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Wednesday, March 31, 2010

Who Pays the Hospital Bills After a Relative's Death?

Hospital bills can be a serious burden -- even more so if the bills are incurred by an individual who dies. Survivors may be worried that they are liable for these bills, which can easily reach thousands of dollars if expensive surgeries or medications were involved in the medical treatment. In most cases, the surviving family does not have to pay hospital bills, but who does pay the bills can depend on a number of different circumstances.

Health Insurance

    Health insurance is available through both group and private policies and is designed specifically to pay hospital bills. In most cases, after the deductible has been paid, health insurance immediately kicks in and begins to pay for hospital expenses for the patient that has the policy. Depending on circumstances, health insurance may pay all or most of the bill until the relative's death. Health insurance companies may not cover expenses directly related to the death.

Auto Insurance

    Auto insurance may also pay for medical bills until the death of a relative. This occurs when the injuries are incurred during an automobile accident. The rules regarding which policy pays for the medical bills depends on the state and laws governing hospitals. It can take time for insurance companies to work out who is at fault in an accident -- and therefore who should pay off the bills. Hospitals, on the other hand, want to be paid quickly. Some states have laws that have auto insurance policies related to the car the injured person was in immediately pay bills regardless of fault.

Court

    When a person dies without a will, a probate court manages the estate and passes assets along to survivors. The probate court pays off any remaining medical bills from the estate. Liquid assets such as cash work best for this, but if necessary, the probate court may sell off other assets to meet the hospital bills, and then give the family possession of what is left. Expenses of last illness, as they are called, are typically in the middle of a list of debts that are paid according to priority.

Family

    Families, in most cases, are not responsible for paying the medical bills of a relative after he has died. This can be a confusing issue because creditors, who are often desperate to be paid, may call relatives and try to demand payment through aggressive tactics. However, family members are only required to pay bills if they cosigned on a loan or were previously responsible for the estate and had already spent some of the money for personal profit.

How to Get Out of Garnishment

How to Get Out of Garnishment

Garnishments are a form of debt collection in which creditors take money owed to them directly from the debtor's bank account or paycheck. Collection bureaus and government agencies may seek garnishment for many types of unsecured debts, including student loans, credit cards, taxes, child support and alimony. Before garnishing any accounts, the creditor must obtain a signed order from the court.

Instructions

    1

    Establish that the creditor does not have grounds for the garnishment. The court may not authorize the collecting party to garnish your accounts if you receive all of your income through a retirement plan or Social Security payments. If you do not believe that the creditor is legally entitled to the garnishment, bring supporting paperwork to the court hearing, such as Social Security statements and income tax returns.

    2

    Settle the debt in full. If you are able to pay off the entire debt before the hearing, the court will not have grounds on which to enter a garnishment order.

    3

    Reach an out-of-court settlement. Creditors may stop pursuing garnishment if the debtor is able to repay his or her debt in regular increments.

    4

    File an emergency bankruptcy petition. Persons who are unable to cover basic living expenses because of garnishments and cannot afford to repay delinquent debts may need to file bankruptcy to get out of garnishment. Once the court receives a bankruptcy petition, it will enter an automatic stay, which will bar the creditor from collecting on the debts until all parties reach an agreement in court.

How to Write a Refusal-to-Pay Letter

How to Write a Refusal-to-Pay Letter

A refusal-to-pay letter should be written in the same format as a business letter. This letter should be typed and written as professionally as possible. When writing a refusal-to-pay letter, focus on the facts and explain what you want the recipient to do about your situation. Be as polite as possible because either the recipient or a judge in a court of law will decide what to do about the outstanding debt you've accrued.

Instructions

    1

    Type your return address in the top right corner of the page. This should be about 3 inches from the top of the page. Don't include your name, just your full mailing address.

    2

    Add the recipient's full name, title, company name and address below your return address. This should be on the left side of the page a paragraph return below your address. Use the company's address for billing or credit reporting issues. Don't mail the letter to the same address where bill payments are sent. If you don't have an address, mail the letter to the address for general correspondence.

    3

    Date the letter. Add a paragraph return after the recipient's information. Spell out the month only. Follow that with the date and then the year. Separate the date and year with a comma.

    4

    Type "RE:" followed by your account name and number under the date. There should be a paragraph return between the date and account information. This should be clearly visible so the recipient can access your account information prior to reading your letter.

    5

    Greet the recipient formally. Start the letter with "Dear" followed by the person's name. Use titles like "Miss.," "Ms." or "Mr." Avoid using "Mrs." for female recipients as this title is reserved for married women only. You don't want to offend the recipient if she's not married by using the wrong title. If you don't know the person's name, a generic "Dear Sir or Madam" is appropriate.

    6

    Explain the reason for the letter in the first paragraph. Tell the recipient you are refusing to pay and explain why. If you can, clearly explain how this debt is affecting you and your personal life. Some examples may be loss of income, illness or too much debt.

    7

    Add additional details to the letter in the second paragraph. Avoid arguing with the recipient and don't threaten to sue or hire an attorney. According to the Consumer Law Office of Robert Stempler, you should leave your options open. The person reading the letter may not be the person who upset you. A judge in a court of law may end up reading the letter so remember to be respectful at all times.

    8

    Include any additional documentation like billing statements, letters from the company or receipts. If you include any enclosures, explain in your letter what you are enclosing and why.

    9

    Ask the recipient to do something in the last paragraph. You may ask them to erase the debt, lower your payments or give you more time to pay.

    10

    Thank the recipient for his time. This should be the last line of the letter.

    11

    Close the letter by writing "Yours Truly," "Sincerely" or "Regards" followed by your full name. Add a few lines after the closing and your name. This space is for your signature.

How to Prevent Foreclosure From Affecting Your Credit

Foreclosure can severely affect your credit rating, so you should consider it only as a last resort. Considered the most damaging aspect of a credit rating, it can remain on your credit report for at least seven years. A foreclosure in your credit history lowers your credit score, which impacts interest rates paid in the future, and can brand you as a high credit risk.

Instructions

    1

    Be mindful of your due dates in the mortgage. You should faithfully track your mortgage due dates, which is the primary step in preventing foreclosure. Contact the bank or lender immediately to try to reach an agreement to stop a potential foreclosure if you think you might miss your deadline.

    2

    Explain your circumstances to your lender. Inform your lender if you encounter unanticipated crises and want to prevent foreclosure, making it clear you are not ignoring your responsibilities. Share your debt reduction plans with your lender. Banks and mortgage companies generally want to avoid foreclosure because they make more money when you successfully pay a mortgage -- even outside of the established time frame. As such, lenders are more willing to help you save your home when they know your plan regarding mortgage payments.

    3

    Get responses to any questions in writing. Do not rely on verbal communications alone. Instead, get the person's name and telephone number for future reference.

    4

    Consider borrowing from your 401k to pay the mortgage. 401k plans allow eligible employees to make salary reductions in order to invest in a chosen area. Because your house is an investment, you may be able to borrow against it through your 401K plan. Ask the human resources department at your company about 401k plan loans.

    5

    Consider a short sale option. Banks sometimes allow homeowners to sell homes for less than what remains on the mortgage, thereby allowing the owner to avoid the time and expense of foreclosure proceedings. Inquire and carefully read the terms and conditions of the short sale before making such a decision.

    6

    In case of foreclosure, contact a credit repair company. Credit repair companies can help you remove marks on your credit report by helping you pay for your credit usually with lower interest charges. Search for reputable and trusted companies who are not scammers.

Tuesday, March 30, 2010

California Law on Defaulting on Credit Card Debt

California Law on Defaulting on Credit Card Debt

Tough economic conditions or personal hardship sometimes lead to credit card default. If you cannot pay your credit card bills in California, you still have rights under the state's debt laws. You cannot be harassed, threatened or treated unfairly by lenders or collection agencies attempting to collect a debt.

Statute of Limitations

    The state of California has a statute of limitations on credit card debts to prevent creditors and collection agencies from pursuing debtors indefinitely. For debts in writing, the statute of limitations in California is four years. For oral debt agreements, creditors cannot pursue the debt after two years. If you contact the lender to negotiate repayment, the statute of limitations starts over. If a civil court in California rules against you for an owed debt, the statue of limitations for collection is ten years.

Creditor Harassment

    Lenders in California cannot harass you to collect on credit card accounts in default. Lenders are only legally allowed to call you between eight in the morning and nine at night. If you are called, lenders cannot pretend to be someone else or scare you for any reason. For example, a debt collector cannot call and claim to be a lawyer attempting to sue you. If you are harassed, contact the California Department of Consumer Affairs to report it.

