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Sunday, February 28, 2010

How to Settle a Credit Card Lawsuit

How to Settle a Credit Card Lawsuit

Have you ever been sued by a credit card company and wondered how to settle a credit card lawsuit? Due to the current economic recession and loss of jobs, many consumers find themselves having to choose between buying groceries and paying credit card bills. As a result, individuals who once had perfect credit now find themselves with a growing pile of unpaid credit card debt. Finding yourself in such situation can be intimidating, overwhelming and stressful. However, you can settle a credit card lawsuit without going to court. Here's how.



    Review the document and make sure you understand all the charges from the credit card company.


    Take note of the unpaid balance. The balance stated in the lawsuit will generally be higher than the balance on your last credit card statement.


    Contact the attorney, in person if possible. Let him know that you are aware that you have an unpaid credit card balance, but you disagree with the amount reflected in the lawsuit. Ask him to itemize all the charges and explain to you how he arrived at that particular amount.


    Make an offer. Inform the attorney that you are willing to settle the credit card lawsuit, but you can not pay the full amount reflected in the lawsuit. For example, if the lawsuit is for $4,000, offer to pay $1,000.


    Get everything in writing. The attorney must agree to accept the payment in full settlement. Ask that the credit card company report the debt as paid in full to the credit bureaus.

What Happens If You Don't Pay Charged Off Debt?

What Happens If You Don't Pay Charged Off Debt?

Although a creditor gives up on trying to collect debt when he initiates a charge-off, this does not absolve the debtor from paying it back. What action the creditor takes after charging-off a debt depends mostly on the size of the debt. Either way, a charge-off will probably do damage to your future financial goals.


    Creditors must charge-off debt to deduct it on their taxes and to complete the transactions in their accounting books. Once charged-off, it will probably go to a collections agency within the company or to a third-party debt buyer who will attempt to get payment. For large accounts, usually over $1,500, the creditor may sue you to obtain a judgment that could include wage garnishment.

Effects on Credit

    The FICO score severely punishes consumers with collections accounts because it shows an unwillingness or inability to pay off a commitment. Judgments against an individual tend to bring scores down between 85 and 160 points, according to CNN. The impact of a collections account expands when credit scores climb. This will make it harder to obtain credit in the future or cause lenders to charge you higher interest rates.

Time Frame

    Federal law requires credit reporting agencies to remove a collections account from your record after seven years from the date of the charge-off. Since most lenders charge-off an account after 180 days of no payment, this is seven and a half years for most people. Collections agencies cannot report a date of delinquency after the charge-off date. You can dispute an item with the credit bureaus if you see an incorrect date.


    You can remove a collections account from your record only by negotiating with the lender, not a third-party. Creditors may claim the account delinquency as an error in return for a partial or complete payment.

    Paying a charge-off does not improve your credit rating, but lenders like to see paid-off accounts as a sign of good faith. Also, you won't owe on the debt after the statute of limitations passes. Each state has its own laws on when debts become noncollectable. When a creditor or collector sues you after the statute of limitations, you can tell the judge you refuse to pay because the debt is too old. You will renew the statute of limitations by admitting to the debt or repaying some of it -- so make sure to avoid saying anything other than you absolve responsibility for the debt once the statute of limitations passes.

States in Which Wages Can Not Be Garnished

States in Which Wages Can Not Be Garnished

One of the methods available to a creditor in pursuing an unpaid debt is to file a civil lawsuit against the debtor. If a creditor wins a judgment against you, that creditor can potentially take action against you to garnish your wages. This means that a percentage of each paycheck is paid directly to your creditor to satisfy the debt. At time of publication, only four states do not allow garnishment of wages resulting from a creditor judgment.


    Under Title 3, Section 63.004 of the Texas Civil Practice and Remedies Code, current wages are 100 percent exempt from garnishment resulting from a creditor judgment. State law permits wage garnishment for any child support owed. Under federal law, your wages may be garnished if you owe federal student loans, alimony or federal taxes. Income that is not considered a wage is also subject to garnishment, with the exception of Social Security benefits. For example, if you receive regular income from an investment, such as a rental property, a creditor can legally pursue these funds for garnishment.


    Under Pennsylvania law, credit card companies and collection agencies are prohibited from pursuing wage garnishment to satisfy a judgment. State law does permit wage garnishment to recoup certain other types of unpaid debt. At time of publication, your wages can be garnished in Pennsylvania for unpaid child support, alimony or other obligations relating to a divorce decree; state-issued student loans; back rent owed on a residential lease; restitution owed resulting from a criminal conviction; and certain types of taxes. Garnishment for federal student loans or federal taxes is also permitted.

North Carolina

    North Carolina does not permit garnishment of wages with the exception of three specific circumstances. Under state law, your wages may be garnished to enforce an order for child support, to recover unpaid taxes or to enforce a judgment for unpaid medical services provided by a public hospital. The North Carolina Wage and Hour Act does permit the enforcement of wage garnishment orders issued in other states if those orders are compliant with that state's garnishment law.

South Carolina

    Under Section 37-5-104 of the South Carolina Consumer Protection Code, wage garnishment is not allowed to satisfy judgments for debts arising from a consumer credit sale, a consumer lease, a consumer loan or a consumer rental-purchase agreement. Wage garnishment is still available to satisfy obligations for state or federal taxes, federal student loans, child support or spousal support.


    If a wage garnishment is enforced against you under federal law, the weekly garnishment amount is limited to 25 percent of your net earnings. If a creditor is able to obtain a judgment against you in one of these four states, it may choose to pursue a bank account garnishment or place a lien on your property to force repayment of the debt.

Saturday, February 27, 2010

How to Handle Old Debt

Once a year, it's a good idea to get a copy of your credit report to review the status. Once you have a copy, you may find some old debts that you had forgotten. Some old debt needs to be handled in a specific manner. The age of the debt will determine what action you should take, if any. When you clean up old debt, you will be able to manage your credit file more effectively.



    Check for any debt that you have had for 7 years or longer. If you have debt that meets this criteria, you may choose to do nothing. A debt this old should not remain on your credit report. If it does, you may want to dispute it by writing to the credit reporting agency that lists it. They should be able to get the debt deleted from your credit file. Any debt that you have not paid in 7 years should fall from your credit file automatically.


    Find out the statute of limitations on your debt. Your old debt may have passed the statute of limitations, which varies according to each state. Generally, it can range from 2 years to 15 years.

    Also, note that there are four types of debt: oral, contract, promissory and open-ended accounts. Each type of debt may have a different statute of limitations. When the statute of limitations has passed, a debt collector is not allowed to sue you for the debt. They can continue to send past due notices and make phone calls but legal action is not allowed.

    Be aware, however, that even though the statute of limitations has passed, some debt collectors will try to bring legal action against you anyway. If you receive a summons to appear in court, you must go if you want to win your case. Once you are in court, you just need to show the judge or referee that the statute of limitations has passed. If you fail to attend court, the creditor will receive a default judgment against you even though the statute of limitations has passed.


    Review your credit report. Make a note that even though the statute of limitations has passed, the debt could still be on your credit report if the 7-year time frame has not passed. If you are about to purchase a home, the mortgage lender will request that you pay off this debt, even though the statute of limitations has passed. The statute of limitations does not cancel the debt; it merely limits the actions a creditor may take against you in collecting the debt.


    Settle your old debt. If you need to pay an old debt, you may be able to settle for a lesser amount. A settlement is when you and the creditor or collection agency agree to pay an amount that is less than the original debt. A settlement can range from 20 to 75 percent of your outstanding balance, according to Smart Money.


    Determine if there are any judgments or collection accounts on your file. Any judgments and collection accounts should also fall from your credit report after 7 years. If they are still on your account, you can dispute them as well.


    Pay your debts. You may just decide that you want to pay your old debt, no matter how old it is. If this is the case, you may have to call the original creditor. They should be able to direct you to the collection agency that is handling your account.

Organizations That Help With Bills

Organizations That Help With Bills

Perhaps you thought about bankruptcy or tapping your friends and family for help when you were beset with financial obligations beyond your reach. Maybe it was because you lost your job or had an illness that resulted in bills that were sky-high. Few people realize that there are organizations that can help you in your time of financial need. And if one organization cannot help you, maybe it can steer you to one that can.

American Red Cross

    If you need help with your electric or heating bills, a local branch office of American Red Cross is a place where you can turn. In addition to helping out with those bills, if you qualify, the Red Cross in your community provides families disaster relief, safety and health classes, and many other services. The money used by the Red Cross for help in paying bills comes from the United Way in your community.

