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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..

Friday, August 31, 2012

How Do Companies Write Off Your Credit Card Debt?

How Do Companies Write Off Your Credit Card Debt?

Credit card companies write off consumer accounts that it deems uncollectable. This prevents the company from wasting further resources attempting to collect the debt. Once a credit card company charges off your account, it will appear on your credit report for seven years.


    Credit card companies write off unpaid debts by purging the records of each bad debt from its accounting ledger. Once a company writes off a debt, the debt no longer appears as an active account within its computer system, but you still owe the debt.

Time Frame

    According to MSN Moneys Liz Pulliam Weston, most credit card companies wait to write off an overdue account until the debt goes unpaid for six months or longer.


    After writing off bad debts, credit card companies often sell the debts to a collection agency for less than the amount owed on the account. This allows the company to recover a portion of its losses.


    Once a credit card company writes off an overdue consumer account, it can claim the amount the individual owed as a tax loss. If the company sold a debt, it must deduct the purchase price of the account from the total debt when determining its deduction.


    If a written off account exceeds $600, the credit card company must issue you a copy of Form 1099. You must then claim the amount of the credit card companys deduction as income on your taxes.

Tax Impact of a Defaulted Forgiven Debt

Tax Impact of a Defaulted Forgiven Debt

If you are feeling overwhelmed by debt, you may be considering enlisting a debt cancellation company's help. That's one option you have instead of bankruptcy. However, if you are expecting your debt forgiveness company to arrange for you to pay only a portion of the total debt owed, be aware that there may be some consequences for your taxes.

Debt Cancellation

    Debt cancellation is the process of working with a third party to pay off your debts, but only a fraction of the total amount owed. For example, if you have a credit card with a balance of $5,000 and you can't pay it, you might be able to get the debt cancelled if you pay one lump sum in an agreed upon amount. The amount you have to pay can vary but normally is a percentage of the total, such as 40 percent. When you do this, the credit card or loan company that holds the debt claims it as a loss on its taxes. Debt forgiveness does not affect your taxes when it is a mortgage or IRS tax debt -- you still owe the tax on the whole owed sum. Consult the IRS website to see what other debts you do not have to claim on your taxes when they are forgiven.

Your Taxes

    When you settle a loan through a forgiveness program, you are more than likely going to have to claim the forgiven amount on your taxes. The government sees the forgiven amount as income. After paying off the debt, you should receive a 1099-C. The credit company will issue a 1099-C for any debt forgiveness greater than $600. Keep this with your tax information for when you prepare your taxes.


    It is important to report forgiven debt on your tax return. You'll find a place on your 1040 tax return where to record your forgive debt. The number of the line that it's on may vary from year to year, but the line where you're supposed to put the 1099-C information will be somewhere on the first page under the "other income" section. Do not include this amount in your regular wages.


    When you do not include any debt forgiveness information from 1099-C on your tax return, it will catch up with you later. It could result in a lower refund the following tax year, or you might have to pay additional taxes to make up the difference.

Thursday, August 30, 2012

How to Test a MasterCard

Before you accept MasterCard payments in your store or online, test a MasterCard to make sure that you can properly process payments for the corporation. MasterCard is an international corporation that is designed to process payments between merchants and the bank that issues the card. To accept a MasterCard from a customer, you must be approved to accept them through MasterCard or through a third-party payment processor such as Google Checkout or PayPal.



    Enter a dollar amount for the transaction. If you are testing a real MasterCard, enter $1 or less. If you are using a test number, enter any value. To test a MasterCard for an online transaction, select your website's "Buy Now" button and checkout.


    Key a live MasterCard number or a test number into the credit card machine, or enter it into the corresponding field online. MasterCard requires a 16-digit test number that begins with a "5." Three test numbers that you can use are: 5105105105105100, 5555555555554444 or 5431111111111111.


    Read the results. The test or live MasterCard number will return a result that confirms that the address has been verified, the security code matches and the payment has been authorized. If you use a test number, no money actually moves.

Is It Safe to Use My Credit Card for Purchases?

Is It Safe to Use My Credit Card for Purchases?

Credit cards serve two primary functions for consumers. They offer a more convenient payment method than checks, and they supply a quick source of immediate credit, though at a hefty price when compared to other types of consumer loans. Your credit card is connected to a pre-approved line of unsecured credit, which means you are not offering any assets as collateral that the lender can seize if you fail to repay your debt.


    Credit cards allow you to purchase items or services now and pay for them later. You and the merchant each keep a copy of the receipt, and the bank credits the merchant for the amount charged. The bank sends the transaction information to the credit card company which, in turn, credits the bank, and the card issuer sends you a bill for the charged amount.


    Your credit card is often the most convenient payment medium. With the tremendous growth in consumer purchases made via the Internet, credit cards allow you to execute your transactions quickly. The merchant can easily authenticate your card, and payment to them is guaranteed by the bank or creditor, which means your merchandise can be sent immediately.


    It is considerably safer to use your credit card for purchases -- whether by phone, online or in a store -- than money orders, checks or cash, due to protection against fraudulent charges provided under the Fair Credit Billing Act of 1974. If you fear having your number stolen when using your credit card for purchases, you should know that the Fair Credit Billing Act limits your liability to $50 for fraudulent charges on your card. Using your credit card for purchases generally makes it easier to obtain refunds, return items and dispute charges.

Zero Liability

    A number of credit card companies now have a zero liability policy, which means you will not be held liable for any fraudulent charges. This policy makes it easier to dispute charges on your card that you did not approve or when items acquired are not as they were represented. It is advisable to check with your specific credit card company for the proper steps to take for disputing a purchase as some companies have certain restrictions attached to their zero liability policies.

Debit Cards

    You may think debit cards are an effective deterrent for high credit card bills, but in regard to fraud, they pale in comparison to credit cards. The longer you wait to report any unauthorized activity with your debit card, the higher your liability. According to the Federal Trade Commission, reporting unauthorized transfers within two days caps your liability at $50, but waiting longer can raise it to $500, and reporting beyond 60 days can result in unlimited loss.

Perishable Credit Cards and Third Parties

    Some credit card companies, such as American Express, MBNA (Maryland Bank National Association) and Discover, have created temporary or perishable credit cards. These credit cards are issued with an online purchase or merchant-specific credit card number for a specific time period. Making payments through third-party payment services, such as PayPal, also provides a safe way to make purchases, without exposing your bank account or credit card information.

Tuesday, August 28, 2012

Can You Pay Off Payday Loans With Collection Agencies?

If a person fails to pay back a payday loan on time, the company that issued the loan may attempt to get the money back by hiring a collection agency. This collection agency, which will either be hired on commission or will purchase the debt outright, may attempt to incur repayment through a variety of means. A payday loan borrower is legally required to pay any collection agency the lender hires. When he wishes to repay the loan, the debtor can make payments directly to the collection agency.

Payday Loans

    A payday loan, although generally lasting for a shorter period of time and commanding a higher rate of interest than a normal loan, is structured the same as most other types of loans. The lender is allowed to transfer the debt to another party, such as a collection agency. If the loan is transferred, then the borrower is legally required to repay the money to the new owner of the loan.

Collection Agencies

    Collection agencies, whether having purchased the debt or working in a lender's stead, are legally empowered to seek collection of a debt in the same manner as the original lender. This means that the collection agency can not only request repayment of the debt, but also can take legal action to compel it. This means the collection agency can sue the borrower and take more severe legal action such garnishing her wages.


    If a borrower chooses to repay the debt, he likely can make the payments directly to the collection agency. Depending on the collection agency's policies, the debtor may be allowed to make payment in a variety of different ways.

Debt Settlement

    In some cases, the collection agency may be allowed to negotiate a settlement with the debtor. If the collection agency has purchased the debt outright, it can settle the debt for whatever amount it chooses. However, if it is working for the original lender, it may need the lender's permission before striking a deal with the debtor for an amount less than she actual owes.

Monday, August 27, 2012

Can You Quit a Claim to a Property If You Owe on Other Things?

Quitting claim to a property is a simple administrative procedure that doesn't depend on the amount of outstanding debt you have. It's a questionable strategy for debt management if you have a mortgage, however, because a quitclaim does not release you from the mortgage. You could find yourself obligated to make monthly payments without having legal rights to the property. Furthermore, you can't hand the property back to the mortgage company by filing a quitclaim.

