How to Get Help With a Credit Card Judgment With a Debt Collector

The best way to get assistance for dealing with a judgement against you for a delinquent credit card is to contact a debt settlement or bankruptcy attorney. Working with such professionals is not the only way to defend yourself from a credit card judgment, but it's the most effective method for getting expert advice. If you hire a lawyer, he's obligated to act in your best interests.

Instructions

1

Avoid working with companies that offer you relief from credit card judgments. Unless you hire a lawyer, you run the risk of having your finances ruined by an unscrupulous company that may harm your finances through such methods as filing for bankruptcy without your consent.

2

Find a debt settlement or bankruptcy attorney who will assist you in protecting your assets from debt collectors. The goal of your attorney will not necessarily be to file for bankruptcy, but to discharge your debts at a minimum expense and prevent your assets from being sized to pay back your debts.

3

Attend all court dates that you are summoned for. If you miss a court date, a default judgment will be filed against you. Have your attorney accompany you to all court dates. They will advise you on what documents to bring with you and what to bring up during the hearing.

4

Attempt to reach a settlement with your creditors with the aid of your attorney. In most cases, even if you have had a judgment successfully filed against you, you will be able to settle the debt for less than the total amount owed.

5

Consider filing for bankruptcy with the aid of your attorney if you can't afford to settle your debts or if judgments against you threaten you major assets, such as your home. Your expenditures and overall financial behavior over the last six months or more will be scrutinized by a judge after you file for personal bankruptcy.

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How to Get a Line of Credit With Bad Credit

There are times in life when a line of credit is critical. Whether you must pay emergency medical treatments or car repairs, a line of credit can help you. But for many people, low credit scores prevent lenders from extending credit to them. Fortunately, there are other options available.

Instructions

1

Request a free credit report to check your credit score. Review debts to find any mistakes that could decrease your ability to get a line of credit. Check open lines of credit for any accounts that have a zero balance and can be closed.

2

Seek a loan from a Web-based lender. Some Web-based lenders have more-relaxed requirements for obtaining a line of credit, according to "Entrepreneur" magazine. Your loan history will be reported to the major credit bureaus, so if you repay in a timely manner, your credit score will improve over time.

3

Apply for a secured credit card. According to Money Matters, lenders are more lenient with credit score requirements on secured credit cards. You will pay a deposit and borrow against your own money.

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How Can I Get Credit to Buy My First Home?

Getting credit to buy your first home can prove challenging if you aren't prepared for the process. Mortgage loan approvals require completing an application with a lender, and then waiting for a lender to review your application to determine eligibility. Knowing common lender requirements before beginning the process can help ensure a quick approval.

Instructions

1

Build your credit score. Develop a habit of always paying present creditors on time to help build the best credit score possible and qualify for the lowest mortgage rate. Getting credit to buy a first home requires a good overall credit score -- 680 or higher says the Home Loan Learning Center.

2

Lower your debt ratio. Increase purchasing power by reducing your balances on credit cards and paying off loans, if possible. The standard debt ratio for a mortgage is 28 percent (house payment cannot exceed 28 percent of monthly income). Do not apply for new loans just before buying a home, and limit credit card use.

3

Deal with charge-offs. Some mortgage lenders will require payment of collection accounts and charge-offs before approving you for credit to buy a home. A charge-off occurs when a creditor gives up on you paying your credit voluntarily. Contact old creditors, and make payment arrangements.

4

Keep accurate records. Income statements such as W-2's and tax returns are imperative when getting credit to buy a home. Lenders use these documents to determine what you can afford. Keep past records on file for at least two years.

5

Lengthen your employment record. Wait until you have at least two years of employment history before applying for credit to buy a home.

6

Rate shop with multiple lenders. Apply for a mortgage with two or three lenders, and then compare the loan offers to find the best mortgage rate and payment. Ask questions about various loan programs to learn the pros and cons of each possible option.

7

Ask about FHA mortgage loans. Insured by the Federal Housing Administration, FHA mortgages have reduced credit score requirements, a higher housing ratio (house payment cannot exceed 30 percent of monthly income) and lower down payment requirement. Talk to your broker or lender about FHA mortgages to see if you meet the criteria.

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Can Creditors Legally Call You at Work?

Owing a creditor or debt collection agency money can begin a cycle of endless telephone calls and debt collection letters. Creditors may call your home, cellular phone and place of business. However, you have the right to place limits on where a creditor or debt collector can call you.

Personal Information

When completing an application for a credit card or loan, you likely revealed personal information about yourself, such as your address, home telephone number, employer name and work number. Creditors keep this information on file, and if you default on a payment, creditors can pull your personal information and use the telephone numbers listed on your application to recover unpaid balances. This can result in a creditor calling or leaving messages at your place of employment.

Stopping Work Calls

Legally, creditors can call you at work to discuss a past due debt. However, creditors cannot divulge your personal financial information to your boss or co-workers. Having the legal right to call you at work does not give creditors or debt collectors the license to harass you throughout the workday. In fact, you can stop all communication at your place of business by requesting that creditors or collectors stop calling you at your work place. You can submit your request over the phone. To have a record of the request, submit your "do not call" letter by certified mail and keep a copy for your personal records. This method can also stop harassing calls made to your personal phone.

Alternatives

Asking a creditor or debt collector to stop calling your work does not make the debt disappear. If you owe the money, creditors and collectors can continue to send collection letters and even file a lawsuit against you. Stopping telephone communication isn't the solution. Facing and remedying the debt is the only way to stop creditors and collectors from pursuing you. You can ask for written confirmation of a debt if you feel the creditor has contacted you in error. Creditors and collectors who cannot supply proof that the debt is valid must cease all collection attempts. Another option is to acknowledge legitimate debt and take steps to satisfy the balance.

Considerations

Familiarizing yourself with the Fair Debt Collection Practices Act can decrease ongoing abuse by a creditor or debt collector. Regardless of whether you owe a debt, creditors and collectors are banned from certain actions. For example, creditors and collectors cannot use profanity over the phone, harass debtors, misrepresent themselves or threaten a debtor with arrest, bank seizure or wage garnishment unless they have a legal right to perform those actions and intend to do so. Debtors should keep a record of abusive tactics and report creditors or collectors to the Federal Trade Commission.

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Personal Information in Debt Management Programs

Borrowers may find it difficult to trust consumer counseling agencies, as they can seem too good to be true. Revealing personal, potentially embarrassing details to a stranger on the telephone or in person may feel wrong. Nevertheless, it's part of the debt management process and a necessary evil. The information you provide is totally confidential, and won't be shared with anyone but your creditors, who probably know it anyway.

What You Supply

When you call a consumer credit counseling agency, you'll need to provide basic information, such as your address, phone number, and Social Security number. You'll also need to tell the counselor your monthly income and expenses if you're receiving budget and credit counseling. Your monthly debts will be included in this information.

If you decide to participate in a debt management plan, you'll need to provide the counselor with your balance and minimum payment information; the counselor will use this information to negotiate a repayment plan for you that's within your means.

Confidentiality and You

Your counseling session as well as the information you provide to the agency is confidential. If you elect to enroll in a debt management plan, your creditors may decide to report the counseling information to the credit bureaus, but the agency itself will not report it. Since creditors usually elect to report debt management plan participation, any lender who reviews your credit history will most likely see that you're currently receiving or have received counseling in the past.

Pre-Screened Credit Offers

Lenders usually review credit profiles to determine possible eligibility for credit card or other loan programs. Based on debt management plan participation, you may find yourself receiving offers for secured credit cards. Be wary of accepting these offers, however: not only may you not qualify, as lenders haven't pulled your full report, you may find yourself kicked out of the debt management program. Getting kicked out has serious consequences. It may be impossible to re-enroll, and your accounts could be sent to collection.

Reputable Debt Management Sources

The National Foundation for Credit Counseling has an excellent reputation. It's America's oldest nonprofit. It's staffed with trained counselors who are certified in budget and credit management; counselors are also trained to offer housing counseling as well as bankruptcy counseling, should you need it. Its services are confidential, and it partners with local agencies so you can meet face-to-face if you wish.

There are other reputable debt management sources as well. Springboard Credit Counseling and Consumer Credit Counseling Services are nonprofits that are also highly rated by the Better Business Bureau and also promise to keep your personal information confidential.

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Emergency Financial Help for Disabled Americans

A disability can happen to you or your loved ones when you least expect it and at any age. It could be from an accident, an illness, or depression--which can also be debilitating. Every state in the U.S. has provisions--knowing exactly where to go for assistance can be a blessing.

