How to Get Out of a Cosigned Student Loan in Divorce

If you are a co-signer on your spouse's student loan, you will not be able to end your repayment obligation just because your marriage ends. Even if your divorce decree stipulates that your spouse is responsible for paying off her loan, her lender is not bound by this agreement and can pursue you for payment. You can minimize your risk by including language in your divorce decree that gives you recourse against your former spouse if she doesn't make her loan payments.

Instructions

1

Speak to your lawyer about the student loan debt. As part of the divorce process, both you and your spouse should turn over information about your finances, including your debts, to your respective attorneys. Your attorney should help you work out a fair settlement that allocates responsibility for your spouse's student loan repayment.

2

Ask your lawyer to include language in your property settlement that allows you to take your spouse back to court if he fails to make his student loan payments as agreed. If your credit is damaged or your wages are garnished by the student loan lender, you can take legal action against your former spouse and receive compensation for your losses. Your lawyer should also include a "hold harmless" clause that prevents your ex-spouse from attempting to make you responsible for the debt at a later date.

3

Monitor your credit report. If your former spouse falls behind on her payments, her lender may put this information on your credit report. Let you lawyer know if you find out that your spouse is not making payments on the debt so that you can go back to court and ask the judge to enforce your property settlement.

Read More

Loan Consolidation Advice

Loan consolidation may seem like a one-stop solution for debt problems. It allows you to repay a large number of loans at once, and it comes with the promise of only one payment per month. However, loan consolidation can actually be damaging to your credit and financial health if not done correctly. Be sure to follow advice from credible sources prior to entering into a loan consolidation agreement.

Background

Loan consolidation is the process of paying off multiple loans with one, large loan. Since the old loans are paid off, they are removed from your credit score, and you have no further obligation to those lenders. Instead, you have an obligation for your new, much larger loan with a new lender. Many consolidation companies advertise the process as a simple way out of debt. However, the reality is you still owe your debts, but you now must pay a new lender. In some scenarios, you may even owe more after consolidation.

Risks

It is possible to have a larger principal loan balance after consolidating. This occurs when your existing lenders charge a premium for repaying your debt early. In addition to this premium, your lenders may report the activity negatively on your credit report. This can lower your score, forcing any remaining debts you have to adjust to higher rates. Further, since you have one new loan encompassing all of your previous loans, this loan is very high stakes. If you fail to repay the loan in full, any collateral you placed on your existing debts could be seized and liquidated.

Benefits

You may be able to consolidate some loans without any penalty. For example, you can consolidate federal student loans without any prepayment or credit repercussions. If you are considering consolidating, ask your existing lenders if there will be penalties for repaying your loans early. If not, you can move ahead with a consolidation knowing there will not be negative effects on your credit score or total debt.

Considerations

Never consolidate a low-rate loan into a high-rate loan. You may have several debts you wish to consolidate, each with very different interest rates. Consolidate only those loans with high interest rates into a new, high-interest consolidation loan. Pay off any other low-rate loans directly in order to save money. It is wise to pay down your consolidation loan, which will typically have a high rate, prior to paying down any low-rate loans.

Expert Insight

When you receive a call from a debt consolidation agency, remember this agency may be operating on a sales fee or commission, so it may not be your best source of debt consolidation advice. To learn about the risks and benefits of consolidation loans, seek a neutral third party's advice. Instead of relying on the consolidation lender for advice, use sources such as the Consumer Protection Agency or the Federal Trade Commission. These resources produce unbiased information, and they do not stand to profit from your decision.

Read More

Five Rules for Being Debt Free

When too much debt puts a pinch on your financial resources, living debt free sounds like a challenge. With time and effort, you can, however, learn the money management skills you need to turn your financial situation around. Set a time line to pay off outstanding debts and stick to the plan to achieve your goal of debt freedom. Maintain this by following a detailed budget so that you always know how much you bring in and what you can comfortably afford.

Good versus Bad Debt

Know the difference between good debt and bad debt. Good debt helps you invest in your future. Credit card spending on discretionary consumer items that you can't afford generally counts as bad debt. To determine whether a consumer item is discretionary or essential, ask yourself whether you need or want the item before you decide to buy it. Plan and save for discretionary purchases and pay for them in cash instead of using credit cards.

