Once you’ve finished settling your debts, you’ll probably want to get started repairing your credit as soon as possible. But, repairing your credit likely means you have to add some positive information to your credit report. You may not be able to get approved for a regular credit card and so, a secured credit card may be your only option. There are good things and bad things about secured credit cards. Knowing the whole story keeps you from being surprised.
Perhaps the biggest drawback of a secured credit card is that you must have a security deposit to get approved. The security deposit isn’t a non-refundable fee that’s required to get the credit card. In fact, you can get your security deposit returned as long as you don’t default on the credit card payments. Coming up with the security deposit may be the hardest part of all.
Your credit limit is usually equivalent to the security deposit. If you only put down $100 or $200, you’ll probably have a paltry credit limit to work with. Making a bigger security deposit likely gives you a bigger credit limit. Some secured credit cards let you (more…)
One of the biggest questions you might have about debt settlement is how it will affect your ability to get credit after you’ve finished settling all your debts. Not only could the answer to this question affect your decision to proceed with debt settlement, it could also impact the steps you take to repair your credit should you decide to go through with settlement.
Whether debt settlement goes on your credit report is entirely up to your creditors. Most of the time, creditors do update your account to show that you settled the debt. The account will probably specifically state that the account was settled or it will have wording that indicates you paid less than the full balance due. These remarks, like most other negative information, could stay on your credit report for up to seven years from the date of the settlement.
When debt settlement is listed on your credit report, it typically impacts your credit score – but likely more so in the first few months and years after the settlement is complete. With time, the debt settlement probably impacts your credit score less especially as you add positive information to your credit report like timely credit card payments. (more…)
Inflation is defined as a general increase in prices and fall in the purchasing value of money. With inflation, you’re generally able to buy less and less with the same amount of money. You’ve probably seen inflation happen over your lifetime. If you’re in your 30s or 40s, you were probably able to buy a candy bar and a soda for just $1 when you were a kid. Now, you could probably barely buy a candy bar for a $1, much less a soda. Because of inflation, you’re generally now able to buy less for $1 than you were several years ago.
Inflation and Paying Off Debt
In terms of repaying debt, inflation is typically considered to favor the debtor since you’re paying the creditor back with devalued dollars. In other words, you borrowed $100 last year and got the benefit of that $100. This year, the same goods would have cost $110 and you’re only paying your creditor the original $100 you borrowed. Thus, the creditor would theoretically take a loss because they’re probably able to do less with the $100 you repaid than they could have done with the $100 you borrowed.
That’s a simple example, but inflation’s effect on your debt is typically more complex. Whether it gets easier or harder to repay your debt after inflation probably depends on (more…)
As retirement gets closer, you should get more serious about getting rid of your debt. When most people calculate the amount of money they need to have during retirement, they don’t typically consider debt payments. So, if you retire and you haven’t paid off your debt, you’ll have to make some serious living adjustments to live off your retirement income and continue paying your debt. Or worse, you might have to come out of retirement and return to work until you can pay off your debt for good.
The further you are from retiring, the more time you have to pay off your debt. You can take your time, but the years may fly by before you know it.
You should get rid of credit cards and other unsecured debts first. These debts typically have the highest interest rate and no fixed repayment period. As a matter of fact, if you make the minimum payment the credit card issuer sets in your billing statement, it could take several years to pay off your debt. In that time, you’ll have paid a ton of interest, money you could have been putting into your retirement savings. (more…)
If you’re already in debt and contacted by a collection agency, it might be easy to believe the collection agent is pursuing you for a debt you really created. Even if you don’t remember the debt, a collector could have enough information to convince you that it’s real. However, debt collectors have been known to make up debts, so it’s in your best interest to verify that a debt is real before you pay or settle it.
Use Debt Validation to Reveal Fake Debts
The best way to verify that a debt is real is through the debt validation process. You have the right to ask a debt collector to send proof of a debt as long as you make the request within the first 30 days of being contacted.
When a collector contacts you about a debt that you’re not sure you owe, you should not admit to anything. Instead, you should ask for their name, address and the reference number they use for your debt. You may have already received a bill from the collector, but if not, you should also ask them for a written statement of what they say you owe. Then, once you have their name and address, you can (more…)
It doesn’t happen all the time, but attorneys do contact debtors. Being contacted by an attorney is scary usually because you don’t know what they can do. Can they file a lawsuit against you? Take your home? Garnish your wages? Take money from your bank account? If an attorney contacts you about a debt, don’t panic. Instead, keep a cool head and follow certain steps.
Confirm That It’s a Legitimate Attorney
First, make sure it’s actually an attorney that’s contacting you. Though it’s against the law, collection agencies have been known to misrepresent themselves as attorneys. They may insinuate that they’re an attorney or working with a law firm when they’re actually not. Some collection agencies outright lie and say they’re an attorney just to scare you into paying. Ask the “attorney” to give you the name of the state they’re licensed to practice in and their bar license number. A real attorney can give you both pieces of information. Collection agents usually cannot.
