As the Director of Settlement Services at Debt Relief, I am often asked...

"Is Debt Settlement better than bankruptcy?" 

I wish that this was a simple answer, but the correct answer is that is all depends.

In this case I am talking about unsecured debt such as:

• Credit Cards
• Unsecured Personal Loans
• Store Card Accounts
• Medical Bills

Your Options

When Unsecured Debt gets OUT OF CONTROL and you CANNOT AFFORD to continue making monthly payments, what are you options?

1.  In rare cases, you may be able to secure a 2nd mortgage or Equity Line of Credit to use to pay off all of your accounts.

While many feel like this is unwise, it may be to your advantage to combine or consolidate all of your high interest accounts into one loan that usually has a much smaller interest rate.

Of course, the danger is that if you default on this loan, your home could be in jeapordy!

Also, if your home is foreclosed on, the 2nd mortgage and/or equity line of credit may not be dismissed!

2.  If you qualify, a DEBT MANAGEMENT PROGRAM may be a good option. In a Debt Management Program, your creditors usually agree to lower your interest rate and take a fixed payment for approximately 48 months depending on the account.

Often a common missconception, A Debt Management Program is not a factor in determining your credit score.

The problem with a Debt Management Program is that, many times, the total payment may not be less (and is some cases more) than your current total monthly payments!

3.  DEBT SETTLEMENT is an option that you should consider if you cannot quailfy for or cannot afford the payment of a Debt Management Program and do not have or cannot qualify for a 2nd mortgage or equity line of credit.

In a Debt Settlement Program, your accounts will become delinquent and in most cases charged off by the original creditor and placed with a debt collector.  Once your reserve account has sufficient funds, a settlement of 50% or less can be negotiated and the debt is now classified as "settled-as-agreed".

Even though your credit report will show late payments, eventually all of your accounts will show a  ZERO BALANCE! At this point, your credit score will start to IMPROVE!

Many clients have enrolled in our Debt Settlement Program with $25,000, $50,000 or in some cases over $100,000 of combined unsecured credit and have completed the program, becoming totally DEBT FREE and saving 50% or more!

• If you have no access to home equity or cannot qualify for a consolidation loan...
• If you cannot afford the total monthly payment of a Debt Management Program...
• If you cannot afford a reasonable monthly amount for a Debt Settlement Program...

4. ...then BANKRUPTCY may be you only option.

Bankruptcy is a very serious decision and should only be considered after investigating ALL OF YOUR OPTIONS. However, qualifying for a Chapter 7 bankruptcy is not an option for most people after the Bankruptcy laws changed on 2005.

Most people will only qualify for a Chapter 13 bankruptcy and will pay into a plan for up to 5 years before their debts are discharged.

You may have heard that Debt Settlement Programa charge huge fees! While the debt settlement company will and should earn a fee, recent legislation has gone a long way in stopping bad debt settlement companies.

You should always check out a Debt Settlement Company (or any company) at the Better Business Bureau.

With a Chapter 13 bankruptcy, your creditors will get pennies-on-the-dollar and your bankruptcy attorney will earn a fee. This is usually calculated in the monthly payment you will be making to your bankruptcy court.

So, is Debt Settlement or Bankruptcy the best option for you?

Our Debt Solutions Specialist can help you determine which option is the best choice for your situation.  If you would like a FREE CONSULTATION WITH NO OBLIGATION to explore your options based on your particular circumstances, give us a call at 1-877-492-4109 or click on the link below!

The total amount of all student loan debt is almost $1 TRILLION dollars! That's an average of about $25,000 per loan or about 40 Million loans!  With our economy in a recession for the last few years, many of these loans are in default.

The Student Loan Forgiveness Act of 2012 or H.R. 4170, has been introduced in congress by Rep. Hansen Clark.  If this passes, how will it affect you and your student loan?

 BANKRUPTCY WILL NOT HELP!

The bill, introduced in March would create a new "10-10 standard" for student loan forgiveness:

• If you make payments equal to 10% of your discretionary income (take home pay) for 10 years, the remaining balance of your federal (not private) student loan would be forgiven.
• If you have been making payments on your federal student loans, your repayment period would likely be shorter than 10 years.  In other words, the amount you have already paid on your student loans over the past 10 years would be credited toward meeting the "10-10 standard".
• The bill would also cap interest rates on federal student loans at 3.4%
• The bill would allow private student loans to be converted to federal Direct Loans, and then enrolling their new federal loans into the 10/10 program.
• If you enter a public service profession like teaching, firefighting, law enforcement, etc., you would qualify for a 5 year Public Service Loan Forgiveness Program!

