Bill Paying - Tips for Getting Organized

Paying the monthly bills isn't something many people look forward to, but the task is made more difficult if you don't organize your bill-paying effort. Bills can get lost, current bills can get mixed up with older bills, and credit accounts can get behind if you're not organized.

Develop a System

When your bills come in the mail, the worst thing you can do is put them in mail piles all over the living room or the kitchen. Purchase two office baskets and designate one for bills that need to be paid in the current month and the other for bills that need to be paid next month and beyond. Put the current-month basket on top so it gets the most attention, and do not forget to put bills in the top basket when the months change.

Keep all your bill-paying materials with the bill baskets. Your checkbook, calculator and anything else associated with paying the bills should be in one area for easy access.

Establish a Schedule

Sit down with your bills and write down which bills are due on which day of the month, then develop a monthly budget and bill-payment schedule around those due dates. Designate one day each week to be bill-paying day, and sit down with your schedule and your bills to make sure the bills get paid on time. Create a checklist of the bills that need to be paid every month, and check them off as you pay them.

Refer to the list regularly to make sure all the bills are accounted for, and don't forget to put any one-time bills, such as florist bills or tax bills, on the list as well.

Pay Bills Online

Your computer can be a huge help in organizing your bills. In fact, you can probably pay most of your current bills online from your checking account, which saves money on stamps and saves time because your payment is posted almost immediately. Check with your bank to see if you can pay your bills online.

Software

Invest in money-management software and follow the program each month to make sure your bills are paid. There are also many inexpensive spreadsheet programs you can use to create your own monthly bill planner--you may find it easier to follow something you created than something made by another person.

Read More

What Does 'In Loan Default' Mean?

Loans are governed under contract law. A borrower receives something of value from a lender -- like cash or an asset like a car -- and signs a contract agreeing to repay the lender under certain terms and conditions. This contract becomes a binding legal agreement between the parties. If one party fails to live up to the terms of that agreement, he is said to be "in default."

Default Provisions

Most loan agreements contain a section that outlines the consequences if one party fails to honor the terms of the contract. Although each loan can have whatever provisions both parties find agreeable, in general, the default provisions outline the conditions that constitute a breach of the contract, which puts the loan itself "in default," and the mechanisms both parties have to try to resolve a default.

Lender Default

Although rare, it's possible that a lender could default. For example, a bank could try to finance the sale of a house to a borrower only to learn that the title to the house is contested. In a lender default, the terms of which are usually spelled out in the loan agreement, typically both parties are held harmless and the loan contract is simply voided.

Borrower Default

The most common cause of borrower default is failure to make regularly scheduled payments on the debt, although defaults for other reasons -- like not obtaining insurance on a house or car, or filing a fraudulent application -- do occur. When a borrower is at risk of default, the lender notifies the borrower and attempts to resolve the problem. When the lender cannot get mutually agreeable traction, it declares the loan to be "in default" and the default provisions of the contract take effect.

Consequences of Default

In default, most loans require the entire remaining loan balance to be repaid in full, immediately. If the borrower cannot make the lender whole, then the lender may pursue the full range of collection activity, including repossession, court judgments, garnishments and collection agencies, to recover its interest in the debt.

Some banks or credit unions may offer a reconciliation process to get a person out of default, but this is not common; once the contract is breached, it's breached. Some lenders, like the Department of Education, allow a defaulted loan to be rehabilitated, but the costs and impact to the borrower's credit report can be significant.

Read More

Does an IRS Tax Lien Show Up in a Credit Bureau Report?

Consumer credit bureaus rely, in part, on public records to determine credit scores. This information is regularly collected from state and county courts. Those courts hold a wealth of information, including state, federal and local tax liens, as well as judgments, foreclosures and bankruptcies.

Tax Liens

Tax liens give a lien holder a legal right to claim a person's property. The IRS only files liens after they give a debtor notice of a tax liability and the debtor fails or refuses to pay within 10 days. A lien gives the lien holder a priority claim to property in bankruptcy or if the property is sold at auction. They're filed publicly to warn other creditors that there's a large, outstanding debt they're entitled to collect first. An IRS lien attaches to all of a debtor's property, including his house, car, and in business, accounts receivable.