Collections Notification

    If the original lender of your defaulted credit card debt sells its claim to a collection agency, the original lender must contact you to warn of the impending transfer. This warning is to offer you one last chance to negotiate repayment before your debt is turned over to a collection agency. Collection agencies may add a collection fee to your original debt and increase efforts to collect on your California debt. Collection agencies are still subject to harassment laws.

Payment Plans

    You have the option under the California Federal Debt Collection Practices Act (FDCPA) to negotiate a partial-payment plan with your debt lender. Partial payments prevent possible legal action and the involvement of collection agencies. For example, if your credit card debt payment is $150 per month, you can ask the credit card company in writing if you can pay $100 per month to prevent further negative consequences. Keep track of your written correspondence; save emails and send certified postal mail when necessary.

Monday, March 29, 2010

Can an IRS Return Be Garnished to Pay for Food Stamps?

Food stamps, also known by their formal name, Supplemental Nutrition Assistance Program benefits, are designed to help a low-income household pay for groceries. These benefits are intended as a form of voucher that a person can redeem at participating retailers. However, if a person abuses the program, he may end up owing the state money. If this debt goes unpaid, the state may attempt to collect it through garnishment.

Garnishment

    Garnishment occurs when a person has an income stream diverted by a creditor. If a creditor serves a garnishment order on a party that provides a person with regular payments, such as an employer, the party is legally required to set aside some of this money for the creditor. Both governments and private creditors can attempt to garnish a person's wages if she owes them money.

Food Stamps

    A person does not generally have to pay for food stamps. Food stamps are a form of government assistance that is provided to people at no cost to them. A person can receive food stamps for as long as is legally permitted without having to pay a dime. However, if the person violates the rules of the program or incurs stamps fraudulently, he may be required to repay the state program that provided him with stamps.

Tax Refunds

    When a person files taxes with the federal Internal Revenue Service, she will receive a tax refund -- a check from the government -- if she overpaid. In some cases, this return can be garnished if the taxpayer owes a creditor money. While garnishment of IRS refunds is generally unavailable to private creditors, a state government -- such as a food stamp agency -- can collect unpaid debts through garnishment of the tax refund.

Considerations

    When a person abuses the food stamp program, he is sometimes only required to pay back the money he misappropriated. This is because the people receiving foods stamps are often low income, meaning they do not have the resources to pay back debts. More often, the individual will simply be kicked out of the program. However, a person could also face criminal charges of food stamp fraud.

How to Change Information on a Credit Report

The information on your credit report is used by financing companies to determine whether or not you should be approved for a loan or line of credit. Some employers also examine your credit report when you apply for a job. This is why it is important that your credit report is accurate. If you notice an error on your credit report, you should immediately report it so it can get corrected. It isn't a difficult process, as long as you know how to change information on a credit report.

Instructions

    1

    Review your credit report. You can get your credit report from any of the three major credit reporting agencies: Experian, Equifax or Transunion. You can also get a free credit report if you haven't already this year through the Annual Credit Report website. Once you have your report, make sure to carefully review your name, current and past address and phone information, and the accounts listed.

    2

    Determine how you want to dispute or change information. The three credit reporting agencies offer the option to dispute information on your report online, by phone or by mail. Using the Internet to dispute is much faster than using the phone or mail.

    3

    Gather the information needed and dispute it. For inaccuracies, you want to first gather any information you might have to support your claim before you actually dispute it. Letters and statements from creditors listing the recent status of your accounts are good evidence to support your claim. Make sure you keep copies of all of your supporting documents as well as your communication with the credit reporting agency.

    4

    Dispute the information. When you call or complete the online or mail-in form, you need to know your credit report number, phone number, ZIP code, Social Security number and address. State what you're disputing and why you're disputing. Follow up with supporting documents.

    5

    Allow time for the credit agencies to investigate the dispute. The length of time it takes for a dispute to be resolved depends upon exactly what you are disputing. Some disputes can be resolved within a matter of days while others take time. You should receive an answer within 30 days of filing the dispute unless you filed by mail, which may take up to 45 days.

    6

    Recheck your credit report to ensure the information has been corrected. If your dispute was approved, you can pull your credit report again to make sure that the information has been changed or removed. Make sure to give the agencies time to change the information before pulling it again.

Sunday, March 28, 2010

What Happens If I Don't Pay My Medical Bills?

Medical bills, expenses and charges may seem astronomical, but they do not go away on their own. When bankruptcy is not an option, it's easy to forget about unpaid medical expenses while budgeting to pay more pressing bills, such as food and transportation. Unfortunately, ignoring unpaid medical bills will make matters worse.

Ongoing Correspondence

    Typically, doctors do not collect their own bills. Instead, they employ staff or an outside agency to collect amounts due that are not paid by insurance companies. When a bill goes unpaid, the hospital or agency continues to send the bill to the patient.

Bill Collectors

    When the mail gets ignored, the hospital sometimes chooses to sell the debt to a bill collection agency. Because the bill collection agency now owns the debt, you now owe the collection agency the amount of your unpaid medial bills. This is when the phone calls start. Your telephone will ring often, each time it will be a different employee of the collection agency. They will not leave a message on your answering machine, so if you are home and not answering the phone it may ring every 20 minutes.

Lawsuit

    The bill collection agency has the right to sue you in a court of law in order to collect its debt. Depending upon the amount owed, you will be sued in either small claims court or civil court. Once you are served with notice of litigation, you are required to show up to defend yourself or to settle with the bill collection agency. If you fail to respond, you forfeit and lose the case.

Collection

    If you are sued in court by the bill collection agency and lose, the collection agency has the right to collect the money from you. If you still do not pay, they have the option of garnishing your wages. That means your employer will be informed about your unpaid debt, and will be instructed to remove a court-ordered amount of money from your paycheck until the amount of your medical bills is paid.

    If you own real estate, the bill collection agency also has the option to put a lien on your property. In this case, the debt becomes public knowledge, and the bill collection agency will be paid if you sell your property.

Taxes

    Sometimes, you can settle with the bill collection agency. This means each party agrees that you will pay a smaller amount than the actual debt owed, and the collection agency will forgive the difference.

    When and if this happens, the bill collection agency may send you a 1099 tax form for the amount forgiven. Then you are required to pay income tax on the amount of money owed that you did not have to pay.

Statute of Limitations on Bills in Michigan

Statute of Limitations on Bills in Michigan

A statute of limitations for civil court is the legal time period in which a collector has a right to sue. The reason for a statute of limitations is that, after a certain amount of time, evidence begins to become misplaced or disappear, witnesses are lost and files are misplaced or destroyed. Every state has laws that govern statutes of limitations, and Michigan is no different.

Bills of Debt

    The Michigan statute of limitations for bills of debt, such as loans or credit cards, is six years. Although negative credit can stay on your credit report for seven years, credit reports are not legal documents that say you owe money. Therefore, even if a creditor is asking for money more than six years and less than seven years after your account closed, any civil suit that they could bring against you would be dismissed by the court for surpassing a statute of limitations.

Breach of Contract

    In Michigan, bills that arise from a breach of contract have a six-year statute of limitations. Examples of bills that arise from breach of contract are bills from a landscaper or contractor. A breach of contract includes payment schedule, but can include a great deal more. If you are a contractor and you receive notice from a collector that a customer is seeking restitution, that bill would fall into this category.

Breach of Sale

    The statute of limitations for bills arising from a breach of contract for the sale of goods under the UCC is four years. This would include any bills whereby someone sold you something directly and you failed to pay.

Civil Judgments

    The statute of limitations for civil court judgments is 10 years.

Real Estate

    Any real estate mortgage or loan bill has a statute of limitations of 10 years. This is different from the statute of limitations for rent money due, which is six years.

Saturday, March 27, 2010

How to Deal With Garnishments

Garnishment allows creditors or debt collectors to transfer money from a person's bank account for an unpaid debt -- or to demand regular deductions from the debtor's paycheck. Garnishment is possible after a court order by a judge. Banks, credit unions and employers are forced by law to comply with garnishment. Garnishment freezes bank accounts as the debt collector withdraws money in a lump sum or as it becomes available. During garnishment, the debtor may access the account only to make deposits. Garnishment requires employers to send a percentage of the employee's pay each pay period to the debt collector. Dealing with garnishment is a serious matter and may require help from an attorney.

Instructions

    1

    Identify the source of the garnishment by reviewing notices sent to you by a small claims court or your employer. For bank garnishment, contact the bank. Banks and employers will tell you who is responsible for the garnishment and offer a contact number.