If you currently have a Federal Student Loan, there is little you can do but keep paying.  However, if you are unemployed or have a reasonable financial hardship, you may qualify for a DEFERMENT.

If you have a PRIVATELY FUNDED STUDENT LOAN, you may qualify for a settlement or forgivenss of 50% or more. 

To learn more, CLICK HERE.

If you are considering filing for bankruptcy, you may be wondering: Does filing for bankruptcy get rid of my student loans?

Unfortunately, student loans are usually not discharged in the case of bankruptcy.  According to Chapter 7 Bankruptcy law the only time a student loan might be discharged is if it would cause the debtor “undue hardships”.  The same basic rule also applies to Chapter 13 Bankruptcy cases.  

Discharging student loans became popular during the 1970s, when students would file for bankruptcy soon after they finished their pricey education.  They would do so before they started earning so that they could get the loan out of the way.  However, the requirements for discharging student loans were changed in 1998.

According to these new changes, your student loan will only be discharged if the bankruptcy court is convinced that paying back the loan would bring about undue hardships for you or the people who are dependent on you. 

There are three things that would are used to determine whether a person is eligible to have their student loan discharged or not:

1. Will repaying your student loans prevent you from maintaining a minimal standard of living?
2. Will it be difficult for you to maintain your minimal standard of living over the repayment period?
3. Did you make an effort to repay the loan before filing bankruptcy? Have you been repaying your loan for at least 5 years?

Even if you are unable to fully discharge your student loan debt by filing bankruptcy, there are many other options for dealing with student loans including deferments and forebearance.

Even though it is difficult, you should still discuss your student loans with your Bankruptcy attorney.  They know the law and can help you get the most benefit out of filing for bankruptcy.

If you are considering Bankruptcy, there are alternatives you should consider.  Our Debt Solutions Specialist can discuss your financial situation with you, and help you determine if Debt Settlement or Debt Consolidation would be a good solution for you! Give us a call at 1-877-492-4109 or click the link below.

Good news! YES, There is a way to stop a wage garnishment WITHOUT bankruptcy!

If you are facing financial difficulty and get behind on your credit card payments, the creditor may choose to seek legal measures to recover the debt.

BUT, IT IS VERY IMPORTANT THAT YOU KNOW:

• A creditor cannot just decide to garnish your wages
• A creditor cannot just decide to levy your bank account
• A creditor cannot take you possession!

A creditor will usually follow the following steps to recover delinquent debts:

• Calls, calls, calls!  Click here to learn how to STOP THE CALLS
• Nasty letters with threats of ruining your credit, possible legal action, etc.
• And then, after about 4-6 months, if they are unsuccessful, they may decide to file a complaint for the debt you owe.

After they file a complaint in your local county courthouse, you will receive a SUMMONS.

DON'T PANIC!!!

The summons will state that you have 20 or 30 days to respond with an "ANSWER". 

An "answer" is what you would present if you feel that you do not owe the debt.

Since you owe the debt (even though the interest rates and fees are ridiculous), the fact is that when you signed up for the card, you agreed to all of the fees. (Remember all that fine print you skipped over?)

Anyway, so after about a month or so after receiving the SUMMONS, if an agreement cannot be reached with the creditor, they may apply for a DEFAULT JUDGMENT.

Once the Default Judgment is awarded to the creditor (plaintiff), then they can apply for a WRIT OF GARNISHMENT.

Each state varies as to how much can be garnished and what income is exempt from garnishment.

In most states, the garnishment is 25% of your net (after taxes) take home pay.  For most people who are already in a financial hardship, this would be terrible!

If you receive income from:

• Social Security benefits
• Supplemental Security Income (SSI)
• Welfare or public assistance
• Spousal support or child support
• Public or private pensions
• Veterans benefits and/or loans
• Disability proceeds of life insurance policies
• Cash surrender value of life insurance policies
• and many others

Click here to get a list of exempt wages in Oregon.

OK, so if you don't meet the exemption requirement and you get a garnishment, here's what you have to do:

Contact the creditor or the creditor's attorney.

In most cases, once you have provided proof (BASIC BUDGET WORKSHEET), you should be able to arrange a STIPULATED AGREEMENT.

In a STIPULATED AGREEMENT, the attorney agrees to STOP THE GARNISHMENT and NOT PROCEED with further legal action as long as you send in the agreed amount each month.

This amount should be less that what the garnishment would have been.

IT IS VERY IMPORTANT THAT YOU NEVER MISS AN AGREED PAYMENT!

