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

Thursday, June 30, 2011

How to Pay the Debt of a Deceased Person

The heirs of a deceased person are not obligated to pay the recently departed individual's debts, but the estate left behind is beholden to creditors. After the estate pays for funeral expenses, any existing creditors have a right to divide up the assets of the estate to cover any existing accounts. Once these debts have been settled, the rest of the will can be executed.



    Determine who the executor or administrator of the deceased is. The executor will be named by the will of the deceased. If there is no will, the next of kin will need to appoint one. The executor is given legal and fiduciary responsibility for the estate and all its debts.


    Report the death to all creditors of the estate if you are the executor. Even if the estate has no means to pay back the debts, the executor is still legally obligated to do so. This will not stop collection attempts, but may open up opportunities to settle the debts for less than the full amount owed.


    Pay debts to the federal government first followed by state and local governments. The estate must pay the government first before settling other debts. Once those are settled, the order in which other debts are paid at the executor's discretion.


    Consider contacting an estate lawyer to assist in settling the estate. Settling the debts of an estate without any expertise can open the executor up to lawsuits from heirs concerned that the estate was not managed responsibly.


    Continue paying debts until they have all been discharged or until exhausting all assets of the estate. Once this occurs, any remaining assets may be distributed to heirs as per the stipulations of the will. An estate cannot declare bankruptcy.

What Does it Mean to Charge Off a Debt?

What Does it Mean to Charge Off a Debt?

Credit card companies, banks and other financial institutions that issue credit or loans to consumers adopt different methods for handling delinquent account holders. However, there is one main process that all creditors use once they are unable to collect what is owed.


    Creditors charge off a debt when the account balance goes unpaid for several months. For creditors, the process involves reporting the uncollected debt to the credit bureaus, attempting to collect the balance through a collections agency or their own collections department and reporting the debt as a loss in their financial statements.

Time Frame

    There are two time frames that creditors must adhere to when they charge off a debt. A charge-off can only be reported on a consumer's credit reports for a maximum of seven years. There is also a statute of limitations beyond which creditors can no longer sue consumers for the balance owed and this can be between three and 10 years, depending on the original debt agreement and on the consumer's state laws.


    A charge-off negatively impacts a debtor's credit worthiness and does not absolve responsibility to pay the debt. Debtors may receive several phone calls and letters from creditors or collection companies. Their credit score will also decline even if they enter into an agreement to pay the debt or pay the debt in full.

Wednesday, June 29, 2011

How to Eliminate Debt Fast Without Bankruptcy or Debt Consolidation

How to Eliminate Debt Fast Without Bankruptcy or Debt Consolidation

Regardless of the hype regarding debt elimination, there is no secret government grant or program that eliminates your debt, unless you're considering bankruptcy. Eliminate your debt without resorting to debt consolidation or bankruptcy with budgeting, careful planning, and most of all commitment. The quickest path to financial freedom involves a common sense approach to spending less. Ideally, you will be able to reduce what you owe by budgeting and restructuring your finances, without taking that second job.




    Write down your income and subtract your monthly expenses from the total. Tally everything from gas money to the grocery bill. If you're like most people, you'll notice a discrepancy between what you have left at the end of the month on paper and how much money you have in the bank. Don't make any cuts to your budget right now; just be honest about how much you're spending.


    Review the expenses you've compiled to find where your money goes. If you're serious about financial freedom, you need to take a good look at unnecessary spending. Eating out, entertainment, monthly subscriptions and impromptu shopping trips are just some of the purchases that will hurt your budget. Cut out or cut back on these expenses by paying yourself an "entertainment fee" in cash each month. Avoid reaching for your debit card when the mood to spend hits.


    Discover money you didn't know you had. Many people are paying for extra services they don't use or don't need. If you're paying for banking services, switch to a free checking account. Talk to your banker about refinancing your mortgage. Call your insurance agent and request a lower rate, or consider changing companies. Avoid leasing cars, as this agreement leaves you with nothing to show for it at the end of the lease. Rethink your phone plan and change it to a lower one if you don't need the extra perks or minutes. Call your creditors and ask for lower interest rates. They may not agree, but they won't do it at all unless you ask.

Paying off Debt


    Set your goals. You've found out where your money is going and located unnecessary spending. It's time to rewrite your budget and use what you have left to reduce your debt. Unless your income varies each month, the amount you have set aside for debt reduction should not change. Think of it as another bill that must be paid.


    Choose one debt, and begin making extra payments while paying the minimum on other accounts. Aim for the loan with the highest interest rate. Don't spread extra payments over several debts.


    Use the same technique to pay off the next loan once the first debt is paid. Pay the same extra payment plus the minimum from the prior account. This is called the "snowball effect", and works much like compound interest in a savings plan. It gains momentum and speeds debt reduction by applying more to each debt as others are paid off.

Tuesday, June 28, 2011

Can Wages Be Garnished Through a Prepaid Credit Card?

When a person has debts that are outstanding and delinquent with a creditor, he always runs the risk that he will become the target of a lawsuit seeking collection of these debts. In such a case, the person, if found guilty of owing the money, may become the object of more aggressive attempts to collect the money that he owes. This can include wage garnishment. However, garnishing a prepaid credit card would be difficult.


    Garnishment is the diversion of a debtor's income stream to the creditor to whom he owes money. Garnishments are not generally applied with the debtor's permission but are placed at the request of a creditor. Garnishments must be applied to a source of income for the debtor, such as a paycheck, not to an asset or a bank account.

Prepaid Credit Card

    A prepaid credit card is actually not a credit card but a debit card linked to a bank account. However, unlike a regular debit card that is linked to its holder's checking account, a prepaid credit card is linked to a special account to which the card's owner cannot deposit money, only withdraw it. Often, these credit cards will be given to individuals by retailers or other companies as a refund or gift card.


    It would be difficult for a creditor to garnish a prepaid credit card. This is because garnishments require that the creditor present the garnishment order to the person providing the debtor with income. Unless the creditor were able to anticipate the presentation of a prepaid creditor card to a debtor, he would not be able to serve the order on the card giver.


    A prepaid credit card is linked to an account from which a person can withdraw money to make purchases. While a creditor cannot garnish a person's bank account, it can freeze it and divert money from it, with a judge's orders. Theoretically, if the account had enough money in it, the creditor could apply to have the prepaid credit card account seized.

Advantages of a Co-Borrower Vs. a Cosigner

There is a world of difference between being a co-borrower and a cosigner. Co-borrowers have a legal status as co-owner of whatever asset is being held as collateral for a loan. Cosigners have no legal ownership of the asset; however, they are legally bound to the credit agreement that is connected to the asset.

Rights of Ownership

    As a co-borrower, you are co-owner of the asset. The asset, whether it's a car, motorcycle or boat, will be registered in both your name and the other owner's name. It would require both signatures to sell the asset, and both are responsible for the payments and upkeep. A cosigner, however, has no rights of ownership, only the obligation to pay if the registered owner of the asset does not pay. Whereas co-borrowers are empowered with equal rights of ownership in an asset, cosigners are simply there to pick up the pieces financially if necessary.

Credit Report

    When you cosign any type of loan, the loan is reflected on your credit report as well as the primary borrower's credit report. Your financial life becomes tied to the person's you cosigned for. If the person for whom you cosigned does not make her payments on time, it will have a negative effect on your credit. Even if the primary borrower makes all her payments on time as agreed, being a cosigner could still affect your ability to get credit for other purchases. Lenders will factor the cosigned loan into calculations they make concerning your ability to repay other loans. The loan you cosigned may raise your debt-to-income ratio significantly, which can cause you to either be declined for more credit or force you to pay a higher interest rate for items you buy on credit. In that sense, if lenders treat a cosigned loan as if it is your loan, you might as well be a co-borrower.

Selling the Asset

    As a co-borrower, you are entitled to a portion of any profits from the sale of the asset. Even if you make no payments on the asset and your only role is to allow a co-borrower to use your credit to purchase the asset, you could demand a percentage of the profits when the asset is sold, because your permission is required to make the sale. A cosigner is in no position to demand or negotiate anything. The primary borrower does not need the cosigner's permission to sell the asset.


    In a worst case scenario on a car loan, you may lose contact with the person who needed your help getting the loan. If you are a co-borrower and the other borrower stops making payments, you may rather have the car repossessed than make payments on a car you are not driving. If payments are not made on time and the finance company threatens to repossess the car, you, as a co-borrower, could authorize the repossession. If you know where the car is, you can take an active role in assisting the company repossess the car. Repossession will damage your credit rating, but it might be the best option in this case. A cosigner, on the other hand, has no ownership rights to the vehicle and would be guilty of a criminal offense for attempting to take possession of the car for any reason. The cosigner would remain responsible for the payments if the primary borrower fails to make them.

