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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..

Wednesday, August 31, 2011

How to Calculate How Long to Pay Off Credit Card

Credit card debt can be overwhelming and it may feel like you'll never have it paid off. If you are paying the minimum amount due, it may indeed take quite a long time to get out of credit card debt. You must stop adding to your debt, but even then it's important to understand how long it will take to pay off a card so that you can see light at the end of the tunnel.



    Look at your credit card bill and find out how much money you owe, what your interest rate is and when the interest is compounded. You need to know all of this information to calculate how long it will take to pay off your bill.


    Determine how much you want to pay each month. Keep in mind the smaller amount that you pay the longer it will take for a payoff.


    Multiply the amount you owe on the credit card times one plus the interest rate in decimal form and then subtract your payment and that is what you will owe after the end of each month if interest is compounded monthly. The formula looks like this, p * (1+r) --x, where p is principal r is the rate and x is your payment.


    Repeat this for every month until the amount is zero. The amount of months it takes is how long the payoff will take. This is because even if your principal stays the same which it must for the formula to work, the interest keeps being added to what you owe.


    Consider using an online calculator. The formula for finding the payoff using compound interest without doing math for every month is very complicated. Many financial websites offer online calculators that will do the math for you.

Tuesday, August 30, 2011

Is Consumer Credit Counseling Service Good or Bad?

Consumer credit counseling can be extremely helpful when you cannot handle your financial issues on your own, but it can make things worse if you do not select a good firm. Credit counseling is appropriate when you cannot create a workable budget or your debts are too high, but sometimes your situation is beyond the scope of a counselor's assistance.

Problem Types

    Consumer credit counselors handle a wide range of problems, and legitimate firms offer services ranging from online materials, workshops and one-on-one budgeting assistance to in-depth financial analysis and repayment plans that include getting concessions from creditors. Counseling is not good if you do not have enough income to handle any kind of structured repayment schedule, even if your lenders waive fees and interest. You may need to file bankruptcy rather than wasting time pursuing other options.


    Many nonprofit consumer credit counseling companies charge minimal fees or provide free help to debt-ridden clients, but not-for-profit status is not a quality or affordability guarantee. Ask about the firm's funding sources, cost of counseling, debt management plan fees and other services before you choose a counseling service. Avoid firms that do not disclose this information or you may worsen your problems by running up high fees for counseling sessions or payment plan administration. Free and affordable counseling is good because it does not put you deeper into debt.


    Most creditors cooperate with consumer credit counseling companies when you agree to go on a debt management plan. Normally this means the lenders lower your interest rates, forgive late fees or agree to other helpful terms, and they often mark your account as "on time" with the credit bureaus if you keep up with the payments. This is a good aspect of counseling because it improves your credit rating. Some lenders may refuse to work with your counselor, and they might may even charge off your accounts, which damages your credit score.


    You cannot predict a counseling firm's stability, and it is bad to use a consumer credit counseling company that goes out of business while you are in the middle of a debt management plan. Such plans run up to five years, and your creditors will not receive payments if you do not immediately find out that the counseling firm has shut down. Call the creditors as soon as you know there is a problem, and ask if you can continue the plan by sending the money yourself on the same schedule. Choose a licensed credit counseling firm that belongs to a legitimate professional organization like the National Foundation for Credit Counseling. Ask how long the company has been in business to get an idea of its potential long-term stability.

Credit and Debit Card Rights

Credit and Debit Card Rights

The United States has enacted several laws to protect consumers who use credit cards. These laws regulate credit card fees, payments and credit terms. Fewer regulations are in place for debit cards, which means that banks generally determine the fees and terms associated with those cards.

Credit Card Fees

    The Credit Card Accountability, Responsibility and Disclosure Act of 2009 offers cardholders more protections when dealing with credit card companies. For example, companies must limit their fees to the amounts outlined in the legislation, and late-payment fees cannot be higher than a cardholder's minimum monthly payment. Also, fees charged for going over a credit limit can't exceed the overcharged amount. In other words, a company can't charge a cardholder who exceeds his credit line by $20 an over-the-limit fee that's higher than $20. However, some exceptions to these fee limits apply, especially if a cardholder is consistently late with payments. In such cases, a company can charge higher fees if it can show that the costs resulting from the late payments justify higher fees.

Credit Card Transactions

    The 1974 Equal Credit Opportunity Act prohibits companies from discriminating against consumers in credit transactions based on age, race, sex and other characteristics. Companies must also promptly apply payments made to customers' credit accounts, due to mandates included in the Fair Credit Billing Act of 1974. The same legislation requires companies to fix billing mistakes, and to ensure that such problems don't negatively affect consumers' credit scores.

Credit Terms

    The Truth in Lending Act, enacted in 1968, requires lenders to be consistent in the methods used in calculating the cost of credit and disclosing those costs to consumers. The act also limits the amount cardholders have to pay if their credit cards are lost, stolen or used without their knowledge. In such cases, cardholders are liable for no more than $50 to cover fraudulent charges.

Debit Card Fees

    Debit card fees aren't subject to the same regulations as credit card fees. Banks determine debit card fees, and some banks charge them monthly. Other banks charge a fee for each debit card transaction their customers make. Customers can avoid these charges in some cases. For example, they usually can use the automatic teller machines of the bank that issued their debit cards without paying a fee.

Debit Card Liability

    Some banks issue debit cards with zero liability, which means that cardholders won't be required to pay for unauthorized transactions made with their debit cards. MasterCard and Visa both offer zero-liability protection to their debit card customers. Any bank that imposes liability on its customers for unauthorized debit card transactions must outline the customer's potential liability, along with its policies for handling fraudulent transactions.

Does a Charge-Off Negatively Affect Your Credit?

A charged-off debt is a delinquent debt that a creditor writes off as a financial loss. Charged-off debts have gone unpaid by account holders for as long as 180 days. As a result, charged-off accounts can have a negative impact on a consumer's credit rating for several years.


    Creditors usually turn over charged-off debts to collection agencies in an attempt to recoup some of the money the account holders owe. These delinquent accounts affect a consumer credit report in several ways. For example, creditors initially report late payments to credit bureaus each time an account holder's payment is 30 days past due. Creditors then report to credit bureaus when they charge off delinquent accounts that remain unpaid. All of that negative information goes into consumers' credit files and lowers their credit scores.

Credit Rating

    A charged-off account negatively affects a consumer's credit rating even if the account holder eventually pays off the account. The negative information associated with the account remains in a consumer's credit file for seven years from the date the creditor first reported the account as delinquent. Consumers can help their credit rating after a few late payments simply by bringing their payments up to date and staying current, according to the Fair Isaac Corporation, creator of the FICO credit score. However, Fair Isaac calls a charged-off account a significant problem that usually causes severe damage to a consumer's credit rating.

Paying Charge-Offs

    A creditor or collection agency should report to credit bureaus if a consumer eventually pays a charged-off account in full. A paid-off account may be viewed more favorably by future lenders, although the consumer's credit rating has already been damaged. Paying off the account demonstrates that the account holder assumed responsibility for the debt. The account holder also could explain to the lender if he was unemployed or had some other valid reason for not paying the bill before the creditor charged off the account.


    You can improve your credit rating during the time that a charged-off account remains on your credit report by paying your other debts on time to bolster your credit score. Pay down your debts as much as possible, especially if you have credit cards that are near their limits. Lenders and creditors are most interested in your credit history over the last two years, according to Bankrate.com. Therefore, a recent positive credit history could eventually outweigh negative information in your credit file that's more than 2 years old.

How to Put Loans on Prepaid Cards

How to Put Loans on Prepaid Cards

Having the proceeds from a loan placed on a prepaid debt card can help you avoid using a bank. Some people avoid banks because of what they perceive to be high fees for services. Others may at least temporarily avoid banks because of problems with their accounts, such as garnishment. For example, a credit card company could win a court order to garnish your bank account after you stop paying on a credit card. Garnishment allows the credit card company to make unannounced withdrawals from your bank account until the debt is paid.



    Purchase a prepaid debit card. The cards are available at many large retail stores or online. Make sure the prepaid card has a MasterCard or Visa logo, and read about services offered by the card before purchasing. Call the customer service number listed on the card or on marketing materials to confirm that the prepaid debt card accepts direct deposits.


    Activate the prepaid debt card by following instructions included with the card. A prepaid card purchased in a store typically can be activated at a checkout register by presenting cash to be added to the card. A card ordered online may require you to mail in a money order for your first deposit.


    Shop around for a loan. You should obviously look for a loan with the lowest interest rate and fees, but your primary goal is to find a lender who will give you the loan proceeds in the form of a direct deposit to your debit card. Simply tell the lender that you don't use banks and would like to know if your loan can be issued through direct deposit.