If you find yourself disabled temporarily or for the long term, emergency financial assistance is available to help you get back on your feet.

Apply for emergency financial disability assistance quickly to avoid processing delays.

Federal Government

The federal government has organizations in place in each state to help you get emergency food stamps, heating and electric financial assistance, Medicaid and emergency housing. Apply as soon as possible, either online, by phone or with a social worker.

Non-Profit Organizations

NeedyMeds is a 501(3)(c) non-profit who can help you if you are unable to afford medication or health care costs. The information at NeedyMeds is available anonymously and free of charge.

According to the Patient Advocate Foundation (PAF), they provide "professional case management services to Americans with chronic, life-threatening and debilitating illnesses." PAF acts as a mediator to make sure your financial stability is preserved during your disability.

Debt Management

Suze Orman, personal financial expert, best-selling author and television show host, suggests you register at Consumer Credit Counseling Services (CCCS) if you need assistance to get out of high levels of debt. Being disabled, you have the choice to speak with a financial planner by phone, directly online or in person. This allows to you still pay all of your bills in one small payment each month, without lowering your FICO score. There are free or sliding-scale fee classes available also for financial management. CCCS is a non-profit organization and a division of Money Management International (MMI), another non-profit. CCCS works for you, not your creditors, to help you get your life back.

Long-Term Disability Programs

After you apply for emergency disability assistance, you may want to sign up for long-term disability, if it applies to you. This would be Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI). To receive these payments, you must have been disabled for at least five months with your first payment arriving on your sixth month. You'll be eligible for Medicare after one year of disability payments.

Tips and Warnings

Avoid online websites that promise you financial assistance for disabilities (or for any reason) for a fee. These are scams.

Report people to the police who come to your door or call you by phone to get information from you, such as about your home or bank information. These are also scams.

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Comparison of Debt Reduction Options

Many people feel like they are drowning in their debt, and while there's no magic spell to eliminate debt, with some research, legwork and commitment, you have the ability to dig yourself out. It's vital to understand your options so that you don't waste time and energy going down paths that are inappropriate for your financial situation.

Debt Consolidation

You may be able to reduce your debt more quickly by using a debt consolidation loan. These loans are particularly useful for those who have trouble keeping track of multiple payment due dates. Oftentimes, consolidation loans are advertised as having extremely low interest rates to lure consumers into thinking they will pay less overall by consolidating; however, this isn't always the case. Before making any commitments, it's vital to calculate whether you're really saving money by consolidating. Since consolidation loans eliminate your current balances, you may be inclined to spend even more in the future.

Credit Counseling

Not only will a credit counselor help you to work through your debt, but a reputable company should also assist in figuring out how you got there in the first place. Unlike debt negotiation or debt elimination companies, which are often scams, credit counselors treat the whole problem and not just the symptoms so that you end up with a healthier financial picture. Credit counselors may recommend a debt management plan if you're behind on payments or having a difficult time meeting your minimum payments each month. Such a plan will involve the credit counselor negotiating lower interest rates or payoff balances.

Bankruptcy

Bankruptcy is a last resort for those with extreme debt issues. Under bankruptcy rules, those who qualify receive a court ruling that says they do not have to repay certain debts; however, the effects of bankruptcy may be devastating. You may have difficulty obtaining new credit, a mortgage, life insurance and possibly even a new job. Bankruptcy stays on your credit report for up to 10 years.

Warnings

All three of these options may make it difficult to obtain new credit down the road. Lenders view both debt consolidation and debt management plans negatively because they demonstrate your struggle to make payments in the past. However, if you are truly committed to paying off your debts and keeping them paid off, your credit score will rise and you will find yourself with more lending options.

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The Best Ways to Consolidate Debt

Consolidating debt involves taking out one loan with the intent to pay off multiple debts. People consolidate debts for two distinct reasons: either to lower their monthly payment or to lower their long-term interest payments. When you consolidate to lower your payments, you usually end up paying back more in the long run because you stretch out your payment schedule.

Consolidating Debt Using Credit Card Balance Transfers

Consolidating debt using a credit-card balance transfer is a popular option for debt consolidation. Credit card companies try to entice customers to transfer balances by offering special introductory rates, sometimes as low as offering no interest for six months to a year for balances transferred. Some companies also offer low promotional rates (typically 1.99 percent to 5 percent) for a longer period of time, or even for the life of the balance. Many balance transfers have a fee associated with them- usually 3 percent of the amount transferred, although there is usually an upper limit (cap) on the fee. When using credit cards to transfer balances, be aware that as of August 2009 in the U.S., payments are applied to lower interest rates first., which means that if you use that credit card to make a standard purchase, any payments you make will first go towards paying off the balance transfer debt rather than the new debt. You will thus be charged interest on the standard purchase at the standard rate, for the time it takes you to pay off your balance transfer, until you are able to make a payment that is applied to the purchase at the higher interest rate. However, laws are in the works, as of August 2009, to alter that practice.

Consolidating Debt Using A Personal Loan

You can also consolidate debt using a personal loan from a bank or credit union. A higher interest rate is usually associated with personal loans than with credit-card balance transfers. However, the benefit of a personal loan is that the interest rate is generally set and does not expire or go up after a special promotional period ends. To consolidate loans using this method, you need to apply for a loan at your bank or credit union of choice. Some banks offer special debt-consolidation loans just for this purpose.

Consolidating Debt into a Home Loan

Some people recommend taking a second mortgage or a home equity line of credit in order to consolidate debt. Using that method, you use the equity of your home to pay off other debt, and you then have only one payment -- the mortgage payment (or two payments if you selected a mortgage and home equity line of credit). Mortgages and home equity lines of credit usually have lower interest rates then personal loans. In addition, mortgage interest is usually tax deductible up to a certain level. However, consolidating debt by using a mortgage loan or home equity loan can be risky. Mortgage debt is secured debt, while credit card debt is unsecured debt. That means that if you fail to make your payments , the bank can take your home. Typically, credit card companies cannot take your home for failure to pay credit card debt.

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What is Clean Sweep Debt Consolidation?

Clean Sweep Debt Consolidation was a program offered by Bank of America in 2008 and 2009. Under the program, consumers qualified for a variable-rate loan of up to $50,000. The program was marketed as a way to pay off high-interest debt. As of 2010, Bank of America no longer offers Clean Sweep loans.

How the Program Works

Consumers were charged a 3% fee for advances, which made mutliple advances costly.

Bank of America's Clean Sweep Debt Consolidation program offered consumers loans of between $500 and $50,000, at a variable annual percentage rate (APR). Consumers were charged a 3% fee for advances from the loan. No collateral was required, and consumers could get approval over the phone. The program was targeted at consumers with high-interest debt.

Benefits of the Clean Sweep Program

Interest rates on some Clean Sweep loans were as high as 21%.

The Clean Sweep program allowed some consumers to take out large loans for interest rates as low as 8%, which in turn allowed them to pay off high-interest debt. The ability to qualify for a large, low-interest loan with no collateral was an asset to those consumers who did not own their home or have other assets to use as collateral.

Drawbacks of the Clean Sweep Program

Consumers who owed money to FIA Card Services were not allowed to pay those debts with Clean Sweep funds

While some consumers qualified for the full $50,000 at 8% interest, many more did not. Interest rates on some loans were as high as 21%. Bank of America also did not allow Clean Sweep participants to use the funds to pay off consumer debt owed to FIA Card Services, which is owned by Bank of America. The variable interest rate policy also meant that a consumer's APR could vary widely, making paying off the loan difficult.

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How to Evaluate Debt Consolidation Services

Debt consolidation is the bundling of outstanding debts into one consolidation loan. During the consolidation process, debt consolidators can reduce interest rates, eliminate late fees and lower minimum payments. Once you find a licensed credit counselor who specializes in debt consolidation, you can begin the debt consolidation process. Evaluate the debt consolidation company and the services it provides to be sure you are receiving the best consolidation loan.

Instructions

1

Hire a licensed credit counselor. Most licensed and legally operating credit counseling agencies are members of a national trade association. The American Association of Debt Management Organizations (AADMO) is the largest trade association for the credit counseling and debt management industry.

2

Schedule a consultation. Bring your billing statements, credit card agreements and loan contracts so the debt consolidator can review your credit information and provide a quote free of charge. Inquire about service fees before making an upfront payment.