Monday, June 27, 2011

How Long to Clear Up Credit Issues?

How Long to Clear Up Credit Issues?

Your credit history is extremely important and it can significantly impact the amount of money that you pay in interest now and in the future. If you have credit issues on your credit report, getting these issues taken care of in a timely manner can improve your financial situation.

Timely Payments

    One of the best ways to improve your credit is to start making payments on time. Your creditors will report late payments to the credit bureaus. If you have several late payments, it will begin to negatively affect your credit score. When you start making on-time payments, it could take several months for your credit to start improving. Within six months, you should start to see your credit score improve from this action. If you make another late payment, you will have to start all over.

Removing Credit Report Issues

    Another way to improve your credit is to fix mistakes on your credit report. When you review your credit report and find something that is not accurate, contact the credit bureau and your creditor to have it removed. Both the creditor and the bureau will require written communication and proof of the mistake. When you go through this process, it will typically take up to 90 days to have the mistake corrected. If it was a legitimate error, the credit bureau should be able to remove it completely.

Rapid Rescore

    A service that you could choose to get involved with is rapid rescoring. This is a type of service that is often used when trying to secure a mortgage or auto loan. Your lender can contact a rapid rescore service to help you raise your score quickly. These companies have relationships with credit bureaus and can work with them to change information on your credit report in less than a week. You have to pay them a fee and they can get mistakes fixed on your report.


    If you go through a bankruptcy, it can have a drastic effect on your credit report. Your credit score will be lowered significantly. The bankruptcy will remain on your credit report for at least 10 years after it becomes final. This means that you will have to live with the bankruptcy on your report during this time, but you can begin rebuilding your credit immediately. By getting a secured credit card and making on-time payments, you can undo some of the damage within the first year.

Paying Down Balances

    Another issue that can negatively affect your credit is having high credit account balances. If you have a credit account balance of more than 30 percent of the available balance, credit bureaus will look at this negatively. Paying down the balance can improve your scores within 90 days. The amount of time that it takes to pay down the balance will depend on how much debt you have and your level of expendable income. Getting your balance below the 30 percent threshold could take years if you have a large amount of debt.

Sunday, June 26, 2011

Is Consumer Credit Repair Helpful or Harmful?

Is Consumer Credit Repair Helpful or Harmful?

Consumer credit repair is the process by which you can actively repair your credit rather than hiring a third party to do it. If done correctly, consumer credit repair can be very effective in restoring damaged credit.


    There is nothing that a credit repair company can do for you that you cannot do for yourself.


    Consumer credit repair involves disputing negative items on a credit report, such as collection accounts and charge-offs, in the hopes that those items will be subsequently removed, thus improving your credit score.


    By opting to repair your own credit, you not only save money but prevent yourself from falling victim to a credit repair scam.


    Consumer credit repair requires thorough knowledge of federal laws regarding collection disputes, credit reporting guidelines and potential legal consequences.

Time Frame

    Credit repair is not a fast process. Most consumers should expect to see a change in their credit scores after three to six months.


    Not all negative entries on your credit report will have an adverse effect on your score. The FICO scoring formula does not take collection accounts of less than $100 into consideration when your credit score is calculated. Consumers should primarily focus their credit repair efforts on items that still negatively affect their scores.

Debt Settlement Company: How Do They Reduce Debt?

Debt settlement companies negotiate with creditors on behalf of debtors to reach settlements that allow debtors to pay creditors less than they owe. Creditors lose money by agreeing to debt settlements, but sometimes agree to such deals if the debt settlement firm makes a convincing argument that a debt settlement represents the creditor's best chance of recouping some of the money that the debtor owes.


    You "default" on a loan if you fall more than 30 days behind on your scheduled payments. If you fall behind on loans secured by collateral then your lender can seize the collateral and sell it to recoup your debt. However, if you fall behind on your unsecured debt payments your lenders have very little recourse. A lender can attempt to have a lien placed on your home for the amount of the unpaid debt or a lender can sue you in court, but court judgments typically result in a debtor having to make minimal payments over a number of years.


    Many people who cannot afford to pay their debts opt to file bankruptcy. If you file bankruptcy your lenders can no longer pursue you for the balance of your unpaid debt. Debt settlement firms often highlight the risk that a delinquent borrower could file bankruptcy as a way of encouraging a creditor to enter into a debt settlement agreement. Creditors' often agree to such deals if the debtor agrees to make a substantial lump sum payment to cover a portion of the balance owed.


    Debt settlement agencies are for-profit companies that sometimes charge substantial fees for arranging debt settlements. Debt settlement companies do not have the ability to do anything that you could not do yourself in terms of agreeing a settlement. However, some people find it easier to leave negotiations to debt settlement firms rather than deal with constant phone calls from collection agencies. However, state laws on debt settlements vary, so before you hand over a lump sum or pay any fees, you should ensure that the creditor has no recourse to pursue you for the remainder of the debt.


    When you file bankruptcy it has a damaging impact on your credit score and remains on your credit report for 10 years whereas most other credit events only remain on file for seven years. Consequently, some borrowers are reluctant to file bankruptcy and instead enter into debt settlement agreements. However, many debt settlements companies strengthen your case to agree a settlement by instructing you to stop paying your other debts. Doing this lowers your credit score and gives your creditors the impression that you are more of a high risk borrower than you really are. Firms are therefore more likely to agree to a settlement with you rather than risk getting nothing. This enables you to avoid bankruptcy, but has a similarly damaging effect on your credit score.

How to Apply for Documentary Credit

Also known as a letter of credit, documentary credit is a letter issued by a bank to a seller. The letter serves as a guarantee that the buyer will make his or her payment for a purchase on time and in the correct amount. Documentary credit is essential in international business transactions between exporters and importers. This type of documentation is mainly used to foster trust and confidence in business deals through the intervention of an issuing bank.



    Finalize the terms of the sale agreement with the seller.


    Go to your bank and apply for documentary credit or a letter of credit. Ask to have any terms of the contract between yourself and the seller written into the letter for easy reference and to avoid later discrepancies and/or disagreements with the transaction.


    Thoroughly read the documentary credit letter prepared by your bank. The letter should include pertinent details about your transaction, such as the the shipment of the products.


    Check with your bank to confirm that your documentary credit letter has been processed. Your bank, known as the issuing bank, will send the documentary credit to the seller's bank and request a confirmation.


    Wait for confirmation from the seller. The seller will contact the freight forwarder to validate the shipping date as well as carry out the terms stipulated in the contract.


    Pick up the letter of confirmation for the merchandise you bought that should have been sent to your issuing bank. The confirmation letter sent to your bank literally means the shipped merchandise was received at the designated location spot within the agreed upon port or airport customs department. Verify from your issuing bank if you still need additional documents to comply with the terms of the documentary credit.


    Comply with any final requirements and pick up the merchandise from the customs department.

Financing & Credit Help

Financing & Credit Help

If you've been eyeballing that car or need a loan for a home renovation, you want to borrow money with attractive terms. You need low-interest financing to make monthly payments affordable. However, if your credit history has some rough patches, this could cause lenders to refuse you an affordable rate. To qualify for low-cost financing, your credit score needs to be strong, and there are ways to strengthen your credit muscle.

Why Have Good Credit?

    You need to have a strong credit history to have a high credit score. When your score is strong, meaning no history of bankruptcy, late payments or heavy debts, it allows you to qualify for the attractive financial rates. Lenders will look favorably at customers who can prove they are able to manage their money responsibly and pay bills and loans in a timely fashion. They will offer these customers the lowest interest rates.

Payment History

    Paying your bills on time has the largest impact on your credit, making up 35 percent of your score. Simply changing your habits to pay your cell phone, Internet and cable bills by the respective due date can strengthen your credit score the most. However, if you have a bankruptcy in your past, it will hit this category. Bankruptcies stay on your credit report for 10 years.

Other Tips

    There are other ways to improve your credit score. You should order an annual free credit report from a credit reporting agency and review it for errors. You should immediately report any mistakes, such as late payments that are not true, to repair your history. Create breathing room between your credit limit and your outstanding balance. Ideally, lenders want to see your debt be only 30 percent of your credit limit. This accounts for 30 percent of your credit score.

Credit Counseling

    If you need help or motivation to get your financial affairs in order, speak to a credit counselor, particularly a non-profit agency. If you are looking at a for-profit agency, review its status from the Better Business Bureau. Avoid those with low ratings and many complaints about excessive fees. Michelle Singletary of PBS recommends that a debt management plan shouldn't cost you more than $50 to set up and $25-30 in monthly fees.