    Give the lender the direct deposit routing number and account number for your prepaid debit card after you are approved for the loan. Get the routing and account numbers by calling the customer service number for your prepaid card.


    Confirm that the loan proceeds have been deposited to your prepaid card by checking the balance. Follow instructions with your card to check your balance. Options could include using an ATM to check the balance or calling customer service for the debit card.

Credit Card Consolidation Help

Borrowers are often enticed by the attractive features of debt consolidation, such as lower monthly payments and fewer bills. While consolidation loans can help you effectively manage your credit card debt, they do not relieve you of the long-term pressure to repay the loan and can lead to even more problems if you never learned to responsibly repay your debts.


    Credit card consolidation is useful to some borrowers. However, consolidation programs do not eliminate your debt, but merely shuffle it around to new lenders. Consolidation loans last longer than regular credit card payments and cost you more money over the life of the loan. Anyone considering this kind of loan should always consider how much money you will have to pay in the long term versus how much you can save in the short term.

Balance Transfers

    Credit card debt consolidation comes in different forms, each of which has its own positives and negatives. One of the simplest forms of credit card debt consolidation is the balance transfer, in which you take the debts from two or more credit cards and transfer them to another credit card. Credit card balance transfer offers typically come with low introductory interest rates but can also charge a percentage of the debt transferred as a transfer fee.

Consolidation Loan

    Another way to consolidate credit card debts is to get a consolidation loan, either in the form of a personal loan, home equity loan or similar instrument. These loans typically come with lower yearly interest rates than credit card balance transfer offers, though they usually do not offer the low introductory rates of balance transfers. Also, home equity loans typically require you to grant a security interest in your home which can eventually result in a lien or a foreclosure, whereas balance transfer offers do not require such an interest.

Credit Counseling

    Whenever you need help dealing with your debts or are considering a debt consolidation loan, it is usually beneficial to consult with a professional credit counseling organization that can help you evaluate your options. Be sure to double-check the credentials of any organization offering credit counseling services as some of these companies are scams or offer dubious assistance.

How Can I Clear or Reduce My Debts?

There are many ways to clear or reduce your debt load. By consolidating your debts and making more than your minimum payments, you can reduce debt faster than you ever thought possible. Consolidation may include negotiation to bring your overall debt down and this can be done on your own or with the help of a financial company.

Debt Consolidation

    Consolidate your debt by taking out a bank loan to pay off your creditors. If you have high-interest debt, borrow at a lower rate. That will not only will eliminate your many current debts but also facilitate a single payment to one bank for your debt load.

    Contact a debt-consolidation loan company if you do not feel you can do it on your own. Be aware of the fees they charge to help you with your consolidation. These companies often loan you the money and charge a specified interest rate on top of fees. Make sure you know how that interest rate compares with your present debt and be aware of the fees and how they relate to the company's service.

Debt Negotiation

    Negotiate with your creditors and get them to lower the balances you owe on credit cards. Creditors may reduce principal in return for a lump-sum payment, though in many cases the accounts will have to be closed. If you have money or can borrow money at a lower interest rate to pay off or reduce debt, you may be able to get creditors to significantly lower what you owe them.


    Making larger payments, if you can, will lower your debt more significantly than paying the minimum amounts due. That extra money every month can be applied to your principal and new payment amounts will continue to drop when they are calculated. If you continue to make more than the minimum payments, you can erase or reduce a substantial amount of debt in a short time.

    Make more than one payment per month. This tactic will lower your principal amount. If you make one minimum payment when it is due, that will take care of your interest. Send in another payment and specify on the check itself that the total all be applied toward your principal. This will lower your principal much faster than the minimum payment that is used to pay interest accrued on your account.

What Happens to Credit Card Debt When Someone Dies in Texas?

When somebody close to you dies, you probably aren't thinking about paying her credit card bills for her. However, resolving debts is one of the loose ends you may have to address for your deceased loved one. In Texas, if you were married to the debtor when the debt was incurred, you may be responsible for the debt under community property laws. Otherwise, you are not responsible for the debt unless you had a joint account with the late debtor.

Community Property State

    As of June 2011, Texas is a community property state, which means all debts incurred during the course of a marriage belong equally to both spouses in Texas. Therefore, if a debtor owes money on his credit cards at his death, his spouse automatically becomes responsible for paying those debts. If she does not pay those debts or make suitable payment arrangements, the credit card company can take collection action against her and report her to the credit bureaus for non-payment.

Joint Accounts

    If a non-spouse had a joint credit account with a debtor in Texas, the surviving owner of the account must pay off the debt after the debtor's death. As with spouses, joint account-holders become solely responsible for the debt after an account holder's death, and they can face financial and legal consequences if they do not make arrangements to pay back the existing debt.

Authorized User

    If you are not the debtor's spouse and were an authorized user on her account rather than a joint account-holder, you are not responsible for the debt and do not have to pay the amount owed. Similarly, family members not listed on the account are never responsible for the decedent's debts in Texas. Heirs and relatives do not have to pay these debts after the original debtor dies. If a debt collector tries to collect the debt from you in this circumstance, inform the collector you are not responsible for the debt and ask him to stop contacting you.

Executor of the Estate

    If a deceased person had debts in his name when he died and community property laws don't apply, the executor of the estate must use estate assets to pay off the debt. However, credit card debt is a low priority debt in Texas. If the estate does not have enough funds to pay credit card debts off after paying off other debts, such as taxes and secured debts, the creditor must write off the debt as uncollectible.

Monday, August 29, 2011

Can a Mortgage Broker Accept a Referral Fee From a Debt Reduction Company?

Paying someone to recommend your company to possible customers is often illegal. There are laws against your mortgage lender or broker taking referral fees --- also called kickbacks --- from companies involved in closing on your loan The laws do not prohibit collecting a fee for recommending you to a debt-reduction company when you're in financial trouble.


    The Real Estate Settlement Procedures Act applies federal rules to several aspects of closing, including referral fees. Under RESPA, companies involved in closing can't pay referral fees to each other: If your broker recommends or insists you use a particular title company, she cannot receive anything of value in return for the referral. RESPA applies specifically to mortgage settlements --- not to debt reduction companies, which aren't part of the closing process.


    In 2010, the Federal Trade Commission added several new regulations on for-profit debt-reduction firms to its Telemarketing Sales Rule. One change is that if the company requires you set aside money for debt reduction in a dedicated account, it cannot take kickbacks from the bank holding the account. The new rules don't include any other restrictions on mortgage brokers, or anyone else, accepting referral fees from debt reduction companies.


    If your broker insists you use a particular debt-reduction firm, the new FTC rules give you some protection against the debt reduction company cheating you. Before you sign anything, the company must inform you what its service costs are, and how long it will take to see results. You don't have to pay any fees until the company has successfully negotiated some of your debts down, and if the company requires a dedicated account, you must be free to withdraw the money from it at any time.


    Banning referral fees is meant to reduce costs to consumers: RESPA prevents mortgage brokers from requiring you to use an overpriced title company, then splitting the overage, for example. Mortgage expert Jack Guttentag says on his website that what matters is referral power: As long as a broker or lender can recommend or pressure you to use a particular company, that company will find a way to curry favor with the broker, even if there's no outright kickback fee.

Five C's of Credit Lending

In the lending industry, lenders use various criteria to evaluate applicants for credit. The five C's of credit is a concept that deals with five important factors that lenders almost always examine when approving applicants for credit. If you're about to apply for a loan, look at these five factors to determine if you have a chance of being approved.


    One of the first factors that the lender evaluates is your character. This factor examines the likelihood of your repayment of the loan. The lender looks at your past credit history and references to determine if you have a solid character. This variable may be difficult to quantify, but lenders try to do it so that they can determine if you're a potentially trustworthy borrower.


    Capacity is the second variable that lenders look at when evaluating a credit applicant. Capacity deals with your ability to repay the loan over the long term. Lenders essentially look at how much money you generate on a regular basis to handle the loan payments. If you don't have a steady income, your application for credit will likely be denied.


    Capital is the third "C" in the credit evaluation process. This criterion deals with how much money you personally have available to invest in the deal. For example, if you're borrowing money for business, the lender wants to see that you have sufficient cash to make a down payment. When you're invested in the item that you're buying with the loan money, you're more likely to repay it.


    The lender also wants to ensure that you have some type of collateral. Collateral involves putting up some type of property that the lender may repossess if you don't make your loan payments. In the case of a mortgage, the collateral is the house itself. Lenders evaluate the condition of the collateral to make sure that it's of sufficient value to pay for the amount that you're borrowing.