3

Compare your new loan against your old loan. Look for lower interest rates and lower monthly payments (over a longer term) for your consolidated loan.

4

Request the cancellation or reduction of all penalty fees. Creditors can impose late payment and over-the-limit penalty fees. Inquire about canceling or reducing all or a percentage of these fees to lower the amount of debt bundled into your consolidation loan. Most consolidation programs offer penalty fee reduction services; however, the negotiation process will determine how much is reduced.

5

Consider program services to stop harassing phone calls from creditors. Ask how soon the debt consolidation can stop calls and letters from creditors attempting to collect old debts.

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How to Personalize My Visa Card

Visa cards, including credit cards, debit cards and gift cards, can be customized according to the preferences of the cardholder or the gift card provider. Depending on the kind of card you own and your bank, you can personalize your Visa card through various options. You can design your own your card layout, have your photo on the card for additional security or choose from personal expression templates offered by your bank, like a favorite sport team or hobby.

Instructions

1

Check with your bank for available design galleries and other options like providing your own photo or layout for that personal touch. Choosing the photo security feature can make your Visa card utilized like a legal photo identification. Visa even offers specific marketing designs for corporate gift cards. As each bank's policies and offers vary, know your own bank's guidelines for detailed instructions about personalizing your card.

2

Choose your card design. If you make your own layout, carefully follow the parameters provided by your bank to make sure your customized design gets approved.

When you provide a customized image, it should be appropriately cropped according to the specifications of your card. Use a high-resolution photo to make sure you get a good quality image.

3

Send your card design to your bank online, by phone or by visiting the nearest branch. If you choose from one of the bank's templates, provide the name or code of your chosen layout. If you want a security photo on your card, some banks may require you to have your photo taken at the branch instead of providing your own.

Doublecheck your personal details to make sure everything gets processed without errors.

4

Wait for your card to be mailed to you. Activate your personalized Visa card to replace your old one either online or by phone. Follow the instructions provided in the replacement card's mail. And make sure you sign your new card before using it.

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Companies That Monitor Your Credit for Identity Theft

Millions of Americans' identity is stolen every year. The theft may go unnoticed for months--enough time for serious financial damage. Once the breach is discovered, it can take hundreds of hours and dollars to restore your creditworthiness and reputation. In some cases, it can take years to get everything straightened out. There are several companies that will, for a fee, monitor credit reports to guard against identity theft.

myFICO

Internet firm myFICO offers a service called IDFreeze, which not only monitors credit reports and alerts users of suspicious activity, but also monitors medical benefits and Social Security number usage, and protects your computer against spyware. Spyware is loaded on your computer by various Internet sites; its purpose is to collect personal data. Protecting against spyware can, in turn, protect against identity theft. IDFreeze can be tried out for free for 30 days with no obligation.

myFICO
800-319-4433
myfico.com

LifeLock

LifeLock monitors online activities done in the subscriber's name, arrests in which the criminal used an alias that matched the subscriber's name and birthdate, credit reports and more. The company offers a $1 million guarantee if the system fails to protect a subscriber's identity as claimed. LifeLock also assists subscribers when a wallet is lost, which involves such tasks as calling credit card companies and banks to close accounts and obtain new credentials, and reporting and replacing driver's licenses and other identification. Monthly prices are very reasonable and if paid in full annually, even lower.

LifeLock
800-543-3562
lifelock.com

IDWatchdog

IDWatchdog scans thousands of databases and all three credit-reporting companies to protect subscribers' identities. If a customer does become a victim of identity theft, IDWatchdog works closely with the customer to remove fraudulent activities from credit reports and other financial data. Customers receive monthly reports detailing any activity found in the scanned databases and credit reports. Suspicious activity triggers an automatic snapshot of the customer's reports, and resolution services are begun immediately. The company also will conduct a test that will determine your risk of identity theft.

IDWatchdog
800-774-3772
idwatchdog.com

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Can I Claim Head of Household Hardship Against a Debt Collector in a Lawsuit?

Claiming a "head of household hardship" in a lawsuit with a debt collector may lead to a settlement or a payment plan. However, it cannot serve as a legal defense against the lawsuit. Appearing before a judge and claiming a head of household hardship as a defense will almost certainly lead to an easy victory for the debt collector.

Considerations

Debt collectors file lawsuits to collect unpaid debt. The tactic is common in credit card cases, although lawsuits are also possible for credit obligations stemming from automobile repossession, home foreclosure and other loans. Debt lawsuits are serious legal matters and can force people into bankruptcy.

Consequences

Losing a debt lawsuit results in a monetary judgment signed by a judge. The judgment requires the debtor to pay a specific amount of money to the debt collector. If the debtor fails to do so, the debt collector can request garnishment of the debtor's bank account or wages. Some people file for bankruptcy to stop garnishment and reorganize their finances with the help of a bankruptcy trustee.

Challenges

Illinois Legal Aid reports that debt collectors almost always win debt lawsuits. Unemployment, illness and head of household hardship are all understandable reasons for not paying a debt. However, they are not suitable legal defenses against a civil suit. Identify theft is an example of a possible suitable defense, with the debtor proving in court that someone else is responsible for the debt.

Alternatives

Out-of-court settlements are often possible in debt lawsuits and are usually preferable to a judgment. A settlement ends the threat of garnishment and prevents the listing of a judgment on the debtor's credit report. The Federal Trade Commission recognizes settlement as an option for debt management. The process allows for the debtor to pay off the debt for less than the full balance. SmartMoney reports that settlement offers on unsecured debts such as credit cards range from 20 to 70 percent of the balance. The potential savings are significant because judgments require payment of the entire balance.

Process

Debtors with head of household hardships should call the debt collector before the court date and explain the situation. However, the debt collector is unlikely to show much sympathy given that he has already filed a lawsuit. The lawsuit and a likely judgment gives the debt collector complete leverage, all but forcing the debtor to accept whatever settlement terms the debt collector is willing to offer. Settlements or payment plans are possible until the judge hears the case. Debtors trying to settle because of head of household hardships should may have to contact the debt collector several times to negotiate an affordable agreement.

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The Best Ways to Prevent Fraud & Identity Theft

Anyone can become a victim of identity theft or fraud, which involves another person acquiring sensitive information about you (such as your name, address, SSN or account numbers), and then taking this information and opening accounts in your name. Prevention plays a key role: you can best stop fraud by safeguarding your personal information.

Account Statements

Always know the location of your account statements at all times if you want to protect yourself from identity theft and fraud. People looking to steal your information do not need to steal your statements. They can simply record the information such as your account number and use this information to steal your identity or make purchases. Keeping information secure means storing account statements in a safe location, preferably a locked drawer or box. You should also immediately retrieve statements from mailboxes, and shred documents you no longer need.

Check Your Credit Report

Identity theft and fraud can go unnoticed for several weeks, months or even years. Check your credit report at least once a year to find out if someone has opened an account in your name. You can obtain free online reports from Annual Credit Report, and you can also request reports by writing the major bureaus (TransUnion, Experian and Equifax). Consider taking extra precautions and signing up for credit report monitoring, wherein the chosen company sends immediate alerts whenever someone attempts to apply for credit in your name.

Watch For E-mail or Suspicious Phone Calls

Thieves always look for victims, and they tend to target those who appear too trustworthy or naive. Banks or credit card companies will not send an e-mail or telephone you to verify important account information, nor will they request this information over the phone (unless you prompted the call). Never give your information to someone who claims to represent the company. Hang up the phone, and then contact the company using the telephone number on your account statement to verify the legitimacy of the call. And if paying a bill online or making a purchase, only use websites or companies that include a security logo. Security symbols commonly appear on the bottom left or right of the page.

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Customary Business Practices for Turning a Debt Over to a Collection Agency

Major creditors, such as hospitals, banks and credit card companies, juggle a multitude of responsibilities. Because most creditors are for-profit companies, its imperative that they manage consumer accounts as efficiently as possible with as little effort as possible. Creditors possess neither the time nor the inclination to chase debtors around indefinitely demanding payment. When a creditor's collection efforts fail, it has the option to hire collection agencies for assistance in recovering non-performing accounts.

Time Frame

Creditors do not typically turn delinquent accounts over to collection agencies immediately after the consumer misses a payment. The creditor does not want to share the proceeds from the debt with another company unless it has no other option. The length of time that a creditor will attempt to recover an account before sending it to collections varies depending on the industry. Banks and credit card companies, for example, often wait a full six months before charging off debts while hospitals charge off unpaid accounts sooner.