Quitting Claim Vs. Canceling Your Mortgage Obligations

    Removing your name from the title of a property and canceling your mortgage obligations are two separate issues. The former is simply a matter of changing the way the deed is recorded, and you fulfill the legal requirements for removing your claim to the property simply by signing and filing a quitclaim form. It is far more difficult to remove your name from a mortgage. Whether you have taken out the mortgage in your name or co-signed with someone else, you are legally bound to make payments on it until you pay it off or have it refinanced.

Quitclaim Vs. Deed in Lieu

    If you are considering giving your property back to the mortgage company as a strategy for debt management, you won't be able to do so by filing a quitclaim. The proper procedure is called a Deed in Lieu of Foreclosure, and it requires the consent of the mortgage company. By accepting a Deed in Lieu, the lender agrees to take back the property and remove your name from the title in exchange for forgiving all or part of your mortgage debt. It's usually an option only if the lender knows it can sell the property for more than the mortgage amount.

Filing a Quitclaim

    To quit claim to a property, you need to transfer the rights to a grantee, who could be one other person or several people if you are quitting claim to your share of a community property. After obtaining the proper form from the county recorder's office, fill out your name, the amount of compensation you are receiving from the grantee, the legal description of the property and whether the title should vest as sole ownership, joint tenancy or community property. After you sign the form -- the grantee does not need to sign -- record it with the county, paying applicable recording fees and taxes on the compensation you received.


    Because you incur no further debt by filing a quitclaim, the fact that you have outstanding debts is no impediment to doing it. In fact, quitting claim may be a strategy for paying off your debts if you have significant equity in the property and receive appropriate compensation for it. Quitting claim doesn't get you out of the mortgage, but the grantee who takes over the title may be able to refinance or pay it off. If not, quitting claim is at best a risky proposition, but your debts won't prevent you from doing it if you so choose.

Sunday, August 26, 2012

How to Answer a Debt Summary Judgment

Creditors and collection agencies often use a motion for summary judgment as a way to quickly get a court order stating that the debtor owes them the money. The court will grant summary judgment if the judge believes that there are no material issues of facts in the case and the creditor is entitled to judgment as a matter of law. Because the court can grant summary judgment without a hearing, you should answer any creditor's summary judgment motions in writing.



    Read the laws in your state to determine how long you have to answer the motion for summary judgment. The state's rules of civil procedure will normally contain this information. Many court websites have the rules listed.


    Read the motion for summary judgment carefully and determine what facts and laws the creditor relies upon.


    Write your answer. Be specific with what facts you dispute and include any documentation that supports your version of the facts. If you believe that the creditor does not have legal grounds for a judgment against you, state that and reference any statutes or case law that support your claim.


    File your answer with the clerk of the court. The judge may rule on the written documentation or may schedule a hearing on the matter. If the judge schedules a hearing, you will need to attend and argue your case. If the judge rules on the documents, the court will notify you of the decision in writing.

Debt Advice

Debt is something that is easy to accumulate but difficult to get rid of. Dealing with your debt can seem daunting and frustrating, but with a little patience and the advice you can start to get your debt under control.

Talking to Your Creditors

    One of the tactics you may use to help bring down your debt is to negotiate directly with your creditors. This can be a good idea, but there are some things you should keep in mind when you talk to your creditors. Always remain calm and pleasant. They will be less likely to take an interest in helping you if you treat them with a less than professional attitude. Stick with the facts when laying out your situation, and try not to lay on too much emotion. If you have had a family crisis that has caused your finances to take a turn for the worse, then let your creditors know that, but keep it within the context of the business conversation. Try to call towards the end of the month because that is a time when creditors are looking to clear their accounts as much as possible and they may be more inclined to listen to a proposition during that time.

    Even though it is a business discussion, remind your creditor that you have the option of getting a loan with another creditor and paying off your account if they will not work with you. This is an effective threat because that means years of interest payments that your creditor would be missing out on, and they do not want to give up that revenue so easily.

Prioritizing Your Accounts

    The first thing you may wonder as you stare at your pile of credit bills is where you should begin. The first bills you should pull out are the ones with the largest remaining balances. The next criteria for prioritizing your debt is by the minimum payments you need to pay each month. Put the highest minimum payments on top. Next you will want to look at the interest rate you are paying and put the highest interest rates higher up on the priority list. From there you can separate your bills based on how much you pay each month in service charges.

    Once you have prioritized your bills you then need to decide if you are going to pay them off yourself or get help from a financial lender. The very first thing you should try is to get a personal loan with a low interest rate that you can use to consolidate your loans. If you are able to get a loan that covers all of the remaining principle balances on your accounts, and has an interest rate lower than your lowest credit account rate, then consider consolidating under that loan. If you are unable to get a loan due to bad credit then negotiate with your creditors to get them to lower your interest rate, your interest obligation, or agree to close out your account for a lower payoff amount. All of these will have an effect on your credit score, but at the same time these are also the first steps to repairing your credit in the long run. If a personal loan is not a possibility and your creditors will not negotiate, then it would be time to talk to a financial consolidation company about getting your debt under control.

What If I Apply for Debt Consolidation Without Security?

What If I Apply for Debt Consolidation Without Security?

Consolidation is a debt management option that involves taking out a loan to pay off your old debts. Often, consolidation involves a security, such as your home. However, unsecured consolidation loans also are available. Whether you can apply for unsecured consolidation loans depends on your financial situation and who you approach for the loan. Even if you qualify, you should understand when getting the loan is in your best interest.

The Short Answer

    Debt consolidation that does not require collateral is available through many lenders. From that standpoint, you always can apply for an unsecured consolidation loan. However, because the criteria of each lender varies, you may be limited in where you get the loan.


    Every lender will look at your credit when you apply for a consolidation loan, regardless of whether you apply for a loan that is secured or unsecured. Even so, credit is more important when your consolidation loan doesn't use collateral. With no collateral to collect if you default, the lender has to rely only on your promise to pay with an unsecured loan. The only way a lender can gauge whether you'll keep your promise is by looking at the precedent you set with previous lenders, and your credit score reflects that history. Even with good credit, an unsecured loan typically has a higher rate of interest than an unsecured one, as the CreditLoan website notes. If you are a subprime borrower -- meaning your credit score is below what the creditor assumes is ideal or prime -- interest rates will be even higher. There is no standard for what constitutes a subprime score, with some lenders considering scores as low as 600 still prime. Most lenders use scores around 700 as the cutoff for prime.

Debt-to-Income Ratio

    Your debt-to-income ratio is the amount of debt you owe divided by the amount of money you have coming into your household. To take out a consolidation loan, you must show a lender you have enough money to pay the current debts you owe in addition to the consolidation loan. If your debt-to-income ratio is high, getting an unsecured consolidation loan may be difficult, because creditors may not see how you are going to pay off the loan without relying on other credit sources. Generally, creditors don't want you to enter a situation where you use one credit line to pay another.

Lender Requirements

    Every lender has different requirements for their consolidation loans. For example, one may require you take a credit counseling course as part of the consolidation program, while another may offer consolidation loans only to those who are current account holders. Some lenders offer consolidation loans, but only secured ones due to the lower risk. If you want an unsecured consolidation loan, therefore, you must shop around to find the best deal. Compare terms carefully.


    Even though a secured loan may be easier to find, unsecured consolidation may help you if your situation worsens -- with unsecured consolidation, your creditor may lose the right to come after your property in bankruptcy the way they could with a secured loan. Unsecured consolidation generally is better for people with good to excellent credit (700 or better). Don't consolidate if consolidation eliminates the perks you had with old lenders or if you have very little time left on the original loans. Only include the debts with interest rates that are higher than the interest rate for the consolidation loan.

Friday, August 24, 2012

Does Getting a Credit Account Improve Credit Ratings?

Credit rating improvement involves actively using credit and demonstrating responsible management of all your loans and accounts. You cannot fix a battered credit score without some accounts through which you establish on-time payment records. Creditors want to see recent activity on your credit reports, and new accounts that you maintain in good standing influence your credit score positively.


    You need more than one credit account to improve your credit rating. MSN Money columnist Liz Pulliam Weston explains that creditors want to see how you handle installment loans with fixed payments and credit cards or other revolving accounts with variable spending limits and payment terms. Credit cards and personal loans both come in secured varieties if your current rating is so low that you cannot get traditional accounts. Your own funds or property secure the card or loan.


    A good credit rating requires a proper balance between the amount of credit available to you and how much you actually use. Weston advises that your revolving account balances should never exceed 30 percent of your available credit. Ten percent usage is ideal for credit rating improvement.