    The last factor that plays a role in credit evaluation is outside conditions. The lender evaluates the current market and all economic factors involved before making a decision. If times are hard, lenders are much less likely to hand out loans, because fewer people can afford to make payments on them.

Sunday, August 28, 2011

How to Repair Bankruptcy

The effects of a bankruptcy can destroy your credit rating. Bankruptcies stay on your credit file for 10 years, and once the bureaus delete this information, creditors reviewing your credit report will not be aware of your past mistake. However, you don't have to wait 10 years to clean up the effects of a bankruptcy. There are ways to improve your credit score in the meantime.



    Consider not including all your debts in the bankruptcy. If you haven't filed a bankruptcy yet, you may want to keep some debts and continue paying these creditors as agreed to help repair your FICO score.


    Add two or more credit accounts. If you've already filed a bankruptcy and included all your credit accounts, start repairing a bankruptcy by applying for new credit accounts, such as a secured credit card through your bank or credit union. Pay the required security deposit to acquire the card. Also, talk to your bank about unsecured bad-credit credit cards. These have higher interest rates, but they'll help restore credit after a bankruptcy.


    Establish a payment history to improve your credit score. Whether you've retained a few debts from before your bankruptcy or applied for new accounts after your bankruptcy, be sure to pay these creditors each month on time. Timely payments are key to repairing the effects of a bankruptcy. Pay early or pay online to avoid being late.


    Eliminate debt at the end of each month. Pay off new credit card charges each month to build and maintain a high credit score after a bankruptcy. Plus, eliminating new charges each month alleviates debt problems, making it less likely you'll file bankruptcy again.

Free Debt-Counseling Service Information

Free Debt-Counseling Service Information

Across the nation there are hundreds of agencies that offer debt and credit counseling to help consumers escape a mess of debt. Some of these agencies are reputable, free, nonprofit agencies. Others are scams. Once a consumer finds a good one, he can use the service just to help him figure out a budget and payment plan or employ the service more actively with a debt management plan to help him become debt free.

Recommended Counselors

    The Federal Trade Commission and MSN Money both recommend consumers seek credit and debt counseling from a member of either the National Federation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. Both organizations have lists of reputable counselors all over the country. Most of these offer their services free or for a low cost and are nonprofit organizations.

Counseling Session

    Counseling sessions can take place in person, over the phone, or by email, depending on the agency you choose. They generally take about an hour. Prior to the session, the consumer will need to gather financial documents, such as tax returns, bills and income statements. Counselors may simply help a client set up a budget or, depending on the consumer's needs, may set up a debt management plan.

Debt Management Plan

    With a debt management plan, counseling agencies take over management of the client's unsecured debt--such as credit cards--by collecting money from the client each month. Together, they set a projected date for paying off all debt. They often negotiate lower interest rates or payments, or get fees waived with creditors. If a debt management plan is agreed to, they also often take a small fee for managing the debts. They often require clients to destroy their credit cards for the duration of the plan.


    Creditors do not know consumers have consulted a service unless the service takes over debt with a debt management plan. But, because these plans often result in consumers paying somewhat less than their original arrangement would have them pay, contracting with a counseling service can damage credit. According to MSN Money, a third of clients can manage their debt after one counseling session. Two-thirds either can't get a handle on their debt or drop out of the debt management plan.

How to Calculate Your Debt Payoff

How to Calculate Your Debt Payoff

Many people who are in debt want to know one thing---when they will be out of it. Calculating a debt payoff date may help you stay on track when trying to tackle your debt. Calculating your debt payoff takes only a few minutes.



    Gather all of your debt. Whether it's credit cards, car loans, personal loans or other types of debt, gather the statements for the amount of money you owe. Many people exclude their home mortgage when figuring out a debt payoff.


    Record the amount of each debt alongside the interest rate that is being charged. Debt payoff calculators usually place columns for the debt owed beside the interest rate for that debt. Work your way down the calculator entering those amounts.


    Enter the payments that you are making to those accounts. To receive an accurate indication of when that debt will be paid off, you must enter the amount of money you pay each month to each of those accounts. The more you pay, the faster the debt will be paid off.


    Calculate your payoff date. Once the information has been entered, simply hit return and to see when your debt will be paid off.

Does Not Paying a Doctor's Bill Affect Your Credit Score?

Does Not Paying a Doctor's Bill Affect Your Credit Score?

Your credit score can affect every aspect of your life, from getting a mortgage to advancing in your career. Protecting your credit score and your good name means paying your bills on time, every time, whenever possible. That includes medical bills such as a doctor's bill. If you don't pay a doctor's bill, the result may be a black mark on your credit.

The Number One Threat to Your Credit

    Nothing affects your credit more than paying your bills and paying them on time. Pay each bill on time, and your credit score has nowhere to go but up. Pay bills late, or, worse, neglect to pay them at all, and your credit score will plummet. Therefore, if you don't pay a doctor's bill, you risk harming your credit. The more medical bills you do not pay, the worse the damage.

The Determining Factor

    Whether or not neglecting to pay a bill from your doctor will hurt your credit score depends on whether your doctor -- or, as is usually the case, his financial officer -- reports delinquent accounts to credit reporting agencies. Unless your doctor is driving a horse and buggy and making house calls, then he likely reporting accounts to the three major credit bureaus. If your doctor is not reporting to these credit bureaus, he is probably contracting with a service that does.

The Domino Effect

    Most physicians and clinics use a collection agency to recover debt from patients who have not paid. When your doctor turns your bill over to a collection agency, your credit, which has already taken a blow when you let the debt become past due, takes yet another hit. However, the worst may be yet to come; if you continue to ignore attempts from the collection agency to collect on the debt, the agency may go to court to get a judgment against you for the amount of the debt, which means your credit score suffers yet again.

Making Payment Arrangements

    If you are unable to pay your doctor's bill, don't just ignore it and hope it goes away. Instead, call or visit your physician's office to determine what payment arrangements he can offer you. If you can pay cash for the amount of the service, the finance office may be willing to cut you a deal, and reduce the amount of the bill, of, if a settlement is not available, you may be able to work out a payment schedule and pay the bill in increments.

Saturday, August 27, 2011

What Happens If You Do Not Pay a Debt When in Collections?

You remain responsible for paying off your delinquent debts -- even if your original creditor charges off the debt and sends it to a collection agency. Depending on the types of debt you owe and the collection agency's policies, ignoring the debt may carry significant consequences and result in legal recourse from the company or the debt steadily increasing over time.

Third-party Transfer

    Just because your debt is in collections that does not mean that a collection agency owns the debt. Some original creditors, such as credit card companies, have in-house collection departments that take over responsibility for collecting on delinquent accounts. While the company still reports your missed payments to the credit bureaus, owing a debt held by an in-house collection department does not result in a collection account on your credit report.

    If you do not pay the debt, however, the creditor's in-house collection department will eventually sell or transfer the debt to a legitimate third-party collection agency. The outside collection company will report the debt to the credit bureaus -- damaging your credit rating.

Additional Charges

    If your contract with the original creditor gave your creditor the right to add interest charges to your debt, the Fair Debt Collection Practices Act extends the same right to any collection agency that subsequently purchases the account. Thus, not paying your debt results in the amount you owe steadily increasing.

    Even if your original creditor did not charge you interest, that fact does not stop the collection agency from adding fees to your account. Like interest charges, collection fees result in your debt growing over time.

Collection Activity

    As soon as your unpaid debt falls into collections, collection activity commences. Initial collection activity usually consists of frequent letters and telephone calls from debt collectors. While the Fair Debt Collection Practices Act prohibits third-party collection agencies from contacting you via telephone at any time or place you specify is inconvenient, such as at your place of employment, in-house collection agencies are not bound by the FDCPA -- leaving them free to contact you as they see fit.


    While collection lawsuits are typically a last resort for debt recovery agencies, they do occur. The more you owe, the greater your chances of facing a collection lawsuit. When a collection agency wins the lawsuit, the resulting court judgment sometimes gives it the right to garnish your bank accounts and wages -- depending upon the laws in your state. Judgments also appear on your credit report and cause further damage to your credit rating.

How Long Can a Debt Be Pursued?

How Long Can a Debt Be Pursued?

With few exceptions, outstanding debt may be pursued indefinitely, but collection options may be limited after a certain period. The Fair Debt Collection Practices Act governs debt collection and your consumer rights. Just as creditors have the right to collect, you have the right to question the validity of a debt and file formal complaints of unfair or deceptive collection attempts with the Federal Trade Commission or your state attorney general.


    While most debt doesn't expire, debts discharged in bankruptcy cannot be pursued. Debt collectors must tell you the total amount owed, name the original creditor and notify you of your right to dispute claims. If you send a dispute letter within 30-days of the initial contact, debt collectors must stop collection attempts until they send you verification validating the original debt. According to a 2010 New York Times report, creditors often sell unrecoverable debt to collection agencies for pennies on the dollar.