Charging Off Debt

After the allotted time frame for collection passes, the creditor charges off the debt by purging the unpaid account from its accounting ledger. Doing so allows the creditor to claim the bad debt as a business loss for tax purposes. While the term "charge-off" often refers to credit card write-offs, other creditors that purge their business records on account of nonpayment also charge off debts.

In-House Collections

Major creditors sometimes have "in-house" collection agencies that collect debt on their behalf. An in-house agency is merely a collection department that operates as the creditor's private collection agency, contacting debtors about their delinquent balances. A creditor does not need to draw up a contract with its in-house collection agency. It merely transfers the debt to the proper department for collection.

Third Party Contract

Creditors who do not possess in-house collection departments or whose collection departments could not collect the debt will hire an outside agency to collect overdue debts consumers owe. Through a third party contract, the collection agency agrees to collect the debt on behalf of the creditor in exchange for a portion of the proceeds. The original creditor still technically owns the debt and can still accept payment from the debtor if he offers it.

Third Party Sale

When all other collection efforts fail, a creditor sells its non-performing accounts outright to a third-party collection agency. Collection agencies that purchase debt are known as "debt buyers" and generally pay the original creditor much less for the debt than it would receive if it recovered the debt on its own or paid another collection agency a commission for doing so. After selling a debt, the creditor cannot accept payment from the debtor should he prefer to pay off his original lender rather than a debt collector.

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How to Collect on an Unsecured Debt in Michigan

An unsecured debt is an account in which the lender did not require you to have collateral or security, such as an automobile or a home, as a condition of the loan. Unsecured debts are also known as signature loans. If you are collecting an unsecured debt in the state of Michigan, you must abide by the Fair Debt Collection Practices Act. You must also be aware of the statute of limitations. Once the statute passes, your ability to collect on that debt is limited.

Instructions

1

Send letters and make phone calls. One of the best ways to collect a debt is by sending out a reminder or past due notices. Call the debtor to remind him that the debt has not been paid.

2

Find out if the statute of limitations has passed for that particular debt. In the state of Michigan, the statue of limitations for debts is six years. When a debtor has not paid a debt for six years you cannot pursue legal action. Letters can be mailed and phone calls made, but legal action should not be a course of action.

3

Offer cash settlements before the statute of limitations runs out. Many debtors may want to settle their debt even though the statute of limitations has run out. A settlement is a when the debtor pays a portion of the balance owed, such as 50 percent, as settlement in full. Negotiate to remove the debt from his credit file once the payment is received.

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Can a Credit Card Sue a Customer for Not Paying?

If you owe a balance on credit card debt and do not make your minimum monthly payment on time, your creditor will likely contact you by telephone or letter in an attempt to resolve the past due balance. Once your account becomes 30 days past-due, it may also report you to the credit bureaus, which can affect your ability to obtain future credit. However, if you do not bring your account current, the credit card company may choose to sue you for the balance.

Lawsuit Process

Because suing a debtor is expensive, credit card companies typically use extensive collection efforts to compel you to pay before opting for legal action. However, if you avoid your creditor or cannot negotiate a repayment plan, the creditor may hire an attorney to file a civil suit, usually in your county's municipal or magistrate court. The creditor or attorney will supply copies of your account information to show that you owe the debt. The court will then serve you with notice of the lawsuit by certified mail or personal service depending on your state's laws.

Opportunity for Response

After you receive notice of the lawsuit, you will have an opportunity to respond in writing or at a court hearing. The length of time for response varies by state -- most states allow about 30 days. If you can demonstrate that you have already paid the credit card debt, or that the creditor or attorney violated procedural law when filing the lawsuit, the court may dismiss the suit.

Judgment

If you do not respond to the credit card lawsuit, or cannot provide an adequate defense during the time frame allowed, the court will typically enter a judgment in favor of the creditor. A judgment legally affirms that you have a debt obligation to the credit card company. It becomes public record, which means that future potential lenders, landlords and employers can access this information. Judgments also appear on your credit reports for seven years after you repay the debt, or seven years after your state's statute of limitations.

Consequences

A valid judgment for credit card debt limits your options to resolve the debt -- most creditors will not accept a partial settlement after obtaining a legal judgment. In most states, the credit card company or attorney may apply to the court for authorization to garnish your bank accounts or wages -- this allows the creditor to take part of your bank account balances and earnings to apply toward repayment. The court will also place a lien on real estate property you own, preventing you from selling the property until you pay off the judgment.

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How Much Can a Credit Card Garnish My Wages?

If you default on your credit-card payment agreement, the creditor can take measures to collect the unpaid debt. In some cases, it sells the debt to a debt-collection agency or hires an attorney to collect it. Sometimes, the creditor uses a collection agency, which acts as its agent. A creditor or debt collector can garnish wages for a credit-card debt if the state that you are paid in allows wage garnishments. Federal and state laws restrict the amount that can be withheld from your wages.

Process

Most states allow wage garnishments for credit-card debts, but a few, such as Texas, South Carolina, North Carolina and Pennsylvania, do not. If the state you are paid in permits wage garnishments, to begin the garnishment process, the debt collector must first file a lawsuit against you. It has to obtain a judgment by winning the suit. Then it applies for a writ of garnishment with the same court to garnish your wages.

The court should serve you papers, notifying you of the lawsuit and the steps you can take to present your case to the judge. If you do nothing, most likely the judge will grant the debt collector a judgment against you. Depending on your state, you might be given a chance to satisfy the garnishment before it actually begins, or the paperwork might be sent immediately to your employer to verify that it has wages for you and to begin the withholding.

Federal Limit

Title III of the Consumer Credit Protection Act restricts the amount of pay an employer can withhold in one pay period for an ordinary wage garnishment, such as for a credit-card debt. Your employer can withhold up to the lesser of 25 percent of your disposable income or the total by which your disposable income is more than 30 times the federal minimum hourly wage -- $7.25 per hour at the time of publication. Your disposable income is your earnings after you subtract legally required deductions, such as payroll taxes.

State Limits

The state usually sets withholding limits, which in many cases mirror federal law. In some cases, it's less than federal law, in which case, your employer should use the smaller amount. A few states, such as Florida and Missouri, provide an exemption for employees with head-of-household filing status. For example, in Missouri, only 10 percent of your wages can be garnished for a credit-card debt if you are the supporter and head of your household.

Considerations

Depending on your state, your employer might be allowed to deduct a small fee, such as $2 or $3, for administering the wage garnishment. The state generally prohibits such a deduction if it causes your income to fall below the minimum wage. In many cases, the state allows a judgment to accrue interest until the date it's satisfied. If a wage garnishment is causing you financial hardship, contact the issuing agency for its procedures on filing a claim of exemption. A debt collector cannot obtain a judgment or a wage garnishment against you if the statute of limitations has expired.

Filing Chapter 7 bankruptcy enables you to get rid of credit-card debts and eliminate wage garnishments; the creditor cannot collect on the debt because it does not exist anymore. A Chapter 7 bankruptcy can stay on your credit report for 10 years.

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How to Get Approved for a Credit Card With Bad Credit in Canada

One way to improve a bad credit score is to begin rebuilding it by getting a credit card and making monthly payments on time. However, when you already have bad credit, it can seem nearly impossible to get approved for a credit card in Canada. Don't despair. There are several companies that are willing and ready to help you improve your credit by offering you a line of credit in Canada. There are limitations and fees associated with these cards, but they are a great way to get your financial life back in order.

Instructions

1

Check your credit report. First, you will want to obtain a copy of your credit report to check for inaccuracies. The reason for your low credit score could be related to a mistake that is on your report and needs to be corrected. There are two agencies in Canada that handle credit reporting, TransUnion and Equifax. These agencies must send you a free copy of your report by mail if requested. If there are any discrepancies, you can call the agency to have the mistakes corrected.

2

Apply for a secured credit card. While it's nearly impossible to be approved for an unsecured credit card when you have bad credit, almost anyone can get a secured credit card. Usually the interest rates are not as bad on these cards, because you are putting up collateral to back the card. You will normally have to put up a deposit of at least a few hundred dollars. The line of credit will be the same amount as the deposit you placed. There is also an annual fee of from $5 to $120 on these cards. You can avoid paying a deposit by using your home as security. If you default on the payment, though, you risk losing your home. For a list of secured credit cards available in Canada, take a look at the Consumer Bad Credit Guide. See Resources for the link.