    American Red Cross National Headquarters
    2025 E Street, NW
    Washington, DC 20006

Salvation Army

    The Family Emergency Services division of the Salvation Army also provides help with utility bills, as well as providing for basic human needs. You can contact to local office of Salvation Army and it will tell you how to go about receiving help. In essence, The Salvation Army assists individuals who have no other place to turn. Of particular importance is the counseling you will receive if you are about to be evicted from your home.

    The Salvation Army National Headquarters
    615 Slaters Lane
    P.O. Box 269
    Alexandria, VA 22313

Feeding America

    Feeding America operates a network of more than 200 food banks around the country, and it distributes food and groceries to almost 10 percent of Americans every year. Among those being served by Feeding America are 3 million senior citizens and 9 million children.

    National Office:
    Feeding America
    35 East Wacker Drive, Suite 2000
    Chicago, IL 60601

Consumer Credit Counseling Services (CCCS)

    When you are deep in debt and and are contemplating bankruptcy, consider calling on CCCS , a nonprofit organization that can help those people with serious money problems. Each of its offices is a member of the Better Business Bureau as well as the National Foundation for Credit Counseling. The organization has helped more than 1 million people reduce stress by helping them pay back what they owe and ultimately, regain their financial footing.

    Consumer Credit Counseling Services
    1300 Hampton Avenue
    St. Louis, MO 63139

1-800-Charity Cars

    This is the largest of its kind in the country and it provides cars to families that are down on their luck but willing to become self-sufficient. Each car is repaired so that it is safe to drive, and the organization also gives monetary assistance, if needed.

    Charity Cars Inc.
    750 Miami Springs Drive
    Longwood, Florida 32779

Debt Settlement Strategies

Debt settlement involves settling your debt for less than what you owe. There are many debt settlement companies and organizations that promise to settle your debt for pennies on the dollar. While it is possible to find a reliable debt settlement company, and possible to settle debt for less than what you owe, you generally can negotiate with your creditors without the help of a debt settlement company. And in either situation, you will still end up paying at least a portion of your debt back.

Select the Opportune Time to Settle

    Most creditors will not settle your debts until you have fallen behind on your payments. There is simply no reason for a creditor to accept an offer of less than what you owe while you are still current, even if you are struggling. While you might be able to speak with a creditor and arrange a payment plan that lowers your monthly payments and extends the amount of time you have to pay your debt, this is not settling debt for less and will end up costing you more in interest in the long run. Creditors will only settle debt for less if they fear that the debt is going to go to collections, because when a debt goes to collections the creditor is only paid a very small fraction of what the debt is worth. Most debts are written off or sent to collections after 6 months. So the opportune time to settle is when you are more than 30 days late on a payment, but before six months has passed. During this five-month window of time, you should be saving the money you would normally send for debt payments toward a lump sum settlement. Be aware that creditors will become increasingly persistent about collecting money during this time, so you should expect ample calls from collectors.

Get Everything In Writing

    Although it is tempting to try to negotiate with creditors on the phone, especially when they are calling you often, this is not advisable. You want to have everything, especially any settlement offers, in writing. Communicate with your creditors by registered letter, and ensure that any letters that are sent to you are on official company letterhead and/or signed by someone with decision-making authority in the credit card company. When negotiating, you should generally make an offer to pay approximately 30 to 50 percent of what you owe. Creditors may counter that offer, and you can negotiate back and forth with creditors until you arrive at an amount that is workable for you. Before you send any money, make sure you have a document detailing the full terms of the settlement, including how much you are to pay, when you are going to pay it and for which debts it will constitute payment in full.

Understand the Law(s)

    During the time period when collectors are calling you, you need to understand the Fair Debt Collection Laws. Creditors cannot threaten you, call you before 8 am or after 9 pm, make false claims that they will arrest you or that they are an attorney or send you documents that look like legal papers if they aren't really legal papers. During the period of time when you are negotiating with your creditors, you should remind debt collectors of these rules and if they violate them, keep detailed records as you can sue debt collectors for violating any of these rules.

    You also need to understand that settling debt will have an adverse impact on your credit score. Your payment history, which makes up 35 percent of your credit score, will be affected during the months of non-payment. In addition, the debt will usually show as "settled" on your credit report instead of "paid in full," and this also has an adverse impact on your credit rating.

    Finally, you may be taxed on the forgiven portion of your debt as income. This means that a 1099C will come in the mail, you will have to file these taxes with the IRS, and you will have to pay taxes on the forgiven amount of the debt.

What Are Some Debt Cures That Work?

What Are Some Debt Cures That Work?

When looking for debt cures that work, turn your eyes from the debt counselors who peddle their services on television. For a fee, they might help you find some measure of debt relief, but before turning over more money to get out of debt, there are steps you can take on your own to help bring down your debt and improve your credit score.

Pay Higher Interest Debts First

    If you are confused about which debts to pay down, start with the higher interest debts first, then work your way down. Even if your higher interest debts have smaller balances, these balances will grow faster than your other debts because of interest. Pay down (or pay off completely) those debts first to avoid paying unnecessary amounts of interest down the road.

Pay More Than the Minimum Payment

    Just because credit card companies calculate a minimum payment for you, that doesn't mean it helps you to only pay that amount. If possible, try paying double, or even triple the amount. This will help mitigate future purchases on credit you use, and it also helps you pay off credit balances you don't use. Most of a minimum payment goes to interest. If you want to pay down your debt, you have to reduce the balances.

Consolidate Debts Yourself

    Instead of consolidating your debts through bankruptcy, which can cripple your credit rating for at least seven years, try consolidating your debts yourself. Move higher interest credit card balances to lower interest credit cards. Most credit card issuers charge a small fee to transfer balances, but this is a small price to pay for cutting 5 percent to 10 percent interest off of your balances. If a family member is willing to loan you a certain amount of money at low or no interest, jump on this offer and use this loan to pay off your higher interest debts.

Pay-As-You-Go System

    Adopting a pay-as-you-go system, or only buying things you can afford to purchase with cash, can prevent plunging you into further debt. It takes discipline, but once you decide what you can afford per month without using credit, you can create a healthful lifestyle without the allure of unneeded credit. Once your debts are paid off, you will have already adopted a philosophy that will keep you from repeating the cycle of debt that ensnared you in the first place.

Acquire Collateral

    If your debt-to-cash ratio is too high, but you still have some cash available, you might want to try to acquire some collateral. Try buying a house or car by way of auctions, which often have good homes or cars available for a small opening bid. These purchases will give you collateral that you can use to try to convince a bank to help consolidate your debts. You might be able to negotiate a lower interest rate loan than your current debts, and use your loan to pay off older and higher interest loans or credit cards.

Thursday, February 25, 2010

Does Using a Debt Settlement Company Ruin My Credit?

Does Using a Debt Settlement Company Ruin My Credit?

While debt settlement companies may make you lots of promises, such as cutting your debt by as much as half, you must use caution when dealing with such a company. Often, the way that debt settlement companies negotiate with creditors has a significant negative impact on your credit score. In addition, you may end up with even more debt than you started with.


    Debt settlement is different from debt consolidation or debt management plans through credit counseling programs. The terms "debt settlement" and "debt negotiation" are used interchangeably. Where credit counseling companies work with clients to create a healthier financial plan overall, debt settlement companies focus only on cutting your existing debt, usually by withholding your payments from the creditors until they agree to reduce your payoff balance.

Damage to Accounts

    As a result of the way that debt settlement companies conduct their business, you are risking your credit score by agreeing to work with one. Even if you're making payments to the settlement company, your creditors aren't seeing any of that money, and as a result your credit score will plummet. One of the top factors in calculating your credit score is your history of making on-time payments. Once you start paying the settlement company rather than your creditors, you likely will be viewed as having defaulted on payments.

Further Debt

    When you make payments to the settlement company rather than your creditor, you may acquire hefty late fees and higher interest rates. According to the Federal Trade Commission (FTC), these fees may cause your debt to double or even triple. Additionally, most debt settlement companies charge high fees to establish an account, as well as monthly service fees and a final fee for a percentage of the money the service "saved" you. This additional debt will weigh heavily on your credit score.


