Credit Repair Made Simple

Repairing your credit can be simple. But it won't necessarily be quick. To repair your credit you need to fix credit mistakes and establish a new, clean credit history. Once you repair your credit, you will be able to get loans at a lower interest rate and qualify for a mortgage.

List All of the Debts that You Owe

Make a list of all your debt. This should include debt you are making payments on, debt you have stopped making payments on and any bills that have gone into collections. This would include student loans, credit cards, car loans and bills such as unpaid phone bills, electric bills and medical bills. One easy way to begin building this list is to pull your credit report to see if any undue bills are listed. You should also go through your records.

Get and Stay Current on Your Bills

Become current on bills that are not already in collections. This is the first step in repairing your credit history. You can raise extra money by selling things or taking on a temporary part-time job. Once you become current on your bills, continue to pay them on time. This will demonstrate that you are being more responsible with your credit and it will help to increase your credit score over time. Establishing a current good payment history will help banks overlook your past mistakes.

Pay off Your Old Debts

It is also important to take care of bills sent to collections. Often you can settle these by paying a lump sum around half of what was originally owed. Make a list of these bills and work on saving money to offer in payment of each bill. List the debts from smallest to largest. Call the collection agency and offer a lump sum as payment in full for the debt. If the agency agrees to this, do not send the money until you receive a letter that the agency will accept the payment as payment in full. Work on one debt at a time. If you contact more than one and do not have all of the money, you may begin receiving collections calls again. Doing it one at a time will prevent the phone calls.

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How to Bargain for a Credit Card Payoff

You can successfully bargain a credit card payoff without any special training or hiring an expert. If you're willing to take a few hits to your credit rating in the process, you can strengthen your negotiating position by waiting for the credit card account to become late or delinquent. If you have an unsustainable level of credit card debt, it may save you more money to negotiate a payoff rather than struggle to make minimum payments every month.

Instructions

Delinquency

1

Allow your credit card account to become at least 60 days late. Once your account crosses that line, most companies will begin sending you offers in the mail for interest payment freezes, balance reductions and interest rate reductions. They may also offer favorable repayment plans that will allow you to pay down your balance without worrying about additional interest accrual. Your credit score will be damaged, but not as much as it would be if the account entered delinquency. If you would like to keep your credit card account and preserve your credit score and don't mind paying extra, you can accept your company's terms. If it doesn't contact you with settlement offers, call your credit card company and ask them to make you an offer.

2

Wait for your credit card account to be charged off and sold to a collection agency. Credit card charge-offs remain on your credit report for seven years, affecting your ability to take on affordable debt. The advantage to this is that you will now be able to negotiate a payoff agreement for much less than the total amount that you owe.

3

Contact the collection agency that now owns your delinquent credit card account to request a debt settlement. The collections agency will likely contact you first regarding your debt, so you can get the contact information from those communications. Offer to settle the debt for at least 10 percent of the total amount. Raise your proffered payment in 5 percent increments if it refuses. Request that any debt settlement be mailed or faxed to you so you can sign it. Once you have received this document, mail your payment to the collection agency with a copy of the agreement.

4

Respond to all court summons promptly if you are sued to collect on the credit card debt. It's unlikely that you will receive a judgment against you immediately if you make your court appearance. Once you are in court, you can settle the debt using a similar strategy to the one previously outlined with the lawyer representing the collection agency. Ensure that you get all agreements for payment made in writing and keep the original for your records.

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Government Grants for Debt Payment Are a Scam

Late night infomercials featuring that hyperactive guy wearing the funny question-mark print suit purport there's more than $890 million available in government grants--essentially "free money" to pay for your bills, expenses and debt payments. But be wary, gullible consumer, warns the Federal Trade Commission (FTC). Convincing you that there's an abundance of government grants for debt payments is one way con artists are taking advantage of cash-strapped individuals during an economic downturn. The truth about government grants for individuals is that eligibility is limited to those who use the monies to fulfill a public service set forth by U.S. law, such as academic and professional research.

About the Scam

Regardless if you hear about government grants to pay personal debt on the television, in print or on the Internet, these offers are inevitably scams, the FTC states. Scammers state that "free government money" can pay for education expenses, home repair and business expenses and even your unpaid debt. Scammers acquire banking information, purportedly so that the government grant can be deposited directly, or charge consumers an application "processing fee." The FTC notes that not only won't you see any government grant money; the scammers disappear with your money.