3

Get a prepaid credit card. Prepaid credit cards will allow you to make purchases online and can be used in places where checks aren't accepted when you don't have cash. These are another great tool to build your credit. One prepaid card available to Canadians is the CAA TravelMoney card. This card has one of the lowest setup fees and no monthly maintenance fee, but requires a higher minimum reload amount. See Resources for a link. Another prepaid card available in Canada is the MyPlash Prepaid MasterCard. This has a lower minimum reload amount, but has a higher setup fee and a monthly maintenance fee of $5.95. See Resources for a link.

4

Apply for a student credit card if you are a student. Students are notorious for having little to no credit, so companies create credit cards specifically targeting them. These cards are a great way for students to begin building credit. Student credit cards typically have lower limits to help younger card owners keep their finances in check. Student credit cards are helpful for first-time card owners. TD Canada Trust offers a variety of Visa cards to students. See Resources for a link.

5

Apply online. Once you have selected a card that is appropriate for you, apply online. Online applications are faster and don't involve all the paperwork included with traditional applications. They are also received and approved faster. Before you apply, make sure you are getting the best deal available. Read the fine print to make sure the interest fee you are offered at first won't skyrocket after the first six months.

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Debt Free Alternatives

Many people feel that debt is a natural part of life, and that there are types of debt, which are unavoidable. However you can choose to have a debt free life by making wise financial decisions and choosing to wait to make purchases until you have the cash to do it. Choose to be debt free may mean making sacrifices that will benefit you in the long run.

Emergency Funds Instead of Credit Cards

The first step to avoiding debt is to plan ahead for your purchases. This includes planning for emergencies. While you are working to get out of debt you should set aside between $1,000 to $2,000 to cover your unexpected expenses. This would include things like your medical bills, speeding tickets, car repairs or any other expense that cannot be planned for in advance. It would not cover remodeling your home or vacations. These things can be planned and saved for.

Pay Cash for a Car

One of the most common types of debts is a car loan. Generally, these tend to be quite high, and can be sued effectively to build wealth. Once you have paid off your current car continue to drive it until you have saved enough cash to pay for your car. If you want a newer car you will need to save more money. A car rapidly depreciates in value the first three years of ownership. If you are interested in saving money and building wealth, buying a three-year-old car would allow you to find the best deal on a car.

Make a Plan to Be Debt Free

People who are debt free made a commitment to themselves to stay that way. Creating a long-term financial plan that includes getting and staying out of debt is essential to being debt free. This plan should include retirement savings, paying for your children's college, and major house repairs. It should also include a budget that has regular savings each month. If you are not already debt free, you should set up a payment plan to get out of debt.

Home Ownership and Debt

Buying a home is very expensive, and it is nearly impossible to do without going into debt. However some people do save up the money before purchasing a home. If you do decide to borrow money to buy a home make sure that the amount is no more than 25 percent of your take home pay. Take out a loan with a fixed mortgage rate, and limit the term to ten or fifteen years. Do not cash the equity out of your home, because this will prevent you from building wealth and leave you with continually debt and house payments.

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Debt Management Tools

Being mired in debt can be an overwhelming and stressful experience, and some consumers may be unsure about what debt management steps to take. Debt management tools, including self-assessment tests and financial inventories, can help people begin to better manage their debts.

Financial Health Quizzes

Financial health quizzes, such as the online quiz offered by Consumer Credit Counseling Services, can help people determine the state of their finances. The quick multiple-choice assessment asks individuals questions about how they pay bills, whether they make only minimum balance payments, the percentage of income directed toward bills or approaching credit card maximum allowances. After submitting responses, a brief assessment appears with suggestions for better managing debt.

Debt-to-Income Calculator

Consumers can very simply determine whether their debts outweigh their income by using a debt-to-income calculator, such as the online calculator offered by Consumer Credit Counseling Services. Individuals may enter the debt amounts for up to 12 different debtors, and then enter their monthly income. The debt management tool automatically calculates the debt-to-income ratio. Percentages under 15 percent are considered healthy, while percentages between 15 percent and 20 percent may signal pending debt problems, according to the website.

Budget Calculators

Understanding and maintaining a monthly budget is a vital tool for better managing debt, according to Consumer Credit Counseling Services. Their online worksheet for establishing a monthly budget allows consumers to enter their income, and then begin totaling monthly expenses such as rent, taxes, car payments, groceries, clothing and other items. A monthly surplus or deficit is automatically calculated so that consumers can use the information as a tool to tackle debt.

Determining Net Worth

Consumers may determine net worth in order to have a better understanding of their financial health and tackle debt management problems, according to Debt Management Tool, an online information resource for debt management. To do this, Debt Management Tool suggests determining what an individual's total assets and liabilities may be. Once the liabilities are subtracted from total assets, net worth may be determined. Net worth is helpful in managing debt in that some assets may be liquidated to decrease financial liabilities. For example, one person's money market account may earn 5 percent. But if she is paying 12 percent interest rates on outstanding credit card debts, it may make more sense to liquidate the money market account to pay down the high-interest credit card.

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Debt Reduction Education Programs

In this day and age, countless consumers find themselves in debt. Whether due to credit cards, loans or sheer mismanagement of personal finances, debt levels continue to grow. If you want to learn how to regain control of your debt, debt reduction education programs are available. Numerous programs are offered, but consumers should be sure to verify the program they use through the Better Business Bureau.

Debt Reduction Services

Federally approved since 1996, Debt Reduction Services offers debt education and consolidation offers. Based out of Idaho, DRS is available to anyone who needs debt help in the US. According to the website, the education programs available teach consumers about personal and household budgeting, preventing and eliminating excessive consumer debt, developing effective spending habits and using credit wisely. Information is available through online archives and webinars, as well as live seminars in a corporate setting.

Debt Reduction Services
6213 N. Cloverdale Rd. Suite 100
Boise, ID 83713
208-378-0200
debtreductionservices.org

Money Management International

Money Management International (MMI) has been in business since 1958. MMI offers educational services for many situations, though one of the most popular is the management of family finances. While some people may have individual credit, managing the finances of an entire family is a whole other ballgame. MMI counsels people on credit cards and credit scores and home finances. MMI also teaches consumers how to save money, an oft-overlooked aspect of money management. Money Management International's education resources include Web workshops as well as online tools, such as podcasts, quizzes, eBooks, webcasts and an array of debt calculators.

Money Management International
9009 West Loop South, 7th Floor
Houston, TX 77096-1719
866-889-9347
moneymanagement.org

Family Life Credit Services

For those who incorporate faith into their financial outlook, Family Life Credit Services (FLCS) is a community-based Christian ministry that offers debt counseling. A nonprofit organization, Family Life Credit Services dubs itself as a "counseling agency that provides faith-based financial education and counseling to families struggling to find hope." Some of the educational options available include homebuyer information, credit card usage help and debt management. Family Life prides itself on helping consumers achieve "personal, spiritual, and financial goals" by using a customized biblical debt help program provided by one of FLCS's counselors. As of 2010, FLCS offers debt reduction education programs to 30 states. If your state isn't one of them, FLCS is willing to direct you to a reputable agency in your area.

Family Life Credit Services
2345 Meadow Ridge Parkway
P.O. Box 720
West Fargo, ND 58078
701-237-9247
familylifecredit.org

Consumer Debt Counselors

Consumer Debt Counselors (CDC) offers an array of debt reduction education programs. A nonprofit business with a primary focus on assisting clients with personal bankruptcy and credit card issues, CDC's goal is to provide information to the public on budgeting and buying practices. In addition, Consumer Debt Counselors offer counseling on the major impacts of personal debt. They also offer educational services on how to handle burdensome financial problems such as foreclosure, insurance and debt collectors.

Consumer Debt Counselors, Inc.
4055 Tamiami Trail - Suite 23
Port Charlotte, FL 33952
941-255-3236
debtreduction.org

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Can You Get a Credit Card Payment Reduced If You Lose Your Job?

If you find yourself losing your job, you have several ways to potentially reduce, consolidate or settle your credit card payments to make them more manageable. You should carefully review all of your options to determine the most appropriate resolution for your personal situation.

Notify Your Creditor

The first step is to notify your creditor. Negotiating an alternative payment arrangement can help you avoid a negative impact on your credit report and keep your account current. If your account is in good standing with no recent history of delinquent payments, you may also be able to negotiate a lower interest rate. Not only will a reduced interest rate help you in the long run by allowing you to pay off your debt more quickly, but it will also help you with your short-term goals by lowering your monthly minimum payment.