Statute of Limitations

    Each state has a statute of limitations that prevents creditors from suing you for old debt. The timeframe depends on the type of debt owed. The statute limitations may be used as a defense in court to have a lawsuit dismissed. Exceptions to state statutes may include federal debt such as government loans, child support, alimony and tax debt. Collection agencies understand laws regarding the statute of limitations and may try to persuade you to admit responsibility for or make payment arrangements on the debt. Making a payment on or agreeing to a payment plan may reset the statute of limitations.

Credit Reporting

    The statute of limitations for delinquent debt appearing on your credit report differs by state. Most negative information remains on your report for seven years. Some bankruptcy judgments may be stay on your credit report for 10 years and unpaid tax liens may remain on your consumer history for 15 years. As with debt, you may dispute information on your credit report and inaccurate information will be removed.

Consumer Rights

    Regardless of your financial liability, debt collectors cannot harass you, use obscene language, lie to you about the amount owed or threaten you with legal actions they have no right to pursue. Collectors cannot call you before 8 a.m. or after 9 p.m. in your time zone. If a creditor contacts people you know seeking your whereabouts, they cannot tell the person that you owe money. Additionally, if you tell a debt collector that your employer prohibits calls, they cannot contact you at work. You may send a "cease-and-desist" letter to a debt collector at any time requesting that they stop contacting you and they must comply. Those letters, however, do not protect you from lawsuits or absolve you from debt.

Debt Management Help

Debt Management Help

Debt can seem overwhelming. Just facing the reality of how much debt you have and what it is costing you is enough to send you screaming back to the happy land of denial where things only get worse. Fortunately, when you're ready to face the problem, there are many free or inexpensive resources to help you turn what seems insurmountable into little projects and steps that help you climb out of the debt hole.

Budgets and Payoff Plans

    Consistently, credit counselors and financial advisers such as Liz Pulliam on MSN Money suggest that if you're serious about paying off debt you must create and adhere to a budget that includes at least 20 percent of after-tax income dedicated to debt payments. Two ways of paying off the debt include the snowball, in which you pay off smallest debts first and "roll" the amount dedicated into that debt toward paying off the next debt; and "avalanche" in which you pay off debts with the highest interest rate first.

Online Tools

    MSN Money and other sites also offer free online tools to help you manage your debt. MSN, for example, has a debt evaluation calculator; a calculator to help you estimate your credit score; a calculator to help you figure out if debt consolidation is a good idea; and many articles about tackling debt. (see Resources) Bankrate also has tools such as a debt reduction and mortgage calculator. (see Resources)

Debt Management Software

    There are several free debt-management programs that you can download to keep track of what you owe, what your interest rates are costing you and how much you've paid down on each debt. ZilchWorks has been recommended by CBS Moneywatch as of January 2010.

Consumer Credit Counseling

    There are many consumer credit counseling agencies and companies. Some are better than others. The Federal Trade Commission recommends looking for counseling help at universities, credit unions or U.S. Cooperative Extension Services offices. Also recommended by MSN Money are agencies listed with the Association of Independent Consumer Credit Counseling Agencies or the National Federation of Credit Counselors. (see Resources) Seek an agency that offers free initial counseling in person or via phone or email. If you elect to have the agency help you pay down debts, make sure to pick one with a small fee and one that is listed with the Better Business Bureau.

Thursday, August 25, 2011

Can You Go From Getting Your Wages Garnished to Paying Monthly?

Can You Go From Getting Your Wages Garnished to Paying Monthly?

It takes a judge to reverse a wage garnishment. By the time a person or company sues you and wins a judgment resulting in garnishment of your wages, the creditor has likely exhausted all other methods of collecting the debt from you. After convincing a judge to reverse a garnishment, you'll need to convince the creditor to accept a payment arrangement in order to repay the debt on a monthly basis.

Garnishment Law

    Federal law puts a cap on wage garnishment by credit card companies and other creditors. The maximum amount your wages can be garnished each week is either 25 percent of your disposable income or an amount of your disposable income equal to 30 times the federal minimum wage, whichever is greater. The law allows for a much higher percentage of your disposable income to be garnished if the reason is paying off delinquent taxes or child support.

Challenging Garnishments

    Every state allows you to file a form called a Claim of Exemption, Garnishment Exemption Form or some equivalent. You should receive, by law, a copy of this form once a garnishment is made against you. In some states, you'll have up to 45 days to appeal. You'll be given a hearing date and you can contact an attorney to represent you. At your hearing, you'll be asked to prove your financial situation with past tax forms, pay stubs, rent receipts, bank statements and anything else the court asks for. You, or your attorney, will have to plead your case as to why the wage garnishment should be reversed and why the court, and the creditor, should accept a new payment arrangement from you.

IRS Levy Appeal

    The Internal Revenue Service can garnish, or levy, your wages as a last resort to collect taxes you owe. To fight this, the IRS suggests you start with contacting an IRS manager to review your case. You can also contact the Office of Appeals to make your case and explore other tax collection options. Paying monthly on your past due taxes is one option the IRS can offer.

Debt Help

    Credit counseling agencies can help you negotiate monthly payment arrangements with creditors. The United States Department of Justice offers a list of approved credit counseling agencies that can provide information about the specific rights and options you have in your state regarding wage garnishments, payment arrangements and negotiating with creditors.

How to Reduce Credit Risk

How to Reduce Credit Risk

Having numerous credit cards and credit lines can tempt you to overspend. Instead of saving cash for emergencies, you may find yourself relying on your credit lines as a safety net. Sure, it makes sense to use credit in a financial emergency, but relying too heavily on credit--coupled with illness or an unexpected job loss--can lead to severe debt or even bankruptcy. Carefully monitoring how you use credit can help you avoid that scenario.



    Gather your billing statements or call your creditors to determine how much available credit you have.


    Calculate the total to determine how much money you could spend if you maxed out your credit cards. Depending on your situation, the total could be $5,000, $100,000 or some other number.


    Conduct a purely subjective exercise by asking yourself how much debt you would be able to handle if say, your household income was cut by half because of a job loss or illness. Use this exercise to determine how much you should cut your available credit. For example, you may arbitrarily choose to reduce your credit exposure by 50 percent or more to guard against incurring more debt than you could pay on a reduced income.


    Call your creditors to ask that your credit lines be reduced. Simply tell the representatives that you want to reduce your exposure to excessive debt.


    Store a majority of your credit cards in a bank safety deposit box. Put your home equity line of credit checks and debt card in the box, too, along with with checks or debit cards tied to other forms of credit. Keep just one or two cards in your wallet. The idea is to make most of your credit accessible only in a true emergency, ending the temptation to indulge in impulsive spending on unneeded items.

Wednesday, August 24, 2011

Do Credit Card Settlements Affect Your Tax Returns?

Do Credit Card Settlements Affect Your Tax Returns?

Credit card settlements occur when a debtor arranges to pay a card off for less than the full balance. The process is the same as debt settlement and results in major savings for the debtor. Credit card companies sometimes settle delinquent credit card accounts for as much as 70 to 75 percent of the balance. Settling may have a significant effect on tax returns, however.


    The Internal Revenue Service treats savings from credit card settlement as income, as of the time of publication. That means a person settling $5,000 in credit card debt for $1,500 for example, must report $3,500 in additional income to the IRS. That could lead to a higher tax bill and wipe out a portion of the savings from the settlement. It could create other problems, as well, if the debtor cannot afford to pay the higher tax bill, or does not receive a special exception from the IRS for avoiding a penalty for debt settlement.


    Federal law requires credit card companies to notify the IRS when a person completes a settlement agreement that eliminates at least $600 in the transaction. The card companies also send a 1099-C tax form listing details of the transaction and the amount the debtor must report to the IRS as income. The IRS maintains the debtor is responsible for reporting the income, even if the credit card company fails to issue a 1099.


    There is one way to avoid a higher tax bill for a credit card settlement. The IRS allows exceptions for people who were insolvent at the time of their settlement. Insolvency means a person has more debts than assets. People who do not own real estate or other expensive assets may qualify for insolvency. Others may qualify as well, including people whose real estate or other assets have significantly dropped in value. IRS form 982, "Reduction of Tax Attributes Due to Discharge of Indebtedness," allows people settling debts to apply for insolvencyl.


    People who do not qualify for insolvency should settle credit card debt early in the year. Settling in December means paying the higher tax bill in four months, in April. Settling in January gives the debtor 15 months -- until April of the following year -- to plan for the tax consequences.

State and Local

    Taxpayers should contact their tax adviser for guidance on possible state or local tax liabilities from debt settlement. In 43 states, as well as some municipalities, residents must report income for tax purposes.