If you do, they will most likely VOID THE AGREEMENT and start the wage garnishment again and will not be willing to re-negotiate another Stipulated Agreement.

SOUND CONFUSING?  We may be able to help.  Simply CLICK THE LINK BELOW or give us a call at 1-877-492-4109.

If you have had a debt "forgiven", and receive a 1099-C, how do you avoid paying taxes?

Any amount of "forgiveness" over $600 can be reported to the IRS and if so, then you would receive a 1099-C form.  The IRS says that any debt that is settled for less than the full balance must be included back into your income and you must pay the resulting taxes!

Instructions from the IRS can be found in IRS 4681.

In the instructions, you will find an explanation of "INSOLVENCY".  Of course, when reading anything from the IRS, it is not very easy to understand or interpret.

Basically, the information states that if at the time of the forgiveness, you were INSOLVENT, then the amount of forgiveness IS NOT INCLUDED as additional income and therefore you would not pay any additional tax.

Let's look at an example:

After many harassing phone calls from your creditor, you are able to settle your account for less than the balance.  When it came time to file your taxes, you receive a 1099-C which would lists the debt, the debtor and the amount that was "forgiven".

What do you do now that you have received a 1099-C?

First you need to determine if you were INSOLVENT at the time the debt was forgiven. To determine if you were insolvent :

1.  List all of you assets (things you own that has positive equity):

• Equity of your home
• Net (depreciated) value of your cars, boat, etc.
• Net value of jewelery, stocks, bonds, etc.
• Savings or investment accounts
• Cash in the bank

2.  List all of the debt you had at the time of forgiveness:

• Mortgage (1st and 2nd)
• Auto, boat or other loans
• Credit card debt
• Medical debt
• Personal loans to...

3.  Now subtract your LIABILITIES (that's all the debt) from your ASSETS.

Is the result a NEGATIVE number?  If so, you WERE INSOLVENT!

When filing you tax return, you will need to complete IRS form 982 and submit with your tax return.  Most accountants and/or tax preparers are not aware of the exceptions to paying tax on "forgiven" debt, so you need to be very careful.

Although we are not attorneys nor tax accountants, we can help guide you through the process.

If you would like a FREE CONSULTATION, just let us know.

BOTTOM LINE...DON'T PAY ANY MORE TAX THAN YOU ARE LEGALLY REQUIRED...IT'S YOUR MONEY AFTER ALL!!!

 photo by: MoneyBlogNewz

Have you ever been contacted by a Debt Collector and wondered why they are calling you and how in the world they got your number?  In this post, I will attempt to explain the Consumer Debt Collection process and what to expect when they start contacting you.

The Beginning of Consumer Debt Collection

The consumer debt buying industry began in the early 1990's when the US government started selling off assets from savings and loan banks that had failed.

As consumer debt has grown exponentially over the past decade, the number of debt collection firms has skyrocketed as well, growing from about a dozen firms in 1996 to several hundred today.

The big credit card companies are not able to devote the enormous amount of time and money into pursuing the thousands of people who fall into debt each year, and debt collection companies are eagerly stepping in to buy the debt from creditors for a fraction of the total debt.

Last year debt buyers paid an average of 5.4 cents for every dollar of unpaid debt they bought. Debt collection is a very lucrative business. (CHA-CHING!)

The Federal Trade Commission (FTC), which monitors the complaints lodged by consumers against debt collectors, regularly receives more consumer complaints about debt collectors than any other industry. However, the number of complaints has quadrupled in the past five years.

How Consumer Debt Collection Works!

The typical debt collection company will purchase your debt from the original creditor who is essentially trying to cut its losses.

The debt collector will then attempt to recoup any, if not all, of the original debt. The worst part is not that the debt collectors are trying to collect on an old debt, but instead, it is the Fraudulent Debt Collection practices they use.

Some particularly nasty debt collection companies are resorting to illegal practices -- verbal abuse, harassment, and even threats of violence and lawsuits -- in an attempt to squeeze money from consumers for the debts the company has purchased.

In fact, many times the debt collection company isn't even bothering to harass and abuse the right consumer.

For example, the Washington Post reported that a New Hampshire man was repeatedly called by a debt collector about a loan his daughter owed even though the daughter had moved out 15 years earlier. The debt collector reportedly called this man six times in 15 minutes!

On the last call, the debt collector told the man his Social Security number, his wife's name, and threatened to send thugs.

Another particularly troubling recent practice is the growing number of cases where debt collectors persuade consumers to pay just a little of the amount due, and then they use the bank info to improperly withdraw more money from the consumer's bank account.

