If you have ever received a summons, you know how stressful it can be!

The summons states that you have 30 days (more or less in certain states) to APPEAR and give an ANSWER...

Does that mean you have to go to court?

This will help...

You know that when we apply for a credit card, store card, or an unsecured loan, we are agreeing to repay whatever we charge at certain interest rate and minimum payment.

So what happens if I cannot keep up with the minimum payments?

You will start to get CALLS and LETTERS 

We know that  the credit card industry makes it's billions and billions from interest rates, annual charges, and late or over-the-limit fees

Miss a payment and they go into "over-drive" to try and get you making payments again.

You may get several calls a day (mostly from computer dialers) from the original creditor or from a debt collector who has been assigned your debt or purchased your debt/account.

As long as your account is with the original creditor, they have a right to call.

But, when the account is transferred, sold or assigned to a collection agency, you can put a stop to the calls:

But remember...

Just because the account has been outsourced for collection and you have successfully stopped the persistent and annoying calls, YOU STILL OWE THE DEBT!

There a several options for dealing with this:

• Debt Management (used to be referred to as Credit Counseling)
• Debt Settlement
• Bankruptcy

For more information on each option, click on the link above.

BACK TO OUR MAIN ISSUE...

You either were not aware of your options or just could not take advantage of either of them due to your financial circumstance.

After the creditor fails to get you to start paying again, they may assign your account to a Law Firm that specializes in Debt Collection.

This firm will make the calls and send the letters as before.

You might have to send them the same "Stop the Calls" letter.

If they are unsuccessful in getting you to start making payments again, they may file a COMPLAINT or CLAIM in the county courthouse where you live.

This will result in a SUMMONS being delivered to you.

The SUMMONS states that you have 30 days (average) to APPEAR  and give an ANSWER.

Sounds like you have 30 days to show up in court and explain why you have not been able to pay this debt.

But, that's NOT what it means!

If you'll look closely at the SUMMONS, the words "APPEAR" and give an "ANSWER" are highlighted or in italics.

It means that if you have absolute, documented proof that you do not owe the debt, you have 30 days to file the proper documentation and proof with the court.

If not done within the 30 days, the PLAINTIFF (creditor or collector) may petition the court to be awarded a DEFAULT JUDGMENT.

This may take 2-3 months depending on several factors.

But, after being awarded the JUDGMENT, they can now apply for a WRIT OF GARNISHMENT or BANK LEVY.

WAGE GARNISHMENT in most states is 25% of your NET (after-tax) income!

Hard to make ends meet on 100% of your net, after-tax income?

Try it with 25% less!

Let's say you are bringing home $4,500 each month.

If a WRIT OF GARNISHMENT is sent to your employer, the employer has not choice but to comply with the COURT ORDER and send $1,125 to the creditor/collector per the ORDER!

Yep, that leaves you with only $3,375 to live on!  

WAGE GARNISHMENT IS TERRIBLE and if an alternative payment arrangement cannot be negotiated, you may be forced to seek BANKRUPTCY protection!

OK...

You received the SUMMONS and you know you owe the debt.

Now you understand that you do not have to file any documentation with the court and you DO NOT HAVE TO GO TO COURT.

NOW WHAT????

Many times a SETTLEMENT can be negotiated with the law firm/collector.

If a SETTLEMENT cannot be negotiated, a repayment agreement called a STIPULATED AGREEMENT can be set up.

This STIP is usually filed with the court and it basically says that as long as you make the agreed upon payments on the agreed upon date, they will not move forward with legal options such as WAGE GARNISHMENT or BANK LEVIES.

Once the STIP has been completed, a LETTER OF SATISFACTION is sent to the court.

The JUDGEMENT is removed.

This is supposed to happen, but you have to follow up as many collectors do not do this!

OK...I hope you understand a little more about this process now.

The most important thing you need to take away from this is:

Even though you do not have to go to court (or necessarily file any documents),

YOU CANNOT IGNORE the SUMMONS!

You must be "PRO-ACTIVE" to prevent garnishments, levies or liens.

Photo Credit

If your are having a hard time keeping up with your credit card debt, you may start getting calls from a debt collector.  This can be very stressful!  You need to know what a debt collector can do and cannotg do.  This will help!

There are many reasons you may be falling behind in making at least your minimum payments:

• Laid off or reduced hours due to Covid-19
• Divorce
• Loss of loved one
• Too little fixed income in retirement
• Illness or disability
• Just bad decisions

So if you don't have enough stress right now, the phone rings and the caller says something like,

" This is Bob from XYZ collections.  We have your Visa Card account with a balance of $8,500.  You must make a payment today or we may decide to turn your account over to an attorney for collection!"