Credit Counseling Vs. Debt Reduction

Credit counseling services can help reduce the total amount of debt you owe. There are other debt reduction options you can choose to perform yourself. If you are overwhelmed by your debt or you simply want to get out of debt as quickly as possible, you should consider all options before decising on a course of action.

Credit Counseling

    A credit counseling service works with your creditors on your behalf to negotiate lower interest rates and reduce the amount you need to pay to eliminate your debt obligations. These services, which typically require a fee, also help you plan a monthly budget and teach you how to manage your finances more effectively. If you use a credit counseling service, it will be noted on your credit report. Before choosing a credit counseling service, research the company to make sure it is legitimate and has established a favorable reputation.

Debt Settlement

    If you are behind on your monthly payments, you can attempt to negotiate a settlement with your credit card company. Generally, you must offer to pay between 20 percent and 75 percent of the amount you owe before the creditor will consider accepting the settlement, according to the MSN Money website. Do not submit the payment until you have received a statement in writing that the payment will count as settlement in full. Any debt that is forgiven is taxable at the end of the year. Your debts will be shown as settled on your credit report and may affect your credit score. Any previous delinquiencies will remain on your credit report.

Debt Payment Plan

    Another way to reduce your debt is to pay it off as part of a structured plan. Establish a debt payment plan by listing your debts in order of highest interest rate to lowest rate. Pay the minimum required amounts on all of your debts, and apply any extra money to the highest interest debt on your list. Extra money can be obtained through more austere budgeting or by adding an income source, such as a second job. This option does not have a negative affect on your credit score.


    Bankruptcy can reduce the amount of debt you must pay, but this typically is a last resort. This does have a negative effect on your credit score and may make it difficult to purchase a home or borrow any additional money for several years. There are strict rules surrounding bankruptcy, and you should consider contacting a bankruptcy attorney to learn more about the procedures and rules of bankruptcy. Student loan debt and several other types of debt are not included in your bankruptcy.

DIY: Debt Solutions

Debt solutions that don't require assistance from a debt consolidation or credit counseling agency can help pay down high balances without a monthly service fee. High debt levels can affect credit scores, and if buying a house, outstanding debts can reduce the amount that you're able to spend on the purchase. Do-it-yourself solutions can bring down your balances and put you on the path to better finances.

What Do You Owe

    Know what you owe on all your credit accounts and the interest rate charged by your creditors. Look at your statements and write down each balance and the APR. Calculate the total of your outstanding balances. Solving debt involves first knowing what you owe your creditors.


    Look at your budget to see how you spend your money. Excess spending can slow down debt elimination efforts because you're likely buying items you can't afford with credit, or using money to make unneeded purchases. Maintain all receipts for 30 days, and then assess where your money goes. Create a spending budget and determine how much you need for housing, transportation, food, utilities and other importance necessary expenses. What's left after paying recurring expenses is your disposable income.

Debt Elimination Goals

    Setting long-term goals helps you achieve debt-free living. Take your disposable income and divide this number by the amount you owe. If you owe $5,000 on a credit card, and you have $200 in disposable income each month, it takes about 25 months to pay off the debt completely. Plan to pay down debt little-by-little each month until the balance disappears.

Interest Rate on Your Debt

    Speed debt elimination by negotiating a cheaper interest rate on your accounts. Creditors charge interest so that they can earn money from financing your purchases. Most credit accounts have an assigned interest rate, but this doesn't mean you have to pay exorbitant fees each month. Talk to creditors about reducing your rate to pay less in less interest charges each month. Move your balances to a low-rate credit card if unable to negotiate a better rate.

Stop Living on Credit

    Living off credit can keep you in debt. Use credit cards as a last resort, and only as a short-term solution to cash flow issues. Pay for the majority of your items with cash, and if you do use credit, always pay off balances at the end of every month to avoid debt.

Tuesday, August 23, 2011

Can I Get a Payday Loan and Put It in Someone Else's Checking Account?

Although the terms under which payday loans -- loans that must be paid back quickly at a high rate of interest -- are issued vary greatly, most payday loan companies follow similar procedures. Generally, a person can only borrow money for himself and cannot have money drawn from a payday loan deposited directly into another person's account. However, once he receives the loan proceeds, he can place the money in someone else's account.

Payday Loans

    When a person takes out a payday loan, he is responsible for the debt. A person cannot, under U.S. law, take out a loan and shift responsibility for the loan to another party without that person's permission. However, there are no laws that prevent a person from giving the money from a payday loan to another party. However, he is still responsible for repaying the debt.


    When a payday loan company issues a loan, it typically requires that the borrower provide either a checking account number or a postdated check. In some cases, if the person provides a checking account number, the payday loan company deposits the money into that checking account, as a means of verifying its existence. When the loan comes due, it extracts the amount owed from this same account.

Checking Account Rules

    While a person can legally authorize a payday lender to deposit money into a checking account that he does not control, he cannot legally authorize the lender to withdraw money for repayment of the debt from an account that is not his. Some payday lenders require that the person use the same account to both receive the money and pay it back. In such a case, the borrower can't have a payday loan deposited into another person's account.


    Some payday loan companies, however, allow separate accounts to be used to receive payment and pay back the loan. In such a case, the money could be deposited into someone else's account. In other cases, some loan companies provide the loan in the form of cash or a check. If so, the borrower can do whatever he wants with these funds, including give them to someone else by depositing the money in that person's account. The bottom line is that once the borrower has the funds, he can do whatever he wants with them.

Tax Levies & Garnishments

Tax Levies & Garnishments

If you owe unpaid federal or state taxes, the Internal Revenue Service or your state's tax board can collect from you in a variety of ways. Two common methods governments use when recovering tax debts are tax levies and garnishments. Both tax levies and garnishments are involuntary -- forcing you to pay off the debt if you do not make voluntary payment arrangements.

How It Works

    A tax levy occurs when the IRS or state directs your bank to freeze your accounts. The government then seizes payment for the tax debt directly from your checking and savings accounts. A garnishment differs from a levy in that the government seizes a portion of income you are due to receive, such as wages, before you receive it. Unlike commercial creditors, government entities do not need to sue you before garnishing your income or levying your bank accounts.

Time Frame

    The IRS has 10 years to collect unpaid tax debts. After 10 years, the statute of limitations for doing so expires, and the IRS must release any pending levies or garnishments against you. State governments also adhere to a statute of limitations, which varies depending on the debtor's state of residence.

    In general, garnishment will continue until the government collects the full amount the debtor owes or the statute of limitations expires. A bank levy provides the government with a one-time lump-sum payment from the debtor's account, but it can execute numerous bank levies until the debt is paid in full.

Special Permissions

    Government agencies can legally garnish and levy income that commercial creditors cannot. Social Security payments, for example, are exempt from garnishment and levy by banks, hospitals, collection agencies and other commercial creditors. The IRS, however, can both garnish Social Security benefits and seize them from the debtor's bank through a levy. Neither the state nor the federal government can garnish child support payments.

Amount Seized

    Title III of the Consumer Credit Protection Act regulates wage garnishment amounts in order to protect consumers. These garnishment restrictions apply to both commercial and government creditors. The IRS or state tax board can either seize 25 percent of your take-home earnings or the amount by which your earnings exceed thirty times the minimum wage per pay period.

    The IRS gives consumers additional leeway with garnishments and levies by limiting the amount seized based on the number of dependants the debtor has. For example, if the debtor is single and claims only himself on his tax return, $182.69 of his weekly income is exempt from garnishment by the IRS.

Can You Settle Credit Card Debt for Pennies?

Many companies promise to be able to settle a debt for pennies on the dollar, meaning that you can pay a small percentage of your debt and the debt collector will consider it paid. Unfortunately, it is not that simple and there are no guarantees that a debt collector will agree to any kind of settlement, much less one that offers such a low percent of the debt.

Debt Settlement Companies

    Many companies negotiate debt settlement on your behalf. However, this is a lengthy process and there are no guarantees. When you work with a debt settlement company, you stop making payments on the debt and instead deposit money in your account with the settlement company. The settlement company takes a cut of the money as its fee and saves up the rest as the settlement. When the company thinks you have accumulated enough money to settle the debt, usually 50 to 60 percent, according to Bankrate, it will call the debt collector and try to negotiate a payment.

Do-It-Yourself Settlement

    Individuals can call companies that hold debts and try to negotiate settlements without the help of a middle man. This has the advantage of avoiding the fees. However, individuals have less leverage than debt settlement companies. If you do happen to get a debt collector to agree to a settlement, get the agreement in writing before you send any money. The agreement should state the amount that you will pay and the fact that the debt collection company will report the account as paid and not pursue you for further repayment.