    2

    Stop using the bank account with the garnishment if you're dealing only with bank garnishment. Redirect all your recurring direct deposits to a new bank account or prepaid debit card account. Bank garnishments are for a specific account, with debt collectors usually obtaining the account number from previous payments made by personal check. Moving to a different bank account or prepaid debit card account could allow you to escape the garnishment, at least for a while.

    3

    Visit small claims court in your county to confirm that the garnishment is valid. Ask for assistance from a court clerk to view records for the court judgment and garnishment order against you. Make copies for your records. Garnishment is possible only after a party filed and won a lawsuit against you, unless the party is a government entity, such as the Internal Revenue Service. The legal victory results in a judgment ordering you to pay a specific amount of cash, followed by garnishment in some cases.

    4

    Ask the clerk for paperwork available through the court for filing a "motion to vacate judgment" if you were unaware of the lawsuit or did not attend the court hearing. Failing to show results in an automatic default judgment, which is reversible by a motion to vacate. Vacating the judgment forces at least a temporary end to garnishment. File the motion with the court; a judge will respond to the request in writing. Ask a court clerk about typical waiting times for a response.

    5

    Call the debt collector holding the garnishment order if a motion to vacate the judgment is not an option. Make an offer to end the garnishment. Offer a lump-sum payment, if you can afford it, or promise regular monthly payments -- but don't offer to pay more than you can truly afford. Negotiate with the debt collector, but don't enter into a final agreement over the phone. If the debt collector is willing to offer a deal, ask him to send the details in writing, preferably by fax to speed up the process.

    6

    Consult with a consumer affairs attorney who also specializes in bankruptcy filings if the debt collector will not agree to end the garnishment. Give the attorney all pertinent information about the garnishment, including any correspondence from the debt collector. The attorney can advise you about legal options. For example, the state of New York has laws preventing bank garnishment if less than $1,750 is in the account. Also, federal laws prohibit garnishment on certain types of income, such as pension payments and Social Security benefits.

    7

    Direct the attorney to send the debt collector a letter indicating that you will file for bankruptcy if the debt collector does not end the garnishment and accept a settlement. Bankruptcy ends garnishment immediately and, depending on the type of bankruptcy, the debt collector may receive nothing.

    8

    File for bankruptcy with the help of the attorney if all other efforts to end the garnishment fail and you cannot pay your bills or cover your living expenses as a result.

Friday, March 26, 2010

How to Get a Credit Line Without a Personal Guarantee

If you are a new or established business, you may be wondering if it is possible to get a credit line without a personal guarantee of your own assets and income. The answer is yes, in some cases. Some business credit card companies, like Advanta, will process a credit card application using only the business's name as a guarantee. Information about your business credit line is not reported to your personal credit report. There are a few things you need to do for your business credit application to be approved this way.

Instructions

    1

    Register your business with the state as a corporation. There are a number of low-cost services that you can use for incorporating yourself (see links below). Once you are a corporation, your business becomes a separate entity from you, the individual.

    2

    Apply for an employer identification number (EIN) for your corporation. You will use this number in place of your Social Security number when you process applications regarding your corporation.

    3

    Check your mail. After a couple of weeks, you will probably start to receive applications for business credit cards. Look at the interest rates, rewards and other program offerings and decide which business credit cards you will apply for.

    4

    On the credit card application, look for the section that asks for information about your business structure. Select the option for "corporation." Write in your EIN where it asks for your Social Security number or taxpayer ID. You may be asked for verification of your corporate status from the creditor to process your application without a personal guarantee from the owner. The creditor will also probably check your business credit report to see how your business has been with payments in the past.

Wednesday, March 24, 2010

What Are the Primary Functions of Finance Companies?

What Are the Primary Functions of Finance Companies?

A finance company seeks simply to finance the activities of other businesses and individuals. This means that the company is in charge of lending money to those interested in pursuing such funding. Finance companies focus solely on this lending aspect and do not accept deposits the way that banks do. This allows finance companies to respond more quickly to changes in interest rates, so they are often able to offer slightly better deals on the money they lend out.

Personal Loans

    One of the most common functions for finance companies is the distribution of personal or individual loans. These are loans to individuals not affiliated with any business, and designated for personal uses. The most common type of individual loan is the home loan or mortgage, but of smaller loans, such as auto loans, are also popular.

Business Loans

    Business or commercial loans are granted to businesses for use in an enterprise. There are many types of business loans, and finance companies may handle any of them. Some businesses may want money to buy assets like property or equipment, while others want a loan for their first major supply purchase, or a bond payout they cannot currently afford. Business loans are often larger than individual loans and make the finance company more money on interest.

Funding Activities

    Since finance companies do not receive their money from deposits the way that banks do, they need another way to come up with the money that they loan out. One of the main functions of a finance company is borrowing these funds from banks themselves, or acquiring the funds from money market activities.

Capital Financing

    Capital financing is a special type of financing that is conducted by finance companies owned by parent companies that sell products or services. These finance companies work with the customers of the parent company, loaning them money so that they can purchase parent company goods. The parent company benefits from the decrease in inventory and the interest that the loan will generate.

Bankruptcy Counseling and Debt Information

Although many Americans do all they can to stay afloat financially, debt and bankruptcy often becomes a reality. This is not desirable, because debt decreases disposable income. Additionally, bankruptcy stays on your credit report up to 10 years and greatly influences your ability to get future credit. Bankruptcy counseling and debt typically go hand in hand.

Purpose

    Often, people who file for bankruptcy file again later. This results in enormous losses for lenders. It also costs taxpayers money, because courts must meet the administrative costs of handling the bankruptcy. The purpose of bankruptcy counseling thus is to modify your financial habits and make you aware of the ramifications bankruptcy has. Ideally, armed with new financial methods and bankruptcy information, your likelihood of filing decreases.

When Counseling Is Necessary

    Counseling about bankruptcy is useful to all consumers. However, counseling becomes more necessary when you have trouble managing your debts or budget, or if you have trouble negotiating payment plans with lenders.

Types of Bankruptcy

    The primary types of bankruptcy include Chapter 13 and Chapter 7. With Chapter 13, you make a payment plan to handle your debt with future earnings, rather than through liquidation of assets. With Chapter 7, you liquidate all your assets that are not exempt and use the money to pay off your lenders. Because each type of bankruptcy operates differently and has specific regulations attached, the advice you receive in bankruptcy counseling depends on the type of bankruptcy you file.

Changes in Bankruptcy Law

    Due to changes in bankruptcy law enacted in 2005, you must enroll in bankruptcy counseling at least six months prior to filing. Additionally, there are more restrictions against Chapter 13 bankruptcy. This counseling must be from a government-approved agency.

Considerations

    Although you must seek financial counseling from an approved government agency if you're going to file for bankruptcy, many independent organizations provide similar counseling. Not all of these companies are legitimate and, in fact, some actually prey on those with debt problems. Good agencies do not charge for their information or use of other financial resources. They operate entirely as nonprofits, considering the issuance of free bankruptcy help an asset to the overall health of the economy. As the Federal Trade Commission suggests, always check if the agency you are considering using is licensed or has a good rating through the Attorney General, your local consumer protection agency and the Better Business Bureau.

Tuesday, March 23, 2010

How to Merge Debts

Reducing debt is often a long process as you send each credit account a little money each month. However, there are tactics to help you get rid of your debt faster and manage your debts. Debt consolidation is a way to merge your debts into one bill and make one payment a month. This benefits you if you have high interest rates on your credit cards, because debt consolidation often results in a lower rate and fewer interest charges. A drop in interest charges helps you pay down the balance faster.

Instructions

    1

    Move your high interest credit cards. Check the interest rates on your existing credit cards, and then apply for another credit card to see if you can get a better rate. If so, move or transfer the balance from your higher interest cards to the card with the lower rate.

    2

    Take advantage of lower rate home equity loans. A high credit rating (700+) can qualify you for a low interest rate home equity loan, and you can use money from the loan to consolidate or merge your outstanding debts. Check with a mortgage broker to compare rates on an equity loan or line of credit.

    3

    Get a secured debt consolidation loan. Take personal property like your car and use it as collateral for a low-rate debt consolidation loan. Apply with your personal bank and then compare the quote with one or two other institutions to get the best interest rate.

    4

    Use debt counseling to merge your debts. Services can help you consolidate your debts and get a better interest rate. Nonprofit debt/credit counseling agencies offer education, debt management services and negotiating tactics to help you repay your debts sooner.