Rainy Day Fund

Set up a rainy day fund. Debts can pile up fast if you or your significant other loses a job, or if someone in your family needs expensive medical treatment. Prepare for the unexpected by setting aside money in a separate bank account that you only withdraw from in case of emergency. Commit to adding a small percentage of your income to your rainy day fund each month if you don't have a lot left for savings. Increase the amount of money you set aside over time.

Credit Scores

Make payments on loans and credit accounts in a timely fashion to maintain a good credit rating. Late payments lower your credit scores and you won't qualify for good interest rates on mortgages, home and car loans and some private student loans. Higher interest rates can mean substantially higher monthly payments on your essential purchases. Check your credit reports each year to make sure that inaccurate information about you isn't lowering your credit scores.

Track All Spending

Track daily spending carefully to see where your money goes. Even small purchases can add up and you need a complete picture of your spending habits to manage them. Financial statements can tell part of the picture; some banks offer online tools to help you with spending. Fill in information gaps not covered on statements by saving all receipts for cash purchases and adding them to your expenses spreadsheet. Examine spending categories regularly to prevent overspending.

Get Professional Advice

Plan ahead for major expenses such as your house, car and college tuition. Avoid peer pressure or sales tactics to convince you to take on a monthly payment that you can't afford. Seek professional advice periodically from a qualified and reputable financial planner when you need it. A good financial planner can provide you with information about tax laws and other considerations pertaining to major financial purchases that can help you limit debt over the long term.

Read More

What to Do If You Were Sent to a Collection Agency

Improper contact with collection agencies can upset any consumer who is unaware of his rights. Correct planning and negotiation skills will allow you to resolve credit issues in a way that is satisfactory and beneficial to you, your family and your pockebook. By utilizing the laws in place to protect you as a consumer you will know what to do when facing collection agencies.

Debt Validation

Determine how long the collection agency has had your account. Based on the Federal Debt Collection Practices Act, regulated by the Federal Trade Commission, a collection agency must contact you within 30 days of first receiving your debt. Determine if the data is valid. Request that the collection agency provide in writing via certified mail information that this is indeed your debt. This method is most effective if you challenge the collection agency within 30 days of receiving notice that the agency has your account. If you are unsure that the debt belongs to you, do not admit liability of the debt until you know for sure. Admitting the debt is--or could be--yours automatically binds you to the debt. If it is past 30 days, determine the accuracy of the debt by contacting the three credit bureaus--Equifax, TransUnion and Experian (See Resources).

Repaying the Debt

Contact the original creditor directly to determine if you can pay off the account. Sometimes an original creditor has written the debt off as bad in the accounting books and cannot work with you any further. It is worth a try anyway to settle the debt directly with the original creditor because the power always lies in the original creditor. Though the collection agency purchased the debt from the original creditor, the creditor can pull an account from the collection agency at any time if you speak with and resolve the matter with a representative willing to help.

Settling the Debt

If the debt is proven to be yours, create a debt repayment plan or settlement amount for the debt. Go over your current finances, income and budget to determine how much, if any, of the debt you can repay. Since the account has reached a collection agency, you are not always required to pay the full amount. Contact the collection agency via certified mail or over the phone to negotiate your debt repayment plan or settlement amount. When you reach an agreement on a settlement or repayment plan, get all the details in writing and ensure both parties sign the document. Do not make any payment until the document is written and signed.

Cease and Desist Tip

If you do not want to correspond with the collection agent over the phone, send a cease and desist letter to the collection agency. Based on the Fair Debt Collection Practices Act, collection agencies may not contact you by phone if you opt for them not to do so.

Read More

Debt Write Off Regulations

Debt write-offs are conducted when a company decides that they are most likely not going to receive the funds owed to them. This could be a credit card company that has not been about to collect a debt or a utility company or other institution that has not been able to collect payments.Debt write-off regulations help to ensure that both the debtor and the company money is owed to are treated fairly.

Debt Not Forgiven

If a company writes off a debt, the debt is still active. The company may continue to attempt to secure the funds from the debtor. This can be done in the form of civil suits, collection calls or written notices. This may continue past the time in which the debt is on the person's credit report.

Credit Score Damage

The debt that is written off will be noted on a person's credit report. This will negatively affect the person's credit score. The amount of damage per write-off is not a steady amount, and different circumstances will affect the damage levels. There is no way to have a debt written off without taking a hit to the person's credit score.