Negative Consequences

    Even if you can settle a debt, you will end up with a few negative consequences. First, your credit report will show that you paid the debt off for less than you owed, which could cause your score to drop by as much as 100 points, according to the MyFICO website. Second, your credit report will take a few hits while you are saving up money to make the settlement. During this time, collection agents will likely call you to try to collect and you could be sued or have your wages garnished.


    If you are concerned about protecting your credit score, you should not settle a credit card debt. Instead, call the credit card company and explain your situation before the account gets charged off and sent to a collections agency. Ask about reducing your monthly payment temporarily. If the company believes you are acting in good faith, it might grant this request, which will keep your account in good standing. Another option is to enroll in a debt management plan, in which a company negotiates a payment plan with your creditor and makes regular monthly payments until your debt is paid off. If you cannot afford to make any monthly payments, negotiation, debt settlement and debt management will not help you. Instead, you should contact a lawyer and ask about filing bankruptcy.

How to Remove Negative Credit Through Negotiation

How to Remove Negative Credit Through Negotiation

If you have problems on your credit report, you may have already experienced the consequences of these problems. Poor credit can affect future loans sought, apartments desired to rent and even jobs you hope to acquire. The credit bureaus, Trans Union, Equifax and Experian, all reserve the legal right to report negative accounts for up to seven years. Therefore, it is only through the power of your persuasion that you can remove negative accounts from your credit report. This is most often accomplished with a goodwill letter.



    Pull a copy of your credit report to verify the negative accounts. Visit Annual Credit Report to get a free copy of your credit report. Circle the negative accounts. These will be listed in the Public Records section for judgments, bankruptcies or liens or in the Trade Lines section for delinquent or charged-off accounts.


    Pay off any negative accounts first. The credit bureaus will absolutely not eliminate accounts that still report a balance. It is possible, however, to remove negative accounts that are paid in full.


    Find the documents that corroborates the legitimate reason for the delinquency, bankruptcy or charge-off. If you simply got lazy and didn't pay, it is unlikely you will experience success at an attempt to clear these accounts. However, if you have a sound reason like a disability, unemployment or death in the family you might have an good opportunity to clear these negative items.


    Draft a goodwill letter (see Resources). This letter should candidly address the delinquent and negative reports on your credit report. Use this letter to both describe the events leading up to the delinquency and to explain, in an attempt to appeal to the credit bureau employee's empathetic side, the circumstances that prevented you from paying on time. Ultimately a human being decides whether or not to eliminate accounts, so appealing to his emotions is in your best interest.


    Photocopy all documents relevant to the delinquency. This could be income documents, W-2s, disability award letters, letters from physicians, letters from employers, laid-off notices or severance pay stubs. Do not send originals. Also, send copies of the credit accounts you hope to eliminate.


    Send the goodwill letter with all corroborating documents to any and all credit bureaus reporting the negative account.


    Wait for a response. The credit bureaus have 30 days to respond to your inquiry and another 90 days to take action on your claim.

Sunday, August 21, 2011

A Guide to Credit Card Debt

A Guide to Credit Card Debt

Many consumers reach for credit cards to help meet expenses and feed various desires, such as taking a vacation or buying new furniture. Understanding credit card debt is a must. Responsible consumers are able to evaluate credit cards, manage the debt associated with using them and handle any negative repercussions stemming from credit card mismanagement.

Credit Card Types

    As of December 2010, the total amount of credit card debt held by Americans totaled $800.5 billion, according to the Federal Reserve. This total represents several different types of credit cards. Store credit cards, secured credit cards or unsecured general credit cards represent just a few of options available. Major retailers offer store credit cards for use only with that retailer. Secured credit cards require a security deposit and are typically offered to those with poor or no credit. Unsecured general credit cards represent the most common credit card available to consumers. Consumers can use these unsecured cards at any retailer or merchant that accepts credit cards.


    Credit cards offer a convenient way to purchase goods and services, online and in person. Understanding how the use of credit cards can impact your financial future begins with understanding how credit card debt accumulates. Each credit card provides access to credit under different terms. The fees charged by credit card companies, in exchange for offering you credit, can include interest, transaction fees and other charges. Read the details of your credit card contract carefully to fully understand the cost of borrowing and how it can impact your credit card debt. Understand the impact of carrying a balance, and how your credit card company computes interest on all purchases. Investigate a grace period for purchase. Grace periods allow you a specified amount of time to pay off a purchase in full before the credit card company will charge you interest.

Handling Credit

    When used appropriately, credit can help individuals and families build a positive credit history. Establishing a positive credit history can open up additional opportunities and better interest rates on larger purchases, such as homes and automobiles. Paying off the balance in full each month or at least paying the minimum on time each month, demonstrates financial responsibility. Paying late, going over your available balance and carrying too much debt in relation to your income, often referred to as your debt-to-income ratio, can all negatively impact your credit score and leave detrimental marks on your credit report.

Getting Help

    Seek help if credit card debt becomes overwhelming. Talk with a qualified credit counselor who can help develop a plan to pay down the credit card debt. If interest rates go up on one credit card, consider moving the balance to a credit card with a lower interest rate. Managing credit card debt in a proactive manner can keep you out of the bankruptcy line and on the path to a secure financial future.

US Government Financial Grants for Debt

US Government Financial Grants for Debt

The very first thing you'll note on the federal government's grants website is the following statement: "ATTENTION! Grants.gov does not offer money for personal financial assistance or debt." Even though a basic Internet search will provide pages of website links to sites that offer "government grant assistance," there is nothing on these sites that you can't find for free yourself. The worst of these official-looking sites will steal your money and your identity.

U.S. Government Grants: Facts and Fallacies

    While it's true that the federal government does provide billions in free aid and loans every year to those who apply, successful applicants must meet specific criteria and no funds are available for consumers who are looking to eliminate personal debts, such as credit cards.

    However, if you think you may qualify for a grant relating to agriculture, the environment, or the myriad other programs that the Grants website administers, visit www.Grants.gov. You can apply online, and there is never a fee. You won't need to supply any personal information, only information that pertains to the grant itself (for example, how you plan to innovate and adopt an approach to environmental conservation).

Federal Benefits

    The federal government also provides a benefits website, www.Benefits.gov, that describes many loan opportunities that may work for you. For example, if your debt is the result of a small-business start-up, you may be eligible for a small-business loan (or microloan). If you're late on your mortgage and need help getting back on your feet, you may qualify for an FHA streamline refinance or mortgage modification. Like federal grants, consumers must meet certain criteria to be eligible for these programs.

    As of April 2011, there are no federal loan programs available for consumers who are behind on their personal debts, like credit cards and auto loans.

Grants Scam Artists and Identity Theft

    Websites that offer "government grant assistance" in exchange for a fee -- often small -- may provide you with legitimate information, but it's information you can locate for free by yourself on the federal site. However, a more insidious scam has found its way into the game: identity theft.

    Unscrupulous companies develop official-looking websites and hire professional-sounding telephone representatives. If you are contacted about a grant, do not provide any personal information. The U.S. government does not require your credit card or bank account information when reviewing a grant application. If you're asked for this information, it may be a ruse that's disguising the true intent: identity theft.

    Identity theft can take years to undo and cause tremendous personal damage. If you suspect you've been scammed, order your free credit reports immediately at www.AnnualCreditReport.com. Report any suspicious activity. Complain to your state attorney general's office and also the Better Business Bureau.

If You're in Debt

    The best resource if you're in over your head in debt is a nonprofit called the National Foundation for Credit Counseling. You'll get a free budget and credit consultation administered by one of the NFCC's counselors, all of whom are trained in budget and credit management.

    If you're eligible, you can enroll your unsecured loans in a debt management plan. Your debts will be paid in full in five years. The accounts will be made current -- even if you're already delinquent -- and you may have your interest rates reduced. The accounts will be closed.

Medical Collection Procedures

Internal Collections Are First Step

    Medical offices routinely bill clients and expect prompt payment, but are equipped to handle mild delinquencies with their own internal collections department. Because external collections agencies often require a substantial portion of the amount collected, medical offices will first attempt to collect the debt themselves. This collection procedure may consist of letters, telephone calls, emails or (depending on the facilities available to the medical office) personal discussions at the medical office. The duration of the collection effort varies depending on the office's policies, available resources and the amount of debt, but the efforts may continue for six to twelve months.