How Bankruptcy Affects You

Consumers shouldn't use bankruptcies as a way to fix debt problems. Yes, a bankruptcy can wipe out your outstanding credit card and loan balances. However, the consequences are severe and long-lasting. Before filing a bankruptcy with your court system, consider the effects on your credit and personal finances.

Credit Score Drop

    The full effects of a bankruptcy are unknown until the information shows on your credit report. A drop in credit score is expected, and the actual damage of filing a bankruptcy varies for each person. According to the Consumer Credit Counseling Services, a bankruptcy can reduce credit scores by 100 points or more. A bankruptcy filing is likely to affect someone with good credit more than someone who already has bad credit.

Decade Credit Stain

    Bankruptcies remain on credit reports for the duration of 10 years. Having this information on your personal file may scare off some lenders and make opportunities for financing in the future scare to non-existent.

Interest Rates

    Higher interest rates are expected after filing bankruptcy due to a drop in credit scores. Creditors and lenders charge higher interest rates after bankruptcy because you're seen as a high-risk applicant who is more likely to default on bill payments than someone with a good credit score. The higher your interest rate, the higher your payments on a loan or credit card. For example, a five-year $15,000 car loan with a 4 percent interest rate has a monthly payment of $276.25. Increase the interest rate on the same loan to 10 percent and monthly payments jump to $318.71.

Mortgage Loans

    After filing bankruptcy, you'll likely need to postpone any plans to purchase a home for at least two years. According to the Home Loan Learning Center, mortgage lenders typically require a minimum credit score of 680; therefore, they will not consider your application shortly following a bankruptcy. You'll need the time to rebuild your credit score and prove that you can manage your debt and finances. Federal Housing Administration-insured home loans are an option 24 months after a bankruptcy, says Bank of America. Mortgage brokers and lenders can provide specifics on eligibility.

Employment

    Filing bankruptcy doesn't only affect loan options, it can also affect employment opportunities available to you. Certain jobs in industries such as the government and banking do require a good payment history (no missed or late payments) and no recent derogatory information (bankruptcies, foreclosures, repossessions and collection accounts). A bankruptcy can indicate poor debt and money management skills and disqualify you for a position.

How to Reduce Debt by Up to 70 Percent

How to Reduce Debt by Up to 70 Percent

Getting into debt is easy. Getting out of debt is hard, but with determination, you can reduce your debt. If you face financial hardship, you may be able to use a debt reduction plan to reduce your debt as much as 70 percent. The reductions must be negotiated with creditors, and the percentage of reduction attainable varies. If you want to reduce your debt while your account is current, your creditors are unlikely to agree. If you are seriously delinquent, you may contact your creditors individually to negotiate a debt reduction, but chances are you will need the services of a reputable debt settlement company to be successful.

Instructions

    1

    Compile a list of your consumer debts such as credit cards, personal, nongovernment student loans and auto loans.

    2

    Calculate your total debt. Figure out the percentage of each debt relative to the total. If credit cards represent a large percentage of your debts, make a note to start with reducing credit card debt. You should also classify your debts based on annual percentage rates. Credit cards, particularly department store cards, and personal loans carry the highest APRs.

    3

    Create a list of income sources and total expenditures that include household costs and other necessities. Part of the requirements to work with a debt settlement service is to figure out your debt-to-income ratio, which establishes your capacity to repay your debts.

    4

    Research national debt settlement programs at The Association of Settlement Companies website. Choose a company that is accredited and bonded through TASC. A number of companies' debt settlement services include credit counseling and debt reduction programs. Through them, you may seek interest rate reductions or principal balance reductions on your debts. An interest rate reduction lowers your monthly payment, allowing you to pay more towards the principal each month, but your overall debt amount is not settled for a lower amount. In a debt settlement, your debt settlement company negotiates a reduction of the principal balance with your creditors. The actual reduction amount varies based on the type of debts you have and what your creditors are willing to accept.

    5

    Contact a debt settlement service and explain your financial situation. Based on an evaluation, the representative will be able to determine which program is right for you. Inquire about service fees, which are based on how much debt you have. Some debt settlement companies charge fees up front. However, reputable companies will only charge you if they are able to successfully reduce your debt.

Monday, March 22, 2010

How to Put an Alert on a Credit Report

Identity theft is an increasingly common crime, and a fraud alert is one of the first steps to stop a thief from using your information. At least 9 million Americans are victims of identity theft each year, according to the Federal Trade Commission's Identity Theft website. Once you put a fraud alert on your report, lenders should contact you by phone before opening any account in your name, although they are not required to by law. Once you believe you're a victim of identity theft, it is fairly simple to request a fraud alert.

Instructions

    1

    Request an initial fraud alert on your credit report. This will last for 90 days.

    2

    Contact the fraud department at one of the three major credit bureaus as soon as you notice the possibility of identity theft. You can reach Equifax at (888) 766-0008, Experian at (866) 397-3742 and TransUnion at (800) 680-7289. You can also request an initial fraud alert online from Equifax at http://alerts.equifax.com and Experian at http://Experian.com/fraud. Once you call one credit bureau, it will share your information and pass on the alert to the other two bureaus.

    3

    Provide the necessary personal information to request the alert. This includes your first and last name, Social Security number, address and email address.

    4

    Include a telephone number so lenders can call you when someone attempts to open a credit card in your name. A cell phone number is easiest so that lenders can quickly reach you. The alert is in place even when you try to open a new account.

    5

    Watch for a confirmation in your mail a week or two after you file the alert. If you don't receive a confirmation, contact the credit bureau again.

    6

    Request an extended fraud alert if you have proof of identity theft and want further protection. An extended fraud alert will stay in place for seven years. Setting up an extended alert requires proof of identify theft through a report with a law enforcement agency.

Gambling & Credit Card Debt

Gambling & Credit Card Debt

Casual gambling can turn into a serious addiction that quickly depletes finances. Gamblers often turn to credit cards to fund their habit, only to find the mounting debt overwhelming.

Statistics

    According to the SMR Research Corporation, 90 percent or more of those suffering from gambling addiction use credit cards to gamble. Approximately 10 percent of bankruptcy filings are linked to gambling losses and over 20 percent of compulsive gamblers end up filing bankruptcy due to gambling losses.

Easy Credit

    Credit cards make for easy gambling.
    Credit cards make for easy gambling.

    Easy access to credit makes it simple for the compulsive gambler to fund his addiction. The very act of funding gambling with credit cards indicates a gambler has gone from recreational gambling to problem gambling.

Recommendations

    Friends and relatives of gamblers should look for behavior indicating that the gambler is funding her habit with credit cards and be prepared to intervene when necessary. Canceling jointly-held credit accounts and directing the gambler to therapy or support groups can halt debt growth before it grows out of control.

Sunday, March 21, 2010

How to Fight an Aggressive Bill Collector

How to Fight an Aggressive Bill Collector

Falling behind on your credit card bills and other debts often ends up in endless calls or letters from collection agencies. Bill collectors can cause you serious problems, especially when they get aggressive and use harassing or even illegal tactics. Fortunately, you have specific rights against collectors, and when an agency or creditor gets overzealous, you can sue it in court and have it end up paying you.

Instructions

    1

    Research the Fair Debt Collection Practices Act. This law limits what collectors can do when trying to get you to pay a debt. The FDCPA is a federal law that applies to all states, and knowing its provisions is essential if you want to fight back against a creditor.

    2

    Keep records of every communication you have with a debt collector. Make copies of letters you receive and those you send, keep a log book of any phone calls made, and explore the possibility of recording phone calls. You may not legally be allowed to record phone calls in your state, so talk to a lawyer before you consider recording conversations.

    3

    Get information. Debt collectors must give you their names and contact information when they contact you or when you request it. Make sure you keep a record of all the collectors who contact you so you know who to name in a lawsuit if you later sue them.

    4

    Make your demands in writing. You have the right to demand that a debt collector stop contacting you completely. Though this does not stop the creditor from suing you, you can demand that the creditor stop calling or writing you, or that it only contacts your attorney. Make all such demands in writing and keep a copy. If the creditor later contacts you contrary to your demand, this is a violation of your rights.

    5

    Contact the Federal Trade Commission. You can file a complaint against any violator you believe violated your rights. Be prepared to provide evidence of the violations. Contact the FTC at ftc.gov or call 1-877-FTC-HELP (1-877-382-4357) to file a complaint.

    6

    Sue the violators. The Fair Debt Collection Practices Act allows a judge to impose a $1,000 fine for each time a collector violates the terms of the law, even if you didn't suffer financial damage because of the violation. You can sue the creditor in federal court, state district court or state small claims court if your claim is small enough.