    Working with a credit counseling company is far less risky than working with a debt settlement company, so consider getting in touch with a credit counselor first. If you are having difficulty making payments or have already defaulted on your debt, your credit counselor may recommend a debt management plan (DMP). Under a DMP, a credit counselor negotiates lower interest rates and/or payoff balances for your debt. The counselor then gives you a clear timeline, by the end of which your debt will be paid off. However, these negotiations are made while you continue to pay your creditors, and you begin making payments to the counseling company only after the agreements are made. The credit counseling company then pays your creditors. Although credit counseling companies are less risky, the FTC recommends checking with the National Foundation for Credit Counseling to ensure that you are working with a reputable organization (see Resource).

What Happens If a Collection Agency Refuses My Payment?

Collection agencies work as a middleman for a larger company, or as an independent agency. When you owe a bill to a hospital, credit card company or any other creditor, the company has the right to use a collection agency to seek payment. The agencies may also buy your debt and seek payment from you to make back its money. Collection agencies have the right to refuse partial payment and seek the full amount due.

Legal Rights

    According to Finance House, a collection agency has the legal right to refuse a payment from you, if you pay less than the total amount due. The agency does have the right to accept a smaller amount than the total debt. For example, the agency may agree to accept $500 for a hospital bill of $1,000. When you work out a smaller amount, you typically must send the new amount due within a set period of time, such as 10 days.


    Paying only a fraction of the bill does not mean the collection agency must accept the payment. Anytime you send less than the total amount due, the agency has the right to refuse the partial payment and refund it to your account. In some instances, the agency may accept the payment as a good faith effort that you will pay the total amount due.


    A collection agency will continue to contact you for payment of a debt, unless the debt is paid in full. If the first agency cannot get a payment from you, then it might sell your debt to another party and the cycle begins again. The collection agency may continue to phone you, contact you by email or cell phone if you provided that information and send letters. The agency may even threaten to take you to court. If it is successful in court, the agency could garnish your wages to collect on the debt.


    If you work out a payment plan or agree to pay a fraction of the debt, then make sure that the collection agency sends you a letter in writing that lays out the details of the new agreement. In the future, the agency must follow the guidelines set forth in the letter. The agency cannot refuse a payment if you have an agreement and you send the amount detailed in that agreement.

Wednesday, February 24, 2010

Am I Responsible for My Wife's Debt During a Divorce?

Am I Responsible for My Wife's Debt During a Divorce?

Creditors really don't care how marital property and debt are divided in a divorce. They continue to hold both spouses responsible for repaying any debts charged to joint accounts. Unfortunately, how your spouse handles her finances can affect your credit standing long after the divorce. It only makes sense then to take the necessary steps to separate financially from your wife once you file for divorce.

Individual Accounts

    Your wife is responsible for paying off any charges she makes to an individual account in her name. The account will appear on her credit report. However, if you are an authorized user on that account, the account may appear on your credit report as well. In equitable distribution states, even if only one spouse incurs the debt, both spouses can be held jointly responsible for credit card debt that benefited the family as a whole. Yet the court often considers which spouse has the higher income when allocating marital debt. If you live in one of the nine community property states, you will be liable for a portion of any debts your wife incurred while the two of you were married. Whether you live in an equitable distribution or community property state, any debts that your spouse incurred individually before you got married are her sole responsibility.

Freezing Joint Accounts

    You have several options available to you when deciding what to do about credit accounts your spouse can access. If you and your spouse applied together for an account, both of you are obligated to repay the debt, even if your divorce agreement assigns specific debt obligations to each of you. However, if your spouse is simply listed as an authorized user on an account you opened, the credit card company will hold you responsible for any charges she makes. You can close an account unless it still has a balance. In that case, you can freeze the account to prevent your spouse from making any future charges. The drawback is that you won't be able to use the account either.

Transferring Debt

    Ask your spouse to transfer her portion of any debts charged to joint accounts to her own individual accounts. That way she will be responsible for paying what debt is hers. If she isn't willing to transfer some of the debt, keep all joint accounts current while the two of you are negotiating a divorce settlement. Pay all accounts on time, even if you only make the minimum payments due. Late payments can hurt your credit; so keep any joint accounts that will be your spouse's responsibility after the divorce current as well. It's better to make the payments yourself if you have to rather than have missed payments negatively impact your credit rating.

Negotiating Power

    In many cases, couples who are divorcing agree to divide their marital debts equally with each spouse responsible for paying off certain debts. However, if you earn more than your wife, you could offer to pay off more of the debts in exchange for receiving additional equity in the marital home or a retirement plan. When negotiating a divorce settlement, the assignment of marital assets and debts can get complicated and have long-term effects on your finances. Consider your options carefully.

Tuesday, February 23, 2010

How to Set Up a Payment Plan With Collection Agencies

How to Set Up a Payment Plan With Collection Agencies

Collection agencies do not simply threaten consumers; they may also work with a consumer to arrange a payment plan for a past-due amount. Creditors, after a certain point, hire collection agencies to attempt to collect money owed. Collection agencies charge creditors a fee which is typically a portion of the collected money. Setting up a payment plan with a collection agency begins with a person reviewing all debts he owes. This helps determine, in advance, how much of a payment he can afford.



    Determine a lump sum that is affordable, as well as a monthly payment. Review all debts and income to have a clear understanding of what amount of payment will work for you. If you enter into a payment plan that you cannot afford, you will likely default again on payment.


    Call the collection agency with your play for repayment. It is important to call the agency, or to answer its calls, to minimize the damage to your credit rating.


    Make an offer for a reasonable one-time lump sum amount. The agency may counter offer, so make the offer at a lower amount than what you actually can afford or want to pay.


    Suggest a monthly payment plan, if the agency does not agree to the lump sum. Explain to the agency the amount you can afford. The agency may counter your offer, so begin with a lower amount than what you can afford.


    Confirm the details of the arrangement. Ask the creditor when the payments will be due and if interest will be charged and at what rate. Find out the length of the payment plan and the date the debt is calculated to be paid off. The agency will likely issue a monthly statement.


    Request the terms in writing. Ask the agency to provide you with a written set of the terms. Review the terms to ensure their accuracy.

How Can I Get Rid of My Debt?

How Can I Get Rid of My Debt?

Getting rid of debt is something that many consumers are struggling to do. Debt elimination requires more than making sure you pay your bills. In order to get rid of your debt completely, you need to devise a plan and stick with it. Willpower and financial planning can help you to realize your goal of eventually eliminating debt.


    Budgeting your money requires you to list out your monthly obligations and expenses and compare them to your income. Prioritize your bills so that you pay the important payments, such as the mortgage, car payment and food, first. Then apply the excess money to paying off your debt. Arrange your debts in the order you want to pay them off. Apply any extra funds you have at the end of each month, including money freed up by paying off existing accounts, to the debts on your list, in the order you listed them. You can list your debts based on balances, interest rates or monthly payments. Staying within a budget means not incurring any new obligations until you have paid off existing accounts. Avoid new debt until you have addressed your existing situation.


    Debt consolidation is the process of creating a single payment to take care of all of your high-interest debt. You can do this by using a personal loan or a home equity loan. If your credit does not allow you to qualify for a unsecured personal loan, you do not have the collateral for a secured loan and you do not have the equity in your home for an equity loan, consult a debt consolidation service. Start out by talking to your bank or your accountant about consolidation, because they may offer the services you need.

Credit Counselor

    Some people do not have the ability to create budgets, manage their cash flow or talk to a debt consolidation representative. If you need professional assistance, talk to a credit counselor. A credit counselor will help you create a monthly budget and teach you how to pay your debt down with your own money. If you need to consolidate your debt to pay it off, the credit counselor can help you with that process as well.

Debt Negotiation

    In debt negotiation, you contact your creditors and negotiate a pay-off balance for your debt that is less than what you owe. The creditor closes your account, and you negotiate a monthly payment with your creditor to pay off the negotiated balance. Debt negotiation is one of the least reliable methods of getting rid of debt because creditors do not have to accept your offer. If you are current on your payments or less than three months behind, your creditors will more than likely not accept a reduced pay-off. However, if you prepare your argument in advance, approach the situation with professionalism and be prepared to compromise on your negotiated pay-offs, you have a chance to get rid of your debt by making monthly payments on negotiated pay-off amounts.

Monday, February 22, 2010

Dangers of Settling Your Debt

If you can't afford to pay off your entire debt, you may be able to negotiate a debt settlement. With debt settlement, your creditor agrees to allow you to pay off your entire debt with one lump sum payment that is less than the amount you owe. Occasionally the creditor may agree to a payment plan as well. You can choose to negotiate directly with your creditor, or you may hire the services of a debt settlement firm. The dangers of debt settlement include long-term credit ramifications and possible legal action.