External Collectors May Become Aggressive

    Once the medical office has exhausted its resources in attempting to collect the debt, it may choose to either employ a collection agency (compensating them with a portion of the amount collected) or sell the debt to a professional collector at a significant discount. If the debt is sold, the medical office simply writes off the debt as a loss and the collector assumes ownership of the debt. If the medical office employs a collector, the collector will continue collection efforts at a more aggressive pace and remit a percentage of the collected amount--if any--to the medical service provider. In either case, the collector notifies the debtor of the collection intent and allows a 15-day response period (as required by law in some state). Collection tactics vary from collector to collector, but usual collection procedures involve multiple telephone calls, letters and bills. Collection agencies also routinely report collection status updates to major credit bureaus, further damaging the debtor's credit. Collectors may generally execute the collection process any way they see fit, but some activities deemed abusive or harassing are regulated by the Fair Debt Collection Practices Act.

Medical Debts May Be Sold and Resold

    If the collection agency is unable to collect the debt, it may choose to sell the collection account to another collection agency. Each time the debt account is sold, the new collection agency renews collection efforts in an attempt to recover their investment; these efforts may include renewed letters and telephone calls, and, though the Fair Debt Collection Practices Act expressly prohibits the practice, reporting the debt to credit bureaus as a new debt in a practice known as "re-aging."

Some Collectors Sue

    Depending on the amount of the debt, the collection agency may also choose to pursue legal action against the debtor in an effort to force the patient to pay. This action is generally reserved for debts of a large amount, as legal costs can quickly add up in a legal suit. If the debtor is sued by the collector, the debtor will be served papers explaining the basis of the case and be required to appear in court.

How to Charge Debt Recovery Fees On Invoices

Many creditors will forward their bad debt or charged-off accounts to collection agencies. A charged-off account is one on which a customer has not paid any money in 180 days. The creditor will report the account as a loss to the Internal Revenue Service (IRS) for tax purposes. When the collection agency receives money from the past-due debtor, it bills the original creditor by sending an invoice. The manner in which debt-recovery charges appear on an invoice is predetermined when the business relationship is established.



    Determine how the billing charges will appear on the invoice. When money is collected by the collection agency, these charges can be calculated in a couple of ways. One way is to bill the original creditor for the entire amount collected. For example, if the collection agency collects $1,000, it sends a check for that amount to be applied to the debtors account, and sends an invoice for $250 (assuming the agency charges 25 percent for money collected).


    Send out invoices for the net amount collected. If the collection agency charges 25 percent for everything collected and collects $1,000, it will forward a check in the amount of $750 to the original creditor. The collection agency will take its fee before funds are remitted.


    Review the invoice on a monthly basis. It is always a good idea to review invoices on a regular basis to make sure no errors are made. The invoice should appear in one of the following methods:

    Gross amount collected $1,000, minus collection agency fee of $250, equals net amount remitted: $750 to creditor


    Gross amount collected $1,000; total amount remitted to creditor $1,000; creditor invoice in the amount of $250.

Saturday, August 20, 2011

Do-It-Yourself: Get Rid of Debt

Debt creates a problem for many consumers because too much of it leads to poor credit. If you have a good to excellent credit rating, you qualify for the most competitive interest rates and loan terms. Create a strategy to rid yourself of debt and build your credit rating over time.

Planning Debt Payoff

    The amount of time it takes you to rid yourself of debt depends on how much you owe and the amount you can afford to repay each month. Debt calculators are available online to help you determine, based on your interest rate, how long it will take you to pay off each of your debts at a certain monthly payment amount. The more you pay, the less time it will take you to get rid of the loan.

Tight the Belt

    To free up extra cash to apply toward your debt, you may have to cut back on certain expenses until your debts are paid in full. No matter what debt you are repaying, making partial payments means accumulating more debt each month. The primary reason for this is interest. Interest payments are applied to each billing cycle your balance is not paid in full. Use coupons, compare prices, shop for items on sale and eliminate costly leisure activities until you can afford to repay your debt in full.

Divide and Conquer

    Analyze your debts before making a commitment to how much you want to pay on each card. Divide the high interest rate cards from the low interest rate cards and make the largest payments on cards with high interest first. The sooner credit cards and loans with high interest are repaid, the more cash you have to make payments toward your low-interest debt. If all your cards have high interest rates, prioritize the debts according to the amount owed from highest to lowest.

Avoid the Minimum

    Making the minimum payment on your debt means you pay back the debt multiple times before it is paid in full. On large debts, this can mean paying back a debt for years instead of months. CNN Money notes that minimum payments barely covers the interest owed on a debt, which means payment on your debt is simply a formality to keep you in compliance with your loan agreement. Ignore the suggested minimum and pay according to your goals to become debt-free.

How to Determine Credit-Worthiness

How to Determine Credit-Worthiness

Credit worthiness is defined as being an assessment of the likelihood that a borrower will default on their obligations. The company lending you money wants to know how likely they are to receive it back from you before they lend you money. Even if a company decides to advance you credit, the rate of interest will be determined by your credit worthiness. You need to know the factors companies look at when determining your credit rating and score, or which factors to consider when advancing credit to somebody else.


Calculating Credit Worthiness


    Obtain credit reports from the three main agencies: Equifax, Experien and Transunion. As noted below, your report is provided free of charge once every 12 months. If you are looking at providing credit to others, their permission must be sought to obtain their reports, and the agencies will charge for providing it.


    Check the credit score. Generally, anything below about 720 (the exact figure varies) is below average and might limit the credit that would be made available.


    Look at the credit profile and performance in the main areas that determine the credit score. These are: payment history, which is how often you have made late payments or missed payments altogether; and credit utilization, defined as how much of the total credit lines available are being utilized. These two factors make up about two thirds of the weighting on the credit score.


    Look at the other factors the credit rating agencies check ---- length of credit history, how often one applies for credit, types of credit utilized and whether there are any court judgments, tax liens or something similar.

How Hard Will a Debt Collector Try to Collect a Credit Card Debt?

How Hard Will a Debt Collector Try to Collect a Credit Card Debt?

Credit card companies rely on timely payments to turn a profit. Although a credit card company will pursue missed payments for a limited amount of time -- usually no more than 180 days -- these companies routinely turn unpaid balances over to collection agencies. Debt collectors then work to recover defaulted credit card accounts. How hard a debt collection agency will work to collect a credit card debt depends on a variety of factors.

Collection Methods

    While some collection agencies rely on regular telephone calls or debt collection letters when conducting business, others find success using more aggressive debt recovery methods such as lawsuits and garnishing an employee's paycheck. Thus, company policy often dictates how much effort a given collection agency will expend trying to collect your delinquent credit card debt.

Amount You Owe

    The amount you owe affects how diligently debt collectors will pursue you. Regardless of whether the collection agency purchased the debt from your credit card company or is collecting the debt on commission, the higher your debt, the greater the profit a debt collector can expect to make.

    Your original contract with the credit card company provided the company with your permission to levy interest charges on your balance. The same right to levy interest charges passes to the debt collector when the original creditor sells or transfers the debt. The more you owe, the more interest the collection agency can charge and the higher your debt will grow, giving the company greater incentive to pursue your debt aggressively.

Old Debts

    Debt collectors typically pursue debts less fervently as they age. This is because each state possesses a statute of limitations restricting creditors from suing consumers for old debts. Once a lawsuit is no longer an option, federal debt collection laws restrict collection agencies from even using the threat of a lawsuit when recovering debts.

    Because a collection agency must depend on your voluntary payment after the statute of limitations passes, your debt does not hold the same value for the company. It can no longer force you to pay, and the frequency of its demands for payment will typically decrease.

Debt Transfer

    Debt collectors that fail to recover your unpaid credit card debt will eventually sell the delinquent account to another collection agency. When this occurs, the new debt collector takes on the responsibility for collecting your debt and you will notice an increase in telephone calls and collection letters. The cycle of decreased and increased contact will continue as your unpaid debt is repeatedly bought and sold. This process can continue indefinitely because, although the statute of limitations restricts lawsuits, your delinquent credit card debt remains valid until you pay if off.

How to Overcome Financial Problems

The best way to overcome financial problems is to create a plan for reducing your debt while increasing your income. It's not always possible to significantly increase your income, but even modest gains can be helpful as you try to overcome financial problems. An additional job working part-time could result in enough additional income over time to pay off a credit card bill or an installment loan. The key is creating a reasonable plan and sticking with it.



    Make a complete list of all your debts and expenses. Keep a diary of all your spending for at least a month to understand how you really are spending money. Write down every expenditure no matter how small. Gather copies of all of your contracts, promissory notes, credit card statements and installment loan agreements. Also get copies of mortgage loan or apartment lease agreements and utility bills. Gather pay stubs and statements detailing money available in savings or retirement plans as well.


    Seek advice from a reputable, nonprofit credit counselor. The U.S. Trustee Program maintains a list of government-certified credit counselors. Check the website for a counselor near you (see Resources).