Friday, March 19, 2010

Alternatives to Credit Reporting

The main purpose for a credit report is to determine how likely you are to pay your obligations on time and in full, based on your past history, and paint a picture of how you use your available credit. Sometimes, suitable reports are not available from the national credit bureaus, or you may need to show through alternate means that you are able to pay your loans. There are ways to do this outside of the credit reporting agencies.

Lenders Using Alternate Credit

    Most lenders use the traditional FICO score, created by the Fair Isaac Corp. as a partial, if not complete, determiner of the creditworthiness of a borrower. If you don't have a FICO score, or it is not high enough, forget about getting a loan with a large bank where the loan decision is automated. If you are using alternate credit, you should look toward small local banks or credit unions where you can walk in and speak with the person who will be making the loan decision. They will be more likely to take special circumstances into consideration, and manually underwrite a loan.

On-Time Payments

    If you are looking for an FHA home loan, the bank can specifically look at rent receipts and utility payment receipts to establish how likely you are to make a mortgage payment. The bank probably will want to verify these payments with a third party, and some credit reporting agencies will perform this service for the banks if they don't do it themselves. Banks may also use paid cell phone bills and records from retail stores that offer credit to their customers as a credit reference.

Bank Accounts

    A bank account can be a source of credit for a lender. If you can show bank statements covering 12 months without bounced checks, a bank may accept this as a source of good credit because you are able to manage a bank account. Also, if you have too many bounced checks, you may not be able to open a checking account because banks are keeping track of people who abuse checking accounts through Chexsystems. Regular deposits into a savings account showing balance that is consistently rising over time can also be used as a positive credit reference.

Expansion Score

    Fair Isaac has also launched its expansion score. This score looks at credit references that do not routinely report to the major credit bureaus, such as payday lenders and rent-to-own stores. Fair Isaac believes that the expansion score may be able to generate an acceptable credit score to be used by lenders for the estimated 25 million Americans who do not have a FICO score, mostly immigrants and younger people. Others feel that this may just become a way to locate borrowers who are already overpaying for credit, and target them for more high-priced loans.

How to Eliminate Charge Off Credit Card Debt

How to Eliminate Charge Off Credit Card Debt

Charge-offs are accounts that a creditor has deemed "uncollectible." These are serious delinquencies on a credit report. If you have any charge-offs on your report, you should take immediate action to remove them. However, this process can be challenging. The credit bureaus reserve the right to report delinquent debt for a period of up to seven years, but they are not legally obligated to do so. Therefore, if you make a compelling case to them, the credit bureaus may remove negative items from your report.

Instructions

    1

    Pull a copy of your credit report to verify that the charge-off actually exists. Visit annualcreditreport.com to obtain a free copy. Once you obtain your report, look in the Public Records section for any charge-offs. These accounts will be shown as at least 120 days overdue.

    2

    Contact the original creditor to obtain a payoff statement. A payoff statement is a bill that reflects the total amount due on the account including all back interest, fees and late charges. It will have a good-through date (expiration date). Pay off the remaining account balance, if you can.

    3

    Arrange a repayment agreement if you cannot afford to repay the debt in one lump sum. You will likely need to agree to a monthly repayment plan. Your monthly payments will be based on your monthly income. Make photocopies of your income documents (pay stubs, W-2s) and either Fax or mail them to your creditor. Begin making payments on your debt. Your charge-off balance must be paid in full before you request its removal from your report.

    4

    Review the time period in your life when the account went delinquent. The credit bureaus will want a reason for the delinquency. This could be due to unemployment, disability, medical bills or a death in the family (the breadwinner).

    5

    Find any documents that will corroborate your reason for delinquency; for example, award letters for disability payments, medical bills, or proof of SSI (Supplemental Security Income) payments to the debtor.

    6

    Draft a goodwill letter. The credit bureaus will not automatically remove charge-offs once they're paid. In most cases, if you do not take action, they will remain on your credit for seven years. See Resource 2 for a sample goodwill letter. This letter must describe, in detail, the economic hardship leading up to your delinquency.

    7

    Make copies of all documents relating to your hardship. Include these in the envelope with your goodwill letter. Send this letter to all credit bureaus reporting the charge-off. See Resource 3 for contact information.

    8

    Wait for a response. The credit bureaus have 30 days to respond to your letter and 90 additional days to make a decision on your request.

Thursday, March 18, 2010

How to Offer a Settlement on a Charged-Off Credit Card

How to Offer a Settlement on a Charged-Off Credit Card

Consumers that find themselves drowning in a growing pile of credit card balances and interest fees may look to offer a settlement on outstanding credit card balances. In a settlement, a debtor proposes to permanently close the account by paying less than what is owed. It is not a clean slate solution, as you still owe the remainder of the balance -- it is more of an agreement between the debtor and creditor to move on.

Instructions

    1

    Conduct a financial inventory. Before offering settlements, you want to understand how much you owe and what you have to work with in an effort to settle these debts. Get out the most recent statement for each credit account you wish to propose a settlement and list the outstanding balances. Then, review your current assets, bank account balances and expected future cash flow.

    2

    Construct your settlement offers. Based on your outstanding debt, number of accounts and available cash, come up with how much you would be willing to offer the creditor to settle the account in full. While you do not want to go too high, offers that are too low will be not be considered. At a minimum, you will want to make sure you have the cash to cover at least 40 to 60 percent of your outstanding balances.

    3

    Write a letter to your creditors. For each creditor you wish to settle, send a certified formal letter indicating your interest to settle the account as well as your offer. This is the negotiation stage, so perhaps you may want to start a little lower and see what type of response you get. Once the letter has been delivered, wait for written response from the creditor. If the creditor accepts your offer in writing, immediately transmit payment.

    4

    Stop paying your monthly bills. As long as your account is current, even if you are only paying the minimum payment, the creditor will be disinterested in simply accepting a settlement and charging off the rest. Provided the previous step fails, your creditor will be more interested in settling once you are not paying. This is a tough step to take as it comes with stress, and will wreak havoc on your credit score.

    5

    Force a settlement offer. After three or four months of not paying your minimum payments and not returning your calls, your creditor may be incline to reach out to you with a settlement offer. This is another opportunity to negotiate the amount down, but if the amount is within your budgeted range, strongly consider accepting the offer to avoid additional financial and legal complications. Once the offer is extended in writing, formally send in a written response of your acceptance along with payment.

    6

    Monitor your credit report. During this process, particularly if you are not making minimum payments, your credit score will suffer. Review your credit report before, during and, especially after, the settlement process is complete. You want to verify the completion of the process, where the account may read something like "paid as agreed" or "legally paid for less than full amount."

Help for Fixing Consumer Credit

Help for Fixing Consumer Credit

Getting into trouble with credit is not hard to do. High credit card balances on multiple accounts, missed payment or collection can really hurt a credit history. A bankruptcy or foreclosure can damage it for between seven and 10 years. Consumers can fix their credit, but it takes commitment, time and effort. Sometimes it also takes a little help from outside sources.

Credit Report Errors

    Many people in trouble with credit problems fail to realize that they are best person to help them out of a bad credit situation. A copy of a current credit report is the best place to start, and annualcreditreport.com gives every consumer a free report from each of the three major credit bureaus once a year. It is not unusual to find errors on a credit report, such as accounts with incorrectly reported data or ones that belong to someone else. According to the Federal Trade Commission, sending a letter to the credit reporting agency listing the disputed account info and supporting data can start the process of correcting the information. The agency has 30 days to investigate the claim and request an investigation from the creditor. If the information is invalid, then the agency will correct the account entry.

Collections

    Accurate, but damaging, credit items on a report are harder to fix. According to the credit reporting agency Experian, a collection account shows both a balance and a delinquency, both of which negatively affect a credit score. Paying off the debt changes the balance to $0, which is a positive factor, but the impact of the delinquency remains. However, the longer the period since the delinquency, the less impact it has on the score. After several years, the delinquency will have little to no lingering effect to a credit score. In addition, all negative reporting falls off a credit report in seven years.

Credit Counseling

    Sometimes it is difficult for a consumer to gather the persistence and discipline required to fix her own credit. There may not be enough time in her schedule, or creating a repayment plan is a challenge because she cannot manage her spending. In those cases, a credit counseling agency can really help. These nonprofit agencies help negotiate settlements or better terms with creditors, set up a monthly budget and help create a payment plan called a debt management plan. A credit counseling agency may also collect one monthly debt payment from the consumer and distribute it among his creditors. These agencies receive a low monthly fee, typically $25 or less, along with a sign up fee of no more than $50. Some agencies will perform services at no cost to the consumer. The National Foundation for Credit Counseling helps consumers find the right reputable agency.