Saturday, June 25, 2011

Should You Consider Debt Settlement Even if You Can Pay Off Your Debt?

If you are deep in debt and unable to pay, you may have considered debt settlement as a way to get out of debt. In debt settlement, your creditor agrees to accept less than the amount owed as payment in full. If you don't have problems paying your bills, it may be tempting to try to save money by negotiating a debt settlement with your creditors. While you can save some money settling debts, the practice has some pitfalls you should consider.

Credit Damage

    For a creditor to consider settling a debt for less than what you owe on the account, you generally must be past due on your debt payments. A creditor has no interest in accepting less than what you owe if it believes that it can collect the full balance. If you are current on your debts, you need to become past due by skipping payments to put yourself in position to negotiate a settlement. Becoming past due will damage your credit rating, and debts listed on your credit report as settled for less than you owe also cause your credit score to drop.

Tax Implications

    If you settle debts for less than you owe, the forgiven portion of the debt is considered income by the Internal Revenue Service. The creditor that accepted the settlement will send you a form 1099 that will list the amount of forgiven debt. You need to report this on your form 1040 as taxable income and pay any taxes that are due. Although this reduces the benefit of debt settlement, it does not eliminate it. If you are in the 28 percent tax bracket and settle $20,000 in debt for a $10,000 payment, you will owe $2,800 in taxes, but you will have saved $10,000 on the debt payoff.

Promises Broken

    When you sign an agreement to pay a debt, you have given your word that you will pay it as agreed. Sometimes things happen that make it impossible for this to happen. In these cases, most people can make a moral case for debt settlement. However, a person may have a problem intentionally becoming past due on a debt to settle the debt for less money than what he owes when he is capable of paying the bill as agreed.

Other Options

    If you are able to pay off your debts in full over time, you may want to establish a written budget and develop a plan that will allow you to pay off all debts within a fixed amount of time. If you need to make monthly payments to creditors to pay off the debt, you may want to attempt to negotiate a reduction in interest rates rather than a reduction in the balance. You can often negotiate a reduction in the interest rates on your balance if you agree to close the accounts. This may be a better option, as it is not as likely to damage your credit.

Virginia Laws Regarding Spousal Credit Cards

Virginia Laws Regarding Spousal Credit Cards

In the commonwealth of Virginia, spouses are jointly liable for their marital debts and remain jointly liable if they divorce. Similar to the majority of other jurisdictions, the commonwealth is an equitable distribution jurisdiction. In equitable distribution states, all marital property is jointly owned. Similarly, all marital debts are equitably divided between spouses. If spouses cannot agree upon a mutually acceptable settlement agreement allocating their assets and liabilities between them, Virginia courts will allocate their property and debts for them.

Spousal Credit Cards

    Individual liability after separation or divorce for a joint credit card depends on whether the account was initially created as a joint account. If the account is truly a joint account, then both spouses remain jointly liable for repaying the outstanding balance on the account. Moreover, each spouse remains individually liable for repayment of the debt. In other words, a credit card company can sue both spouses jointly or sue each spouse separately for any remaining balance. However, if the account was not created as a joint account but as an individual account with authorized users, then the account is not a joint account but instead, a personal account. Individual spouses remain individually liable for repaying debts incurred by authorized users.

Equitable Distribution

    In equitable distribution states, property and debts divide equitably between divorcing spouses. However, in community property jurisdictions, community property, including marital debts, is typically divided equally. In equitable property jurisdictions, such as Virginia, courts can divide property and debts equitably and not necessarily equally. Although Virginia courts encourage spouses to enter into written property settlement agreements without judicial intervention, spouses who are unable to agree upon settlement terms must ask a circuit court to allocate their debts and property for them. Virginia law allows judges the discretion to divide debts unequally in the interests of justice.

Divorce and Debt

    Since Virginia is an equitable distribution state, Virginia courts may require one spouse to pay a greater portion of the outstanding credit card debt if she was primarily responsible for incurring the debt. If one spouse purchased an item using the joint credit card over the objection of the other spouse, Virginia law allows its judges to assign the responsibility to repay that debt to the other spouse. However, in equitable distribution jurisdictions, separate property and debts remain separate, and the spouse who owned the card prior to marriage is separately responsible for repayment.

Credit Card Companies and Divorce Agreements

    Property settlement agreements and divorce decrees are between the individual divorcing spouses. Credit card companies who were not parties to those divorce agreements are not obligated to comply with the terms of those agreements. As such, a credit card company can sue each spouse individually for the repayment of the joint debt. However, spouses can sue one another for repayment if they entered into enforceable agreements and obtained valid judgments requiring repayment by one spouse.


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

Friday, June 24, 2011

If My Student Loans Are in My Chapter 13, Can I Still Qualify for an FHA Loan?

If My Student Loans Are in My Chapter 13, Can I Still Qualify for an FHA Loan?

Federal student loans and Federal Housing Administration (FHA) loans are both generated through the federal government. Whenever you apply for a loan with the government's backing, you will be subject to its rules and regulations, which can be stricter than those in the private market. Your financial history with the government, including how you have paid previous debts and taxes, will affect your ability to obtain a new loan with their backing.


    Many people think the government issues loans to individuals who do not qualify for private loans. In reality, the government has a strict set of rules and regulations on borrowing. While many federal programs are aimed at low income borrowers, most programs require a positive credit history. This is true of both federal student loans and FHA loans.


    To obtain any federal loan or federally backed loan, you must meet requirements. These requirements include a positive loan payment history, a lack of bankruptcy or foreclosure in the past, and good standing on all of your current debts. If you have student loans in bankruptcy, you will not qualify for an FHA loan.


    When the FHA issues a loan guarantee, it promises to repay the primary lender if the borrower defaults. This means the FHA is taking a large risk, and it must do so wisely. If the FHA has reason to believe you will default, it will not issue the loan. If you are paying off a Chapter 13 bankruptcy and are current on those payments, you may be considered for an FHA loan. However, if that bankruptcy includes federal student loan debts, your chances of approval are very low.


    One option you have is to pay off your Chapter 13 payments prior to applying for an FHA loan. If you do this, the FHA will consider your loan application in the future. However, if you need a loan in the near future and cannot wait to pay off your bankruptcy, you may have to seek a private loan without an FHA guarantee. In this case, your bankruptcy may still preclude you from qualification.

Types of Debt Relief Government Grants

Types of Debt Relief Government Grants

Only a very limited number of government programs offer grants to help with debt. Programs available limit assistance to critical needs, such as housing and utilities, but do not help with other types of debt, such as credit card bills. However, certain government programs can provide loans to help you better manage certain types of debts, such as mortgages and student loans. The federal government funds the majority of programs, but a limited number of local governments offer emergency assistance.

Homeless Prevention and Rapid Re-housing Program

    If you are behind on rent payments and face the threat of homelessness, you may qualify for the Homeless Prevention and Rapid Re-housing Program. Funded by the American Recovery and Reinvestment Act of 2009, the U.S. Department of Housing and Urban Development administers the HPRP. HUD grants funds to states, which administer HPRP benefits for their residents. For example, the State of North Carolina offers HPRP assistance through its Housing Finance Agency. The HFA offers financial assistance for qualified residents to help pay back rent, security deposits and moving expenses. You can only receive HPRP assistance for rental housing expenses, but the program does not provide help to prevent foreclosure.


    If you have received a disconnection notice due to unpaid utility bills, you may qualify for the Low Income Home Energy Assistance Program. The U.S. Department of Health and Human Services sponsors LIHEAP, and awards block grants to states, Indian tribes and United States territories. Grantees administer the program through local government and nonprofit agencies, which assist local residents by helping to pay their utility expenses. You must meet income limits to qualify for LIHEAP and award guidelines vary from location to location. Typically, LIHEAP will not pay funds directly to you, but rather make payments to your utility providers.

Local Programs

    A limited number of local governments offer programs to help residents facing financial difficulties, and typically only offer assistance with basic needs, such as housing. For instance, the Housing Assistance Program of Greater Kansas City in Kansas City, Missouri administers the Housing Assistance Program for disabled, low-income residents. If you meet disability requirements, the program may help you pay your mortgage, rent or utilities. The program does not offer assistance for other types of debts, such as credit card, phone, legal or repair bills. Program administrators base grant amounts on the size of your household.

Other Government Programs

    You may consider government programs that help you manage certain types of debt. If you have more than one federal student loan, the U.S. Department of Education can help combine your debt through the Direct Consolidation Loan program. The program enables you to make a single monthly payment and extend your repayment terms.

    If you face financial difficulties due to mortgage debt, you may find relief through the federal Making Home Affordable program. MHA plans can help you reduce your monthly payments through loan modifications on first and second mortgages. Certain MHA plans offer interest rate reductions and loan term extensions up to 40 years.