    Credit accounts are essential to credit rating improvement because they provide an opportunity to show you can make on-time payments. The MyFICO credit scoring site explains that payment dates and delinquencies influence over a third of your credit score. Installment loans require the same payment amount every month, so you simply need to pay by the deadline. Credit cards let you pay a predetermined minimum or higher amount. Pay enough to keep the balance below 30 percent of your credit line, and respect the due date.

Time Frame

    Keep your credit accounts open, even after you improve your credit rating, because you need some long-term accounts to keep your credit score at its peak. All accounts help you when they show an unbroken string of on-time payments, but older accounts with no delinquencies are especially valuable. Creditors prefer to work with stable borrowers, and the MyFICO site advises that 10 percent of your credit score is based on the age of your accounts and length of time you have used credit.


    You do not have to get new credit accounts to improve your credit rating if you still have older credit cards. Catch them up if your payments are delinquent and always pay on time in the future. Unused cards let you build up your credit score too. Charge something on your old cards at least twice a year, radio host Clark Howard's website advises, even if you do not wish to use them regularly. This adds recent activity to those accounts on your credit reports. Pay off the balances quickly so you do not raise your debt load.

Debt Snowball Tips

Financial advisor Dave Ramsey popularized the "Debt Snowball" program for people trying to get out of debt. The program is based on the concept of building momentum with extra payments by adding the previous payment on debts you have paid off to the next debt on your list. Soon you will be making very large extra payments on your biggest debts, and the successes of paying off your smaller debts help you build emotional momentum as well.

Stop Accumulating Debt

    Before starting the debt snowball program, you need to make two major changes in the way you handle your finances. The first is to stop using credit cards and other forms of short-term debt. The snowball program will not work if you keep adding to your debts. The second is to put away $1,000 in a savings account for emergencies. This will allow you to not use your credit card if you have an emergency such as needing car repairs on your primary vehicle.

Equal Monthly Payments

    The key to the debt snowball program is that your total debt payments are equal every month, even when you have paid off some of your cards and your minimum payments go down. The payment amount above the minimum is your snowball, and it keeps getting bigger as you pay off debts. For example, if you start the debt snowball program with three credit cards, one with a minimum payment of $40, one with $100 and one with $160, you will pay $300 every month toward your debts. After you pay off the first card, you can put $140 per month toward your second card. After the second is paid off, you get to put the full $300 per month toward the last card, which greatly accelerates its payoff.

Tighten Your Budget

    The debt snowball program will work more quickly if you can start with a total payment amount even greater than the sum of your minimum payments. Reducing your other household expenses with methods such as eating out less frequently than usual or canceling your cable television service can free up more money in your budget to put toward your debts. If, in the above example, you decided to put $400 per month toward debts instead of $300, you could start with an extra payment "snowball" of $100. This would bring your payments on the first card with a $40 minimum payment to $140 per month and help you pay that card off much more quickly, not to mention the others as well once that snowball was applied to them.

Make Lists on Paper

    When you first start a debt snowball plan, you need to make a list of all of your debts, starting with the smallest amounts owed at the top of the list. You also should write down the minimum payment for each debt. As you pay off a debt, you cross it off the list. Although you can make these lists on the computer, making them on paper is even better because you can post them in a place where you see them regularly. Seeing the plan and seeing debts get crossed off the list help motivate you to keep making your extra snowball payments on the debts. Much of the snowball program is based on the emotional momentum of paying off your debts.

Wednesday, August 22, 2012

How to Get Rid of Debt Collectors

Debt collectors are persistent. They'll call your home two and three times a day, leave harassing messages and they might call you at work. Debt collectors have a legitimate job, which involves collecting money on past due accounts. However, this doesn't give them the right to harass debtors. Debtors have specific rights. And fortunately, there are ways to get rid of debt collectors and stop the harassment.



    Write a dispute letter. Occasionally, an old charged-off debt or an unknown debt will come to haunt a person. When this happens, write a dispute letter to the creditor or collection agency, and ask them to provide written proof of the debt. By law, creditors and collection agencies have 30 days to respond to a dispute. If they're unable to provide proof of the debt, they have to cease all collection attempts.


    Establish a new payment arrangement. If the debt is legitimate, set up a payment arrangement with the creditor or collection agency. Agree to pay a certain amount every week or month. This is usually enough to satisfy the debt collector, in which they'll stop the harassment.


    Hire a debt management company. Debt consolidation and management agencies know how to deal with debt collectors. They'll contact your debt collectors, negotiate better terms and create a new payment plan. You'll submit payments to the agency. In turn, the agency pays your creditors.


    Record phone calls and keep copies of letters. Some debt collectors are bold. They leave threatening messages on telephones and rudely address customers. Keep records of all telephone messages and attempt to record a telephone conversation. Contact the debt collector and ask to speak with a manager or supervisor.


    Get a lawyer. If necessary, hire an experienced attorney to stop debt collector harassment. Regardless of whether you owe the debt, debt collectors don't have the right to make threats.

Financial Debt Assistance

Financial Debt Assistance

Financial debt can be overwhelming, especially if you do not know where to turn. In today's economy many consumers find themselves living paycheck to paycheck; using credit cards to pay for the basic necessities needed to survive. Eventually when it becomes difficult to make even the minimum monthly payments, late fees and higher rates become the new nightmare. Fortunately there are financial debt programs that can help you get back on your feet.

Credit Counseling

    A good way to start organizing your finances and gaining debt assistance is talking with a reputable non-profit credit counselor. A credit counselor can help you look over your current financial situation and help you to find a course of action. They can help you decide whether or not your solution might be as simple as budgeting or as extreme as bankruptcy by going over your monthly income and examining your total debt.

Debt Management Program

    A debt management program (DMP) is recommended for consumers with credit card debt that has become unmanageable. If you are unable to make your minimum monthly payments and are paying high interest rates, a DMP might be something to consider. Credit counselors work directly with your creditors to lower your rates, sometimes down to 0 percent, putting you on a payment program that can help you be debt free in two to five years.

Bankruptcy Options

    If you are unable to make any payments toward your credit cards and are receiving collection calls, filing bankruptcy might be a solution to your financial debt problems. There are two bankruptcy programs usually filed by consumers for most debt relief, Chapter 7 or Chapter 13. Chapter 7, which is the most extreme, eliminates most of your debts, and Chapter 13 puts you on a payment plan.

    Filing bankruptcy can relieve the pressure of collectors and debt but it can be costly to both your pocket book and your credit file. Lawyer fees are involved and your credit can be affected up to ten years when filing bankruptcy.

Hardship Programs

    Many creditors, such as Discover, offer hardship programs for financial debt assistance to their consumers. If you have recently lost your job, have run into medical issues, or are just struggling to make your monthly payments, then contact your creditor directly and ask them about available hardship programs. A hardship program temporarily lowers your rate or payment to an affordable amount while you are trying to get back on your feet financially.

Debt Settlement

    Debt settlement programs are offered by companies promising to lower your monthly payments dramatically as they work with your creditors to lower the balance owed to them. Unfortunately there is no guarantee with these programs, some creditors will not even negotiate, and the program fees can be considerable. It's important to ask many questions when considering this option and be alert that a creditor may end up suing you for payment if they do not agree upon a settlement.

Divorce & Debt in Georgia

Divorce & Debt in Georgia

In Georgia, when spouses cannot agree to a mutually acceptable property settlement agreement, they may request a judicial property division from family law judges or from a 12-member jury upon request. During the pending trial, Georgia Code Section 19, Section 19-5-7, Domestic Relations, prohibits spouses from transferring property, except as required by law, until the court issues a final divorce decree.

Property and Debts

    Georgia courts divide marital property and liabilities using the legal equitable distribution rules. Equitable distribution allows judges to award property and divide assets as equitably as possible, although not necessarily equally between them. Judges will equitably divide marital property and debts but will allow separate property and debts to remain separate. As long as the spouse who owns the separate property did not convert separate property into marital property, then that spouse can retain sole possession. Examples of separate property that may become joint property include investment accounts acquired prior to the marriage, but commingled into the spouses' joint marital account after marriage.


    Courts in Georgia are not obligated to follow any strict formula to divide marital debts between the parties. If one party requests the court to allocate a larger responsibility to pay marital debts to the other spouse, then that party must provide justification in support of the larger allocation. Spouses may ask judges or the 12-panel jury to consider marital fault if the party is seeking a fault-based divorce. Typical examples of fault in Georgia include desertion or abandonment, adultery, abuse and fraud. Additionally, one party may also offer evidence as to the party's personal sacrifices to maintain the marital home and care for the spouses' children, while the other spouse had the freedom to advance her career and job opportunities.