Credit Repair

    Credit repair is the last step in fixing a credit history. New loans, such as auto loans, give the consumer the chance to show that her credit mismanagement is behind her when they are paid on time and in full. Secured credit cards, which hold money equal to the credit line amount of the card aside in an account, are another way to start building a positive credit history. After about two to three years, poor credit scores can recover into the average range.

Wednesday, March 17, 2010

What Is the Legal Process to Garnish a Bank Account?

What Is the Legal Process to Garnish a Bank Account?

Although most people intend to pay their debts on time and as outlined in their credit agreements, it sometimes isn't possible to avoid creditors from seeking collection via a debtor's bank account. Current debt and credit law outlines distinct steps for account garnishment. Legitimate companies follow these steps to get what debtors owe.

Collection of Information

    Before a creditor can do anything regarding garnishment, they have to gather basic data about you and the bank. For instance, they need your account number and the address of the bank. They also verify the amount of the debt you owe and the account number their company has assigned you. Creditors do this because it costs money to ask for garnishment through the courts, and because the courts won't issue a garnishment order if the creditor doesn't have all the data necessary for the garnishment.

Lawsuit and Certification of Judgment

    When a creditor is sure he has all the information necessary for garnishment, he files whatever papers are required by the state to initiate a lawsuit. The court looks at the evidence the creditor has to determine whether the lawsuit is valid. During the lawsuit, you have a right to defend yourself. If you ignore notices regarding a lawsuit, the courts typically will side with your creditor. At the end of the lawsuit, if the judge finds the creditor's garnishment request is reasonable, he will issue a judgment that states the creditor has the authority to garnish your wages. Typically, the creditor then verifies the judgment with the county clerk, which means the clerk records the judgment formally on the judgment docket.

Getting and Filing Paperwork

    Once creditors have a valid judgment against you, they get the forms they need to proceed with garnishment. They fill these forms out and process them with the county clerk. The clerk then issues copies of a formal Writ of Garnishment. During this procedure, the creditor also obtains a copy of the judgment and Answer to the Writ of Garnishment forms.

Serving the Garnishment Papers

    Your creditor has to let the bank know he has a garnishment order against you. The creditor thus serves the bank with a copy of the Writ of Garnishment, the copies of the Answer to the Writ of Garnishment forms, envelopes addressed to the county clerk, your creditor and you, and a check or money order that covers the cost of the bank processing the garnishment order.

Notifying You

    Your creditor legally isn't supposed to withdraw money from your account until you know the garnishment is going to happen. For this reason, the creditor sends you a copy of the Writ of Garnishment, an exemption claims form (you can list what monies in the account should be exempt from garnishment, such as Social Security), a Notice of Garnishment and a copy of the judgment. If for some reason you didn't know by this point the creditor was taking action to collect money from your account, you still have a right to protest the garnishment via the court, but you'll need to prove that the debt isn't owed or that the creditor didn't follow due process.

Negotiation

    Once you have received a Notice of Garnishment, the next step usually is looking at your budget and negotiating a payment plan or settlement, as you can't use your account until the debt is eliminated. If you agree to pay even a portion of the debt from other sources, the creditor typically will deduct less from the bank account.

Actual Garnishment

    If you cannot negotiate in a way that eliminates the need for garnishment, the creditor proceeds to withdraw money from your account as stipulated in the Writ of Garnishment. In some cases, this amount is small. In other cases, the garnishment entirely drains the account. If you put more money into the account during the garnishment collection process, the creditors are legally entitled to access those funds until you pay the entirety of your debt. For this reason, most debtors end up relying on other accounts or put their money into prepaid credit and debit cards at this point.

How to Remove Student Loans

Failing to repay a student loan puts you in default, most likely resulting in a negative score on your credit report. While there is a legal way of having this information removed, keep in mind that a borrower typically ends up in this situation because he didn't make the required payments on a student loan, according to the loan agreement. Seeing this failure, a lender will signal to the major credit bureaus that the borrower has a delinquent account.

Instructions

    1

    Order your credit report from the three major credit bureaus--Experian, Equifax and TransUnion. You can obtain a free copy of your credit report at AnnualCreditReport.com. Simply complete your request online, or download the appropriate form and mail it to the credit bureaus.

    2

    Review your credit reports and locate all of your student loan accounts. Write down the lender or collection agency's name, your account number, outstanding balance, amount of your last payment and other relevant details. Make notes of any errors or inaccurate information you find.

    3

    Contact the lender or collection agencies involved. Depending on your financial situation, the lender or agency may offer you a settlement offer for less than what you actually owe. If you agree to a monthly payment plan, make sure the plan is affordable for your budget. In addition, work with the to remove your defaulted student loans from your credit score, as soon as you pay the balance in full.

    4

    Get the agreement in writing. Ask the lender or agency to send you a confirmation letter stating the payment agreement terms, your current balance due and the appropriate due dates for the remaining payments.

    5

    Submit your required payments in a timely manner. As soon as you make your final payment, request a paid in full letter. This letter is proof that you did fulfill the payment agreement's requirements.

    6

    Verify that your student loans have been removed from your credit reports. You can order your credit report by visiting Experian.com, Equifax.com and TransUnion.com. It may take up to 30 days for the lender or collection agency to contact the credit bureaus about your account status. If the student loans still appear on your credit reports, submit a formal dispute form to each credit bureau.

Definition of Skip Tracing

People seeking to escape collection agencies may be able to run, but they may not be able to hide very long. Those skilled in the art of "tracing" are always on the lookout for debtors who have "skipped" out on their bills.

Definition

    Skip tracing locates missing debtors who are attempting to avoid having to pay bill collections or past-due judgments, according to Bene Finders. The person doing the work to locate the debtor is known as a skip tracer.

Methods

    Skip tracers look for the person using a phone book, the Internet and public records from the Department of Motor Vehicles or courthouses. They also use paid services to find a debtor, such as hiring an investigator to go door-to-door in the debtor's last known neighborhood and place of employment.

Regulation

    The Fair Debt Collections Act governs the limits of skip tracers and collections procedures. Section 803 of the Act allows a skip tracer to obtain a debtor's employment and residence information.

Warning

    A skip tracer must stay within legal boundaries when searching for a person. Harassment of a debtor and unfair actions violate the Fair Debt Collections Act, which may lead to legal action against the skip tracer.

How to Make Quick Cash for a Debt

How to Make Quick Cash for a Debt

You don't need to cash out your car title or dig yourself deeper in the hole to pay off a serious debt. With a little creativity and determination, you may find a variety of money-earning opportunities. Some could even become ongoing activities in your future.

Instructions

    1

    Sell things you don't use anymore through classifieds or Internet selling sites. School textbooks, electronics, musical instruments, games and computer equipment are hot items as of 2010, and by listing your high-ticket items on multiple platforms, you can choose to sell to whomever is willing to pay the most.

    2

    Start an account on FreeCarMedia.com. Free Car Media is a marketing company that pays ordinary people up to $900 a month to wrap their cars in advertisements and drive around.

    3

    Participate in a clinical study. Some studies pay in the thousands in exchange for you to try a product or lifestyle change. There are studies for the healthy and for others with serious conditions. Start at clinicaltrials.gov to see if you're eligible for any paid tests in your area.

    4

    Take on an odd job or temporary job. Consider babysitting for the neighbors, dog walking, data entry or enrolling with a temp agency.

    5

    Deliver vehicles to dealerships. People transporting large specialty vehicles like ambulances and trucks to dealerships can make around $30,000 a year, according to CNN Money.

    6

    Be a movie or TV extra. Search "casting call for extras" in your search engine, accompanied with your location, to see if local opportunities exist.

Tuesday, March 16, 2010

Can I Be Summoned to Court for Credit Card Debt If I'm on Disability & SSI?

Having a lot of credit card debt can be worrisome, particularly if you don't have many assets and have a limited income. While it is possible that a credit card company, or its collection agency, might file a lawsuit, it is unlikely that it will be able to collect much, if anything from you. State and federal laws make it impossible for most creditors to garnish or seize Social Security income and assets.

Social Security Disability Programs

    Supplemental Security Income (SSI) is a federal benefits program administered by the Social Security Administration that provides benefits to elderly, blind or disabled people who have a very low income. Social Security Disability Insurance (SSDI) provides disability benefits to those who paid into the Social Security system long enough to qualify. SSI income is protected from garnishment by all creditors, and SSDI income is protected from garnishment by most creditors, with the exception of repayment of certain tax, child support and student loan debts.