Credit Ramifications

    In spite of some advertising claims, debt settlement is usually destructive to your credit. Many debt settlement firms suggest that entering into a payment plan is a good alternative to bankruptcy, because bankruptcy is so damaging to your credit. However, entering any type of debt settlement plan is a major negative item on your credit report, as it shows lenders you are willing to pay back less than you owe.

Legal Action

    If you work with a debt settlement firm to reduce your outstanding debt, your creditors do not have to accept your plan. What they must do is provide accurate credit information to the credit reporting agencies. Debt settlement firms often hold customer funds in a type of savings account, or worse, they may withdraw fees from your payments before sending any money to your creditors. As a result, if you start making payments to a debt settlement firm instead of directly to your creditors, you most likely will produce a record of late payments to your creditors. After a certain amount of time, this can lead to your creditors suing you for non-payment, even if you are working with a debt settlement company.

High Fees

    Debt settlement firms typically do not offer their services for free, and, in some cases, the fees can be high. In spite of regulations implemented by the Federal Trade Commission, some settlement firms charge fees before they send your money to your creditors. Additionally, if you stop paying your creditors while working with a debt settlement company, your creditors may impose late fees, penalties, additional interest, and over-the-limit fees on your original debt, if applicable.


    Perhaps the most surprising feature of debt settlement is that even if you successfully settle your debt, you may have another bill due. The IRS views most types of cancelled or forgiven debt as taxable income, meaning you will generally owe tax on the amount by which your creditor reduced your debt. For example, if you owe $100,000 in debt and pay off only $60,000 through a debt settlement program, that $40,000 in forgiven debt is taxable income. When you combine the added taxes with the fees and expenses from both your creditor and the debt settlement company, your total financial benefit from the debt settlement plan may not add up to as much as you originally planned.

How to Freeze Interest Payments on Credit Cards

How to Freeze Interest Payments on Credit Cards

The Credit Card Protection Act has many provisions to protect consumers from sudden rate changes and relieves them of honeymoon interest rate increases. But the unintended consequences have come along with it, prior to the Credit Card Protection Act being passed, credit card companies, in order to avoid losses, raised interest rates and imposed fees ahead of the law. For consumers struggling with credit card debt, there are options to more effectively amortize balances, such as freezing interest payments to focus on the principal.


    Contact your credit card issuer.
    Contact your credit card issuer.

    Contact the credit card company and request a full itemization of the principal balance, interest rate estimate and any fees associated with card privileges (such as annual fees and over-the-limit fees). This statement as it applies to secured credit is known as a payoff statement. If the company does not provide such a service, most of this information can be found on the monthly statement.

    Phone the credit card company.
    Phone the credit card company.

    Phone the credit card company and ask to speak with a supervisor or manager. Ask them if they would consider a temporary interest payment freeze. Explain why you are making the request, for instance, if you have become unemployed or have an illness that would leave you unable to work. If you are already behind on payments or are considering bankruptcy, they will try to accommodate in order to collect.

    Write a letter requesting an interest freeze.
    Write a letter requesting an interest freeze.

    Write a letter to the credit card company requesting they freeze the interest rate so you may pay off the balance. Include the creditor's name, address, phone number, account number, your name and address. Also include the name of the individual you spoke with and request reconsideration of the freeze. Ask that they reply via mail with a freeze approval and payment instructions.

Christian Agencies That Help With Tax Debt

Christian credit counselors help their clients manage debt and become debt free. Christians believe that the Bible tells them they cannot owe money. Because they may only serve one master, Jesus Christ, having any other master is taboo. When you owe tax debt to the government, the government becomes a second master. Christian credit counselors work with their clients using Christian values and principles, but non-Christians are welcome to avail themselves of the services.

Christian Debt Counselors

    The Better Business Bureau gave Christian Debt Counselors in Boca Raton, Florida an A- rating. This is due in part because the company has been in business since 2007 and has received very few complaints. Christian Debt Counselors is accredited by the Better Business Bureau. You do not need to be a Florida resident to benefit from their services.

    Christian Debt Counselors

    2255 Glades Road, Suite 302E

    Boca Raton, FL 33431



Mike Habib

    Mike Habib is licensed enrolled agent with the Internal Revenue Service. He works with clients in all 50 states to negotiate tax debt relief with the IRS. He is a Christian and works from a Christian perspective. He can be contacted online or by telephone. According to his website, his business has earned an A+ rating from the Better Business Bureau.

    Mike Habib, EA

    3452 E. Foothill Blvd., Suite 1010

    Pasadena, California 91107




Reliance, Inc.

    Reliance, Inc., is a Christian debt counseling company that offers help for clients who need IRS tax relief. Many who work at Reliance, Inc., used to work for the IRS. They focus on representing clients who have not filed tax returns for several years or have significant unpaid taxes. They work with both individuals and businesses. Reliance, Inc., also works for tax professionals, including CPAs and lawyers who specialize in tax law.

    Reliance, Inc.

    3940 10th Avenue North

    Lake Worth, FL, 33461




Sunday, February 21, 2010

Statute of Limitations on Debt in Iliinois

Statute of Limitations on Debt in Iliinois

The Statute of Limitations is a defense that debtors can use against creditor collection efforts: If a debt is outside the statute of limitations, the creditor can no longer legally enforce payment of the debt. In Illinois, the length of the statute of limitations depends largely on the type of debt owed.

Open Accounts

    The Illinois statute of limitations on open accounts, such as credit card and charge accounts, depends on whether there was a written contract between creditor and debtor. If the creditor can show that there was a written contract, the statute of limitations is 10 years. If there was no written contract, the statute of limitations is five years.

Oral Contracts

    The statute of limitations on oral contracts in Illinois is five years.

Written Contracts

    Written contracts have a statute of limitations of 10 years in Illinois.


    The statute of limitations to collect judgments is 20 years in Illinois. It is also possible for the creditor to ask a judge to renew the statute of limitations on a judgment at the end of that time.

Bad Checks

    Checks that have "bounced" or that have been returned for non-sufficient funds (NSF) have a statute of limitations of three years after the check was returned, or 10 years after the check was written, whichever is first.


    Statutes of limitations on collecting debt is different than the laws that govern reporting debt to credit bureaus. Federal law allows the reporting of negative credit information for up to seven years after the account become delinquent and never became current again.

    A creditor can also "toll" your debt if you leave the state of Illinois during the statute of limitations. This means that the period of time that you spent out of state does not count toward the statute of limitations.

Credit Debt Consolidation Counseling

Debt consolidation isn't the best debt relief option for everyone, so it may be helpful to work with a credit counselor to fully understand all the options available for your specific circumstance. You must be committed to paying off your debt when you take on a consolidation loan. By making the right choice in your debt payment strategy, you will avoid falling further into debt and regain control of your finances.

Credit Counseling

    Those who are struggling to make payments on their debt each month or have trouble coming up with a reasonable budget may consider using a credit counseling company. The National Foundation for Credit Counseling website is an excellent resource for finding reputable credit counseling organizations across the country. Your counselor will help you to create a budget, as well as examine your specific financial situation to propose solutions. Such options may include debt consolidation, debt management plans, self-help plans or even bankruptcy, depending on the extent of your debt. A credit counselor will be able to help you consider all of your options carefully and help you decide if debt consolidation is the right one for you.

Debt Consolidation

    Debt consolidation is one option for tackling your debt, and it involves gathering multiple debts under one loan so that you only make one monthly payment. Many companies and banks advertise debt consolidation loans at rock bottom rates to encourage people to think that they will pay less on their overall debt with a consolidation loan; however, those rates generally apply only to those with very high credit scores. Therefore, it's important to make sure that you truly are getting a better deal by consolidating by checking your current interest rates against the loan you qualify for.


    Debt consolidation may not be the right option if you have problems with overspending. When you take on a debt consolidation loan, your previous balances are wiped out and nothing is stopping you from spending on them again. Therefore, you must be dedicated to paying down the consolidation loan and leaving your paid accounts alone. A credit consolidation counselor will help you to budget the payments into your financial plan so that you have an easier time staying on track.


    For those who do have trouble with overspending, a safer route to paying off debt may be to negotiate lower interest rates with creditors and then create a payment plan on the existing accounts. Bypassing debt consolidation means avoiding the temptation of spending on the credit that becomes freed by the loan. Lowering your credit card interest rates may be as simple as calling your creditors and requesting a reduction in your current rates. If they don't agree, call back another day and ask a different representative. By lowering your interest rates, you end up saving money on your overall debt, which means you can pay off your debt faster.