Superior Courts

    Superior courts in Georgia will require the parties to exchange financial information during the legal discovery process. After discovery, attorneys for each party will provide the court with a list of assets and liabilities between them and the amount of each liability and fair market values of all property. The superior court judge will then conduct a review of all assets and liabilities and assess a monetary value to each. After the assessment, judges will divide both as fairly as possible.

Jury Verdict

    Under Georgia Code, Title 19, Section 19, when one party requests a jury trial, then the court must order a jury trial. Judges will properly weigh the jury's verdict regarding distribution of marital debts and liabilities and incorporate the jury's findings into a written divorce decree apportioning the debts and assets between the spouses.


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

Credit Card Payment Options

Credit Card Payment Options

With the advent of technology, you now have more options to make credit card payments. You can still make them through the mail, or you can take advantage of other methods that are not only more convenient, but can also buy you more time---sometimes a valuable commodity. In the end, it's all a matter of personal preference


    Credit card companies now list their home page URLs on the back of their cards and on paper statements. Somewhere on their home page there's a link that allows you to register as a user. Once you set up online access to your account, Internet payment options becomes available to you free of charge. The credit card companies log online payments instantly. So if you pay a bill the day it is due, it will be on time, but there are cutoff times. Your company's policy might state, for instance, that payments made after 3 p.m. Eastern time are processed the following day. In addition, using this option gives the credit card company access to your bank account to process the transaction.


    Phone payments are now the norm; however, you are usually charged for the convenience of making payments via the company's toll-free customer service number. This option is best for those times when you have to pay your bill at the last minute, but do not have online access. When you call, you also must have your bank account information handy, so customer service can initiate the electronic withdrawal.


    Since not everyone has a computer and Internet service, the old-fashioned pay-by-mail option still exists. The credit card company provides a window envelope for the pre-addressed payment stub. All you need is a stamp. This option, however, requires you to mail your payment days before it is due. The credit card company considers your account paid the day it processes the payment. If that happens past the due date, your account is assessed a late fee.

Auto Pay

    Many banks offer automatic bill pay, allowing you to schedule payments in advance. You just have to set the date and amount; however, this service is not always free. Credit card companies might also charge you for making a payment using a third party. With this, as with any payment option, it's a good idea to refrain from assumptions and to ask everyone their fee policies.

Over the Minimum

    Adding interest to the amount you borrow is how credit card companies make money; thus, the higher your balance, the more interest you pay. In addition, the longer you keep a balance, the more you end up owing. So, if you cannot pay your bill in full, at least pay more than the minimum payment. This will save considerable interest.

Lower Interest

    The Motley Fool, a financial company, recommends on its website that you transfer your debt to the card with the lowest interest rate available to you. However, this only works effectively if you continue to make the same high payments you were making before. This way, less of your money goes towards paying interest and more is allocated to lower your principal. Transferring money to a low-interest card simply to pay less each month still leads to high debt in the long run.

Tuesday, August 21, 2012

How Can My 18 Year Old Get Out of Debt?

How Can My 18 Year Old Get Out of Debt?

Credit cards, automobile loans or student loans can cause 18-year-old individuals to go into debt. Your 18-year-old can get out of debt by getting financial assistance or finding methods to gradually get out of debt.


    One of the best ways for a person of any age, including an 18-year-old, to get out of debt is to pay her bills on time or ahead of time. Paying off bills can help teens to start building good credit. They often need to learn how to create and stick to a budget. A budget teaches people to learn how to spend money and pay it back in an efficient manner.


    Parents or other relatives can help an 18-year-old person get out of debt by loaning them money to pay their bills. They may want to draw up an official or unofficial contract, outlining how much the 18-year-old will borrow, how much they will pay back and when they will start paying back the money. A loan can allow parents to help their children while also teaching the teenagers to become more responsible.


    Another important way that an 18-year-old can get out of debt is to get a job. Relatives and friends can often help an 18-year-old to find a job, sometimes by asking friends, family members, acquaintances or coworkers if any jobs are available. Having jobs can help older teenagers to learn responsibility and pay off their debts. In addition to getting jobs, 18-year-old individuals can also sell old clothing or items, at a garage sale or on a website, to make money.

How to Clear a Bad Credit Record

How to Clear a Bad Credit Record

A bad credit record severely affects your ability to get credit. All lenders, when considering your application for credit, check your credit record. Ensure you know what your credit records show. Three credit reporting bureaus are used by lenders: Experian, Equifax and TransUnion. You can get free credit reports annually for all three from AnnualCreditReport.com. It's the first place to start. Be patient: it takes time to clear a bad credit report.



    Apply online to AnnualCreditReport.com. Complete the online application form. Follow the simple instructions. Once your identity has been verified you can access your reports instantly and begin the process to clear a bad credit record.


    Print your report. It makes it easier to highlight parts of the report that need attention. Check your report for errors: they lower your credit rating. Report any errors to the lender and the credit reporting bureau immediately. Correcting them is the fastest way to start to clear a bad credit record.


    Identify and highlight areas of the report that are affecting your credit record. This is an important part of clearing your bad credit report. Credit reports show your payment history and rating for all companies you have credit with.


    Pay off as much as possible from credit cards that are close to their credit limit. Reduce them to 50 percent. Cards close to their limit indicate a possible risk to a lender. Your report is marked and your credit rating falls. Reducing your credit card debt helps to clear a bad credit report. Rectify any late payments. Set a regular payment with your bank. Make sure future payments always reach the lender before the due date. A clean payment history improves your credit rating.


    Clear loans if your payment history has been poor. Settled debts remain on your credit report but are recorded as paid off or satisfied. This removes bad credit from your credit report, improving your rating.

Is There a Set Limit That Can Be Garnished Out of a Paycheck?

Is There a Set Limit That Can Be Garnished Out of a Paycheck?

Wage garnishment is the process by which an employer is ordered to withhold a certain amount of money from an employee's paycheck in order to satisfy a debt. A garnishment is often the result of a court order but can be unilaterally undertaken by government agencies as well. While having your paycheck garnished can be a disturbing experience, a worker can rest assured that federal law has established a maximum limit that can be taken.

Garnishable Debt

    Any creditor can seek a writ of garnishment from the court in order to satisfy a legal debt. The garnishment might be granted for credit card debt, defaulted student loans, unpaid court fines, late tax payments and more. Generally, a court order is required before an employer begins the garnishment process but there are examples, such as the IRS in regard to delinquent taxes, where bank accounts and paychecks can be attached without direction from the court.

Garnishment Types

    The most common type of garnishment is when an amount is withheld from an employee's regular paycheck and sent to the creditor to satisfy a debt. Federal law particularly describes the maximum amount of money that can be withheld. The second type of garnishment is bank account garnishment, where the bank holding your account is instructed to take money residing there and turn it over for satisfaction of the account holder's debts. With both types of garnishment, there are special conditions that allow for a higher withholding level.

Federal Law

    The Consumer Credit Protection Act is the controlling federal law when it comes to wage garnishment. A two-fold standard is applied that sets limits on how much of an employee's salary may be garnished. The first standard states no more than 25 percent of any paycheck is garnishable. The second standard limits garnishment to only that amount more than 30 times the prevailing hourly minimum wage. When a writ of garnishment comes in, the employer should choose the standard that results in the least money taken. When state and federal law conflict on garnishment amounts, the lesser total should be used.

Higher Garnishment

    A greater amount of a paycheck can be garnished in the presence of certain debits. Child support, federal or state taxes, and bankruptcy can result in the garnishment threshold being raised to no more than 50 percent, a number than can be raised again to 60 percent if the employee is not supporting a spouse or child. These particular kinds of debts that are more than 12 weeks behind can be assessed another 5 percent penalty. Keep in mind that the garnishment is applied after other legally required deductions have been taken, such as FICA, retirement, and state and local taxes.

Removing Collections From Credit Report

Collection items are entries on your credit report that result from failing to pay a debt that is then assigned to a debt collector. Collection items harm your credit and make it difficult or impossible to be approved for certain types of loans, including home mortgages. Mortgage companies usually refuse to approve loans until all collection items are paid. Some people repairing their credit seek ways to have collection items removed.

Federal Law

    The Fair Credit Reporting Act allows collection items that are accurate to appear on your credit report for seven years. Technically, you owe the debt until it is paid, but by law it cannot be reported on your credit report for more than seven years. Collection items that are inaccurate must be removed if you file a dispute to the credit bureau.