Know Your Rights!

The FTC enforces the Fair Debt Collection Practices Act, which outlines consumer rights and prohibits debt collectors from engaging in unfair, deceptive, and abusive practices.

The key to protecting yourself, and your sanity, is to KNOW YOUR RIGHTS!

You CAN correct errors on your credit report in 3 easy steps!

Step #1 - Get a Copy of your Credit Report

If you are willing to spend a little time and effort, there is no reason to spend hundreds of dollars paying someone else to correct errors on your credit report.

Start by pulling a current copy of your credit report. You can do this absolutely free once per year at www.annualcreditreport.com. 

This site allows you to access your credit report from all three of the major credit reporting agencies (Experian, Equifax, & TransUnion)

If you want to see your credit score, you will have to pay a small fee.  However, if you are just looking to clean up your credit report, there is really no reason to pay for your score at this time. 

Step #2 - Take a Close Look at Each Credit Report

If you have paid off old accounts and they are still showing a balance or if it was charged off and moved to a collection agency, you can dispute the entry and it will be removed.

Most disputes can be addressed online.  Each agency will have it's own procedure, but basically you will need to provide them with proof of payment such as:

• A statement from the creditor or collection agency showing the account has been paid.
• A canceled check showing the payment was processed.
• A bank statement showing canceled check or check-by-phone entry to the agency.

Here are the links to dispute errors:

• Experian Disputes
• Equifax Disputes
• Transunion Disputes

Step #3 - Follow Up!

Correcting or removing errors on your credit report may take 30-60 days. You should receive an email or letter as to the status of your dispute, If you don't, go back online to see what's been done.

If the credit bureaus have not made the correction, make a follow up dispute!  If you have provided proof (as above) that this account has been paid or settled-as-agreed, they will eventually correct the error, so don't give up.

You may need to call the agency and speak to a representative if you can't find any updates online.

Experian:       888-397-3742

Equifax:         800-685-1111

TransUnion:  800-916-8800

If you have accounts that you have not paid on in some time, we may be able to negotiate a settlement at 50% or less!

photo by: TrinityCreditServices

Can a Debt Collector Garnish Retirement Income?

The answer is NO!

First of all, if you fall behind on your credit card or other debt payments, your creditors don't have the right to automatically garnish any sort of income.  Before a creditor can get a writ of garnishment, they have a whole set of hurdles to get over.

The creditor will write you multiple harsh letters and call you over and over!  They will use many dirty tricks of debt collection to try and collect the debt.

If the collector is unsuccessful in getting you to pay up, then they may decide to file a complaint and you would receive a SUMMONS.  If you owe the debt or you decide not to appear in court to fight the summons, your creditor will be awarded a DEFAULT JUDGEMENT adn they can apply for a WRIT OF GARNISHMENT.

If your only source of income is from one of the following, they CANNOT GARNISH IT!!!

• Social Security benefits
• Supplemental Security Income (SSI)
• Welfare or public assistance
• Spousal support or child support
• Public or private pensions
• Veterans benefits and/or loans
• Disability proceeds of life insurance policies
• Cash surrender value of life insurance policies

WARNING:

If you deposit your retirement income (pension, Social Security...) together with any other source of income (part-time job...), then THE ENTIRE ACCOUNT COULD BE SUBJECT TO A BANK LEVY!

As long as you DO NOT CO-MINGLE your retirement income with any other source of income, then the retirement income is safe!

If you are struggling to pay off your debt, or know someone who is being threatened with a garnishment, our Debt Settlement team can help you settle your debts for 50% or less that what you owe!  Give us a call at 1-877-492-4109 or click this link for a FREE Debt Consultation.

You want a good, clean credit report, right?  Of course you do. We all want to keep our credit as tidy so we can borrow money at a low interest rate and keep our insurance rates and security deposits down.  It is very important to work on raising your credit score, but it is also important that you understand what does not affect your score.  That way you won’t spend time worrying about things that just don’t matter.

Here are 6 things that can’t hurt (or help) your credit scores:

 #1: Your Personal Information

Personal information such as your name, current and previous addresses, Social Security number, and birth date is included on your credit report with each of the three main credit reporting bureaus.  However, this information does not have any bearing on your credit score. They also cannot factor in your age, education level, race, gender or marital status. 

 #2: Income Changes

Most people are surprised to learn that income isn’t included on your credit report.  As long as you continue to pay your bills on time, earning less has no negative effect on your credit scores.  However, creditors generally ask for your income information on their applications. So, making less money could be a stumbling block to getting new credit because in addition to your credit score, your income, expenses, and job stability are taken into consideration by a lender.