Noted for Seven Years

A debt that has been written off will remain on a credit score for seven years. Even if the debt is paid off, it will be noted on the credit report as originally written off. If a debt has been written off in error, the debt and write-off can be questioned and removed if found in error before the seven year mark.

Tax Deduction

Businesses are allowed to use debt write-offs as a tax deduction. These write-offs must be supplied to the Treasury Board and IRS to assert that these write-offs are valid. Debts that have been forgiven due to financial hardship or settlement cannot be used as tax deductions.

Read More

Can a Spouse's Debt Become a Lien on Another Spouse's Property?

Married couples typically share financial benefits and obligations, though the extent to which you're responsible for your spouse's debts depends on the nature of the debt and the state in which you live. Depending on your circumstances, you may be responsible for your spouse's debts, and a lender may file a lien against your property to recover an unpaid debt. Talk to an attorney in your area to receive legal advice about your specific situation.

Liens

A lien is a legal interest a creditor takes in your property. For example, when you get a home loan, the lender typically has a lien against your home. If you ever default on the loan, the lender may then foreclose on the home. If you have an unsecured debt, one in which you don't initially give the lender a lien or other security interest in your property, the lender has to sue you and prove its claim before it can file a lien or take possession of your property to satisfy the unpaid debt.

Individual Debts

A spouse's creditor can't generally obtain a lien against your individual property. However, if you own joint property with your spouse, such as a home, a creditor may obtain a lien against this property. For example, if your spouse has an individual credit card and fails to pay back the card debt, the credit card company may seek to place a lien against any of your spouse's property, including any property he owns jointly with you.

Joint Debts

Joint debts are a different situation when it comes to liens. Although someone else's creditors can't file a lien against your individual property, when you share a debt with your spouse, creditors are entitled to place a lien against either joint debtor's property to satisfy the debt. If, for example, you and your wife co-signed for a credit card, even if you never use the card, the creditor may sue both of you and file a lien against your property for any unpaid debt.

Community Property States

In certain states, spousal debts are considered "community property." This means that a debt incurred by either spouse during the marriage becomes a shared debt by the married couple. There are only a handful of community property states: Wisconsin, Washington, Texas, New Mexico, Nevada, Louisiana, Idaho, California and Arizona; Alaska allows couples to voluntarily enter into a community property relationship.

Read More

Do I Lose Points on My Credit for a Car Repossession?

If you cannot make your car payments on time, your auto lender will likely place telephone calls and send letters to compel you to bring your account current. However, if you do not make your past-due payments, your lender may opt to repossess your car. A repossession can affect your ability to commute to work or even run household errands; however, it can also affect your credit in several ways.

Repossession

After a lender repossesses your vehicle, it will report the repossession to one or more of the three primary credit bureaus -- Experian, Equifax and TransUnion. This report will stay on your credit file for seven years. The impact of a repossession on your credit score depends on your score before the repossession; however, it can initially lower your score by 100 points or more. The impact of a repossession entry on your score will typically decrease over time.

Loan Deficiency

The lender's primary goal in repossessing a vehicle is recovering as much of the loan balance as possible. After providing you with a state-mandated opportunity to reclaim the vehicle by paying the balance and repossession costs, the lender will typically sell the vehicle at a public auction. However, the auction sale price may not be sufficient to cover your obligations to the lender. You are responsible for the difference, called a deficiency -- if you do not pay the deficiency balance, the lender can report this amount to credit bureaus. This can cause additional credit damage on top of the repossession entry.

Deficiency Judgment

Failing to pay a deficiency balance after your lender sells your repossessed car can cause legal trouble -- the lender may sue you for the deficiency. The court will give you time to contest the lawsuit -- about a month, depending on your state's laws -- and will then award a judgment to the lender if you cannot raise a valid defense. A money judgment is public record and also becomes part of your credit file, which can further damage your credit score.

Considerations

Staying in touch with your auto lender is essential for avoiding a vehicle repossession and minimizing credit damage. Although your lender may still report late payments, these reports will cause less damage to your credit than a repossession or a deficiency judgment. Also, your lender may accept postdated checks, offer a repayment plan or defer your past-due balance to help you get your auto loan back on track.

Read More