Saturday, February 20, 2010

What Do You Do If a Credit Reporting Company Does Not Remove a Bankruptcy From Your Credit Report?

One of the worst effects of declaring bankruptcy for the filer is the damage it does to his credit score. After having the majority of his debts written off, a person will usually see his credit score heavily damaged. Fortunately, according to U.S. law, the record of a bankruptcy can only appear on an individual's credit report for a maximum of 10 years. Yet, in some cases, a credit reporting company will inadvertently keep the bankruptcy on the report.

Types of Bankruptcy

    Personal bankruptcies come in two types---Chapter 7 and Chapter 13. Chapter 7 bankruptcies are sometimes referred to as liquidation bankruptcies. These will generally result in the seizure of a large number of the filer's assets and writing off of most of his debts. This bankruptcy can appear on a credit report for up to 10 years. Under a Chapter 13 bankruptcy, a debtor has his debts reorganized. This type of bankruptcy can appear on a report for a maximum of seven years.

Correct Information

    While a credit reporting agency can only keep a bankruptcy on an individual's credit report for seven to 10 years, depending on the type, it may choose to remove the record sooner. However, if the record of the bankruptcy is accurate and date of expiration has not yet been reached, a credit reporting company is under no obligation to remove the record. Petitions to do so will nearly always be fruitless.

Incorrect Information

    If a bankruptcy remains on a person's credit report after it should legally have been removed, the individual has the right to instruct the credit reporting agency to remove the item. Under the Fair Credit Reporting Act, a credit reporting agency is legally required to verify all information if challenged. Otherwise, the information must be removed. If a credit reporting agency refuses to comply, it can be sued in civil court.


    According to the Moran Law Group, if a person files for bankruptcy and then, before the bankruptcy has been discharged, decides to dismiss it, the credit reporting agency is obligated to report both the bankruptcy and the dismissal on a credit report. Also, after a bankruptcy has been successfully discharged, all discharged debt should have their balances reduced to $0, so that it is clear that the filer no longer owes money on these debts.

Can Collection Agencies Leave a Recorded Message With a Client's Name at Their Place of Work?

Can Collection Agencies Leave a Recorded Message With a Client's Name at Their Place of Work?

Collection agencies must follow several guidelines when they communicate with individuals or third parties in an effort to collect a debt. Most importantly, they are not allowed to engage in any act that violates an individual's privacy, which would prohibit leaving revealing recorded messages at a workplace.


    According to the Federal Trade Commission (FTC), the government agency that implements the Fair Debt Collection Practices Act (FDCPA), it is against the law for collection agencies to use abusive, unfair, or deceptive practices to collect from individuals. Under the FDCPA, collection agencies are allowed to contact a third party once and only in order to obtain an individual's contact information. Attempts to contact an individual at work can also be made, but only with the individual's permission.


    The FDCPA offers protection to consumers with certain types of personal debt. This includes credit cards, car loans and mortgages.


    Although collection agencies may request an individual's contact information from a third party, sharing information about the collection account with the public is prohibited under the FDCPA. This includes leaving a recorded message at an individual's workplace or with any third party that informs them of the debt or the collection account's details.


    To prevent collection calls at work, consumers can simply inform the collector that they cannot contact them at work. The FTC also recommends that consumers send a certified letter (return receipt requested) to the collection agency with their demand to cease all future contact.

What Is SEMA & GEMB on My Credit Report?

What Is SEMA & GEMB on My Credit Report?

The information on your credit report comes from a variety of sources. One source could be a bank, such as GE Money Bank, represented as "GEMB." Another possible source is from a survey of retailers, such as with the Specialty Equipment Marketing Association, i.e., "SEMA."

Credit Reporting Sources

    Retailers often offer financing in order to make products affordable to consumers, but retailers are not banks. Instead of directly offering credit themselves, retailers use third-party banks to provide the financing that lets you buy a new living room set or a car. Those banks report your payment history.

    Additionally, there are trade groups and organizations which take surveys of their member companies to share information on the credit and payment histories of specific clients. These associations also get to provide information on your credit report.


    According to GE Money Bank's website, they are the world's largest provider of retail financing. GEMB provides financing through thousands of retailers in 55 countries to more than 130 million customers. When a GEMB-backed loan or credit card appears on your credit report, "GEMB" will normally preface the name of retailer.


    SEMA collects credit and payment information on the customers of its member-companies once every month. SEMA Credit Reporting Group sends surveys to all of its members for all trade payment information on their customers. SCRG then compiles the information on every customer into individual customer files, which it sends back to all of the member companies so they can make educated credit decisions on current or potential customers. You will see "SEMA" on your credit report when the information comes from them.

Friday, February 19, 2010

How to Use Multiple Credit Cards

How to Use Multiple Credit Cards

As long as you can avoid the impulse to go into debt, having multiple credit cards can be an excellent way to maximize the benefits of each.


    Some credit cards are great for balance transfers and carrying debt

    If you're looking to transfer a balance, keep an eye out for promotions in the mail or online for new cards that offer 0% APR for all balance transfers (usually for 12 months). Often, a fee applies for the balance transfer. Crunch some numbers and do the math: is the interest you'll pay if you kept your balance on the old card higher than the balance transfer fee? Most often, the answer is yes and it's worth transferring.


    For all debt that you know you can pay off, you should use a credit card with a competitive rewards program. These tend to have a higher interest rate, so you won't ever want to carry a balance. Use it for things like gas, groceries, or big purchases you can pay off immediately. You can choose free tanks of gas, frequent flyer miles, or even cash back for your rewards program.

    Some credit cards offer more security for online purchases

    If you do a lot of online shopping, it's worth it to use a credit card with some sort of online protection and security program. Some credit cards offer insurance in case your card information is stolen.

Can VA Benefits Be Garnished?

When a person owes a significant amount of money on an unpaid debt, the creditor may try to forcibly collect payment on the money owed. In this case, the individual may be the subject of a garnishment -- a forcible seizure of the person's wages or other income. While most forms of income can be subject to garnishment by private creditors, federal benefits, such as VA benefits, cannot be.


    In order to garnish a debtor's wages, the creditor must first win a lawsuit in which he is awarded damages. A creditor will usually file a suit alleging breach of contract, as the debtor failed to abide by the terms of the loan contract. If the creditor wins, the judge may allow him to serve a garnishment order on the debtor's employer, or other provider of income, and siphon off the owed money.

VA Benefits

    There are a number of different sources of income that cannot be garnished by private creditors. This includes most types of federal benefits, including those benefits provided by the Veterans Affairs Administration. These VA benefits are exempt from garnishment by private creditors. This means that they cannot only not be garnished, but they cannot be seized after the recipient has placed them in his bank account.


    While private creditors cannot garnish federal benefits, certain governments can. While a government agency will not attempt to collect on a debt owed to a private creditor, it may attempt to collect on money owed to the state. If the debtor owes back taxes or child support payments, or if he has defaulted on his student loans, he may find his VA benefits garnished.

Means Test

    There are some cases in which the government will not be able to garnish VA benefits, even if the debtor owes money to the government. For example, many states have means tests, which restrict the garnishment of income from low-income individuals. If the individual makes little money or has dependents he is actively supporting, then he may be ineligible to have his wages garnished, even by a government agency.

How Does FICO Affect Your Credit?

Your FICO score is the version of your credit score most frequently utilized by lenders when you apply for a new credit card or loan. Housing agencies, insurance companies and certain employers also review your FICO scores. Each FICO score ranges from 350 to 850, with higher scores being preferable to lower scores. The information on your credit report determines your FICO score. Together, your credit report and your FICO score determine your overall creditworthiness.


    Your creditworthiness, often referred to simply as your "credit," increases or decreases depending on the amount of risk you present as a borrower. A higher FICO score indicates better credit in general since it denotes positive information on your credit report. A positive credit history demonstrates that you practice responsible debt management and pay your creditors on time. While lenders have no sure way of knowing that you will repay what you borrow, they use your past history to make an educated guess about your reliability.

Consumer Misconceptions

    Your FICO score has no impact whatsoever on your credit report. Rather, your credit report determines your FICO score. As the information on your credit report changes, your FICO score also changes. Mostly positive information within your credit file results in a higher FICO score while negative information lowers your rating.