Thursday, June 23, 2011

How to Deal With Collection Agencies if You Can't Pay

Dealing with collection agencies when you cannot pay requires determination and planning. Although some debt collectors may sound sympathetic over the phone, their only goal is to collect as much money from you as possible -- and in the least amount of time. It's up to you to stand up to the debt collectors by exercising your rights under the Fair Debt Collections Practices Act. The act is a federal law and regulates the behavior of debt collectors. Giving in to debt collectors and making promises you cannot keep could make your situation worse. That's why it's important to develop a sound strategy for handling the debt collectors and stick to it.



    Consult with a consumer affairs attorney for a full understanding of your rights under the Fair Debt Collections Practices Act, and to create a strategy for dealing with collection agencies while you're unable to pay. A relationship with a reputable attorney charging reasonable flat fees could provide significant benefits if you're really determined not to pay debt collectors. Not paying debts such as credit card bills and installment loans can lead to lawsuits, with many debt collectors seeking court approval for garnishment of your bank account or wages. An attorney can review threatening letters you are receiving from debt collectors -- or represent you in court if a debt collector files suit. Federal law also gives you the right to inform debt collectors that they must contact your attorney about your debt and not contact you. That's a benefit for dealing with debt collectors while you're unable to pay.


    Authorize the attorney to pull a copy of your credit report and identify debts that you can safely ignore. State statute of limitation laws restrict the length of time debt collectors have to pursue court action on debts, and federal law limits the listing of collection accounts on credit reports to seven years.


    Contact a local office for the state attorney general to ask about state statute of limitation laws if you decide not to hire an attorney. Obtain a copy of your credit report from AnnualCreditReport.com, a site endorsed by the Federal Trade Commission. Use the statute of limitations information from the state attorney general's office to identify debts on your credit report that are too old for considerations by the court.


    Communicate with debt collectors only in writing. There's little to talk about if you really can't pay them. Send each debt collector an initial letter explaining that you are unable to pay your debt but will be in touch when your situation improves. Instruct debt collectors to contact you only by mail -- a request with which debt collectors must comply under federal law. Another option is to direct the debt collectors not to contact you at all, which is also your right under the Fair Debt Collection Practices Act. After receiving a letter from you requesting that they not contact you again, debt collectors may correspond with you only to acknowledge that they will comply with your request or that they are planning a certain action, such as filing a lawsuit.


    Read any court notices you receive. It is imperative that you respond to notices of a lawsuit, called a summons. Failure to respond results in an automatic monetary judgment for the debt collector.

What Are Reasons to Pardon Very Old Student Loans?

Bankruptcy courts have discharged debt incurred through vices, such as casino gambling, but student loans are almost impossible to evade because of the possibility of bankruptcy abuse. You can "pardon" student loans in a few cases, but this is usually extremely hard to prove. The most likely scenario to handle your debt is to restructure it.


    Private student loans became non-dischargeable if the borrower filed a bankruptcy case after October 7, 1998. Even then, a borrower could only discharge student debt after it had been in payment status for seven years and the originator did not receive funding from a nonprofit organization. Federal student loans have always been non-dischargeable except for undue hardship.

Undue Hardship

    As of 2010, you can only pardon student loans--federal or private--if paying them back presents an "undue hardship" after Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. Technically, "undue hardship" can mean anything, but the courts almost always only consider a severely debilitating injury, such as paralysis, an undue hardship.

Other Possible Reasons

    The other reasons to pardon old student loan debt are usually less likely than experiencing a severe disability. You can discharge debt, for example, if you die or the college you attended closed before you could complete your degree. Another possibility is identity theft that lead the lender to authorize the loan under false pretenses, such as a forged signature. Some programs, such as Teach for America, allow you to forgo some student loan debt.


    A few bills bounced around Congress in 2010 that would ease the restrictions on discharging student loan debt. While some say it would entice people to take out student loans, get a degree and then declare bankruptcy, some politicians argue that this is unlikely, because nobody likes going through bankruptcy.


    Student loan lenders often trade debts back and forth, so you may owe more than you should and get to object to the balance under a Chapter 13 plan. Alternatively, you might be able to consolidate your loans into one payment under a Chapter 13 restructuring plan. In Chapter 13, you repay debts over three years to five years based on what you can afford.

Is it Bad to Settle a Debt?

If your creditors stop receiving regular payments from you and you are in danger of defaulting on your account balances, your creditors might negotiate a settlement balance with you in order to minimize financial losses. From a creditor's perspective, recovering a portion of the debt you owe is better than recovering nothing at all. While settling your debts may be necessary in certain circumstances, doing so can carry negative consequences.

Tax Issues

    By paying less to your creditors than you actually owe and settling your outstanding accounts, you free up money to apply to other debts -- helping you get back on your feet financially. The creditor then forgives the portion of your debt that you leave unpaid. Just because the creditor forgives the debt, however, that does not mean that it disappears.

    When your creditor files its taxes, it writes off your settlement's unpaid balance as a loss. The IRS classifies the amount written off as "discharge of indebtedness" income, and you must count as income and pay taxes on whatever debts your creditors forgive during a settlement. Doing so could increase your tax bill or decrease your tax refund.

Credit Consequences

    Creditors don't agree to settle consumers' accounts merely because the consumer makes the request. A creditor only agrees to a debt settlement if the alternative is receiving nothing. Thus, few creditors -- if any -- will settle your debts without you being late on your payments. Each time you miss a payment, however, the company reports this fact to the credit bureaus. It appears on your credit report and your credit score drops considerably as a result.

    When you actually settle the debt, this fact also appears on your credit report. If the debt in question is particularly old, settling the debt adds a new feature to the account's trade line on your credit report, updating it. Because recent credit entries are more significant to the credit scoring formulas than older items, settling old debts can also lower your credit score.

Collection Debts

    Collection agencies purchase accounts that consumers leave unpaid and then collect the debts themselves. Unless you request a statement from the collection agency noting that the company intends to forgive the remaining balance you owe, the collection agency can sell your settlement balance to another collection agency that will then contact you demanding payment in full for a debt you thought you'd previously settled.

Settlement Solutions

    You can settle your debts with as little risk as possible provided the debt settlement is necessary for your financial stability and you obtain any agreements you make with the creditor in writing before paying the agreed upon amount. Settling debts yourself, if possible, is always preferable to hiring a third-party company to negotiate with a creditor on your behalf. The Federal Trade Commission warns than debt settlement companies charge considerable fees for their services -- often requiring a flat fee and a percentage of the amount you saved through the settlement. Thus, if saving money is your ultimate goal, debt settlement carries the greatest benefit if you conduct the negotiations yourself.

Does a Settlement Negatively Impact Credit?

A debt settlement does negatively impact credit, but how much is dictated by the situation. It depends on the debtor's credit score before settlement and other factors, such as balances and payments on other accounts. A person with great credit could experience a large drop in credit score after a settlement, while people with poor credit may experience little to no change because their credit score is already near the bottom of the scale.


    Debt settlement allows debtors to pay off credit cards and other unsecured debts -- usually for less than the full balance. Settlements for 20 to 70 percent of balances are possible, according to "Smart Money" magazine. However, the process is not quick, and a debtor could experience drops in credit score each month for several months. Credit scores range from 350 to 850 with scores of 720 or higher considered excellent. Scores below 620 are poor, and debt settlement can cause a person's score to fall below that level.


    Creditors have no incentive to settle accounts that are current. A debtor seeking to pay off a debt through settlement must miss several payments before the creditor will consider it. The MSN Money website reports that credit card companies will consider debt settlement after accounts are three or four months behind. At six months, card companies usually close accounts and list them internally as charged off. Even then settlement is possible, but a string of missed payments and a possible charge-off can severely hurt credit even before the settlement.


    Major credit bureaus, such as Experian, update credit reports after receiving information from creditors. They update the debtor's credit report to show debts as "settled" or "settled for less than the full balance." Experian reports that settlement notations are very bad for a person's credit, and can cause scores to drop even more, in addition to the harm caused by missed payments.


    Debtors should not consider debt settlement just because they don't want to pay their bills. The overall damage to credit is usually too big a price to pay for that. Negative credit information -- such as missed payments, charge-offs, collection accounts and settlements -- remain on credit reports for seven years. People who engage in debt settlement may suffer from poor credit scores for two or three years as they attempt to rebuild. However, debtors facing bankruptcy may consider settlement a better alternative. Bankruptcy remains on credit reports for 10 years and is the worst credit event possible.