    Paying the collection item results in the status on credit reports being updated to show it as a "paid collection." Paid collections generally don't improve your credit score, but they do show creditors you resolved the debt. People who are within a year or so of collection items being erased from their report sometimes just wait for the information to automatically be removed.


    Another option is a tactic called "pay-for-delete," which allows the debt collector to remove the information from your credit report in exchange for payment. Pay-for-delete is legal, but it does violate the intent of the Fair Credit Reporting Act. As a result, not all creditors and debt collectors will consider such an arrangement. However, many will, and you should ask before paying.


    Pay-for-delete and disputing inaccurate entries are the only legitimate options for removing collection items before they expire. However, people sometimes try to manipulate the credit reporting system by disputing collection items they know are accurate. By law, credit bureaus must remove negative information such as collection items if they cannot confirm that the information is acurate. The credit bureau has 30 days to respond to an official dispute you submit by mail or telephone or through the credit bureau's website. If the credit bureau cannot confirm the veracity of the item by the deadline, the collection item must be removed. Usually the credit bureau does confirm the information's accuracy, and it remains. Occasionally, this strategy works, and the information is dropped.

Personal Debt & Credit Counseling

You are a likely candidate for credit counseling if you are struggling to pay your bills on time, frequently borrowing against lines of credit to pay other bills or often making withdrawals from your savings or 401k to meet monthly obligations.

Credit Counselors

    Certified Consumer Credit Counselors can advise you on financial strategies for getting out of debt and maintaining a budget. Its services include: credit management education, confidential debt counseling and home buyer education.

Bankruptcy and Foreclosure

    Credit counselors can also advise you on sensitive topics such as bankruptcy, debt settlement, home mortgage delinquency, avoiding home foreclosure and more.

Finding A Counselor

    A good place to start is The National Foundation for Credit Counseling (NFCC). The NFCC is a national nonprofit network with counselors in nearly 850 locations across the United States. Some counselors even offer counseling sessions by phone or over the Internet. The NFCC provides a directory of counselors at its website: http://www.nfcc.org.

Doing Your Homework

    Be sure to ask good questions and investigate any counselor or agency you're considering. Unfortunately, there are scam artists in the industry whose real purpose is to sell you services you don't need or which will put you further in debt. Once you have developed a list of potential counseling agencies, check them out with your state attorney general, local consumer protection agency or the Better Business Bureau. For more information on how to investigate or what questions to ask, visit the website of the Federal Trade Commission: www.ftc.gov


    Many services provided by nonprofit credit counseling agencies are often free, such as budget counseling sessions and advice on debt management plans. Other services, such as working with you monthly on a long-term management plan, require a nominal recurring fee starting at about $25.

Monday, August 20, 2012

Why Is it Important to Build a Credit History?

When you build your credit history, you establish a record of financial trustworthiness. As a good credit risk, you'll be approved for credit cards or bank loans, you'll be a strong job candidate and you'll be able to pursue goals like buying a home.

Getting Loans

    With a good credit history, you look more attractive to potential creditors, and they will be more willing to offer you loans for your long-term goals. For example, when you have a history of paying your credit card bills on time, you're more likely to be approved for a mortgage.

Teaches Discipline

    Building a credit history teaches you to be disciplined in managing your finances wisely. If you know you have to make monthly student loan payments, for instance, you'll be less inclined to spend your check carelessly and you'll stick to a spending limit.

Applying for a job

    When you apply for some jobs, the employer will check your credit history. A poor credit record will hurt your candidacy.

Financial Literacy

    When students open their first credit card account in college, they get valuable lessons in debt management. They'll learn credit terms such as available balance, interest rates and grace periods, and they'll also learn what happens when they miss payments.


    When unemployment, a death in the family, divorce or a natural disaster happens, having a good credit history is essential. You may need to use credit for temporary hotel stays, to get a new apartment, to buy groceries or to pay bills.

How to Build Credit as a College Student

How to Build Credit as a College Student

College is where students learn about living on their own, how to get along with a roommate and how not to depend on the bank of Mom and Dad. Young adults tend to spend lots of money once they are out on their own, and credit card companies know this. College students often pay their credit card bills before anything else because they want to keep spending. Building a good credit history and being responsible with credit will help avoid future credit problems.



    Establish a bank account. A checking or savings account is the beginning of building your financial history and creditworthiness. You can open a free account with a minimum deposit of $100 at most financial institutions. A savings account is a good way to put aside a little money every payday for emergencies instead of using a credit card.


    Search for low-interest credit cards and read the fine print before signing the agreement. Some cards have minimum income requirements and require an established credit history. An alternative would be to ask a parent to add you as an authorized user on his card.


    Apply for a department store card or gas card. These cards often have a beginning limit of $200 to $300 until the applicant has established a history of reliable payments. The credit limit is raised periodically after that.


    Apply for a card secured by a deposit. If you don't qualify for a regular card because of a lack of credit history, applying for a secured card can give you a first taste of independence. A deposit of $100 to $300 is generally required, along with an application. Issuers of secured credit cards report to the credit bureaus just like issuers of unsecured cards, so pay your bills on time.

Debt Settlement Vs. Debt Consolidation

Two common ways to manage or eliminate debt are debt settlement and debt consolidation. Even though both have a similar goal they are two very different ways to control debt.


    Both debt settlement and debt consolidation are ways for people to restructure or pay down their debt. The ultimate goal of both is to become debt free.


    Debt settlement agencies help you reach an agreement with your creditors for lower monthly payments and interest rates.

    Debt consolidation is a restructuring of your debt so that your monthly payments will be lower. Your debts are combined into one monthly payment.


    Debt settlement agencies negotiate with your creditors to settle your debt for less than what is owed or secure a lower interest rate.

    Debt consolidation allows you to make one payment each month, often at a lower rate, until all the debt is paid off. Common debts that can be consolidated include home equity loans, second mortgages, refinances or personal loans.


    The debt settlement agency does the negotiating for you. You pay the agency one payment a month and they then pay your creditors.

    With debt consolidation you are responsible for the monthly payment. Once your debt is consolidated the old accounts can be closed right away.

Other Aspects

    Debt settlement agencies do not begin to negotiate with creditor's until you are months behind on payments, which can hurt your credit score.

    Debt consolidation loans usually increase the total amount of time it will take to pay off your debt, causing you to pay more total interest.

Does a Collection Agency Collect Civil Money Judgments?

When a defendant loses a lawsuit, he may be ordered to pay damages to the plaintiff. These damages, referred to as a civil judgment, are like any other debt. The defendant is legally obligated to pay them, and, if he does not, the plaintiff may takes a number of steps to recover the money. This includes hiring a collection agency to incur payment of the funds.

Civil Judgments

    When a judge or jury awards money to either a plaintiff or defendant in a civil lawsuit, the civil judgment becomes a legal debt obligation of the losing side in the case. The side awarded the money becomes, in effect, a creditor, with all the rights that are given to a creditor. Under U.S. law, creditors are allowed to transfer debt or have other people collect the debt on their behalf, such as collection agencies.

Collection Agencies

    A collection agency will usually either purchase a civil judgment outright -- often for pennies on the dollar -- or they will be hired on commission, meaning they are compensated with a percentage of the money they collect from the defendant. Collection agencies are not legally barred from collecting civil judgments; however, they must abide by the ruling of the court and cannot add additional interest or fees to the judgment, or make the debtor pay before the money is legally due.

Use of Collection Agencies

    While a collection agency can legally be hired by a person seeking payment of a civil judgment, it doesn't mean that the person will do so. Instead, the person may choose to attempt collection himself. Or, if the person refuses to pay, they may petition the judge who made the ruling to secure collection of the money through additional legal pressure.


    While a collection agency is empowered to collect civil judgments for a creditor, there may be several actions that he cannot legally take. For example, a collection agency may not be legally allowed to garnish the debtor's wages or seize his bank account, depending on the laws of the state. In addition, the collection agency must respect the statute of limitations and cannot collect the damages after the statute has expired.

Saturday, August 18, 2012

Help for People With Debt Problems

Debt problems can easily overwhelm people who face changing employment circumstances, health crises or poor financial self-management. The Federal Trade Commission mentions several possible solutions, ranging from counseling to bankruptcy.


    If debtors cannot manage their own debts or negotiate lower payments with their creditors directly, they may consider working with a credit counselor to develop a workable repayment strategy. Credit counselors often enroll their clients in debt management programs that involve regular monthly payments.