    Each individual has three credit reports -- one from each reporting agency -- and, subsequently, three FICO scores. Because the data within each of your credit reports varies, your FICO score from each agency will also differ.

FICO Factors

    The exact formula the reporting agencies use to calculate FICO scores is a well-kept industry secret. This prevents consumers from calculating their own FICO scores instead of purchasing them. The basic factors that go into your FICO score, however, are public knowledge and you can use this knowledge as a tool to alter your financial behavior and boost your score.

    Your payment history, for example, makes up the largest percentage of your FICO score. Thus, paying creditors on time is crucial for maintaining good credit. Other factors that help determine your FICO score are how much debt you carry, the age of your accounts, and whether your report reflects derogatory entries, such as collection accounts, judgments and bankruptcies.

Credit Considerations

    Your FICO score, while important to your overall credit, is not the only factor lenders take into consideration. Your lender wants to see that you have sufficient income to pay off any debts you incur. Some lenders, such as mortgage lenders, will review your actual credit reports in addition to your credit scores to identify any outstanding debts that could hinder your repayment ability.

About a Debt Reduction Form

About a Debt Reduction Form

Clearing debt is a goal that several consumers would like to achieve. However, simply making the minimum payment each month on credit cars and loans does very little towards moving the balance. People that have several different creditors often find it difficult to manage their expenses wisely. One unfortunate outcome is increased debt in the form of charges and fees. A debt reduction form is a simple way to begin organizing finances and developing a plan to reduce expenses.


    A debt reduction worksheet helps organize and prioritize all the monthly expenses. According to Kenneth Koh in his article "Some Tools That You Need to Know in Relation with Debt Reduction," the debt reduction worksheet can help simplify the financial outgoings. Placing everything on paper in an organized fashion helps you see just how much is owed and the amount that is going out each month. For those that cannot afford to pay all their obligations, the debt reduction form can help prioritize creditors in order of importance.


    Debt reduction forms come in various types. If you are considering a debt management program or debt counseling, then you'll likely be asked to fill in a household income and expenditures form. This type of debt reduction form lists your income as well as all of your expenses, both fixed and variable. This is an effective tool for creating a new household budget and payment plan. You and your debt management counselor will look at your expenses to see where any flexibility might exist.


    Filling out a debt reduction form can offer several benefits. For people facing financial difficulty where there is more money going out than coming in, a debt reduction form can help prevent things from becoming worse. If you are in a collection situation, you might be asked to fill out a debt reduction form. This form acts as evidence that currently you have insufficient funds to make the current level of payment. Once the form has been reviewed, the possibility exists for reduced payments. This, however, does depend on the creditor.


    Debt reduction forms are quite widely available. Several debt management agencies offer their own forms to help consumers organize their budgets. Debt reduction forms are available online, and there is also the possibility of software to help list the household budget expenses.


    A debt reduction worksheet will help organize your finances and establish a budget. It will help simplify your current financial state. However, once the budget is created, it is essential that it is followed. A debt reduction form is only the first step in getting control of your finances. Proper spending and discipline are also required.

Thursday, February 18, 2010

Student Credit Options

Student Credit Options

Getting higher education typically improves earnings in most careers, but you have to pay for that post-secondary degree. It's not unusual for a single credit to cost $200 to $400 as of 2011, and many students have trouble funding their education upfront entirely on their own. This leads them to seek student credit options.

Credit Cards

    Student credit cards operate in the same way as non-student cards. That is, the students charge against their available credit and then pay at least minimum amounts on their balances each month. Credit cards are usually unsecured, which means you don't need to offer collateral to get one. If you are a student who is under 21, you likely will need a parent to co-sign, since most states have laws that forbid minors from signing legal contracts, and because the Credit Card Act requires those under 21 to have either a co-signer or proof you can pay off your debt yourself. Credit card companies market aggressively to students to gain new lifetime clients.

    Credit cards, when properly managed, are an excellent way for students to manage their cash flow. However, they often come with high interest rates and fees (particularly after introductory periods end) because many students haven't built up a sufficient credit history to get better deals.

Prepaid Cards

    With a prepaid card, you purchase the card at face value, or load a desired amount of your own money onto the card. You can spend only the amount you've put into the account. For this reason, prepaid cards generally are better for money management and limiting debt. They are accepted in most places where credit cards function, since they are backed by the issuing company in many cases. You can choose from store-specific cards or general prepaid cards you use at any vendor. An advantage to a prepaid card over a debit card is that it isn't necessarily linked to a bank account. Prepaid cards don't require extensive credit history because you operate the card with your own funds, so they're usually very easy for students to get. Fees, if any, tend to be lower, and there usually isn't any interest. Not all prepaid card companies report your account history to the credit bureaus, but some do.


    Loans are the traditional method of meeting major student expenses, aside from grants and scholarships. Students may choose from both government and private loans, and loans can be unsecured or secured, depending on the lender and your credit history. To approve the loan, lenders usually require proof of your income, and they may specifically state in the loan terms that the funds are to be used only for academic expenses. Government loans usually have lower interest rates. However, the amount you take out in any student loan is limited by your debt-to-income ratio, and you likely will be paying your student loan debt for years after you get your degree unless you borrow only a small amount. Loans should be a last-resort funding choice.


    Regardless of what credit option you choose as a student, how you behave with your funds as you learn greatly impacts your financial stability in the future. To avoid potential money traps, read every word of your credit and loan contracts, and enroll in economics or budgeting courses that will show you how to control your assets. Don't use any credit option unless you know exactly how you'll finance it or pay it back.

Wednesday, February 17, 2010

Simple Instructions Ways to Pay Off Debt

Simple Instructions Ways to Pay Off Debt

Credit card problems can sneak up on you and getting into debt is relatively easy. When you charge everyday items on credit cards without paying them off monthly, you might have an issue. If you want to pay down your debt, you need to encase your credit cards in a block of ice in your freezer. Once you do the obvious--stop compiling new debt--there are techniques and actions that can help you reduce your debt faster.

Pay More Than The Minimum

    As the Motley Fool website explains, paying the minimum amount due on your bills each month is poor practice. Simply put, the longer you take to pay, the more your creditor makes off of you in the form of interest charges. Fool.com suggests finding extra money and paying double the minimum monthly payment. According to Bankrate.com's minimum monthly payment calculator, paying the minimum--starting at $20 in the first month--on a $1,000 credit card balance at 18-percent interest results in almost $1,400 in interest paid. It will take you 151 months to bring the balance to zero. If you pay a fixed amount of $40 each month, you will get rid of the balance in 32 months and pay just over $262 in interest.

Use the Snowball Method

    A popular way to tackle a pile of credit card bills is to use the snowball method to bring down the balances. Compile a list of all of your credit card balances and monthly payments. Under the snowball method you break your own rule by paying the minimum on all of your cards except for one, but the practice leads to a sound end result. Funnel all of your extra cash into one card. Once you pay off that card, move on to the next and so on. Financial expert Dave Ramsey suggests starting with the smallest balance. By doing this, Ramsey claims you give yourself the psychological boost of quick progress, making it more likely that you will stick to your plan.

Call Your Creditors

    Pick up the phone and call your creditors. The Motley Fool website indicates that you can have success renegotiating the terms of the agreements you have with your creditors. If you warn your creditors that your financial situation might lead to bankruptcy, they might be more willing to deal with you out of fear of not getting paid at all. Ask for lower interest rates and more manageable payment terms. Alternatively, you can go to credit counseling organizations that will make the calls and do the bargaining for you. Be sure to check out the agencies you are considering with the Better Business Bureau or your state's Attorney General first.

How to Change My Bad Credit History

As a consumer, you have a file, or credit report. Your file contains information, such as your address, Social Security number, outstanding amount on each of your debts and bankruptcies, if any. Your credit report also reflects your payment history. Creditors and landlords avail themselves of the information in your file to determine your creditworthiness. A negative credit history can prevent you from obtaining credit or qualifying for a lease. Fortunately, you can change a bad credit history.



    Request a free annual copy of your credit reports. You do not need to contact each of the three major credit reporting agencies, Experian, Equifax and TransUnion. You can order it online from AnnualCreditReport.com (see the Resources section). You also may mail in your request or submit it over the phone.


    Analyze your report and determine if it contains any inaccuracies, which can have a negative effect on your credit rating. Look for accounts that do not belong to you or negative items that are more than seven years old.