    Rebuilding credit after settlement requires paying all remaining bills on time while keeping balances low on revolving accounts, such as credit cards. Some debtors open new, secured credit card accounts to help the process. They make small charges on the card each month but pay them off in full at the end of the month. Secured cards require money in a bank account that serves as collateral. People with poor credit because of debt settlement and other reasons favor the cards, because they find it difficult to qualify for standard credit.

Tuesday, June 21, 2011

Fair Credit Act Laws

Fair Credit Act Laws

Consumers who have behaved responsibly but hit a financial snag and those who overspent and wound up in money trouble alike are protected in the United States by the Fair Credit Reporting Act. The FCRA does not relieve debtors of their obligations, but it does limit some of the more nefarious behaviors of the creditors that were common prior to its passage.

Personal Information

    Under the FCRA laws, you do not have to give any additional personal information to creditors when they contact you by phone. Some creditors will attempt to get more information from you, such as the name of your boss or family members you have in town, what you earn at your job or what your job is, for that matter. You are protected from these intrusions by the FCRA.


    The FCRA ended some of the more egregious practices of debt collectors that used to be the norm prior to its passage. Collectors can no longer call you before 8 a.m. or after 9 p.m. local time. They are forbidden from using "foul" language or threatening. They must also inform you of who they are and what their purpose is. If you contact the collection agent in writing and tell them you would no longer like to receive calls, they must abide by that. However, using that course of action will likely result in the creditor pursuing all legal means against you to collect the debt.

Credit Reports

    You are entitled to a free copy of your credit report from each of the three reporting agencies --- Trans Union, Equifax and Experian --- once per year. Additionally, the fair credit laws require these agencies to provide you with a free copy of your report if you are denied credit based on their information. Your request for the free report must be made within 60 days of the denial. You will receive a letter informing you of your right to the report if you are denied.

Equal Opportunity

    You may not be denied credit based on race, national origin, religion or marital status. When you are denied credit, the agency must inform you in writing as to the reason. If you believe you are the victim of discrimination, contact the FTC.

Monday, June 20, 2011

How to Build Credit After Bankruptcy

How to Build Credit After Bankruptcy

Bankruptcy can feel like the end of the road, rather than a chance for a new beginning. If you can embrace this way of looking at it, there is a very good chance you can rebuild your credit after filing bankruptcy. You can come back with a financial strength you never had before.



    Apply for credit using new avenues. A lot of what you can do to build credit after bankruptcy will ring familiar to you. It is, in fact, quite similar to building credit for the very first time. This may mean looking to avenues such as department stores in order to apply for credit. Gas cards are another good option. These credit cards are typically high interest rate cards, but the lending institutions behind the cards are usually more lenient on the loan requirements.


    Use credit cards sparingly. Once you've managed to procure a card, use it sparingly. Don't fall into the same traps that forced you to file for bankruptcy in the first place. At the same time, you should use the card. Just having it, sitting there in your purse or wallet, won't do anything for your credit report. But with some sparing use and some reasonable transactions, you can illustrate a new restraint in your spending.


    Pay balances off quickly. When you use the card, take note of what your spent and make sure you have the funds to pay the balance in full at the end of the month. Do this every month and do it on time. Missing the due date can add excess interest charges and will be looked upon as a further black mark on your credit report.


    Wait it out. A bankruptcy is removed from your credit history in seven years. This may seem like a long time to wait, but you can take the time to completely retrain yourself on using credit responsibly. Once you've gone largely without it for that long, you won't feel the impulse to abuse it when you have the privilege once again.

Help With a Credit Card Debt Sent to a Collection Agency

Delinquent credit card debt may be charged off by your credit card company and your account may be closed. That means the company has written it off in its books as bad debt. At that point, an in-house collection agency or an outside one hired by the company usually takes charge of the debt and will try to get you to pay it. Knowing your rights and the process helps considerably.

Your Rights

    The Fair Debt Collection Practices Act (FDCPA) is a federal law designed to protect consumers from predatory creditors and collection agencies. Under this law, collection agencies must send you a written statement of the debt they believe you owe within five working days of the first phone call. Also, they may only call you between the hours of 8 a.m. and 9 p.m. in your local area, unless you give them permission to do otherwise. Most importantly, they may not threaten or harass you in any way, including through use of obscene language. If you tell them that you cannot receive calls at your job, they must cease calling you there. If collection agents violate any part of the FDCPA, you may have grounds to sue. See the FDCPA for all specifications.


    Collection agencies may be willing to negotiate payments for the amount you owe on a credit card. If a debt is old, offering a lump sum amount such as 35 percent of what the agency says you owe may be accepted just so the company can remove your account from its records. If the debt in question is yours, and collection agencies are not mistakenly contacting you, consider attempting negotiation. Stipulate that you'll offer a certain amount but only if you can get a written letter from the collection agency promising to remove the collection account from your credit history with all three credit reporting bureaus (Experian, Equifax, and TransUnion). The letter should also state that the debt will be marked as paid in full so it cannot be sold to another collection agency. Don't settle for an oral agreement over the phone; get it in writing before you give the promised money.

Stopping Agency Contact

    If you do not want a collection agency to contact you any longer, send it a letter requesting that it cease all contact with you. Send it certified mail, with return receipt requested, and keep a copy for your files. After receiving such a letter, collection agencies can no longer call or write you, except to inform you that they have received your letter and will be ceasing contact, or are proceeding with a specific action, such as a lawsuit.


    Collection agencies can file a lawsuit against you to obtain debts they are owed. However, such lawsuits must fall within your state's statute of limitations regarding credit card debt, which is typically three to five years from the date of last contact. The statute of limitations varies by state, so you may want to contact a local attorney to learn the specific law in your state and how it applies to your situation. If you receive a summons to appear in court, whether the debt is yours or not, respond or have your attorney respond by the deadline to protect your rights. If the statute of limitations has passed, bring evidence to your court date to indicate this fact, in addition to stating it orally.

Sunday, June 19, 2011

What Is an ACH Charge on a Credit Card Transaction?

What Is an ACH Charge on a Credit Card Transaction?

The automated clearinghouse, a financial network commonly known as the ACH that facilitates the electronic processing of bank checks, provides a number of conveniences for both businesses and consumers. Although merchants and consumers can benefit from ACH transactions, an ACH statement entry may have different meanings.


    An ACH entry on a consumer credit card statement, according to the Federal Financial Institutions Examination Council, indicates a payment made through the automated clearinghouse network. Because the ACH network typically processes check-based payments, such an entry may represent a payment made through credit card access checks that financial institutions provide to cardholders.


    At the end of each statement period, businesses who process credit card transactions typically receive a statement from the merchant account processor. If the merchant accepts electronic check payments, according to the merchant processor MindBody, an ACH item signifies an electronic check. In addition, the FFIEC explains that service providers often settle merchant account payments through an ACH deposit into the merchant's bank account, and an ACH entry on a merchant's credit card statement may indicate a deposit from the merchant account provider.


    Consumers can use the automated clearinghouse network to make credit card payments at merchants who do not accept credit cards and at online electronic check processors. Merchants, according to MindBody, can increase sales by accepting ACH payments, and businesses can quickly receive credit card settlements without the need to deposit a live check.

Saturday, June 18, 2011

How to Remove a Deceased Spouse's Debt

How to Remove a Deceased Spouse's Debt

The Fair Credit Reporting Act (FCRA) entitles each individual to an accurate and fair credit report. The only debts that should appear within your credit file are those that you signed for yourself. Unfortunately, it is not uncommon for an individual to pass away while still owing outstanding debts. Even if his spouse is not legally liable for the debts, his creditors are likely to attempt to collect from her. It is illegal, however, to insert a deceased spouses debt onto the surviving spouses credit report. If this happens to you, there are steps you can take to have your deceased spouses debt removed from your credit history.



    Verify that you are not responsible for the debt. If the original account was a joint account, you and your spouse are both equally liable for the debt. If the account was solely in your spouses name, however, it should not appear on your credit report.


    Notify the creditor that is reporting the debt on your credit report in writing that you do not currently owe the debt and never did. Stipulate that the debt belonged to your spouse, who is now deceased, and if the debt is not promptly removed from your credit report, you intend to file a lawsuit for a violation of the FCRA.


    Pull your credit reports after 30 days to ensure that the debt has been removed.


    Write a letter to each credit bureau, Experian, Equifax and TransUnion, if your deceased spouses debt still appears within your credit history. Explain that the debt belonged to your deceased spouse and that it was not held in a joint account. Provide a copy of your picture ID, a copy of your Social Security card, and an original death certificate for your spouse. Additional death certificates can be purchased from your county's vital records office.


    Give the credit bureaus 30 days to investigate the inaccurate entry on your credit report. If the entry is still in your spouses name, the credit bureaus should remove it immediately. If, however, the creditor transferred the debt into you name, the credit bureaus will each contact the creditor for verification. If the creditor does not or cannot verify the debt, it will be removed from your credit report. You will then be mailed an updated copy of your credit files from each credit bureau.