Repayment Strategies

    Debtors may obtain a consolidation loan, using their homes as collateral, to help repay debts. Some companies offer debt negotiation programs that attempt to get creditors to accept a lesser amount, but the Federal Trade Commission warns that these programs do not always work as advertised.


    In the most serious cases, debtors may exercise their right to file for bankruptcy. Bankruptcy gives debtors protection from their creditors' attempts to collect, with the debtor's assets sold by a trustee and the resulting money distributed among the creditors. Because bankruptcy tarnishes debtors' credit ratings for 10 years, the Federal Trade Commission recommends it as a final option only.

Can You Obtain an Auto Loan While Collecting Unemployment?

It's possible to qualify for an auto loan while collecting unemployment --- it depends on your overall credit and financial situation. For example, you may have multiple income streams from retirement plans, small businesses and other investments. Losing a job and collecting unemployment isn't always a hardship in those situations. However, if your only source of income is unemployment, you may find it impossible to qualify for a car loan.


    Unemployment benefits are temporary: You receive only a small percentage of your previous salary. Automobile loans usually require payments that last at least three to five years; no traditional bank or credit union is likely to approve such a long-term loan based on temporary unemployment benefits. People eligible for unemployment initially receive benefits for 26 weeks, with certain extensions possible, according to MSN Money.

High-Risk Lenders

    Even auto lenders comfortable lending to people with poor credit are unlikely to approve a car loan based solely on unemployment benefits, although exceptions are possible. There's always the chance that a used-car dealer could arrange financing at an exorbitant interest rate. The dealer may steer you to an overpriced car and require a significant down payment with an exorbitant interest rate approaching or exceeding 25 percent. That's typically a good deal for the dealer, even if it repossesses the car just a few months later.

Existing Credit

    If you're unable to qualify for a standard auto loan because of unemployment, consider existing lines of credit, such as a home equity loan. The bank may not request employment verification if the account is in good standing, making unemployment a nonissue. However, the Federal Trade Commission recommends that you not use home equity loans, if possible: These loans are helpful for emergencies, but they can lead to excessive debt if used unwisely. The Federal Trade Commission warns that defaulting on a home equity loan can lead to foreclosure.


    If you're unemployed and need a car, consider buying a car for cash, even if that means scrounging around for a used car that's $1,500 or less. That's less than a down payment on most cars, and it eliminates adding debt during a tough time. Long-term rentals are another option. Major rental-car companies often offer rentals for two-month periods; you can renew the contract for additional months, if necessary.

Does Consolidating Your Credit Work?

Does Consolidating Your Credit Work?

There are several options available to individuals interested in consolidating their credit. There are pros and cons associated with every option. In deciding which consolidation program is right for you, you should consider the type of debt you have and how indebted you are. Consolidating your credit can work, that is, it can be effective in getting you out of debt. However, you must evaluate the advantages and disadvantages of all available options.

Private Credit Consolidation Companies

    There are many credit consolidation companies that offer consolidation for credit card debt and other types of unsecured debt. These companies are typically for profit, as opposed to non-profit. Once you agree to enter a contract for credit consolidation with one of these companies, the company contacts your creditors to let them know you're consolidating. Typically, these companies negotiate with your creditors for lower interest rates, then you make monthly payments to the consolidation company --- usually via an automatic deduction from your bank account --- and the company is then responsible for paying each of your creditors with your monthly lump sum payment. Depending on how much debt you have, credit consolidation programs can take up to 48 months to complete, that is, until your creditors are paid off. These programs can work, but it's important to note that you must have the money for the automatic deduction on the specified date each month. Additionally, your credit score does not improve until after you've completed the program.

Consolidating Credit With a Credit Card

    One option for consolidating credit it to obtain a credit card that allows for credit transfers. Usually, these credit cards offer a low interest rate for balances transferred from other credit cards. It's important to read the fine print, as some of these credit cards offer low interest rates on transferred balances for a limited amount of time. In other words, your transferred balances might be subject to a higher rate of interest after six months or one year. This option can work; however, you must be diligent about making your monthly payments. Otherwise, you could end up owing more debt than you had when you started.

Consolidating Your Credit With a Loan

    For some people, obtaining a loan from a bank or a credit union --- which is then used to pay off lines of credit --- is an attractive option. This can also work, provided the loan has a lower interest rate than the credit cards being paid off. If you can acquire a loan from a bank or credit union to pay off your debt, you must make sure you use the loan for that purpose. If you don't, you'll end up saddled with more debt.

Chapter 13 Bankruptcy

    Although it might seem scary to some people, filing for Chapter 13 bankruptcy is a good option. Chapter 13 bankruptcy works much like credit consolidation through a private consolidation company, but it there's less risk involved. Once you file for Chapter 13, the bankruptcy trustee notifies all creditors of your filing. You are then required to make monthly payments to the bankruptcy trustee, who takes care of the rest. In a Chapter 13 bankruptcy, creditors typically must agree to lower interest rates. Additionally, the aim is for Chapter 13 filers to be debt-free within three to four years of filing. Once the process is complete, it takes roughly two years for the bankruptcy filer's credit score to go up.

Friday, August 17, 2012

Five Tips for When Choosing a Credit Counselor

A good credit counselor is a lifeline when you are drowning in debt. The Federal Trade Commission (FTC) website explains that legitimate credit counseling firms provide materials, education, budgeting help, negotiation with creditors and debt managements plans. Some counseling companies are not legitimate, even if they run fancy ads or make expansive promises, the Better Business Bureau (BBB) warns. Choose a counselor carefully to avoid getting scammed.

Services Offered

    Choose a credit counseling firm that offers a complete range of services. The FTC website warns that some credit counselors try to pressure you into a debt management plan without discussing your personal financial situation. A good counseling firm has materials to help you develop your own budget, classes and other options in addition to formal plans. The counselor should have enough resources to help you choose the least burdensome form of help.

Licensing and Training

    Check the counseling firm's licensing and ask if its counselors are trained and certified by an outside source, like a professional organization. Many firms are nonprofit, but this does not necessarily mean that they are honest or that their fees are affordable. The BBB website warns that legitimate counseling firms should be licensed in states that require it and have properly educated counselors.


    Ask how much the counseling firm charges for its services. Legitimate credit counselors disclose this information upfront and put it in writing upon request, according to the FTC. A good credit counselor should not turn you away if you cannot afford to pay for services. Ask how the firm compensates its counselors, and stay away from those that offer employee incentives for locking you into a debt management plan or other specific services. Otherwise, you could get pushed into unneeded services so the counselor can earn more money.


    Ask about the credit counseling firm's privacy and security policies, the BBB advises. Credit counselors gather sensitive personal and financial information about you, including your name, address and account data. A procedure for securing personal information should be in place so that your information cannot fall into the hands of identity thieves. Otherwise, your credit problems could be compounded by criminals opening more accounts in your name.

Written Contracts

    Ask whether the credit counselor puts agreements in writing before you proceed with a debt management plan or other services. Legitimate credit counseling firms provide written contracts, the FTC explains. Verbal promises and assurances are not enforceable, so reject any counselor who refuses to put everything on paper, including specific fee details.

How to Negotiate Payment With a Debt Collector

Being in debt is stressful enough as it is. So don't let debt collectors make it worse. When it comes time to negotiate with a debt collector, a little preparation and confidence can make a huge difference when it comes to creating a plan to paying back the money you owe. Take control of your finances, and negotiate the right way.



    Be realistic, and figure out what you actually can afford to pay back. Don't compromise on what you expect yourself to be able to pay back. Compromise on what you know you'll be able to pay back.


    Pay what's most important first. Keeping your home warm in the winter is more of a priority than a credit card payment, even if that credit card payment may seem more financially daunting.


    Understand your specific financial situation. Visit the Federal Trade Commission website to get the answers you need. The debt collector should not be your only source of information.


    Organize all of your financial records to have as reference points throughout the negotiation.


    Stay focused on a solution for the future, not a reason to explain the past. Debt collectors have heard every story in the book for why bills weren't paid. So stay focused on the negotiation.


    Stay in control of the situation. If the debt collector is saying something that you disagree with, be honest and open with him about it.


    Get a written contract for what you ultimately agree upon in the negotiation. Protect yourself for any future problem that might come up.

Thursday, August 16, 2012

The Average Consumer Debt As Percent of Income

Ratios and percentages help banks and financial experts determine consumer debt averages. Some organizations use these figures to make determinations about the economy as a whole. Others use them, especially the personal income to debt ratio, as guideline for loaning and loan terms.