Use a Credit Counseling Service

If you have more than one revolving debt account or are uncomfortable negotiating with your creditors directly, an alternative option is to use a third-party credit counseling agency. These agencies contact your creditors on your behalf and work with them to design a plan that is manageable with your budget. Once approved, you will make one monthly to the credit counseling company, who will in turn distribute payments to each of your creditors. Because this consolidates your payments, you will likely see an increase in the total amount of your monthly minimum payments.

Debt Consolidation Loans

If you have a strong credit history, a debt consolidation loan is another option. This is an unsecured loan, so you need to furnish proof of a steady household income in order to qualify. You might need to ask a spouse or relative to co-sign the loan. The interest rate will be determined by your overall creditworthiness rating with a combination of your income and credit score.

Home Equity Loans

Homeowners may also have the option of applying for a home equity loan or line of credit to pay off revolving debt. These loans often have a much lower interest rate than those associated with traditional unsecured credit cards and can reduce your monthly required payment. To qualify for a home equity loan or line of credit, your financial institution will look at a number of factors including your credit score, the amount of equity in your home and your income.

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How to Handle Credit Card Collectors

Credit card companies use in-house collectors and outside agencies for debt recovery. Collectors must adhere to the Fair Debt Collection Practices Act (FDCPA). This law prohibits collectors from using false statements, harassment, threats and unfair practices. Credit card collectors must provide written notification of any debt owed. Consumers have the right to dispute the debt and stop collectors from contacting them. The FDCPA also prohibits collectors from contacting a consumer during certain hours and in instances involving an attorney.

Instructions

1

Speak with the credit card collector. Determine if his call is legitimate or if you wish to dispute the debt. If you owe the credit card company money, see if you can resolve the matter with an installment plan or some other payment option. For disputes, the collector is required to send you a written "validation notice." This notice must be sent within five days after the collector first contacts you. It must inform you how much money is owed, include the name of the creditor to whom you owe the money and state how to proceed if you dispute the debt.

2

Ask the credit card collector for debt verification. If you dispute the debt, write the collector or the company she represents a letter. State in your letter that you are disputing the debt and provide the reason. Send the letter certified, return receipt requested. This will provide proof the collector received the letter. If the collector cannot provide written verification of the debt, she must stop contacting you. If, however, written verification is provided, the collector may recontact you. You must mail your letter within 30 days after you receive the validation notice.

3

Write a letter stating you no longer wish to be contacted. Send a certified, return-receipt letter to the collector asking him to cease contact. The law says the collector can further contact you under only two circumstances. He may call to notify you that no further contact will be made, or he may call to let you know that further action will be taken by the creditor. This can include filing a lawsuit against you.

4

Consider when calls are received. By law, a debt collector may not contact a consumer at times when it is known to be inconvenient. This includes calling before 8 a.m. or after 9 p.m. unless you agree to it.

5

Notify the collector you have retained legal counsel. If you hired an attorney to represent you in a credit-card debt collection, the collector may not contact you after being notified of this.

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Fastest Way to Pay Off Debt

Paying off debt quickly requires minimizing new spending and ranking debts according to interest rates, when possible. In addition, to the extent possible, high-interest debt should be transferred to lower-rate accounts to minimize interest expenses and in turn ease the repayment process.

Devote as Much Money to Repaying Debts as Possible

Paying off debt begins with maximizing the amount of money available to pay them off. Although it is cliche, living within one's means is essential to closing debts. Similarly, the speed of repayment is a direct function of increasing payments and avoiding additional consumption that might cause new debts.

For example, simply paying the minimum on a credit card bill is insufficient. Paying as much as fast as possible toward the debt will reduce the amount of interest paid and will expedite the end of the debt.

Transfer Debts Away from High-Interest Credit Cards

Especially in the case of credit cards, it is sometimes possible transfer debts away from high-interest rates to those with lower rates. This reduces the interest obligation on the debt, which makes it easier to reduce the principal of the debt.

Rank Debts by Interest Rates

Debts with the highest interest rates should be paid first to minimize interest expenses. In much the same way as transferring debts to lower-rate accounts, prioritizing high-interest-rate debts will speed the process of paying against the principal of the debt instead of just paying interest.

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Will a Debt Reduction Program Ruin Your Credit Score?

Debt reduction plans are plans that people can enter into to help eliminate large debts. One of the reasons that many people hesitate to get into this type of program is because they fear that doing so could damage their credit. The direct credit impact from this type of program may not be as negative as you think, depending on what type of program you get into.

Function

A company that specializes in debt reduction or debt management plans works with people who have large amounts of debt. If you have credit card debt, medical bills or other types of debt, you can sign up with one of these companies for help. These companies will generally negotiate with your creditors to lower your interest rates and payments; certain companies also negotiate debt settlements for a fraction of what you owe.

Types

There are different types of debt reduction programs that you could choose to enter into. Some programs are referred to as debt management plans. These plans take a monthly payment from you and distribute it to your creditors. This type of plan can get you a lower interest rate and long-term savings. Other plans use debt settlement as their main strategy. With this method, they negotiate with your creditors to take a lump-sum payment. The creditors will take less than what they're owed to settle the account.

Negative Impact

With a debt management plan, you have nothing to worry about when it comes to the negative impact on your credit score. According to Bankrate.com, "Since 1999, FICO has ignored any credit-counseling information when calculating a consumer's credit score."

Debt settlement programs tend to have more of a negative impact on your credit score. Settling a debt could potentially lower your credit score by as much as 125 points if you had a high score to begin with.

Benefits

By entering a debt management plan, you could potentially help your credit over the long term. If you were at risk of missing payments on your accounts, the debt management plan could help you maintain a higher score. The effect of missing payments can be devastating to your credit file; a debt management plan helps ensure that you're able make your payments. These programs can also benefit you by giving you some flexibility in your monthly budget.

Considerations

When signing up with a debt reduction company, investigate the company thoroughly to make sure that it's legitimate. You could use the Better Business Bureau as a resource to see if there are any complaints against the company. If you sign up with a company that doesn't actually make your payments as agreed, it could end up hurting your credit score. This makes it essential to choose only companies that have a decent reputation in the industry.

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Can I Request Debt Validation After a Wage Garnishment Has Started?

Debt validation is the process of proving that you owe money to a creditor or debt collector. You can request debt validation if you believe a creditor or collector is trying to claim money you do not owe. However, once a creditor or debt collector gets a wage garnishment order against you, debt validation usually isn't an option.

The Fair Debt Collection Practices Act

The Fair Debt Collection Practices Act is a law that dictates the conditions under which debts may be collected. It is designed to provide some protection to borrowers. Under this regulation, a person or company that believes you owe a debt you aren't paying has to sue you to get a garnishment order and deduct money from your wages. The regulation further states that you have 30 days from the date you are notified of the intent to sue to request a debt validation. After the expiration of the 30-day period, you give up your right to request a validation. This regulation applies only to third-party collectors, so you don't have the right to request validation from an original creditor.

What Garnishment Means

A creditor or collection agency cannot get a garnishment order until it formally sues you in court. The judge decides whether the creditor or collection agency has sufficient evidence that you owe the debt at that time. If the judge finds in the creditor's or agency's favor, the creditor or agency may ask the court to issue a garnishment order. Thus, if you already have received a garnishment order, it means the collection agency or creditor already has been able to show sufficient cause for the garnishment, thus validating the debt.

Appealing Garnishment Orders

If a creditor or collection agency has procured a garnishment order against you, but you still feel you don't owe the debt, you have the right to appeal the judge's decision. However, this can be time-consuming. Furthermore, the creditor or agency does not have to stop garnishing your wages until the courts issue a cessation order. If a judge eventually overturns the garnishment order, you may be able to get some or all of the garnished funds back.

The Bottom Line

In general, if your wages already are being garnished, you do not have the right to request debt validation. This is why it is so important for you to ask for the validation immediately after your creditor or collection agency threatens to sue. However, you always have the right to appeal the lawsuit decision that led to the garnishment, so you shouldn't necessarily give up if you truly believe you are being garnished without cause.

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Are IRAs in Illinois Exempt From Creditors?

If you owe money to creditors and you stop making payments, you may wonder which of your assets they can seize. Creditors can take possession of most types of property. Specific regulations pertaining to creditors differ by state, but, in Illinois, the money contained in your individual retirement account (IRA) typically is exempt from seizure for unpaid debt.