    Inform the credit reporting company of any inaccuracies. Send a letter explaining the inaccuracies and include copies of supporting documentation. Your letter should include your complete name, Social Security number and complete address. Circle or highlight the item that you are disputing. Make a copy of the report and include it with your letter. Once the inaccuracy is corrected or deleted, your credit score will likely improve.


    Contact the creditor responsible for the inaccuracy. Explain why you dispute the item and include copies of any supporting documents.


    Ask the credit reporting agencies to add accounts that do not appear in your credit file. Although your credit history includes most accounts, credit union, gasoline card and local retailer accounts are not always documented. If your bad credit is due to insufficient credit or using the majority of your credit limits, request that credit reporting companies add information from all accounts that will help raise your score.


    Pay your bills on time. Accurate negative information will remain on your credit report for about seven years, according to Experian.com. Some bankruptcies can stay on the report for up to 10 years. However, paying your bills on time going forward can change your credit history for the better.


    Pay off or settle old unpaid debt. If you cannot pay off the debt, contact the creditor and make a settlement offer. Ask the creditor to report the debt as "Paid in Full." Unpaid debts generally drop off your credit report after seven years. However, if you need to apply for a loan prior to that time, you will need to take care of the debt.

How to Become Debt-Free the Easy Way

How to Become Debt-Free the Easy Way

Being in debt can wreak havoc in your life. Worrying about mounting debt can make you stressed and quick to anger from all the tension. Getting out of debt eases the strain and allows you to better prepare for inevitable financial crises in the future. It is easy to get out of debt if you are determined to sacrifice for a short while to ensure a debt-free future. The process takes consistency, a single-minded commitment and building new financial habits.



    Write down every expense you and your family members have each week or keep a total for a month. Even if it is just a pack of gum, a bag of chips or a soda, keep a running total in small notebooks each family member carries at all times. Another idea is to place every single receipt into an envelope if you use your debit card for all purchases. At the end of the week or the month, add up your expenses and determine where you can cut corners. Be creative: Cutting expenses may mean buying a 24-pack of sodas on sale and carrying a couple each day to work in a small cooler. It can mean buying a large bag of chips and putting them into individual zipper-style plastic bags. Pack a sandwich for lunch. Anything that saves you money is worthwhile.


    Give each family member an envelope for his allowance each week. You can eventually give each member a monthly allowance, if you choose, but it is easier to struggle through only a week at the beginning. Tell each member that he is his own bank. He will not receive any more money until the next week's allowance. If he sees a big purchase in his future, he must save for it.


    Designate an envelope for each bill you must pay during the month. Divide up how much you need to put in the envelope each pay period to pay the bill when it is due. For instance, if your cable bill is $80 a month and you are paid twice a month, place $40 in the cable envelope every two weeks. This ensures you will have the money when the bill comes due.


    Set aside an envelope for an emergency fund and only use it for true emergencies, such as medical emergencies, car or house repairs. Consistently build up the emergency fund, just as if it were a bill, with at least $1,000. In the future, when an emergency arises, you won't have to resort to credit cards or bank loans to handle the expense. If you must deplete the emergency fund, steadily build it up again. The $1,000 should be in an easily accessible bank account that does not penalize you for withdrawals. Once you build the emergency fund, you can build a larger savings in another account.


    Increase your income by getting a part-time job, having a garage sale, selling items online or by doing without every luxury until the debt is gone. Sacrificing for a short time is well worth the relief you will feel once you are debt-free.


    Spend every extra penny you can on reducing your debt. Start with the smallest debt and pay extra on it each month until it is gone. After getting rid of that payment, take all the money you were paying on it and put it toward your next higher debt.

How Does Canceled Debt Affect Your Income Tax Liability?

Canceled debt may seem to have nothing to do with your tax liability, but under many circumstances, you could be taxed on the amount of your canceled debt. If a creditor cancels any of your debt, the creditor generally will send you a tax information form that you must include when you file your taxes. There are certain situations in which you can avoid paying tax on your canceled debt.

Canceled Debt

    Generally speaking, if you owe any creditor a debt, it usually is due to some benefit you have received. For example, if you have an outstanding credit card debt, you have received money from the credit card company for your own use. If you owe a merchant a debt, you probably have received some type of product in exchange for your promise to pay. If you don't pay back what you owe, the IRS considers the debt cancellation taxable income, since you essentially received either cash or property for free. Unless you qualify for an exception, you must pay tax on that canceled debt.

Reporting on Taxes

    If you are the beneficiary of a canceled debt worth at least $600, the creditor canceling the debt must send you a Form 1099-C at the end of the year. The 1099-C lists the date and amount of your canceled debt, along with information on both the creditor and debtor, such as name and address. You are responsible for transferring the amount of your canceled debt on Form 1099-C to your Form 1040 when you file your taxes.


    Although negotiating a debt settlement with your creditor may in some ways be preferable to filing bankruptcy, bankruptcy has the edge when it comes it taxation. The IRS regards debts canceled in bankruptcy to be nontaxable, so you do not have to include discharged debts on your tax return. If your creditor does send you a 1099-C, the creditor should check the box marked "bankruptcy" to indicate that the canceled debt is not taxable.


    If you are insolvent, you do not have assets that exceed the amount of your debts. Although you may be able to declare bankruptcy if you are insolvent, you also can avoid taxation on your canceled debt just by demonstrating insolvency. If you claim insolvency to avoid canceled debt taxation, you must file Form 982 with the IRS.

Tuesday, February 16, 2010

Why Can I Only View Credit Reports Once a Year?

The federal government mandates that all U.S. residents are entitled to a free copy of their credit report from each of the three major credit bureaus each year. However, you are not limited to these reports. You can purchase a credit report any time you want, and there may be situations in which you are entitled to additional free credit reports.

Free Yearly Credit Reports

    You can get a free copy of your Experian, Equifax and TransUnion credit reports once each year through the Annual Credit Report website. You must go to this website; the credit reporting agencies are not required to give you a free credit report if you contact them directly. If you do not want to enter the necessary personal information on the website, there are also instructions on how to order your credit report by phone or through the mail. It's important to get copies of all three reports, because not every creditor reports the same information to each bureau. If you are married, you and your spouse are each entitled to free reports, even if most of your credit is through joint accounts.

Other Free Credit Reports

    Under federal law, you are entitled to a free copy of your credit report if you are denied credit or employment because of something that's in your report. You must request the report within 60 days, however, to get it for free. You are also entitled to a free credit report if your report has inaccuracies because of fraud or identity theft. You can also get a free credit report if you become unemployed and plan to look for work or if you go on welfare. Some states also mandate that their residents have access to free credit reports.

Buying a Credit Report

    You can buy a credit report from any of the three credit reporting agencies any time you want. Perhaps it's been several months since you got your free credit report and now you are looking at buying a house and want to see if anything has changed significantly. Or perhaps you've gotten behind on bills and you want to see if late payments have started showing up on your credit report. As of March 2011, you can get a credit report directly from each credit bureau for around $15, and that also includes your credit score.

What to Look For

    When you get copies of your credit report, the Federal Trade Commission says you should be looking for two things: errors and fraud. Your credit report may contain inaccurate or out-of-date information, such as closed accounts being reported as open or negative items remaining on the report after they should have disappeared. Your credit report is also the best way to find out about fraud or identity theft. If you find any errors, dispute them in writing to the credit reporting agency and provide copies of any supporting documentation you have.

Monday, February 15, 2010

How to Be Free of PDL Debt

How to Be Free of PDL Debt

A payday loan, or PDL, is a type of high interest loan that can trap consumers in a seemingly endless cycle of debt. The consumer takes out a small loan to tide over until a paycheck, but the high interest rates on the loan cause the individual to pay more money, which results in another payday loan. The cycle continues to grow until the debts are high and the individual is stuck in a bad situation. Getting free of PDL debt results in better finances over time.



    Look up the state PDL laws. Every state has different laws regarding PDLs and that means that actions can differ depending on the state. For example, if a state law declares that online PDLs are not legal, any resident of that state who took out an online PDL is dealing with illegal lenders and can take action against the lender.


    Check the PDL companies for legality. According to Debt Consolidation Care, PDLs given by companies that are not legal in the state do not have the same power as PDLs that are legal according to the state. The most common illegal PDLs are online, where the lender might be legal in one state, but are not licensed in other states. If a lender is providing illegal loans, the individual that took out the loan has options. Debt Consolidation Care states that anyone whose taken out a PDL through an illegal source is only required to pay back principal.