Considerations

Tax liens are similar to bankruptcies. They stay on your credit report for seven years. According to the Fair Isaac Corporation (FICO), which is the company responsible for the most widely used credit scoring formula, "The presence of a public record (such as a bankruptcy or tax lien) and a serious delinquency are powerful predictors of future payment risk."

Misconceptions

Some people believe that a tax lien will be removed from a credit report after it's paid. This is false, according to FICO. "Satisfying the public record will not remove it from your credit report. The fact that it occurred is still predictive of future payment risk and will be considered by your FICO score."

Actions to Take

The best way to prevent a tax lien from impacting your credit score is to pay your taxes or enter a payment plan with the IRS before a lien is filed. Mistakes can happen, and tax liens are occasionally filed improperly. If this happens, the IRS will send you a tax certificate stating that the lien was in error. Mail a copy of the certificate to the three major credit reporting bureaus: TransUnion, Equifax and Experian.

Significance

Lenders like borrowers who pay back loans. Borrowers who do so are often given more favorable terms on car loans, mortgages and credit cards. A good credit score can save a borrower thousands in interest rate payments and other fees. If you have a tax lien and do not want to pay it, consider the idea that having a tax lien on your credit report may cost you more in future interest payments than it does in taxes.

Read More

How to Explain Charge Offs

A charge off often appears on a credit report after a person has been denied a loan or other form of credit. Some people get upset and angry because they don't understand what a charge off is or how it negatively affects credit. A correct explanation of charge off can help to defuse an already upsetting situation. Explaining a charge off doesn't have to be a complicated or confusing process if a few simple, necessary points are made.

Instructions

1

Provide information about the definition of charge off. It is important to remember that a charged-off debt is beyond a past due debt and is not considered to be collectible. Charge-off is an accounting term used to remove a debt from a company's assets when that debt is no longer considered to be collectible. Once a debt has been charged off, it can be sold to other debt collection agencies. Those agencies can continue to try to collect the debt and report their efforts to the credit bureaus. The original creditor can't continue to collect interest on the debt, however, the agency purchasing the debt can.

2

Explain how a charge off negatively impacts credit. A debt considered to be a charge off is more serious than a past due debt. Charge offs generally can't be removed from a credit report for 7 years from the date the charge off first appeared on the report. Past due debts reflect that the debt is still active but past due. It is difficult to obtain credit while the charge off is still on the credit report. Potential creditors view a charge off as a black mark on a credit report. If credit is obtained, interest rates will likely be significantly higher.

3

Recommend ways to avoid future charge offs. Keeping an open line of communication with creditors and making regular payments on past due debt before the debt is charged off shows that you are willing to work with the creditor. The creditor will report to the credit bureaus that regular payments are being made. After several payments, the past due debt can be reclassified as current and the charge off can be avoided.

Read More

Does It Hurt Your Credit to Cosign?

State laws govern the rights that creditors have against cosigners. In most states, as recognized by the Federal Trade Commission, lenders can immediately pursue collection efforts against cosigners without first attempting to collect their debts against primary debtors. As further noted by the Federal Trade Commission, a primary borrower's failure to pay his loan can hurt his credit record as well as his cosigner's credit record.

Overview

In most cases, cosigners are relatives of primary borrowers. Most often, a primary borrower's credit history is insufficient to qualify for a vehicle loan or other type of loan for personal property. As a cosigner, the individual cosigning a loan becomes financially responsible for repayment. If the primary borrower defaults or simply sends one payment after the due date, the lender can demand repayment from the cosigner for the delinquency. Furthermore, a lender can demand repayment of late fees and interest from a cosigner. Unlike "guarantee loans," lenders can pursue repayment from cosigners even before a buyer is technically in default.

Legal Consequences

Although the Federal Trade Commission regulates the disclosure notices, it does not regulate state laws governing the consequences of default. Creditors have a legal right to report any default by the primary borrower to credit reporting bureaus. The negative report can affect the credit records of both the primary borrower and cosigner. Furthermore, joint and several liability laws allow lenders to sue cosigners and primary borrowers separately for repayment of their loans. Moreover, a lender can sue a cosigner without suing the primary borrower. Lenders can garnish and levy a cosigner's personal property and wages once he obtains a judgment and writ of execution.

Federal Law

Under the mandatory federal disclosure laws, creditors must provide cosigners with an informational statement regarding their rights. Codified in the Code of Federal Regulations, banks and lenders engage in deceptive practices in violation of federal consumer protection laws if they fail to provide cosigners with a disclosure notice.