    Provide the counselor with a complete review of your finances, including your lists detailing your debts, income, financial assets and monthly spending. Ask the counselor to help you create a budget allowing you to get your finances under control while reducing debt. Entertain various scenarios, including trading down to a less expensive automobile, moving into a cheaper apartment, eliminating vacations and more.


    Discuss long-range plans for eliminating debt after creating a new budget. Ask the credit counselor about a debt management plan which allows the counseling agency to contact your credit card companies and others to negotiate lower interest rates and a reduction of fees to allow you to pay off the balances sooner. Also ask the counselor about debt settlement, which allows you to pay off unsecured debt for less than the full balance due, and bankruptcy, which can eliminate many debts.


    Overcome your financial problems by following a budget allowing you to live below your means. Also evaluate advice from the credit counselor on eliminating debt. Seek additional advice on debt reduction, if necessary, from a trusted financial advisor such as an accountant. Seek a free consultation with a bankruptcy attorney if you are considering that option.

Debt Relief Programs Pros & Cons

Debt Relief Programs Pros & Cons

Many people find themselves in debt at one point or another. For some, debt becomes unmanageable, and making payments on time--or even at all--becomes impossible. A number of debt relief programs exist that can help you deal with debt. While this may sound like an ideal solution, there are downsides to consider.

Pro: Avoid Bankruptcy

    If you are looking into debt relief programs, chances are you're in dire straits. You may even be on the verge of bankruptcy. Bankruptcy will have a long-term negative impact on your credit, and obtaining additional credit in the future may be impossible. After a complete analysis of your situation, debt relief companies will be able to recommend the best course of action for your situation and will often be able to save you from having to file for bankruptcy.

Pro: End Harassment

    Harassing calls and letters from lenders and collection agencies can be a traumatic experience. You may find yourself avoiding phone calls for fear that it may be another collections call. Agencies may threaten you with legal action if you do not pay. This is especially scary in situations where you cannot raise enough money to make even the minimum payments each month. Debt relief programs may allow you to negotiate settlements with collection agencies. Other options include a debt relief agency paying your debts off for you and you paying it a single monthly payment, or alternately it pays your creditors monthly while you send it a single monthly. Either plan can end harassing phone calls immediately.

Pro: Cut Interest Payments

    Consolidating your debts with a debt relief agency may save you money in the long run. Rather than having to make interest payments to each of your creditors each month, you can pay a lower interest rate as a part of your monthly payment to the debt relief company. Due to penalties from missed or late payments, your interest rates may be high. Debt relief programs may lead to substantially reduced rates, relieving your financial burden significantly.

Con: Hurts Credit

    Enrolling in a debt relief program hurts your credit by both lowering your credit score and putting a note on your credit report stating that you are receiving assistance from the program. This note does not look good, as it may cause creditors to think that you are irresponsible and cannot manage your finances on your own. The impact may be so heavy that you may be unable to obtain any sort of credit for the period in which you are enrolled in the debt relief program. Depending on the amount of debt you are in, this may take several years.

Friday, August 19, 2011

Debt Assistance Programs

Debt Assistance Programs

Owing a large amount of money is stressful, especially if you can't afford the monthly payments on your debt. However, programs are available for consumers that can help lower both interest rates and monthly payments, making it easier to be debt-free than ever before. Choosing the right program may seem like a daunting task. Know the facts about the different types can help.

NonProfit Debt Assistance

    A nonprofit consumer credit counseling company can help you with your debt. Companies such as American Consumer Credit or the National Foundation for Credit Counseling provide counseling, education and debt management programs that can assist you with reducing your debt. They work with the credit card companies to lower your interest rates, sometimes down to 0 percent, and can enroll you in a program that can get you out of debt within a couple of years. You will be required to close all your credit cards, but because your monthly payments will be lower, you will have extra money for other bills.

Debt Settlement

    The aim of debt settlement is negotiating your debts down considerably, with some companies accepting just 30 percent to 70 percent of the total owed. You will pay money each month into an escrow account rather than paying your creditors. However, most of these companies charge considerable fees to negotiate the amount of your debt, and they can't guarantee that your creditors won't sue you. If you go this route, ask about fees, how many years it may take, tax ramifications and other terms and conditions.

Bank Hardship Programs

    If you are struggling to pay your bills, you can contact your creditor to find out if the company offers a debt hardship program. Many times the bank's collection department will contact you when you've missed payments and will provide the information about this type of debt program. Similar to a debt management program, your rates and payments may be lowered temporarily or even permanently until you've paid off the account.

New Affordable Mortgage Programs

    If you own a home and are having difficulties making your mortgage payments, you may qualify for a Home Affordable Modification Program (HAMP). You may qualify for a reduction if you occupy your house as your primary residence, your monthly mortgage payment is greater than 31 percent of your monthly gross (before tax) income, your loan amount does not exceed $729,750, and you are unable to afford your current payment. Contact your lender to see if you qualify.


    Talk with a lawyer to see if you qualify to claim bankruptcy. This should be a last resort and only done when you are unable to make payments to your creditors, even on a debt management program. There are different ways to file, and you may have to sell property to pay for debts owed, or you might have the option to set up a payment program that allows you to make payments over time. Because bankruptcy has a negative impact on your credit history, seek this option only when there is nothing else available.

Help With Legal Debt Settlement

When taking on the challenge of getting out of debt, there are many options available to you, including debt consolidation and bankruptcy. One option that you may want to consider pursuing is debt settlement. Debt settlement involves negotiating with your creditors to eliminate a portion of the money you owe. You can also get help with this process from a debt settlement company.

What is Debt Settlement?

    The process of debt settlement is something that you can engage in after you are delinquent on your outstanding debt. Most of the time, you have to be at least a few months late on your payments before the creditor will consider settling your debt. At that point, you can negotiate with your creditor to take less than the full amount that you owe in exchange for a lump sum payment. Your account is closed out and the creditor gets the money.

Debt Settlement Companies

    You could choose to pursue debt settlement on your own or you could hire a company to help facilitate the process for you. These companies are numerous and you can find advertisements for them on television, radio and online. When working with a debt settlement company, you will have to give the company a portion of the total debt that is settled. The company will contact your creditors and negotiate a settlement on your behalf. In some cases, you may have to save up enough money to pay their fee and for the settlement.

Damaging Your Credit

    When you settle your debts with your creditors, it can significantly lower the total amount of money that you have to pay. While this can help you financially, it can also hurt you when it comes your credit report. According to MSN, your credit score can be damaged by as much as 125 points by settling a single debt. If you do this with multiple accounts, it can devastate your credit score and make it very difficult to get loans in the near future.


    When you use a debt settlement company to help you settle your debts, you have to be very careful with the company that you choose. A number of companies in this industry have been punished by the Federal Trade Commission for taking advantage of customers. Some of these companies charge a large fee on the front end and do not provide the services that they originally claimed. Before signing up with a company, make sure that you are dealing with a reputable company.

Will I Get Sued for My Credit Debt?

When a debtor owes money to a creditor, the creditor can take a number of different steps to collect payment of his money. Collection tactics can range from the relatively benign, such as calling or writing a letter to the debtor, to the severe, such as wage garnishment and bank account seizure. Generally, a creditor will have the legal right to sue the debtor. However, whether he chooses to do so will depend on a number of factors.

Legal Right

    When a person agrees to borrow money from a lender or receive another asset on credit, this transaction is legally protected. Whether the agreement was made verbally or in the form of a written contract, the lender has the legal right to receive timely payment of the money, as per the terms agreed to by the two parties. If the debt becomes delinquent, the creditor has the write to file a civil suit in court to compel payment.

Financial Advantage

    While a creditor has the write to sue the debtor, he will not always find it in his financial interest to do. Unless the creditor has extensive legal knowledge, he will generally need to retain the services of an attorney to draft the civil suit and to argue the case in court. In many cases, the creditor will find that the cost of hiring an attorney will exceed the cost of the debt, with no guarantee that the judge hearing the case will rule in the creditor's favor or that the money will ever be collected.

Statute of Limitations

    In addition to the cost of hiring an attorney, a creditor must also consider laws regarding the statute of limitations on debts. Each state has different laws restricting how long a creditor can legally pursue collection of a debt. After this time limit has expired, the creditor can still sue the individual, but the case has no legal merit. A judge hearing the case will be legally obligated to throw out the creditor's suit.

Legal Collection Tactics

    While a creditor may not choose to sue a delinquent debtor, he must first do so if he wishes to pursue a number of collection tactics. For example, in order for the creditor to garnish a debtor's wages, he must first obtain a ruling from a judge ordering the money to be turned over. If the debtor does not comply, only then can a creditor file a motion for garnishment. If the debt is large enough, the creditor may find it in his financial interest to sue.