The Truth About Government Grants

The FTC notes there's never any need to pay anyone to get information about government grants--all of the information that you need is on the Internet, at www.grants.gov, which provides a list of grants available to organizations and individuals. Grants.gov, which is administered by the U.S. Department of Health and Human Services, states unequivocally that government grants cannot be pursued for purposes of personal expenditure. You cannot pay your debt with them or receive personal financial assistance for a similar purpose.

Who Government Grants Benefit

Government grants benefit the public, not the individual. According to grants.gov, most government grants go to groups and organizations. Examples of these include state and local governmental agencies, independent school districts, colleges and universities, non-profit organizations and small businesses. A limited number of individual grants are available, but these are typically for purposes of conducting research or providing a public service. For example, as of November 2009, the National Endowment for the Arts offered a grant for those who wished to pursue the translation of creative literature (novels, poetry and drama) from another language into English.

Closing Down Government Grant Scams

In July 2009, the FTC launched "Operation Short Change" to close down shop on con-artists who were defrauding the consumer public, including scammers offering bogus government grants for personal debt payment. "Rising unemployment, shrinking credit, record-setting foreclosures, and disappearing retirement accounts are causing consumers tremendous anxiety about making ends meet," stated David Vladeck, director of the FTC's Bureau of Consumer Protection. Scammers such as Grants For You Now, which operated numerous "free government money" websites and against which the FTC took legal action, provide an example of how con artists work. Consumers were charged $1.99 for grant information, charged a monthly membership program fee of almost $100, and $20 search fees through a third-party "Google Profit" program.

Who Can Help

There are no government grants for personal debt. Those in a financial bind may be eligible for public assistance and other services through the federal government or state services, notes Grants.gov. If you meet eligibility criteria based on your level of income and minimum personal assets, you may be able to receive such benefits as energy assistance, job training, child support, career counseling, Medicaid/Medicare, housing assistance or assistance to pay for food.

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About Restructuring Troubled Debt

All too often, lenders are unaware a borrower is facing a crisis until loans are defaulted and proceed to collections. In many cases, if the borrower approaches the lender and describes the situation in full, the lender will choose to modify the loan to avoid foreclosure. Troubled debt restructuring (TDR) occurs when there is a financial difficulty for the borrower and the bank is willing to change aspects of a loan agreement.

The Facts

Troubled debt restructuring is a service provided by banks or other lenders in which they relax or modify the terms of the loan to help a borrower avoid default. If a borrower is experiencing financial difficulty, he can approach the lender and ask for loan modifications. Although the bank is not legally required to work with the borrower, many will do so to avoid further loss on the loan. The bank is basically choosing to recoup as much of the loan as possible instead of foreclosing on the loan.

History

During national economic trials, banks face tremendous losses because borrowers lose their jobs and wages and can't keep up with their loans. These kinds of loan dealings were common in the late 1980s and early 1990s. Soon after, the economy rebounded and the lending environment was strengthened. During the economic downturn that started in 2007-08, banks returned to the practice of troubled debt restructuring to avoid costly loan foreclosures.

Types

There are many ways that lenders may choose to modify the loan agreement. They may simply reduce the interest rate for the remaining life of the debt, reduce the accrued interest, or extend the loan period to lower the monthly payment. Lenders can also transfer funds from third parties, real estate, or other assets to pay toward the debt. Another type of modification can be granting forgiveness of a part or the entire principal or accrued interest.

Benefits

For the borrower, TDR can prevent painful foreclosures. When borrowers face a financial crisis, they can lose their home, vehicle, and much more. If a lender is willing to work through an agreement by which the borrower can continue to pay on the loan at a slower pace or with smaller payments, it is mutually beneficial. The lender typically loses money in foreclosures, and TDRs can often create more cash flow than the amount that could be collected from a foreclosure sale.

Warnings

If the loan modifications include changes in payment schedules, interest rate, or principal amounts, the old loan is basically treated like a new loan. This may be viewed under tax laws as taxable income. This usually happens only in cases where the principal of the new loan is less than the previous loan. If the debt is forgiven, the borrower may also be responsible for taxes on the reduction.

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How to Avoid Credit Card Judgements

When credit card debt goes unpaid, a credit card judgment can be the result. If you allow your credit card bills to pile up and do not make a payment for six months, most credit card companies will charge off the account and sell it to a collection agency. This benefits the original creditor because the bad debt can be written off as a tax loss. A collection agency may decide to file a lawsuit against you to collect the debt. If the collection agency wins the suit, a judgment will be levied against you. Not only is a credit card judgment damaging to your credit score, in some states it may result in your wages being garnished.