    Sue the creditor for violating the FCRA if it verifies the accuracy of the entry to the credit bureaus. The majority of creditors would prefer to remove the entry rather than fight you in court.

How to Get out of $24,000 in Credit Card Debt

With the U.S. in a recession, many people have large amounts of personal debt. If you have $24,000 in credit card debt, you are hardly alone. In March 2010, total U.S. revolving debt was $852.6 billion. Ninety-eight percent of that was credit card debt. The average American household owes over $16,000 on credit cards. If you genuinely cannot repay such a large debt, you can get rid of a large portion of it. One way is to file for bankruptcy. However, if you are a homeowner or have any significant assets, this is often not the best solution, as you can end up losing your home and those assets. There is another way.



    Stop making payments on your credit cards. This will immediately start to lower your credit score. If you are struggling with unmanageable debt, your credit score is probably already very low.


    Put the money you would have used for the repayments in a high-interest savings account.


    Check your credit score regularly. You can find out the score from TransUnion, Experian and Equifax.


    Wait until the score drops below 500. This is considered to be a very low score. No reputable lender would let you borrow money with this score.


    Contact your credit card issuers and offer to make a partial repayment equal to the amount that you have saved, in exchange for the remaining debt to be erased. The credit card companies will run a credit check. Your low credit score will tell them that you will never be able to repay the full amount. They will either agree to your offer or make a counteroffer.


    Rebuild your credit score over the next seven years by keeping up with monthly repayments and avoiding getting into more debt.

Friday, June 17, 2011

Debt Relief Vs. Chapter 7 in Michigan

A person who is facing large amounts of debt in Michigan has several options for managing this debt, all of them relatively unsavory. The two main choices are between a form of debt relief, in which the person pays off all or part of his debt, and declaring. Bankruptcy will allow the person to dismiss a number of debts. However, it won't dismiss all debts and it comes with a number of steep downsides in Michigan.

Debt Relief Advantages

    There are various forms of debt relief, including credit counseling, debt settlement -- in which a debt is settled with a creditor for less than the full amount -- and debt consolidation, in which debts are consolidated into a single debt. The advantage to these methods is that they are cheaper and, used wisely, they can prevent a person from having her money seized by creditors.

Debt Relief Disadvantages

    The downside to debt relief is that that it is not always effective. A person may be deep enough in debt that counseling will not help him. Similarly, not all debts can be negotiated down, as a creditor may not be willing to accept partial payment. While debt consolidation can help reduce the size of monthly payments, not all debts can be consolidated, and sometimes fees will actually increase the debtor's overall load.

Chapter 7 Advantages

    In Michigan, a person whose debts outstrip his assets may be allowed to declare bankruptcy. The advantage of doing this is that the person will have a number of her private debts dismissed. If approved, it will also cease all collection actions. In Michigan, it is relatively difficult for a person to lose his house if he declares bankruptcy, as compared to some other states. Therefore, bankruptcy can provide financial breathing room, allowing a person a new start.

Chapter 7 Disdvantages

    Bankruptcy does not allow a person to dismiss all debts. A person must still pay most of her debts to the government, including for unpaid taxes. In addition, bankruptcy will wipe out a person's credit score, making it difficult to qualify for low-interest loans for a time. In addition, not all people qualify for bankruptcy. Finally, in a chapter 7, a person may lose a number of his personal possessions to creditors.

Thursday, June 16, 2011

How to Get a New Credit Report

A credit report is a rundown of your payment history that lists accounts, balances and payment patterns. Creditors rely on credit report information when issuing loans and credit cards. The three credit agencies are Experian, TransUnion and Equifax. By law, people are entitled to at least one new credit report once a year. Once you request the report, you can track your payment history with ease.



    Go to Annualcreditreport.com. It is the only authorized source for consumers to access their annual credit report online for free.


    Select your state on the home page and click "Request Report."


    Type in your name, contact information, Social Security number and date of birth, then click "Continue" to get your new credit report. You will receive one from each of the three credit agencies.

What Is the Statute of Limitations On Credit Card Defaults In Texas?

What Is the Statute of Limitations On Credit Card Defaults In Texas?

Each state has a statute of limitations regarding credit card debt. These debts are referred to as time-barred debts and creditors have reduced collection options regarding delinquent credit card accounts beyond the that date. While the statute of limitations does not absolve you of your debts or erase credit card defaults from your credit report, Texas law does protect you from lawsuits and possible wage garnishments from time-barred credit card debt.

Time Frame

    According to section 16.004 of the Texas Civil Practice and Remedies Code, the statute of limitations on lawsuits due to credit card default is four years. The four-year period begins when you stop making payments on the credit card and the account is considered in default. The statute of limitations does not erase debt; it merely means that you cannot be sued for credit card debt beyond that point.

Consumer Rights

    While the statute protects you from the threat of a lawsuit, creditors may dispute that the debt is beyond the statute of limitations and attempt to take you to court. Do not ignore a court summons as a judgment may be brought against you if you do not show up. Attend your court date and bring proof that the statute of limitations has elapsed.


    Collection agencies may still contact you in an attempt to collect on a time-barred debt and it is within their rights to do so. If you feel you're being harassed, you may send a "no contact" letter to the collection agency stating that you no longer want them to contact you regarding the debt. Send the letter via certified mail and keep a copy for your records. Under the Fair Debt Collection Practices Act, creditors cannot contact you once they have received a "no contact" letter except to notify you of further legal action.


    Verifying the debt or agreeing to pay creditors and making payments may restart the statute of limitations, according to bankrate.com. In addition, delinquent credit card accounts will appear on your credit report for up to seven years. This negative information lowers your overall credit score resulting in less favorable terms with future lenders and higher interest rates.

If I Make a Payment on a Debt, Can They Force Me to Pay All of It at Once?

When a person gets behind in paying a debt, he may attempt to offer the creditor partial payment on the debt. Sometimes, the debtor will accept this, as he wishes to receive some of the money he is owed rather than none of it. However, the creditor is under no legal obligation to accept only partial payment of the debt and has a full legal right to demand the debtor pay all at once.

Debt Contracts

    When a person takes out a debt, he usually must also sign a legal document that clearly lays out when the debt is due and under what terms. While not all debts have written contracts -- some debts derive from oral agreements -- the person's legal obligation is consistent regardless. In addition to the repayment of this debt, the collection of it must accord with the terms laid out in this contract, too.

Late Payments

    If a person misses a payment on the debt, the contract will generally lay out actions the creditor may take. For example, the creditor may be allowed to charge the borrower interest, as well as assess late fees on the debt. The contract may also lay out how a person is allowed to pay back the debt. Some contracts, like those for credit cards, may allow the person to pay as much as he wants at a certain time, while others may make no such allowances.

Partial Payments

    If a debt becomes delinquent and goes into collection, a debtor is not legally required to accept partial payment. The creditor can demand the debtor pay the full amount owed in a single payment, unless the debt contract specifically forbids him from doing this.


    Although a creditor is legally allowed to deny a debtor the right to pay off part of a debt, creditors will generally not do this. This is because partial payment will not prevent the creditor from demanding the debtor pay the remaining amount at a later date. Only if the debtor and creditor strike a debt settlement deal in which the creditor agrees to settle for partial payment will he forfeit his right to collection.

Tuesday, June 14, 2011

Where to Get Free Money to Pay Off Debts

Building up a great deal of personal or business debt is a situation that many people have experienced first hand. In some cases, the debts mount up due to a loss of employment, prolonged health issues, divorce or a range of other problems. While many people may see bankruptcy as the only viable option to eliminate the debt and obtain a fresh start, that is not necessarily the case. There are a few resources that may allow the debtor to obtain grants or endowments to pay off all outstanding debt, with no obligation to repay the funds received. Here are a few steps to help you locate possible avenues for obtaining the funds you need.



    Identify the reasons for the accumulation of debt. In just about any appeal for assistance, you will be required to provide specific answers as to how the debt was acquired, as well as what efforts you have made to pay on the debt. Knowing how the debt came about will allow you to more efficiently search for individuals and agencies that may be in a position to assist you.


    Check on grant programs available through national, state and local government agencies. Depending on your circumstances, it is possible that you may qualify for a grant that will eliminate all or at least part of your outstanding debt. For example, if your financial woes are due to prolonged treatments for a medical condition that prevents you from holding down a job, there is a good chance that some type of financial aid is available (see Resources below).