    Consumer debt as percentage of income shows how much debt consumers have, in relation to their other income. This figure is often used with disposable income, or the income that remains after consumers have paid for unavoidable expenses, like taxes and other items. Debt is composed of elements, including mortgage debt, credit cards and auto loans.


    In 2010, the average American consumer spent about 12 percent of their disposable income on debt. When other payments like car leases and property taxes (other common expenses that accompany debts) are added into the estimation, it increases to 15 percent. There is a sharp difference between homeowners and renters. Although homeowners tend to have mortgage debts to pay off, for renters the number rises to 24 percent for the total amount of debt.


    Lenders pay careful attention to these percentages when deciding on interest rates and setting approval requirements on their loans. They often alter the disposable income number to gross income, or income before taxes. Lenders may be willing to accept as much as a 36 percent debt-to-income ratio and still give a loan, but lenders like to see it lower. If individuals have about 10 percent debt to income, they can qualify for a loan much more easily.

Changing the Ratio

    Individuals who want to change their debt-to-income ratios can either control their spending or increase their income levels. From an economic perspective, the ratio changes as consumers become more wary of debt and begin saving money.

Wednesday, August 15, 2012

Do Payday Advances Use Your Savings Account?

People who need a short-term loan will often seek out payday loans. Payday loans are loans the borrower must pay back within a short period of time, generally several days to a month. The borrower also typically pays a high interest rate. When taking out the loan, the borrower must provide the lender with some form of payment in advance. This payment is usually drawn from the individual's checking account, not his savings account.

Payday Loans

    When a person takes out a payday loan, the lender will usually require that he provide a bank account from which the lender can draw the money when it is due to be repaid. The person will generally offer the lender either a personal check, post-dated for the date of repayment, or an account number. On the day the loan comes due, the lender will cash the check or draw the money out of the account.

Checking Account

    While savings accounts may have restrictions on when and how a person can withdraw money, money can be easily drawn out of and placed into checking accounts. Unless the person pays for the loan by taking cash out of his savings account, most payday loans will not be paid for using a savings account.

Overdraft Protection

    In some cases, money might be indirectly drawn from a person's savings account if the person's checking account does not have enough money to cover the withdraw. If the person has overdraft protection on his account, then money may be automatically taken out of his savings account to cover the amount of the withdrawal. However, money will not come directly from the savings account and will only be routed in this way if the account holder authorizes it.


    Theoretically, a payday loan company could eventually attempt to take money out of a borrower's savings account if the loan goes delinquent. If the borrower fails to pay the loan back, the company may file suit against him in court for breach of contract. If the company wins and is awarded damages, it may seek to freeze the person's bank account and extract money out of it to cover the loan amount.

Tuesday, August 14, 2012

Legally Reduce Your Credit Card Debt

Legally Reduce Your Credit Card Debt

When you're paying off your credit card debt, the last thing you want to do is waste time and money on methods that don't work, or worse yet, are illegal. Depending on the degree of your credit card debt situation, you may choose to pay off your debt on your own or obtain assistance through a credit counselor.

Self-Help Payment Plans

    You need a plan of action when paying off your credit card debt on your own. One method is called the "debt snowball plan" in which you pay off the smallest balance first (while making minimum payments on the rest of your cards), then apply the money you were paying to that debt to then pay down the next-smallest balance, and so on. Others choose to pay off the debt with the highest interest rate first. As of the Credit CARD Act of 2009, your credit card statements need to list the amount of money you must pay each month to pay off your card in three years. You may also choose to use those guidelines as a payment plan. Whatever route you choose, commit to following through with it to truly unburden yourself of credit card debt.

Debt Consolidation

    A debt consolidation loan pays off your existing credit card balances and pulls them all under one loan, so that you only make one payment with one interest rate each month. Oftentimes, these loans are advertised at rock bottom interest rates to lure in applicants; however, if your credit is less than stellar, you probably won't qualify for those rates. Compare your existing rates with those of the loan offer. The biggest benefit of consolidation is convenience, but that may not be worth the risk of fighting debt with even more debt. Since a consolidation loan wipes out your balances, you may be tempted to use your newly freed credit. Stay committed to paying off your debt, and use the loan as a solution and not just symptomatic relief.

Debt Settlement

    When you settle a balance with a credit card company, you pay a one-time lump sum that is generally between 20 and 75 percent of the full balance owed. While this method eliminates your balance, your credit score will take a nasty blow. First of all, to qualify for debt settlement, you need to appear to be at risk for bankruptcy, which generally means that you've defaulted on your payments for at least three to six months. Missing a single payment by 30 days or more may negatively affect your score by as much as 110 points, so doing it month after month is extremely damaging. Also, your account will appear as "settled" or "settled for less than owed," which may be a warning sign to lenders that you've had trouble with your finances in the past, making it difficult to obtain new credit.

Debt Management Plan

    To qualify for a debt management plan (DMP), you must be working with a credit counselor who recommends a DMP as a viable option for your particular financial situation. Under this plan, your counselor will negotiate a lower interest rate and/or payoff balance with your creditors, then set up a time frame, by the end of which you will have paid off your debt in full. A DMP will not negatively impact your credit score; however, it may signal that you are a higher credit risk to lenders.

Is it Good to Settle Credit Card Debt?

Creditors may be willing to cut their losses on consumer credit card debt and accept less money than some customers owe on their accounts. There are drawbacks to settling with creditors because debt settlements usually cause credit scores to drop. However, settlements may be the best option for some people who are deep in debt and have no other way to pay their creditors.

Settlement Process

    Credit card companies that work out settlements directly with consumers rather than through collection agencies usually come out ahead. According to a Consumer Reports article titled "How to Settle Your Credit Card Debt for Much Less," banks received as little as six cents on the dollar from accounts turned over to collection agencies in 2008. However, your credit score will be damaged by the time a credit card company agrees to a settlement with you. Companies often won't agree to accept less than they're owed until their customers' accounts are 90 days or more past due and it appears they won't be able to pay the full amount they owe.

Damage Control

    Some people can use credit card debt settlements to avoid filing for bankruptcy and reduce damage to their credit histories in the long run. Late-payment notations on delinquent credit card accounts can remain on consumers' credit files for seven years. However, bankruptcy filings appear in credit reports for 10 years. An MSN Money article titled "Credit Card Debt: How to Cut a Deal" says some creditors are willing to lower cardholders' rates and minimum monthly payments in agreements that can help consumers who have fallen behind on their payments bring their accounts up to date.

Income Taxes

    Consumers who settle with creditors by paying less than they owe should expect to have their accounts closed. Credit card companies won't allow customers to continue racking up debt if balances aren't paid in full. People who manage to get their creditors to agree to reduce their debt may end up paying more in taxes. Cardholders whose creditors forgive more than $600 of the debt they owe may have to pay additional income taxes because the unpaid amount can be counted as income by the Internal Revenue Service.


    Companies that negotiate consumer debt settlements can charge high fees that sink people deeper into debt. Consider negotiating your own debt settlements before seeking outside assistance. Work out a budget for all your expenses before contacting your creditors to ensure you don't offer to pay more in a settlement than you can reasonably afford. Consumers who agree to a settlement or payment arrangement that they fail to pay may not get another opportunity to work out an affordable payment plan. Consider contacting a nonprofit counseling agency such as the National Foundation for Credit Counseling if you're unable to settle your credit card debts yourself.

What Is Unmanageable Debt?

Most residents of the United States have some form of debt, be it credit card debt, a mortgage or a car loan. In many cases, taking on debt can be a healthy method of purchasing things that a person lacks the current resources to afford. However, when the debt becomes too large, it can be considered unmanageable.


    Unmanageable debt can be defined in several ways. Debt can be quantified numerically using a number of measurements, including negative net worth and debt-to-income ratio. However, debt can also be measured according to its effects on the borrower. If the amount of debt a person is repaying becomes so large as to prevent her from making basic expenditures, the debt can be considered unmanageable. Similarly, if the debt continues to grow larger, with no foreseeable means of repaying it, it is unmanageable.


    There are a number of different ways in which to numerically quantify debt. The ratio of an individual's debt to his income, usually expressed as a percentage, measures how much he is making compared to how much he is taking in. According to the debt relief service organization Care One Credit, an individual with a debt-to-income ratio of more than 36 percent will have difficulty receiving loans at reasonable interest rates, putting him at further risk.