About IRAs

An IRA is an account an individual uses to save money for retirement. Other retirement plans, such as 401k plans, may receive funds from employee and employer contributors. However, an IRA receives funds only from the owner. The owner can deposit as much as he wants into his IRA up to a set maximum. Contributions to a traditional IRA typically are tax-deductible. When the contributor withdraws money from the account in retirement, the government taxes it as income.

Illinois Law

If an Illinois court issues a judgment against you, a creditor can take possession of any of your non-exempt property, including real property, personal property, wages, vehicles and bank accounts. Most judgments last for seven years. Illinois doesn't allow creditors to take money from a debtor's exempt property, which includes life insurance, veteran's benefits, Social Security benefits, alimony, unemployment benefits, 401k plans, pension plans and IRAs.

Bankruptcy

The federal government considers IRAs exempt from bankruptcy. However, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 allows states to either use federal exemption guidelines for bankruptcy or create their own list of exemptions. At the time of publication, Illinois has chosen to use its own list of exemptions, but Illinois includes IRAs on this list and provides partial or full protection for IRAs during bankruptcy.

Inheritance

Though Illinois won't allow creditors to take possession of funds from an IRA you created, it may allow them to take funds from an IRA you inherited. Some states, including Minnesota, have determined that inherited IRAs deserve the same protection as regular IRAs. However, other states, including Texas and Illinois, have concluded that inherited IRAs are not exempt from creditors or bankruptcy proceedings. In these states, creditors can seize inherited IRAs.

Considerations

Though IRAs are exempt from garnishment from most creditors, the Internal Revenue Service can seize them for unpaid taxes. IRAs are also subject to garnishment for family maintenance payments, such as alimony or child support.

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How Much Can a Creditor Collect for Garnishment in Pennsylvania?

Garnishment provides creditors with a collection method that does not depend on debtors submitting voluntary payments. Through garnishment, a creditor seizes funds from your wages or bank balances in order to satisfy your delinquent debt. Although federal regulations exist governing both wage and bank garnishment, Pennsylvania state law places even greater restrictions on creditors using this debt recovery method.

Wage Garnishment

Through wage garnishment, your creditor petitions the court to issue a writ of garnishment that the creditor serves to your employer. Your employer must then withhold a portion of your unpaid wages and pay that portion directly to your creditor.

Pennsylvania only grants certain creditors permission to garnish your wages. If you owe back child support, alimony, student loans, taxes, criminal restitution or unpaid rent, your creditor can garnish your wages. If, however, you owe an unpaid credit card debt, hospital debt or collection account, your creditor cannot use garnishment as its collection tool of choice.

Bank Account Seizure

Although wage garnishment is only available to certain creditors, any creditor may garnish your bank account balances. Like wage garnishment, bank account garnishment requires that the creditor have a writ of garnishment against you which it can only obtain via a lawsuit.

Pennsylvania law may prohibit direct wage garnishment for private debts, such as credit debts, but it does not prohibit creditors from garnishing your wages from your bank accounts after you deposit your paychecks. A creditor that serves a garnishment order on your bank is legally entitled to all nonexempt funds within the account.

Garnishment Exemptions

Your "take-home pay," or the amount left after taxes and other federal and state deductions, constitutes your disposable income under federal garnishment law. Those creditors who are permitted to garnish your wages may do so provided they garnish no more than 25 percent of your disposable income or the amount by which your weekly pay exceeds the current minimum wage by 30. If you owe back child support or taxes, your creditor may garnish up to 50 percent of your disposable earnings.

Bank account garnishment provides you with additional protection. Provided you file an exemption claim with your bank upon receiving notification of the impending garnishment, your creditor cannot seize your Social Security, retirement pension, alimony, child support or unemployment.

Collection Limitations

Rather than collecting debt directly, private creditors often sell their overdue accounts to collection agencies. The Fair Debt Collection Practices Act governs the actions any third-party creditor can legally take when recovering debt. The FDCPA notes that it is illegal for a debt collector to threaten you with wage garnishment if the company cannot legally garnish your wages. Should this occur, you have the right to sue the collection agency for violating your consumer rights under the FDCPA.

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Advice About Getting Out of Debt

Although the process of getting out of debt is not necessarily fun because it requires that you live within your means, the reward is well worth the effort. When you are debt-free, you can use your income in the ways you want instead of being tied to your debt payments. Keep your eyes on the goal as you develop a plan to get out of debt.

Face the Debts

Being in denial about how much you really owe is not going to help you get in a position to get out of debt. Face your debts by making a list of every debt you have, from the mortgage down to the money you borrowed from a friend to buy a candy bar. For each debt, list the total amount you owe, the interest rate and the minimum monthly payment. Add up the minimum monthly payments on all the debts to find your total monthly debt payment.

Develop a Realistic Budget

To get out of debt, you need to stop spending more money than you earn. In addition, you have to factor your debt payments into your spending. Create a realistic budget of how you plan to spend your take-home pay each month. Start with the necessities, including your housing, utilities, transportation, insurance, groceries and total monthly debt payment. Allocate the rest of the money toward luxury spending, such as new clothes, eating out and buying gifts for people. Stay within your budget by setting aside cash out of each paycheck and not spending any more money after you run out of cash.

Make Extra Payments

As you pay down your debt, your minimum payments will decrease. Use the extra money you set aside as your total monthly debt payment to make extra payments toward your debt with the highest interest rate. In addition, use unexpected bonuses from work and your tax refund check to pay off debt rather than making unnecessary purchases. If you have time, get a part-time job or sell belongings you don't need to earn extra money to put toward debt payments. Making extra payments helps you get out of debt faster than you would just making the minimum payment. Plus, it saves you money on finance charges.

Seek Support

If you know somebody else who is struggling with debt, support each other in the process. Your friend can also keep you accountable for sticking to your plan and not getting deeper into debt. Meet regularly to share the tricks you are learning to cut your expenses so you can make more monthly payments. You can even start a friendly competition to see who can save the most money each month to put toward getting out of debt.

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How to Get Rid of a Default Judgment

Your finances can be severely affected if you have a default judgment filed against you. A simplistic definition of a default judgment is a judgment that has been issued by a court of law against a party who failed to either appear, take a pleading or follow other procedures. A default judgment will remain on your credit report for a minimum of 7 years; however. if the state that the judgment was filed in mandates a longer period of time, each renewal filed in the courts will be reflected on your credit reports. A motion to vacate, or void, the default judgment will need to be filed to attempt removal of the judgment against you.

Instructions

1

Research the court procedures, also known as "civil procedure" for your state. You will need this information in order to create your motion to vacate the default judgment. Not only will you need to know what to say in your motion, but you will need to know the process for creating it, filing it and having your case heard before a judge.

2

Search online for the website of the county court where your judgment was filed. Many courts have information about civil procedure rules that are specific to their court or county. Look for a "self help" section of the website, or contact the court by phone to see if there is a template that you can use for your motion. Include within the body of the document the reasons why you believe the judgment should be canceled, providing documentation to substantiate your claims.

3

File the motion with the court according to the court's procedures and serve certified copies of the motion on the plaintiff. You must file a notice of service with the courts to prove that the other party was notified of the motion and had time (normally 35 days) to prepare their answer to your motion. Pay the necessary fees and file your motion to vacate judgment. Check with the clerk to make sure you have provided all of the necessary paperwork.

4

Go to court on the day of the hearing. Dress well and be prepared to offer evidence as to why the default judgment should be vacated. Present an argument that is clear, has merit and is based upon a substantial issue such as fraud, newly discovered evidence, an error or satisfaction of the judgment, to better your odds at winning the case.

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How to Justify a Negative Credit Report to an Employer

A negative credit report can affect more than just your personal financial portfolio. It can also cost you a job opportunity, particularly if your job of choice places a high value on fiscal responsibility. However, because your credit report is personal in nature, there may be ways in which you can explain your situation and convince a potential employer to take a chance on you regardless of your financial history.

Instructions

1

Read over your credit report before your sit-down with an employer. It is important to be educated about negative items so that you can prepare an explanation. Moreover, you don't want to appear uneducated about your credit history or become visibly surprised during a meeting with your employer about your credit report. This may not only negate any explanation you give about your credit, but your ignorance may mar your image professionally.

2

Explain the circumstances surrounding the negative items to your employer. Be honest and forthcoming so that he understands that you are not wildly irresponsible with your finances at this point in your life, even if you once were. If you want to seem upfront, explain each item one at a time. Not only will your explanations help put your employer at ease, but they will also make it look as though you cared enough to take the time to research each item for your employer.