    Identify non-profit agencies that provide limited financial assistance to individuals who are unable to pay their current outstanding debts. Charitable agencies and faith-based organizations are among the non-profits that sometimes provide one time debt relief. As with the government options, there are qualifications to meet in order to be considered for a grant that does not have to be repaid at a later date (see Resources below).


    Seek out a sponsor or mentor. It is not unusual for persons whove amassed large fortunes to provide a one-time grant to people who are in need, assuming the individual meets the criteria established by the philanthropist. This is often related to some cause or concern that is of deep interest to the individual making the grant. The grant may be limited to persons suffering with a particular medical condition, or persons displaced due to the elimination of jobs from a given industry.


    Apply for assistance from several different sources. Grants to pay off existing debt are usually limited, so it is important to not rely on any one grant application to be approved. Make sure that you meet the qualifications, and provide full and complete responses to any and all questions included on the application.

Can a Collection Agency Collect a Debt That Is 14 Years Old?

Your debts do not disappear if you ignore them. Creditors pass debts on to collection agencies when consumers stop making payments. Collection agencies that cannot collect also sell accounts to other debt buyers. This process continues until you either pay off the debt or a collection agency writes off the account as a tax loss. While a collection agency can collect a 14 year old debt, its methods for doing so are limited.

Legal Recourse

    After 14 years, state laws bar collection agencies from pursuing legal recourse against you for nonpayment. While all states statutes of limitation differ, MSN Money columnist Liz Pulliam Weston notes that most state laws provide creditors --- including collection agencies --- three to six years to bring suit against debtors before doing so violates state laws. A collection agency's inability to file a lawsuit does not prevent it from successfully recovering the debt, but it considerably restricts its ability to do so.

Voluntary Payment

    While state laws bar collection agencies from legally bringing suit against consumers for payment after the state's statute of limitations passes, they do not prohibit collection agencies from actually collecting the debt. If you pay off the debt voluntarily, the collection agency will accept your payment. Given the fact that a collection agency cannot legally sue a consumer after 14 years, debt collection companies often offer settlements or payment plans for old debts, making paying off the account easier to manage financially.

Involuntary Payment

    Not all debt collection companies adhere to state and federal guidelines regarding debt recovery processes. Because of this, an unethical collection agency may still sue the debtor even if the individual's state's statute of limitations has already expired for the debt. If the consumer does not appear in court and claim the expired statute as a defense, the collection agency wins a civil judgment against the individual by default. A collection agency that holds a civil judgment can use it as a tool to garnish wages and seize other assets, such as bank accounts and some forms of personal property. State laws vary regarding the rights collectors have after winning a judgment.

Collection Methods

    Although debt collectors can collect debts from individuals willing to pay them, regardless of the debt's age, they must closely follow the federal laws outlined in the Fair Debt Collection Practices Act when conducting collection activity. Debt collectors can call debtors or send dunning letters, but they cannot threaten to sue, garnish wages or seize property. Because the expired statute of limitations renders such action illegal, threatening to take the action in an effort to obtain payment is also illegal.

Monday, June 13, 2011

Can Creditors Go After Property You Inherit?

An inheritance can be a mixed blessing. It often leads to increased financial freedom. However, depending on your state of residence and the type of property you inherit, your inheritance could end up benefiting your creditors more than it benefits you. If you have debts you haven't repaid, your creditors might be able to sue you and take your inheritance.


    While there are some exceptions, creditors can go after most types of inherited property. However, they cannot touch any of your property, inherited or otherwise, unless they follow certain legal procedures. First, a creditor must sue you and win a judgment against you. Armed with a judgment, your creditor can levy your bank accounts and place liens against your property.


    Depending on which state you live in, an inherited Individual Retirement Account (IRA) might be protected from your creditors. The federal bankruptcy code protects retirement funds, including IRAs, of the person who contributes money to the account. Some states extend that protection to beneficiaries who inherit an IRA. Other states, including Wisconsin, have concluded that IRA benefits are not "retirement funds" to those who inherit them; therefore they're not protected from creditors.


    If you are the beneficiary of an irrevocable trust, money or property that remains in the trust might be off-limits to your creditors. This is generally true if you do not have direct control of the timing or distribution of trust funds, and if the trust contains provisions prohibiting the trustee to make distributions to creditors or other non-beneficiaries.

    Your inheritance is only protected while the funds or property remain in trust. Once the trustee makes a distribution to you, your creditors can access it.


    You may be able to keep an inheritance in the family and out of your creditors' hands by disclaiming the property. For a disclaimer to be effective, you must state in writing that you completely and permanently refuse to accept any interest in the property. This written statement must be given to the personal representative of a decedent's estate within nine months after the death, and you cannot accept any interest in, or benefit from, the disclaimed inheritance. You may not take an inheritance and then give it back with a disclaimer. Property that has been disclaimed goes to the next appropriate heir or beneficiary. If the decedent leaves a will naming a secondary beneficiary, the inheritance passes to this person. If there is no estate plan, state law determines which heir is next in line.

Sunday, June 12, 2011

How to Transfer a Remaining Balance

How to Transfer a Remaining Balance

When you transfer one credit card balance to another credit card, the new credit card pays off that balance on the old credit card. That balance is then added to the new credit cards total balance. This is useful when one card has a lower annual percentage rate than another. If you have a lower rate, you can save money over the long run. Some people also transfer balances to minimize the number of accounts they have to pay and keep up with each month.



    Read through the credit card terms and conditions. The terms and conditions will explain if you can transfer a balance from another credit card to that account. It will also explain what rate will be applied to transferred balances and if there is any fee. If you no longer have the terms and conditions, call customer service or read the account terms in your online account.


    Call the customer service number listed on the back of the credit card that you will transfer the balance to, to get your total available credit. You can also view your current available credit by logging into to that account online.


    Request a balance transfer. You can call the customer service number on the card that you're transferring the balance to and speak with a customer service representative. Some credit card companies, like Capital One, allow you to request a balance transfer online. Just log in to your account and select that option.


    Submit the name of the credit card company whose balance you are transferring, the account number and the amount of the balance transfer. If submitting this information online, select the company name from the list of credit card companies. Enter the account number of that credit card and the amount you would like to transfer. Include cents (e.g., $215.46), if you are transferring the entire remaining balance.


    Submit your request. The credit card company will pay off the balance of the old card. Then add that balance to your total balance.

Saturday, June 11, 2011

North Carolina Law on Not Paying Unsecured Debt

North Carolina was third in the nation for credit card debt as of 2010, according to an article on News-Record.com by the Herald-Sun of Durham. You may be one of the millions of North Carolinians with credit card debt. You may also be worried about what will happen if you fail to pay off your card debt and other unsecured debt. Nothing can replace advice from a competent attorney, but arming yourself beforehand with information about North Carolina law is a good idea.

Statute of Limitations

    The statute of limitations is the maximum time that your creditor has to collect a debt. A creditor may sue you for unpaid unsecured debt after this time has elapsed, but you may use the statute of limitations as a defense in court. North Carolina's statute of limitations for unsecured debt is three years. The clock starts ticking when you make your last payment or make your last charge. Creditors may sue for debts acquired in the last three years.


    Your creditors may sue you in court for unsecured debt. If you lose this case and still fail to pay, your creditors may seek a writ of garnishment. This deducts a portion of what you owe directly from your wages. This is rare for credit card debt in North Carolina, but you may have your wages garnished for other unsecured debt such as unpaid taxes, medical bills or child support.

Illegal Collection Practices

    Your creditors must operate within the bounds of North Carolina law when collecting a debt. State law defines a number of practices as illegal. These include threats such as violence and false threats of prosecution or arrest. Harassing behaviors such as profanity, obscenity, annoyingly frequent telephone calls and attempting to contact a person at her place of business after an explicit request not to do so are also illegal under North Carolina law.


    State law provides for legal redress for those who have been the victim of unscrupulous lenders. You may sue the creditor or collection agency for the sum of any actual damage, plus punitive damages between $500 and $4,000 for each infraction as of 2010. The Attorney General of North Carolina may also levy penalties of up to $4,000 for each infraction in addition to whatever you collect.

Drawbacks of Credit Cards

Drawbacks of Credit Cards

Credit cards have become a common way to make purchases for items that you don't currently have the money for. However, they are not a flawless solution for lack of money and have created as many problems, at least, as they have solved. There are some common drawbacks to the credit card system that you can learn how to avoid.

Interest Rates

    Credit card interest rates can add up to hundreds or thousands of dollars if you maintain a high level of debt. The money you are spending on interest is akin to wasting it, as it does not pay down the principle on the card. Debt can get so bad for some people that they have trouble paying off just the interest every month, not to mention the actual debt.