Court Summons

    If you receive a summons to court, don't ignore it. Seek legal advice if possible. Your local legal aid society may be able to help you. If you or your lawyer inform your creditor that your income is exempt from garnishment, the creditor may dismiss the lawsuit. If your creditor wins a judgment against you, you need to prove to the judge and creditor that your income is from exempt sources, so bring documentation showing the source of your income to court.

Time Frame

    Once a creditor has a judgment against you, it can continue collection efforts until the statute of limitations on judgments has expired in your state. The statute of limitations on judgment collections can be very long in some states, and it can often be renewed by a judge. This means that your creditor may have decades in which to try and collect a judgment from you. If your circumstances change, prepare to hear from your creditor.

Credit Reporting

    Late payments, charge-offs and paid judgments can remain on your credit report for up to seven years. If your judgment remains unpaid, it can stay on your credit for seven years or the length of the statute of limitations on judgments in your state, whichever is longer. This can have serious and long-lasting effect on your credit score.

Prevention/Solution

    While it may be difficult for a creditor to collect a debt from you, the fallout of unpaid credit card debt, such as property liens, collection calls and a bad credit report, can be ugly. If you find yourself in serious debt, consider negotiating a settlement with the credit card companies, either on your own or with a credit counselor.

Reasons for UK Consumer Debt Increase

Reasons for UK Consumer Debt Increase

Consumer debt is outstanding, or unpaid, consumer credit. It is also sometimes called personal or household debt. Reuters reported in April 2010 that personal debt, including mortgages, in the U.K. stood at 1.5 trillion, or $2.16 trillion, and that one in ten people has debt problems. Credit Action, a charity, reports that this is a twelve-month growth of 0.9%. It adds that the average household debt in the UK is almost 9,000, excluding mortgages, or about $13,000.

Reasons for the Increase

    Falling interest rates fueled borrowing.
    Falling interest rates fueled borrowing.

    Data from the Bank of England, quoted by The Institute for Fiscal Studies, show that unsecured, meaning not collateralized, debt as a fraction of household disposable income has been roughly constant since 2002. This means that the rise in incomes has been followed by a rise in debt. Falling interest rates, which fell from 5% to 0.5% in less than three years, encouraged people to borrow more. Once they entered difficulties, debt just kept getting larger, thanks to high repayment rates by credit card companies and other lenders. Rising unemployment also fuels debt problems. The goingdebtfree.com website says that more than 1,500 people in the U.K. lost their job every day in 2010.

Renters and the Poor are Most at Risk

    People renting a house are more at risk than homeowners.
    People renting a house are more at risk than homeowners.

    The Institute for Fiscal Studies says that those renting their houses and lower-income households generally face a greater risk of running into problems. This is mainly because of high and rising utility bills combined with slowing growth of real incomes. Also, people with poor credit scores get locked into high interest rates on money they borrow, which makes it more difficult to repay the debt.

Debt Forecast

    Rising unemployment makes things more difficult.
    Rising unemployment makes things more difficult.

    Most experts predict high debt levels for some time. Chris Tapp from Credit Action, in a report quoted by the Glitec financial website, stated that personal debt levels in the UK are set to remain high as many people are still struggling with their finances and therefore do not have the resources to tackle their debts and make repayments on the money they owe. The situation is made even more difficult by the fact that many people have lost their jobs or now work reduced hours.

Monday, March 15, 2010

How to Settle an Old Car Repossession Debt

When a repossessed car is sold at an auction the proceeds may not be sufficient to pay the balance you owe. If your car was repossessed and you had a balance remaining, some creditors will require you to pay it and some will not. If you have an old debt that is still lingering because of repossession, contact the creditor to make arrangements to pay. Sometimes you can settle for less than the balance owed.

Instructions

    1

    Find out who you should pay. Many creditors turn remaining repossession balances over to a collection agency or third-party debt collector. Contact the creditor and it will let you know which company is handling your debt. Call the collection agency and make arrangements to pay. You may be able to get a reduction on the balance. The collection agency will give you the address to send your payment.

    2

    Negotiate to have the derogatory credit information removed from your file as a condition of paying off the debt; otherwise, this information will remain on your credit file for seven years. Some creditors will agree to your demands and others will not. If your creditor agrees, make sure you get everything in writing before you pay the debt.

    3

    Check on the statute of limitations. If the statute of limitations has run out on the debt, the creditor can send letters and make phone calls asking for payment but cannot bring legal action against you. The statute of limitations can vary from state to state.

    Even though the statute of limitations has run out, this debt will still be on your credit report if the seven-year time frame has not passed. When you apply to buy a home, the mortgage company will make you pay it off before lending to you.

    4

    Choose the method of payment. If you can send a check for the full balance, that will be the end of it, and your check will serve as your source document or receipt. You can pay with a credit card, but you will incur finance charges if you carry the balance. Some bill-pay services allow you to pay electronically online.

    5

    Update your credit file. Make sure the collection agency reports your account as paid in full. It should show as a paid repossession. Order a free copy of your credit report after 45 to 60 days to make sure it is correct. If the information is not correct, contact the credit reporting agency with the new information.

Five Things You Need for an Insurance Policy

Purchasing insurance is often a requirement more than it is an optional expenditure. This is especially true for car insurance as well as business insurance coverage. When setting out to determine which insurance policy to buy, and when you finally settle on a policy, there are various documents that you need. However, the precise set of documentation or things you need for an insurance policy may vary with the type of policy you want to purchase.

Quotes

    Insurance quotes help to determine which insurance policy suits you best. You may obtain insurance quotes online from insurance companies' websites or from insurance salespersons. Insurance quotes indicate the different premium structures offered by an insurance company. It is also advisable for you to obtain a copy of the insurance policy to enable you to compare different benefits, coverage and premiums offered by different companies.

Identification

    When purchasing an insurance policy, most insurance providers require that you provide identification documents. These are proof of your citizenship or residency status in the country. Typical identification documents include a passport or driver's license in the case of personal insurance or a state identification card or passport in the case of a car insurance policy. Other relevant documents of identification include birth certificates and Native American tribal documents.

Financials

    You also need documents that encapsulate your financial information or information about the property to be insured. These include documents such as copies of lease agreements or a bill of sale for car insurance. Documents that demonstrate ownership of business and income levels are also helpful. These include business licenses and tax return stubs. Both employed and self-employed prospective policy holders also need to illustrate income levels. People with a disability or who are retired may use Social Security stubs to demonstrate income levels.

Records

    Records of ownership and health are fundamental documents for an insurance policy. This is especially true in obtaining a health or life insurance policy where you need to present medical records from your physician. Ownership of a business or property is also required to insure property such as business assets, a home or a car. These records are essential because they provide the insurance company with accurate information to determine how much you may claim in the event of an accident.

Application Forms

    Identification documents and records accompany the insurance policy application. You may obtain application forms online from an insurance company's website or you may get these from insurance salespersons. It is essential to provide accurate information in the application to ease the process of obtaining your insurance policy. You should obtain the insurance policy from the insurance company approximately 60 days after your application is submitted. Read through the insurance policy to ascertain that the terms of the policy are correct.

Sunday, March 14, 2010

Can You Stop a Court Order Judgment on a Credit Card Debt?

Can You Stop a Court Order Judgment on a Credit Card Debt?

A credit card company you owe a balance to can seek a court judgment against you if you do not voluntarily pay off your debt. Or the credit card company can sell the account to a debt collector that also has the right to sue you and seek a judgment. A court judgment allows the creditor to recover the debt, typically by garnishing your bank accounts or wages. Under certain circumstances, you can stop a court judgment from occurring -- even if the creditor's lawsuit is already under way.

Prevention

    If a credit card company or debt collector threatens to seek a judgment against you in court, you can attempt to prevent a lawsuit by either paying off the debt or working out a settlement with the creditor through which you pay less than the total amount you owe and the creditor forgives the remaining balance. If you cannot afford to pay the debt or settlement amount in full, some creditors will agree to a payment plan that allows you to pay your delinquent credit card debt in installments.

Fighting the Lawsuit

    Collection agencies sue debtors more frequently than credit card companies. Debt collectors, however, do not always have the documentation necessary to prove that the debtor actually owes the debt. If you contest your liability for the debt in court, the burden of proof lies with the plaintiff. Thus, if a creditor cannot prove that you owe the credit card debt, it may drop the lawsuit rather than pursue a case it may not win -- preventing a court judgment from occurring.

Prevent Docketing

    A judgment becomes official when the plaintiff "dockets" the judgment. The plaintiff does this by filing the certified judgment with the court. The court then enters the judgment into the public record. Once the judgment becomes a matter of public record, anyone can research and view the details of your case and the judgment appears on your credit report.