    Talk to the lender about the situation and see if he can offer a payment plan. There are situations where paying the money back in full is not an option, such as pay cuts or job loss. Ask the lender about extended payment plans and whether the firm can set one up for you.


    Look at help options. PDLs are short-term loans with high interest rates. Help options like consolidation are available, but try avoiding these options until you talk to the lender personally. If the PDL lender will not allow an extended plan, getting help from a consolidation company or similar debt help program will often settle the problem. Take care when selecting a help program and look into the company before using their help.

Debt Handling Guide

Debt Handling Guide

Even if you're able to make your minimum payments each month, excessive debt can stop you from getting a mortgage or auto loan, because lenders prefer applicants with a low debt-to-income ratio (percentage of your income that goes to debt payments). But take heart -- even if you're drowning in debt, you can still improve your finances. Learn to tame your debt and get rid of your credit card balances. This will improve your personal finances and increase your credit rating.

Eliminate High Interest Rates

    Little maneuvers here and there can help speed the debt payment process and get you on the path to debt-free living. For example, the amount you pay in interest charges each month impacts how fast you're able to pay down your principal balance. Check the rate on all of your credit cards, and then call your creditors to negotiate a lower rate.

Minimum Payments

    The majority of credit card companies don't require full repayment of your balance each month. They allow you to carry balances from month to month and only request a small minimum payment. Minimums are advantageous when you don't have a lot of extra cash to put towards your debt. But if you have the extra income, ignore the minimum and drop lump sums on your debt each month, to tackle the balance and pay off the cards. Spend $200 a month on your credit card, and you'll pay off a $1,000 balance in about five months.

Beware of Credit Cards

    Credit cards are not "free money" or "magic cards." Yes, they allow you to get whatever you want now. But the inability to control your spending or deny yourself can result in huge debts and financial ruin. Dealing with your debt involves more than negotiating a lower interest rate and making higher payments -- you've got to stop adding new debt. This is the only way to reduce your principal. Take credit cards out of your wallet and learn to survive on a cash budget.

Debt Consolidation

    Eliminating debt is a huge undertaking, and depending on how much you owe, you may need professional help to dig you out of the hole. Debt counselors offer consolidation services -- they merge all your debt and manage debt payments on your behalf. Debt counselors also work with creditors to get you better terms and rates.

What Happens if You Can't Pay Back a Student Loan Due to No Money or a Job?

The consequences of defaulting on a student loan --- whether it's a government-backed loan or a private loan --- can be substantial and long-lasting. Not having the money to pay or being unemployed usually isn't a good enough reason to have your loan forgiven or discharged, although there are exceptions. The typical avenues pursued by lenders and the government in cases of student loan defaults include wage garnishment, tax return confiscation, lawsuits and collection agency involvement.

Types of Student Loans

    Education loans are types of financial aid to help students pay for college expenses. Loans must be repaid with interest, as opposed to scholarships, which don't have to be repaid. According to the website "FinAid," as of 2010, more than 90 percent of the dollar amount of student loans in the United States --- about $100 billion --- originates through federal student loan programs, with about $10 billion provided by private lenders. Although the government has more tools at its disposal to collect delinquent student loans, private lenders have ample ammunition for collection purposes.

Government Loan Defaults

    According to the website "Student Loan Borrower Assistance," consequences and options regarding student loans depend on the situation --- whether you're delinquent on a loan or actually in default. Delinquency occurs once you fail to make a payment on time. Nine months of nonpayment results in default. Lenders will contact you, usually by mail, once you become delinquent. This is the time to contact your lender to try to work out an alternative payment plan. Once in default, according to FinAid, consequences may include your account being turned over to a collection agency, with subsequent responsibility for associated court costs and lawyer fees; the inability to receive further financial aid until the loan is repaid; being sued for the loan's entire amount; your credit score and history being marred for up to seven years; wage garnishment, up to 15 percent of take home pay on federal loans; income tax returns, both state and federal, being intercepted; a portion of social security benefits being withheld; denial of professional license renewal; and prohibition from the military.

Private Loan Defaults

    Many of the same collection tactics available to the government also are employed by private loan lenders, although private lenders must first obtain a court judgment before measures can be taken. Time limits to bring suit for a student loan delinquency or default vary among states from five to 20 years, according to Student Loan Borrower Assistance. Most states also allow creditors to continually renew suits, effectively providing an infinite window of opportunity for collecting. Wage garnishment, collection agency involvement and judgments for the entire amount owed are standard collection tactics.

Default Prevention & Payment Options

    Once you receive a delinquency notice, every effort should be made to contact the lender who holds the loan to make alternative payment arrangements to avoid default. Options include deferment and forbearance, both of which provide negotiated repayment time periods, usually one year at a time. Scenarios in which forbearance or deferment may be granted include poor health, the inability to pay within the maximum repayment term, personal problems and monthly student loan obligations that total more than 20 percent of monthly income. A loan also may be canceled or discharged through bankruptcy proceedings, although such an option has gotten progressively more difficult to execute since 1978, when federal exceptions to student loan discharges began to be added to the U.S. Bankruptcy Code. Section 523(a)(8) states that "student loans cannot be discharged, unless payment of the student loans would impose an undue hardship upon the debtor or his dependents," according to the website Bankruptcy Law Network.

Sunday, February 14, 2010

How to Pay Your Sprint Cell Phone Bill Online

How to Pay Your Sprint Cell Phone Bill Online

Many companies, government agencies and utilities offer the convenience of online bill payment options. Sprint offers its customers a number of payment options, including online, by mail, by phone and pre-authorized payment. Sprint is one of the largest telecommunications service and product providers in the United States. As of 2010, Sprint serves more than 48 million customers across the country. Sprint was also the first U.S. national carrier to offer wireless 4G service.



    Go to the "Create a sprint.com Profile" page on the Sprint website (see References).


    Register for an account. If you have not done so already, you will need to create a user name and password for a Sprint online account. You need to know your phone number and PIN to set up an account. If you have lost or forgotten your PIN, Sprint will provide you with a new one.


    Sign in at the "My Account" page (see Resource).


    Click on "Pay Now" under Your Bill. You can find the Your Bill tab once you have logged in to your account.


    Choose your payment amount. Enter the amount owed on your bill.


    Choose your payment method. You can pay with a debit or credit card. You can also pay directly from your bank account, but Sprint needs to validate the account, and this can take up to 10 business days. If you wish to use your bank account for future payments, click on "Add an Account" under Bank Account, and add your bank account information.


    Click on "Add a Card" under ATM/Debit or Credit Card. You must enter the number of your credit card or debit card, including expiration dates.


    Verify and submit your payment information.

The Advantages of Going Into Foreclosure

Foreclosure is rarely a good idea; a black mark on your credit that can make getting another mortgage or other credit difficult for years, a foreclosure tells creditors that you were unable to meet your obligations. However, there are times when a foreclosure is the lesser of two evils, and can have financial advantages.

Impossible to Refinance ARM

    Adjustable rate mortgages, or ARMs, often make mortgage payments impossible for home buyers who are not prepared for payments that will go up hundreds or even thousands of dollars when rates adjust. If you're one of the many homeowners who have seen their payments escalate out of affordability due to an ARM, and are finding it impossible to refinance your mortgage, foreclosure may be better than being ruined financially by maintaining a home that you simply cannot afford.

More Home Than You Can Handle

    Sometimes, it's not an ARM that makes paying for your home difficult. Rather, it's the confluence of house payment, tax payment, insurance payment, maintenance and upkeep costs and other incidental costs associated with home ownership. If your home is more than you can afford, and declining property values or other factors have made selling the home impossible, it may be wiser to allow the home to go into foreclosure than to keep paying bills associated with your home that you can ill afford.

Other Factors Creating Problems

    A significant loss of income due to illness, job loss or other factor can make paying for and maintaining your home impossible. And while you do need a home, a home that is unaffordable can only make matters worse. If you cannot sell your home or refinance, it's better to go into foreclosure than continue to pay your mortgage if it means sacrificing your health or well-being by foregoing medications or other essentials to make your mortgage payment.

Making a Clean Break

    If moving from your home and hometown is a necessity due to a new job or other life change, and the home you left behind is not selling, allowing the home to go into foreclosure may be the only way to rid yourself of a burden that is difficult or impossible to handle long distance. However, be warned that if you have not bought another home or signed a long-term lease in your new location, the hit your credit report takes when you stop paying on the home you left may make either option difficult.