    Another way of determining if a debt is unmanageable is if the debt is causing the individual to cut back on necessities. For example, if the debt load has become so large that the person is forced to go without basic necessities or is late in paying off certain bills, such as for rent, the debt might be considered unmanageable.

Multiplying Debt

    Unmanageable debt can also be defined as debt that is so large that borrowers must take out additional debts to service their current debts. In some cases, such as with credit card debt, the debt may multiply due to increases in the interest rate on the loans. If the debt keeps growing, with no foreseeable means of paying it down, it is unmanageable.

Expert Insight

    According to a study by the Project on Student Debt, manageable debt for people paying off students loan was calculated as monthly payments that totaled less than 8 percent of their monthly income. However, this number derived from outdated requirements to receive a mortgage. The study concluded that there is no absolute measure that can be used to determine if student debt is unmanageable. However, those making less than the median income for their age group should not reasonably be expected to pay off their debt without significant hardship.

Monday, August 13, 2012

Advantages & Disadvantages of Renting a Home

Advantages & Disadvantages of Renting a Home

It's a question that's been asked for years. What are the advantages and disadvantages to renting your home versus buying it? Frankly, there is no one answer to this question because it depends on the condition of your pocketbook, whether you plan to stay in one place long enough to reap the rewards of ownership, and the economy. So before you make the decision to rent your home, it is wise to know the pros and cons.


    When you rent your home, none of the monthly rent is tax deductible; but when you buy it, most often most of the money you pay on your mortgage is. Furthermore, the taxes on a home that you purchase are tax deductible, too. Assuming that you have reached the 28 percent federal tax rate, about 28 cents of every dollar you pay toward your mortgage is returned to you through lower taxes. And several years hence when you want the equity that has built in your home, you can take out a second mortgage or a Home Equity Line of Credit (HELOC), and the interest you pay on that loan will probably be tax deductible, too. None of that interest is tax deductible if you rent.


    When you buy your home, its equity will usually increase with every mortgage payment, and if the market value of the house increases, as well, all the better for you. But if you rent your home, your landlord will benefit instead. This is an important consideration when homes in your area are going up in price. However, if the reverse is true, it might be better to rent as opposed to buy your house.

Money Upfront

    Under usual circumstances, your landlord may ask you to make a security deposit of about one month's rent. That deposit will be returned to you at the conclusion of your lease, unless you have abused the property. However, when you purchase a house, you will be required to make a down payment that can be as much as 20 percent of the value of the house. This disparity in upfront costs prevent many people from buying their homes.

Other Considerations

    Regardless of whether your lease is month-to-month or for a year or two, at its conclusion you can simply walk away. However, if you are buying your home, you must first ready it for sale and sell it before you move. Further, if you rent your home, you will have little or no latitude to make changes to make the house more livable for you. If you own it, though, you can make all the changes you want.

Rebuilding Bad Credit

Rebuilding Bad Credit

Credit Cards

    Accruing significant credit card debt is an easy way to ruin your credit score if you're unable to pay it off on time--or if you keep a balance on your card that's more than half of your credit limit. Thus, tackling this bad credit is the first thing you can do to rebuild your credit. If you only rely on one or two credit cards, applying for a third or fourth card that has a low introductory offer can be an option if you can qualify. You could then spread out the balance between your cards, putting the majority of it on the cards with the lowest APR (Annual Percentage Rate) or with a low balance transfer fee. (Be careful to check when these lower rates expire; often they soar when the introductory period ends.) Also, close any credit cards that you no longer use. Even though your credit score may take a slight hit for closing a card, it's also taking a slight hit when the card remains inactive for more than 6 months or, again, when you're unable to pay the balance. If you don't have much credit card debt, apply for a credit card in order to prioritize your other debts and keep you afloat month to month.


    Review your bank statements from the past 3 months. Eliminate frivolous expenses like eating out and see which other expenses, such as cable television, cell phone plans and gym memberships, you can eliminate or reduce by signing up with a competitor. Once your spending habits are scaled back, keep track of every dime you spend. At the end of every month, determine what expenses could have been reduced or eliminated, and put those strategies to use the following month. Though these habits won't in themselves help you rebuild credit, the money you're saving by living more within your means can be put toward outstanding debts and, eventually, into a savings account.

Tackling Bills

    Make paying your bills a priority. Try to get all of your fixed monthly expenses paid before you do anything else with your paycheck. For large outstanding debts, call your credit card company, mortgage company or other lender and explain your financial situation. Emphasize that you're serious about paying off these bills and that you're willing to work with the company on a payment plan that will get the loan current and keep you paying on time. In the future, make a habit of contacting any creditor when, and even before, you fall behind. Proving that you're a responsible, diligent person allows creditors to work with you. Finally, monitor your credit score. Many credit card companies will allow you to access your FICO score monthly, and the three main credit bureaus--TransUnion, Equifax and Experian--allow consumers to check their credit scores once a year. If done correctly, an individual could check his credit score for free every 4 months.

Sunday, August 12, 2012

Should I Pay off a Credit Card or Make a Deal to Reduce It?

Paying off the balance on your credit card each month is part of a strong strategy to maintain a top tier credit score. This shows responsible spending habits and financial management. When your balance gets too high and you are unable to make payments on the account, a settlement plan may help you pay off the account. This type of plan may get rid of your debt but it can also hurt your credit score.

Contact Creditor

    If you are experiencing a financial hardship and are temporarily unable to make normal payments on your account, it's important to contact your creditor as soon as possible. Your creditor may have hardship programs available that carry temporarily lower payments and a lower interest rate to help pay down your debt while you get your finances in order. This strategy also shows your creditor that you are serious about paying off your debts, which may help you in future dealings with the company.

Making Minimum Payments

    Making only the minimum payment on a credit card account maximizes the length of time it takes to pay the bill off. It is also increases the total amount you pay on the account because of the interest rate your credit card company charges you. If your credit card balance is in the thousands of dollars and you can only afford to make the minimum payment on the account, contacting a nonprofit debt management service may be a smart financial move. A debt management service negotiate with all your credit card companies and secure lower interest rates on accounts all while creating a manageable monthly payment plan to pay off your credit card debt. Finding a nonprofit debt management plan is important to ensure you are not charged excessive fees just to get your credit card debt in order.

Debt Settlement

    If your credit card account has entered delinquency, you may be approached by your creditor or a collection agency representing them with an offer to settle the debt. A debt settlement pays off your account for less than the total amount owed. If the balance on your credit account is high, a debt settlement could net you a substantial savings and end collection practices against you for that account. A debt settlement does cause some damage to your credit score because you are paying off a debt for less than you owe. You may also have to report the forgiven debt amount as income on your federal taxes if the amount was greater than $600.

Benefits of Paying Debt

    Paying off your credit card account on your own cannot negatively impact your credit score. This is the wisest course of action if you are able to pay the debt down quickly by making larger than minimum payments. You must also curb your usage of the card to ensure you're not just running in place with the debt by replacing the debt you pay off each month. Paying off your credit card signals to other creditors that you are able to handle credit responsibly. This may make it easier for you to secure credit in the future and obtain a more favorable interest rate.

How to Repair Your Credit Score for Free

While many companies claim an ability to fix your credit scores for a fee, there are also many ways you can improve your credit on your own. If you do not want to pay a company, taking steps like making timely payments and paying down your balances can considerably improve your standing with the three major credit bureaus.



    Make timely payments to every creditor. Regularly doing so will make a big difference in your credit score. As much as 35 percent of your score is based on your payment history, so if you have even one late payment, it could have a big impact. Therefore, you need to avoid making late payments of any kind to credit cards or any other creditor.


    Pay down your balances as low as you can. This step may take some time, depending on the size of your debt. The formula used to calculate your credit score bases 30 percent of your score on how much you owe. If your balances are higher than 30 percent of your available credit, it will affect you negatively. Try to get these balances below 30 percent, and you will see your scores start to rise.


    Use old credit accounts more than new accounts, if possible. The length of your credit history comprises another 15 percent of your credit score. This means if you have had a credit card open for several years, leaving it open and in good standing can help. If you want to close out any of your credit accounts, close the newer ones after you have them paid off.


    Obtain different types of credit, if you can. While you may be tempted to stay away from credit when you want to build up your score, this can actually have an adverse effect. The credit bureaus like to see you with a variety of credit types. For example, you may want to have some installment loans like mortgages or auto loans and some revolving credit lines like a credit card. Another 10 percent of your score is comprised of this information.