    Although court districts operate by different sets of rules, if you agree to pay off your credit card debt in full immediately following the judgment, your creditor may also agree not to file its certified judgment with the court. In this case, the judgment occurred but will not enter the public record or appear on your credit file.

Considerations

    Once the court enters a judgment against you, the creditor is unlikely to accept a settlement offer because it has legal means, such as garnishment and liens, to force you to pay off the debt in full. If, however, the creditor cannot force you to pay the credit card debt because your income is exempt from garnishment and you own no property on which the creditor could place a lien, it may agree to a settlement after obtaining a judgment.

Can Someone's Home Be Taken if an LLC Is Sued?

An LLC is a limited liability company. Some business owners choose this legal business structure to separate their personal debts and assets from those of the company. However, complete separation isn't always possible. Many banks and other lenders force owners of an LLC to personally guarantee loans made to the business. That means it is possible in certain instances for a business owner to lose his home because of a lawsuit against the LLC.

Process

    Most business owners seeking credit for their LLCs initially apply for financing in the name of the business only. With all credit in the name of the business only, the owners could file for business bankruptcy at any time and walk away with their personal assets unaffected. Thats why many banks insist on personal guarantees before granting credit to an LLC.

Collateral

    Some business owners elect to pledge personal real estate as collateral for a business loan to their LLCs. It is a risky move with sometimes dire consequences. If the business fails, the bank could file a foreclosure lawsuit and take the house. The action is possible even if the business files for bankruptcy protection.

Considerations

    An LLC does provide protection for the business owner against other types of lawsuits. A customer suffering from a fall in a store could sue the company, but the LLC legal structure usually would prevent the business owner from losing his house because of the lawsuit. In that situation, the assets of the LLC are at risk, but not those of the business owner. The same is true if another company sues the LLC because of a dispute, or some other entity takes legal action.

Protection

    Business owners seeking to protect their personal assets should never agree to personally guarantee debt for the LLC. For some prospective business owners, this could mean not going into business at all. Most banks simply are not going to approve a new LLC for say, a $50,000 line of credit without some form of collateral. Established businesses that are profitable may avoid personal guarantees by pledging business assets as collateral. The assets could include an office building or equipment.

Exceptions

    Some forms of credit are available to new LLCs without personal guarantees -- although the credit limits are usually small. Office supply stores and home improvement chains may grant an LLC credit cards for a few hundred dollars or a few thousand. From there the business can establish a credit rating and eventually qualify for more credit in the name of the business only.

Can They Garnish My Wages Without Me Knowing?

Not receiving your full work pay due to a wage garnishment can create serious problems with your personal finances. You might not have enough cash to pay your bills and other living expenses, and garnishment can continue until a creditor receives full payment of a debt.

Definition of a Wage Garnishment

    A wage garnishment involves a bill collector or creditor making contact with your employer, and the employer then withholding a percentage of your salary. This withholding occurs after your employer deducts state taxes, federal taxes and Social Security. Creditors can then garnish up to 25 percent of earnings, according to Bankrate.com writer Justin Harelik. A wage garnishment occurs due to nonpayment of a debt. The employer withholds the necessary funds, and these funds are then kept by a third party

How the Process Works

    Fortunately for debtors, a creditor cannot contact an employer on his own to set up a wage garnishment. Wage garnishments are court-ordered, and only occur after a creditor acquires a judgment against a debtor. A creditor schedules a court hearing, and if the court finds a debtor liable for the debt, a judge orders a judgment. The debtor can either pay the debt owed or negotiate an installment plan, or risk the creditor returning to court to request a garnishment.

Notification

    A creditor is obligated to notify a debtor of an authorized wage garnishment. This notification also includes information on specific income exempted from wage garnishment, such as worker's compensation payments and unemployment benefits. Once notified of an impending wage garnishment, a debtor can act quickly to stop the garnishment by contacting the creditor to make a payment, or appealing the ruling in court.

Stopping a Garnishment

    Full repayment can effectively put an end to a wage garnishment. But if you don't have the cash, and you can't make a living due to the wage garnishment, you can appeal the decision and schedule another hearing to plead your case. Submit a "Claim of Exemption" form with the court, and then provide supporting evidence of financial hardship due to the wage garnishment. Convincing a judge to reverse or stop a garnishment will require providing income statements, along with a proof of how much you spend on housing, utilities, food, transportation costs and debt payments.

Can You Build Good Credit With a Low Spending Limit?

The three-digit number known as a FICO score determines what interest rate you receive for a new car purchase as well as the amount of deposit required from the utility company. Building a good score requires obtaining and using credit wisely. However if you are just starting to build a credit history or have undergone a bankruptcy, it may be hard to obtain a credit card with a large credit limit. Thankfully, credit management, not the credit limit, is the deciding factor in determining your credit score.

Definition of Good Credit

    Typically your credit is considered good if your FICO score is high. Three national credit reporting agencies track consumers' scores for use by various lenders. Scores range in number from 300 to 850, with high scores indicating less financial risk to the lender. There are five parts to the score: payment history, balance on accounts, length of credit history, new credit and other factors. These parts carry different weights; payment history carries the most weight. Payment history includes any late payments, bankruptcies and other factors.

Building Good Credit

    Starting small and building up is the best way to build a strong credit history, according to Experian. Charging small amounts and paying balances on time demonstrate fiscal responsibility. Maxing out credit cards will not improve credit scores. If you have a credit card limit of $300 or less, try to use less than 50 percent of the limit at any time. It may be tempting to use the entire limit and pay it off each month but be aware of the timing issues. The credit card companies send reports to the credit bureaus at the end of the month --- sometimes before your payment is reflected. This means that your credit report will show a 100 percent utilization rate, which lowers the credit score.

Utilization Rate

    The debt utilization rate determines 30 percent of the FICO score. This rate refers to the debt balance on your account divided by the available credit. The more debt outstanding in comparison to available credit, the lower the credit score. Consumers carrying credit credits with low credit limits need to be mindful of this. For example a credit card with a $500 limit that has a $250 balance has a utilization rate of 50 percent. Paying the balance down to $100 decreases the rate to 20 percent. Lenders look for a low utilization rate when reviewing credit reports.

Credit Score Pitfalls

    A common misconception of people just starting to build a credit history is that opening lots of credit accounts will improve a score. The reverse is true; it is best to only open accounts as needed. After obtaining an initial bank card, secured or unsecured, it is best to limit credit applications. Although department store credit cards offer appealing discounts, the limits tend to be low and the interest rates high.

    Consumers need to pay all bills on time, not just those from credit card companies, to ensure good credit. Landlords, insurance companies and utility companies can also send reports to the credit agencies and any late payments reflect on the credit report. It is also wise to review the credit disclosure statement that comes with new card accounts. Some credit cards carry a universal default clause which means when you are late making payments to any creditor the credit card company can raise the interest rate.

Washington Collection Agency Laws

Washington Collection Agency Laws

Financial debt can be a burden on many consumers, especially in an economic downturn. However, consumers do have rights under law concerning the collection of debt from creditors. In the state of Washington, there are explicit guidelines that must be adhered to by collection agencies when dealing with the state's residents.

Contact by Collection Agencies

    Collection agents cannot threaten nor use offensive language when contacting consumers.
    Collection agents cannot threaten nor use offensive language when contacting consumers.

    Under Washington state law, collection agencies can contact consumers to recover debt on behalf of vendors and creditors. Collection agents must give the name of their agency, the name of the original creditor and provide correspondence indicating the total debt due. Collection agents cannot call consumers after 9 PM nor before 8 AM. Consumers have the right to request collection agencies to stop calling, and they must comply.

Collection of Personal Information

    Consumers can write a letter requesting collection agents refrain from calling and sending correspondence.
    Consumers can write a letter requesting collection agents refrain from calling and sending correspondence.

    In accordance with the Revised Code of Washington (RCW), collection agents can contact employers and other individuals to obtain work and home address information. However, agents cannot reveal to other parties the nature of the call for any reason. If a consumer has legal representation, then collection agents are limited by law to only contacting the consumer's attorney.

Additional Collection Agency Restrictions

    Consumers should keep notes of all phone calls, conversations and agreements with collection agencies.
    Consumers should keep notes of all phone calls, conversations and agreements with collection agencies.

    In accordance with RCW 19.16, collection agents cannot publish consumer debts owed in any manner. In addition, collection agents cannot threaten to jail nor garnish consumers for debt. Collection agents cannot take a consumer's possessions without an official court judgment.