Instructions

1

Request validation of the debt as soon as you become aware that it is owned by a collection agency. This can be done by writing a letter to the collection agency requesting proof that you owe the debt. The Fair Debt Collection Practices Act prohibits further collection activities---including lawsuits---until the collection agency accurately validates the debt.

2

Send your validation request to the collection agency via certified mail with a request for a return receipt. The return receipt will be mailed to you after your letter is delivered, and serves as proof that your validation request was received by the collection agency.

3

Wait for the collection agency to respond to the validation request. A collection agency has no time limit in which it is required to provide you with validation of the debt. During this time period, however, you cannot be sued for the debt. Most collection agencies will send you a printout of the debt. This is not validation as it does not prove that you owe the debt. Lack of proper validation is also a valid defense and will help you avoid a judgment should the case end up in court.

4

Check the statute of limitations for unsecured debt in your state. Each state has a time frame after which a creditor cannot use legal action to recover a debt. If a lawsuit is filed over a debt with an expired statute of limitation, the consumer has an airtight defense in court that will help him avoid a judgment.

5

Evaluate your financial status. If you are currently unemployed or living on Social Security or government assistance, a creditor cannot attempt to garnish your wages after a successful credit card judgment.

6

Inform the collection agency if you are living on income that cannot be garnished. If a creditor knows that you are immune to garnishment, it is unlikely to spend the necessary money to sue you and procure a judgment.

7

File a response with the court immediately if you receive a summons over the debt. Indicate that you intend to appear to contest the lawsuit. Also indicate if you are not currently working. Either scenario is often enough to cause the collection agency to drop the lawsuit.

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What to Do When a Company Buys Your Debt

Those who have had an experience with overwhelming debt may have also had an encounter with a debt collection agency. Although it is not the case all of the time, some debt collection agencies purchase an individual's debt in order to profit from the debtor's payments.

Contact the Company

Call the debt collection company and write down pertinent information such as their physical mailing address, fax number and a direct phone number to call in order to speak with an agent. Depending on the situation, you may want to try and consolidate the debt or bargain with the company. At the very least, you should set up a payment plan that is within reason for your financial situation. Some companies that buy debts do not charge interest and will allow some wiggle room with the size of your payments if you are persistent in asking for it.

Beware of Lawsuits

Although it is not necessarily common, debt collection companies may pursue a lawsuit if you have not paid your debt. However, according to Card Report, most debt collection companies will not pursue lawsuits for debts smaller than $1,500 since the amount of money invested in a lawsuit would not be worth the payoff.

Bargaining

Bargaining with the debt collection company is one tool that may be useful before agreeing to make payments. Bargaining should be done through writing letters so that you can have the terms in writing for your payments. Be sure to keep the original documentation since collection companies may lose their paperwork or try to get more money out of you.

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Can a Judgment Creditor Collect From a Joint Bank Account of a Judgment Debtor?

Bank account garnishment is a strategy that a creditor can use to recover an unpaid debt after obtaining a legal judgment in most states. After a civil court awards a judgment to a private creditor, it can apply to the court for a writ of garnishment and then order your bank to freeze any account on which you are listed as an owner. The bank then sends any nonexempt funds to the court to pay against your debt. If you have a joint bank account, a judgment creditor may still typically execute a garnishment order.

Transfer of Funds

When a bank receives a garnishment order and freezes a joint bank account, the account manager in charge of fulfilling the garnishment order will typically only apply state monetary exemptions when determining the amount of funds available for garnishment. For example, an Ohio bank would consider all but $400 in the account as garnishable funds. The bank does not differentiate between funds contributed by you and those contributed by another account holder.

Filing an Exemption

Transfer of funds in your bank account to the court does not occur immediately after a bank freezes your account pursuant to a garnishment order. Most states allow about 30 days for you to file an exemption with the court. You may prevent the transfer of the other account holder's funds by proving that part of the funds belong to that owner, typically by providing a direct deposit record or a combination of a pay stub and a deposit slip.

Joint Debt

You cannot successfully obtain an exemption of the other account holder's funds if that person is a co-borrower listed on the debt contract or agreement. If the bank account co-owner is a joint debt borrower, he will be listed in the creditor's lawsuit and in the court's judgment record, and will be subject to garnishment for the debt.

Preventing Future Co-Owner Garnishment

If the other bank account owner is not a co-borrower or a party listed in the lawsuit and judgment, you can prevent having to file exemptions by switching her direct deposit to another bank. If that person receives a paper check, have her deposit the check in a bank account you do not co-own. Otherwise, because a judgment creditor can execute multiple bank garnishment orders until the judgment is satisfied or the state statute of limitations expires, you would have to file an exemption with the court each time the creditor freezes your account.

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