3

Provide your employer with your plans for cleaning up your credit report. In most instances, as long as you are taking steps to be more fiscally responsible and get on the road to better credit, your employer will feel more confident in you, despite the negative marks against your credit. You don't have to be overly specific; just giving some key details on your plans should suffice.

4

Reinforce your ability to do your job effectively. Stress to your employer your job skills and ability to carry on with your responsibilities, regardless of your personal financial situation. Doing so takes the focus off your credit issues and puts it back on your value as an employee.

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How Long to Amortize a Loan?

The period of time over which a borrower pays back a loan is known as the amortization period. The amortization period is the amount of time it will take to repay the loan by making payments of principal (which reduces the balance) and interest (which the bank charges to lend the money). Amortization depends on the type and terms of the loan.

Mortgages

A mortgage loan provides financing for the purchase or refinance of real estate. Mortgages provide the most flexibility for amortization. The most common mortgage amortization terms offered by lenders are 10, 15, 20, 25 and 30 years. Some lenders have even been known to go up to 40 years. The interest rate is higher for longer amortization periods, but the payments are lower.

Term Loans

Term loans finance the purchase or maintenance of non-real estate assets, such as equipment. Since term loans are secured by depreciating assets, the terms are usually only as long as the useful life of the asset. Typical amortization periods for term loans are 36, 60, 84 and 120 months. 120-month amortization periods are less common, as the useful life of most equipment rarely exceeds seven years.

Auto Loans

Auto loans finance the purchase of a vehicle. Amortization periods usually run a maximum of 84 months. Since automobiles are equipment, the useful life doesn't run more than seven years. Even 84-month amortization periods are less common. Typical auto loans are amortized between 36 and 60 months.

Personal Loans

Personal loans are a bit more sporadic with amortization periods. A personal loan is an unsecured loan without a specific purpose. Interest rates are high, often exceeding 10 percent. Since the debt is unsecured, amortization periods don't run as long. Sixty to 84 months is the typical amortization period on a personal loan.

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Complaints About Debt Consolidation

According to the U.S. Federal Reserve, outstanding consumer debt totaled out at $2.55 trillion in 2009. Debt consolidation agencies work to assist consumers by consolidating total debt owed. Consumer complaints made to state and local regulatory agencies point to fraudulent business practices and rampant money mismanagement within the debt consolidation industry.

Misrepresentation

Debt consolidation services attempt to reduce consumer debt by coordinating and renegotiating payments plans with creditors on behalf of consumers. Many agencies operate under a "not-for-profit" status, which gives them special tax considerations under the law. According to Bankrate, a financial news and resource site, investigations carried out by federal agencies and regulating committees in 2004 found as many as 50 different debt consolidation agencies engaging in certain business practices that place their tax-exempt status in question. In effect, the less reputable agencies were found to earn substantial profits through unscrupulous money management practices. The monies in question came from payment plan transactions carried out by debt consolidation agencies on behalf of their customers.

High Fees

Debt consolidation agencies allow consumers to make one monthly payment to them on the assumption that the payment will be portioned out to creditors based on an agreed upon payment plan. In exchange for their service, agencies charge administrative fees that vary depending on contract terms. According to Bankrate, some companies are reported to charge fees as high as 3 percent of the consumer's debt while other agencies kept the first month's payment as the service fee depending on the terms stated in the contract. About 25 states have licensing requirements for debt consolidation agencies. However, these agencies are not held to these requirements because of their not-for-profit status.

Inactive Payment Plans

The payment plan arrangements made by a debt consolidation agency typically last anywhere from three to four years. A legitimate payment plan would include lower interest rate payments and eliminate late fee charges, all of which is arranged between the agency and the creditors. Creditors, in turn, give the agency a percentage of these payments back, which is meant to cover the agency's operating costs. According to Bankrate, consumer complaints regarding inactive payment plans resulted in the Massachusetts attorney general's office filing suit against a debt consolidation agency in 2004 for mishandling consumer monies and charging high fees. In effect, the agency failed to pay its clients' creditors, which resulted in additional late fees and penalty charges for those affected. The Massachusetts case is one of many class action suits brought against debt consolidation agencies.

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How Do Creditors Find Your Bank Account?

Many states grant creditors the right to garnish bank accounts following a debt collection lawsuit. In order for your creditor to garnish funds held by your bank, however, it must know where you bank. Creditors have various methods for tracking down consumer bank accounts.

Facts

A creditor or collection agency doesn't have to have your exact bank account information to freeze and garnish funds from your bank. It merely needs to know the name of your financial institution. Once the creditor knows where you bank, it can send a copy of the court judgment, along with a writ of garnishment, to the bank. The bank will then freeze the appropriate accounts.

Features

Unless you previously paid the creditor using only cash or money orders, the creditor probably already has a record of where you bank. A creditor can merely review your past checks or bank drafts to obtain the name of your bank and serve the garnishment order. If a creditor knows where you live, it may also call the banks in your area seeking information about you.

Considerations

If you've changed banks or the creditor has no information about where you hold your accounts, it may hire a skip tracer to locate your bank. Skip tracers are individuals whose specialty it is to track down debtors and debtors' personal information for creditors and collection agencies.

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Tips for How to Build Credit Fast

A number of factors go into evaluating your credit worthiness. Many of these factors are affected by your length of credit history, or how long you have had credit. The more responsible you are with your credit, and the longer your history of responsible borrowing behavior, the better your credit will be. While there are a few tricks you can employ to help you build credit fast, the best thing you can do is learn how credit scores are determined and behave appropriately.

How Credit Scores Are Determined

Avoid behavior that will penalize you; practice behavior you are awarded for. Your FICO score is determined based on a formula by a company called the Fair Isaac Corp. In determining your score, five factors are evaluated. The first is your payment history--your record of paying your debt. A long history of on-time payments raises this component, which makes up 35 percent of your total credit score. A payment that is 30 days, 60 days or 90 days late lowers this score. Settling debt for less than you owe or selling your home in a short sale also lowers this component. Bankruptcy and foreclosure have the most detrimental effect on your payment history, and stay on your credit report for up to 10 years. The second factor is your borrowing behavior. This makes up 30 percent of your score. When looking at your borrowing behavior, creditors look at how much of your available credit you are using. You are penalized for maxing out your credit cards, and charging up to the maximum amount available. Having a low debt-to-credit ratio (keeping small balances on cards with high limtis) is rewarded. Fifteen percent of your score is made up of the length of your credit history--the longer you have had credit, the higher this score will be. Ten percent of your score is made up of the different types of credit you have--lenders like to see a mix of different types of debt: car loans, mortgages and unsecured debt like credit cards and personal loans. The final 10 percent is determined by how many credit inquiries you have. Each time you open a new account, creditors request, or "pull," your credit report, and this is listed as an inquiry. Too many inquiries can bring down your score because lenders believe that you may be borrowing more than you can pay back.

Apply Your Knowledge

Build your credit quickly by identifying the factors that are keeping your credit score low, and work to resolve those factors. If you have a history of late payments, for example, call your creditors and see if they would be willing to work with you to remove one or several of these late payments from your credit report. Occasionally, creditors will do this as a good-faith gesture to a customer who has improved his behavior and is no longer making late payments. If you owe a lot of money on your credit cards, paying down your debt will help improve your debt-to-credit ratio and raise your score. Call lenders and ask if they will raise your credit limit, but only if they are willing to do it without pulling your credit report. If you do not have credit at all, you should start slowly applying for credit cards and/or loans, charging a small amount each month and paying the balance in full and on time. In time, this responsible behavior will help you build your credit.

Become an Authorized Signer

The single fastest way for anyone to build credit, regardless of her situation, is to become an authorized signer on an account that has positive traits. When you become on authorized signer on someone else's credit card, the data from that credit card is listed on your credit report. This can help your score in a number of ways. If the credit card that you are listed as an authorized signer on is an old account, having that account show up on your report can make your credit history appear longer and improve the age-of-credit component of your score (15 percent). If the credit card has a long history of on-time payments, this can improve your payment history (35 percent). If the credit card has a high credit limit and a low balance, this can improve your debt-to-credit ratio (30 percent). All of these factors can help bring your credit score up quickly. No inquiry is required to become an authorized signer, unlike when you open new credit cards of your own or when you cosign a loan. So you get all of the benefits of this new account, without an inquiry that might lower your score.

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