#3: Getting Turned Down for Credit

Although your credit report does show who has been looking at your credit report, your credit report doesn’t show whether an application for a loan or credit card was approved or declined.  Don’t worry if you’ve been turned down for credit.  This has absolutely no effect on your credit score

#4: Paying Small or Local Companies

Bills you pay to small companies or individuals for local services like lawn care, pest control, or rent, usually don’t show up on your credit report. The main credit bureaus have strict requirements about who can report consumer information to them, and in many cases it’s just not feasible for small businesses to do so.

If a merchant doesn’t report payment information to the credit bureaus, then your payment history with that company can’t affect your credit scores. However, if you don’t pay up and they turn your account over to a collection agency, that’s another story! Collection companies will report information to the credit bureaus as soon as they acquire the debt.

 #5: Adding an Authorized User

Adding someone to your credit card as an authorized user allows them to get a card in their name and to make charges up to the credit limit that you allow. An authorized user has no legal responsibility to repay the debt. Their credit situation can’t affect yours in any way.

However, your credit scores could plummet if an authorized user abuses a credit card and you can’t afford to make the minimum monthly payments. So always be cautious about adding anyone to your credit cards.

#6: Checking Your Own Credit

Many people worry about pulling their credit report because they think that it will count against them. Pulling your own credit report is called a “soft pull” and it does not hurt your credit scores.

Understanding what does and does not have an effect on your credit score will help you to focus your efforts in the right areas.  If you need help eliminating debt once and for all, our Debt Solutions Specialist can explain what programs are available to help you no matter what the situation.  Simply give us a call or click on the link for a free debt elimination consultation.

photo by: Casey Serin

If you are delinquent in paying your debts, a creditor can decide to pursue all legal avenues including wage garnishment.

But before you panic, understand that a creditor cannot garnish your wages just because you are behind on credit card or other unsecured debts!

Before they can apply for a WRIT OF GARNISHMENT, a creditor will:

• Contact you in writing or by phone in an attempt to collect the debt and/or work out a repayment plan.

• If the creditor's collections efforts are unsuccessful, they will turn the account over to a collection agency.  This collection agency will also contact you in writing and by phone to collect the debt. In fact, they will most likely call you multiple times a day at all hours.  You do not have to put up with this.  To learn what collectors can and can't do read more about Fair Debt Collection Practices.

• If the collection agency's attempts to collect the debt are unsuccessful, they may decide to retain a local attorney to file a claim.  If they are a ATTORNEY/COLLECTION FIRM, they will file the claim themselves.

• If this happens, you will receive a SUMMONS and it will basically state that you have 20 or 30 days (States vary as to how long you have) to "ANSWER" the claim.  An "ANSWER" is you response to the claim if you feel that YOU DO NOT OWE THE DEBT CLAIMED IN THE SUMMONS.

• It usually takes about 45-60 days before a court date is set. NO, YOU DO NOT HAVE TO GO TO COURT.  This is just a formal hearing to award the judgment to the plaintiff (creditor) by default.  Default meaning that you did not dispute the claim.

• With the DEFAULT JUDGMENT, the creditor can now apply for a writ of garnishment.

What happens once your creditor is awarded a Writ of Garnishment?

In most cases, an agreement not to pursue wage garnishment can be negotiated (if you act quickly).

A STIPULATED AGREEMENT would state that you will make a payment every month until either the full amount or a slightly reduced amount is repaid.

Depending on your state of residency, there may be an interest rate limit(Oregon is 9%, Washington is 12%).  Be sure to check your state's limit.

As long as you make your payments on time, the creditor will not act on the wage garnishment.

What types of income are exempt from Wage Garnishment?

The following types of income are exempt from wage garnishment:

• Social Security benefits
• Supplemental Security Income (SSI)
• Welfare or public assistance
• Spousal support or child support
• Public or private pensions
• Veterans benefits and/or loans
• Disability proceeds of life insurance policies
• Cash surrender value of life insurance policies
• and many others

There are also exemptions and limits as to the calculation final amount of wage garnishment.  We have found that most employers are unaware of these exemptions and limitations, so make sure you know your rights!

In Oregon for example, if you earn below a certain amount, you may be fully exempt from wage garnishment!  Click her to find out more!

Finally, if all of this seems a "little too much for you to handle", we can help. One of our Debt Solutions Specialists can help you decide what is the best next step for you.  Give us a call at 1-877-492-4109 or simply click on the link below for a free debt elimination consultation.