a better deal for creditors to sell delinquent debts to debt buyers than to spend time collecting old debts themselves. You may want to pay off a debt for moral reasons, but you should first require the collection company to send information to you that verifies your account information and the total amount you owe. You also should consider whether you can pay off the total amount owed at one time and avoid payment problems on other debts.