Once you have a name and bar license number, find the website for your state’s bar association and confirm the information. Do not deal with the attorney until you’ve verified they’re an attorney and contact them via the number you find on the bar association’s website, not necessarily the number you’re given over the phone. A collection agent could give you a real attorney’s name and license number, but a fake phone number.
Make Sure They’re Licensed in Your State
If you actually are dealing with an attorney, confirm that they are licensed to practice law in your state. Out-of-state collection attorneys are not likely to sue you because they generally need to be licensed in your state to sue you. (Note: that sometimes collection attorneys are part of a network or group and another attorney in that group may be licensed in your state.)
Even if you’re threatened with a lawsuit, you have up until the court date to work out a deal with the collection attorney. Try using the debt validation process if you need a little time to come up with the money for settling the debt. In debt validation, the attorney will likely have to contact the original creditor to get documentation proving the debt. In the meantime, you could figure out how you can get the money.
Work Out a Settlement Deal
You can settle debts with collection attorneys, but maybe not for a low amount. If you don’t have enough funds to pay a settlement deal, you can try to work out a payment plan with the attorney. Make sure it’s something you can afford and have the attorney agree not to sue you while you’re making payments.
Respond to Any Lawsuit
If an attorney does file a lawsuit against you, don’t ignore it. Failing to respond to a lawsuit will generally result in a default judgment where the judge awards the attorney whatever they’ve sued you for. Then, after a default judgment, the attorney could ask the court to garnish your wages or levy your bank account. If you’ve been saving up for other settlements, the attorney may be able to take that money. It’s probably best to get in touch with an attorney to help you if a lawsuit has been filed against you. An attorney could help you figure out your options and perhaps negotiate a settlement before the case goes before the judge.
Having lived through several weeks or even months of unemployment, you’re probably more than happy to get back in the work force and start bringing in a paycheck. You probably won’t be the only one happy about becoming employed again. All the creditors and collectors you’ve dodged during unemployment will likely come again with their hands outstretched and waiting for payment. You could easily feel like your paycheck is being tugged in all sorts of directions, but you should make a plan.
After returning to work, you’ll probably have a lot of responsibilities to catch up on. If you got severance from your last job, received unemployment benefits or had access to savings, you may have been able to stay current on your debts. If not, then make a list of all the payments you need to catch up on. You could use the bills you’ve received during unemployment or start collecting them as they come in the mail. Then, write down the past due amount for each debt and the amount of delinquency, e.g. 30 days past due or in collections.
You should create a budget based on your expected salary. You should create a budget even if (more…)
In the past several years, medical debt has become more burdensome for many families. So much so that medical bills have become a major cause of personal bankruptcy. It’s not that people have no health insurance. Many individuals who cite medical debt as the cause of their bankruptcy were actually covered under a health insurance plan at the time the medical expenses were incurred. The problem is that certain medical expenses are often uncovered. Debt settlement may be an alternative to bankruptcy for dealing with your medical expenses.
Make Sure It’s Not Covered
Confirm that your health insurance provider doesn’t cover the expenses. Have your doctor’s office verify that the right medical codes were used for your services and then have them resubmitted to your health insurance company. You should also read through your policy (understanding it as much as you can) to be sure those medical expenses were not covered. Also, have your health insurance company review the claim against your policy. Sometimes mistakes are made with medical bills. Going through these steps will save you some time.
Collections Process for Medical Debts
Medical expenses go through a collections process similar to other debts. The doctor’s office or medical facility will generally pursue you for (more…)
People typically add family members, significant others, and sometimes even friends as authorized users on a credit card to help boost the authorized user’s credit score. Sometimes parents add their kids to credit cards to help the kids learn how to use credit responsibly. A spouse may list another spouse as an authorized user on a credit card so that spouse can make purchases with the credit card too. Unfortunately, if you have authorized users on your credit cards, your debt settlement could affect their credit, too.
How Authorized User Accounts Work
Just like your credit card history is listed on your credit report, it’s also likely on the authorized user’s credit report, too. It can be helpful for the authorized user when the credit card balance is low and all the payments are made on time. But, if you settle the debt, that too will generally be added to the authorized user’s credit report, even if they had nothing to do with the settlement.
Authorized users have no legal responsibility for the credit card balance, even if they helped rack up the charges. When you default on payments, the credit card issuer isn’t allowed to go after the authorized user for payment because the user is just someone who (more…)
Not everyone who starts out on the debt settlement path make it to the end. Sometimes, people choose another option because they weren’t ready for the debt settlement process. If you’re strongly considering debt settlement, here are some tips to make your settlement successful, even if you’re not doing it yourself.
Understand the process. Many people who complain about debt settlement companies simply don’t understand how the debt settlement process works. They’re surprised to have been making payments for several months and haven’t yet seen results. Debt settlement results typically don’t happen for several months because you first have to save up enough money to settle an account. This is true whether you hire a debt settlement company or you do it yourself. Debt settlement companies are generally required to let you know how soon you can expect results. That could take much of the guesswork out of the equation.
Pick the right company. Since the government made stricter rules for for-profit debt settlement companies, many of them have gone out of business. The good news is that the companies left in the industry are likely to follow the law. Still, you should pick (more…)