Disclosure Notice

A lender must place its cosigner disclosure notice conspicuously in the original loan agreement or within a separate document. A lender must specifically state that it has a right to collect debts from the cosigning party without first attempting to collect its debts from the primary borrower. Furthermore, a lender must notify a cosigner that it has the same collection rights against the cosigner as it has against the primary borrower. The lender must warn consumers that as cosigners of loans, they may experience lower credit scores and damage to their credit reports.

Read More

When to Negotiate a Debt Settlement

Debt is an issue that many people face and a number of options exist for dealing with it. One option that many choose is debt settlement. Settling debts can provide you with a way to save money, but this option is not for everyone. Before settling your debt, a few factors must be considered.

Debt Settlement Basics

The basic idea behind debt settlement is that you agree to pay a creditor a lump sum of money. The creditor then agrees to close out your account for less than what you actually owed. Debt settlement can be pursued on an individual basis or you can do it with the assistance of an attorney. Once you settle you make your payment to the creditor, it closes out your account and reports it to the credit bureaus as "settled" in most cases.

Future Credit

Before you settle a debt, you need to think about the potential credit consequences of doing so. If you are thinking about taking out a mortgage, getting a car loan or taking out some other credit in the near future, you may want to avoid debt settlement. Debt settlement can be very damaging to your credit report and you may not be able to get a loan immediately after going through the process. It will lower your credit score and you may not qualify for the financing you need. If you have no need for credit in the future, you may want to settle.

Saving Money

Even though debt settlement can be very damaging to your credit report, it can also save you some money. If you have a lump sum of money, but you do not have the total amount that you owe a creditor, debt settlement can be an attractive option. In some cases, your creditor may be willing to settle for half of what you owe. For instance, if you owed $8,000 on a credit card and you have not made your payment in several months, your creditor might take $4,000 to close out your account.

Avoiding Bankruptcy

When you want to avoid bankruptcy, debt settlement might be a better option to pursue. Bankruptcy can be extremely disruptive to your credit profile and it will remain on your credit report for 10 years. If you had hopes of being able to rebuild your credit and get financing again at some point in the future, debt settlement can be a less damaging option to pursue. If you settle several debts separately, the damage you do to your credit could be close to what bankruptcy causes. If you only have one or two large debts, settlement might be the better option.

Read More

Pennsylvania Credit Card Judgment Laws on Joint Banking Accounts

Pennsylvania law prevents creditors from garnishing your wages. However, the state does not protect your bank account if the credit card company wins a judgment against you. This also applies to wages directly deposited into your bank account. Even if you share the account with another person, a creditor may seize funds in your bank account.

Credit Card Judgment

For a credit card company to win a judgment against you, it must sue you and win its case in court. Pennsylvania, like all states, requires the credit card company to serve you notice of the impending lawsuit, giving you time to respond and mount a defense. Failing to appear in court gives the credit card company an automatic default judgment, which it can use to pursue further collections action, such as a lien against your assets or seizure of your bank account.

Marital Property

Pennsylvania is not a community property state. States that follow community property law consider money in a joint bank account deposited after the marriage as marital property, subject to garnishment even if only one spouse owes the debt. However, a bank account seizure in Pennsylvania still affects your spouse if her name is on the account. Your spouse may attempt to vacate the judgment, thereby releasing the account entirely. If you have no access to the account, such as through an ATM card or withdrawal privileges, your spouse may invoke Banking Law 678, claiming she added you to the account for convenience only. In this case, she may have the entire account released. If this is not the case, she may recover 50 percent of the money in the account under Banking Law 675.

Garnishment

Pennsylvania is one of a few states that do not permit wage garnishment as a legal recourse available to creditors. However, certain debts, such as child support, federal taxes and PHEAA student loans, are subject to garnishment.

Bank Seizure

In a bank seizure, your credit card company has the right to freeze the funds in your bank account, effectively barring you from access to the money in your account. Creditors use this as a tactic to force you to pay your debt. Seizure of a joint bank account is permissible in Pennsylvania as long as the debtor's name appears on the account.

Consideration

If you share a joint bank account and have a default judgment against you by the credit card company, the other account holder might want to open a bank account under her name to protect herself against a bank account seizure. However, if you are joint account holders on the credit card, the lender has the right to pursue you and the other account holder equally.

Read More