Spending Trouble

    Credit cards can lead to poor spending habits. It can create the illusion that you don't actually have to pay for the item, even though you will have to pay for the item later, at a total cost (because of interest) greater than the original price. This can quickly lead the cardholder into debt.

Credit Card Companies

    Credit card companies have been known to practice less than honest methods to maximize their profits. Companies target those with new credit cards, those with poor credit, and students as they can charge those demographics a higher interest rate. This benefits the company, but pushers the customer further into debtespecially if they are unfamiliar with the credit system.

Bad Credit Rating

    Late Payments, missing payments, and maxing out credit cards can give you a bad credit score. A poor credit rating can affect future financial matters in a negative way, since financial institutions look at your credit score to determine your ability to repay a loan. Lenders are less likely to lend to someone with poor credit.

Friday, June 10, 2011

Can I Be Sued for Not Paying a Credit Card Debt?

Can I Be Sued for Not Paying a Credit Card Debt?

Debt recovery procedures for credit card companies and collection agencies include telephone calls, collection letters and, occasionally, lawsuits. Your failure to pay your credit card balance could land you in court.

Time Frame

    Although a creditor can file a lawsuit against you for your delinquent credit card debt, it must do so within the time frame specified by your state. Each state has a statute of limitations creditors must refer to when filing lawsuits. If your creditor files a credit card debt recovery lawsuit against you after the statute of limitations expires, you can have the lawsuit dismissed by the court.


    Just because your creditor has the ability to sue you doesn't mean that it will. Creditors are more likely to sue consumers who have steady employment and assets, and whose credit card debt exceeds $1,000. If a creditor sues you and you arrive in court to contest the lawsuit, the creditor must prove that you owe the debt.


    Should a credit card company or collection agency sue you for your unpaid debt, it will automatically win the case by default unless you respond to the court summons and appear in court with a defense. When a creditor wins a debt collection lawsuit, most states award it the right to garnish wages and bank balances.

In Wage Garnishment, What Happens If You're Not Working?

A wage garnishment is a procedure a creditor can use to collect an unpaid debt after suing you and obtaining a judgment from a county or district court. This procedure involves directing your employer to withhold a portion of your earnings and send the money to the court for payment against your judgment debt. Wage garnishment is not typically a viable means of debt recovery if you are unemployed.

Unemployment Income Exemption

    While you are employed, a judgment creditor can typically take up to 25 percent of your disposable income, which is the amount you earn after taxes. Some states place additional restrictions on wage garnishment -- for example, if you are the head of household, Florida law prohibits garnishment of your wage earnings. Similarly, unemployment benefits are exempt from wage garnishment under federal law -- while you are unemployed, a judgment creditor cannot take your earnings.

Statute of Limitations

    Each state sets a statute of limitations for money judgments -- for example, a judgment creditor can collect on a money judgment in Georgia for seven years after the date of entry. Your creditor may apply for a writ of garnishment to take part of your earnings at any time before the statute of limitations expires. This means that if you become employed within the statute of limitations mandated by your state, the creditor may begin garnishing your income.

Other Recovery

    Even if your unemployment prohibits wage garnishment, a judgment creditor may use other methods to collect on a money judgment. It may garnish your bank accounts by ordering your bank to turn over nonexempt funds to the court for payment against your debt. A judgment creditor may also force the liquidation of personal property, subject to your state's laws, to pay your judgment debt. It may also place a lien on your real estate property, preventing you from selling or transferring your home or land until you satisfy the judgment.

Debtor's Examination

    In most states, a judgment creditor may request a debtor's examination at any time before the statute of limitations expires. During a judgment examination, you must disclose all assets, expenses and income under oath. This process allows the judgment creditor to discover assets it may take or liquidate to satisfy your debt. However, a debtor's examination may also work in your favor -- if you are unemployed and have no assets, the court may consider you judgment-proof, which means that the creditor has no recourse for recovery until you become employed or obtain assets.

Thursday, June 9, 2011

How to Respond to Debt Collection Letters

How to Respond to Debt Collection Letters

Collection letters are generally sent to consumers by third-party collection agencies that buy old debt from creditors or other collection agencies. In other cases, the collection agency may be hired by the creditor to recover a delinquent debt. If you receive a letter from a collection agency, it is important to have the debt validated. Some collection agencies try to collect on invalid debts. Others may try to collect an excess amount. Responding to the collection letters in writing is essential.



    Write a letter to the collection agency requesting proof that you owe this debt. The Fair Debt Collection Practices Act stipulates that collection agencies must be able to provide proof that you owe the debt, a process known as validation.


    Send your letter via certified mail and request a return receipt. Having proof that the collection agency received your letter will be beneficial if your case ever ends up in court. The collection agency may ignore your letter, but legally it is required to validate the debt in order to report it on your credit reports and pursue collection.


    Wait 30 days for the collection agency to respond to your letter.


    Send a second letter if you do not receive an appropriate response. Copies of the original account statements or a copy of the original contract between you and the original creditor is needed to prove that the debt is yours and the amount is correct. A simple printout from the original creditor does not prove anything under the FDCPA. In the second letter, include a copy of your first letter with a copy of your return receipt. Explain your rights under the FDCPA and demand that it cease collection attempts and remove the debt from your credit reports.


    Wait 15 to 20 days for a response to your second letter. If you do receive account statements and proper validation, you can negotiate a settlement or other payment arrangements. If you do not receive validation, you can take the collection agency to small claims court. Consult an attorney knowledgeable about debt collection for information about filing suit.

How to Settle a School Debt

Settling any debt, whether it be credit card debt or educational debt, is a challenging process that requires legwork and attention to detail. When settling a debt, you can either attempt to settle the school debt on your own or work with an accredited credit management company. Because the school will lose money in accepting your settlement offer, you want to prepare the best case for your settlement request.



    Consider the best settlement offer. Evaluate how much money you can offer the school to settle the debt. To make your decision, consider any other debt that you owe including credit card debt, home and car loans, and personal debt. Determine what you can reasonably afford to pay as a one-time payment or in installments. Remember, once a settlement is made, failure to pay could impede future changes to the settlement agreement.


    Provide documentation regarding your financial history. If you collect unemployment or have a significant financial hardship, you may have a stronger case for debt settlement. Not all schools accept debt settlement offers, so provide enough documentation to justify a financial need for your request. Bank statements, pay stubs, unemployment checks, and credit card statements are commonly used to show financial hardship.


    Develop a debt elimination plan or offer the school a one-time settlement amount. On average, you can eliminate up to 60 percent of the original debt amount if you partner with a debt consolidation program. If you settle directly with the school or reach an agreement with a credit counseling company, the settlement will negatively impact your credit score.


    Confirm the date(s) and amount(s) that will be paid. If you partner with a debt elimination company, confirm the address where the payment will be sent. Determine each payment amount and the date upon which is must be received.


    Ask which forms of payment are acceptable. Common forms of payment include money order, major credit cards, and personal check.

Wednesday, June 8, 2011

Can You Be Arrested for Not Paying Unsecured Debt?

In the United States, you cannot be arrested for failing to pay your debts whether secured or unsecured. Creditors can sue you for the balance you owe on the debt, but the court will not issue a bench warrant for your arrest if it finds in favor of the creditor.

Secured and Unsecured Debt

    Secured debt is debt in which the creditor holds property as collateral. If you fail to make your payments to the creditor, the creditor has the right to repossess the property such as a vehicle or foreclose on your home. With unsecured debt, the creditor does not hold any property as collateral. If you fail to make your payments, the only recourse the creditor has is to sell your debt to a collection agency or file a civil lawsuit against you.

Creditor Lawsuits

    When a creditor takes you to court in an effort to collect the remaining unpaid balance on your account, it is a civil lawsuit. In civil lawsuits, there is no violation of criminal laws. Therefore, if the court rules against you, you will not face any jail time. The purpose of such a lawsuit is for the creditor to recovery monetary damages from you. The monetary damage a creditor typically seeks to recover is the unpaid balance on your credit account.

Wage Garnishments

    If the civil court judge finds in favor of the creditor, you have the option to pay off your outstanding balance in full. If you cannot afford to pay off your balance in full, the creditor will garnish your wages. The creditor can garnish up to 25 percent of your after-tax wages until you pay off the outstanding balance on your account. However, if your after-tax earnings total less than 30 times the current federal minimum wage, the creditor cannot garnish any of your wages.

State Income Tax Return Intercept

    If the creditor cannot garnish your wages, it will submit a request to the court to intercept your state income tax return check. Your state taxing agency will intercept your state tax return check and will deduct the amount you owe to the creditor. If the refund check is less than what you owe, the taxing agency will send the entire check to the creditor. If the refund check is more than what you owe, the state taxing agency will deduct what you owe to the creditor and send the remaining money from your refund check to you.