You try to explain your situation, but it doesn't do any good. 

He starts back in saying there are several options they have for collection, including:

• Lawsuits
• Garhishments
• Bank Levy
• Lien against your home

You hang up and start thinking:

Can they start taking money from my paycheck?  I can barely make ends meet now!

If they take money out of my bank account, I can't pay the rent or mortgage!  

Will I have to sell my house if they put a lien on it?

And your mind just keeps going....

OK, calm down.  

There are several laws to protect consumers from illegal debt collection efforts found in the Fair Debt Collection Practices Act (FDCPA).

Can debt collectors contact me any time or any place?

They cannot call before 8am or after 9pm.

They can call you at work, but you can stop them by telling them you cannot receive calls at work.

Once your account is transferred or sold to a collection agency, you can put a stop to the calls:

Can a Debt Collector take money from my paycheck or bank account?

A debt collector cannot touch your money (paycheck or bank account) without first obtaining a judgment and writ of levy from the court.

Having said that, there are certain types of debts that don't require a court order for garnishments, such as:

• Failure to pay alimony or child support
• Taxes
• Federal Student Loans (each state has different laws)

There are several sources of income that are exempt from garnishments or levies:

• Social Security
• Pension and/or retirement funds
• Alimony or Child support
• Disablitiy income 

But, as far as your unsecured debts (credit cards, personal loan, medical bills, etc.) are concerned, there is a whole process that must take place BEFORE a creditor can garnish or levy.

After the original creditor or the debt collector attempts to get you to start making payments by making numerous calls and sending letters, they may dedice to seek legal options.

First, they must FILE A COMPLAINT in the county court where you live.

This will result is a SUMMONS that must be delivered to you.

The summons will state that the PLAINTIFF (creditor) is CLAIMING that you owe a certain amount for this specific debt.

It will also say that you have 30 days (varies by state or court) to APPEAR AND GIVE AN ANSWER.

Although this sounds like you have to go to court, that's not what it means!

If you will read carefully, the words "APPEAR" and give an "ANSWER" are in italics!

This basically means that if you CAN PROVE (with written, clear documentation) that you do not own this debt, you have 30 days (or whatever you state or court says) to file an ANSWER with the court.

This ANSWER must be in the proper, legal form and therefore may require an attorney to prepare and there is a filing fee as well.  But, these costs may be worth it if you can PROVE (not just say) that you do not owe the debt.

But if you owe the debt they are CLAIMING you owe, what now?

Now you have to take action!

You need to contact the attorney for the plaintiff (collector) and see if you can work out a repayment plan or settlement to keep them from moving forward with their lawsuit!

Please....DO NOT IGNORE THE SUMMONS!  It will not just "go away"!

Photo Credit

A know on the door and someone hands you some papers and says...

• "You've been served" how did this happen?
• Why did this happen?
• What can I do about it now?

If you have ever received a summons before, it can be a very stressful experience!

The Summons will say something like...

"You have 30 days to APPEAR and give an ANSWER..."

Sure sounds like you are going to have to go to court!

WHAT NOW????

Before I get into the "why did i receive this...", let me tell you that about 99% of the time you will NOT HAVE TO GO TO COURT.

If you look at the summons carefully, you will see that the words APPEAR and ANSWER are italicized.

This is a legal term/phrase that basically means that if you can PROVE with WRITTEN DOCUMENTATION that you don't owe or have paid this debt (THE CLAIM), you have 30 days to file the proper forms with the court.

Since most of the time the CLAIM is correct, there is no need to do that.

SO WHAT NOW????

The biggest mistake many people make is to IGNORE the summons!

If you do, then most likely the attorney for the PLAINTIFF (owner of the debt) will seek a DEFAULT JUDGMENT.

Now that a JUDGMENT has been awarded, the attorney can petition the court for a writ of GARNISHMENT (wages, bank or both).

In most states, this is about 25% of your NET TAKE HOME pay.

Your employer must comply with the WRIT OF GARNISHMENT or face severe penalties!

Think it was hard to pay the bills on you current take home check?

Now you have 25 %  less...

DON'T IGNORE THE SUMMONS!!!!

Contact the attorney for the plaintife and see if you can work out some kind of repayment agreement to stop the garnishment options.

This could be a:

• Full settlement for less than the current claim
• Monthly payments on the full balance
• Or even a settlement for less than the balance paid in monthly payments

Once a wage garnishment starts, it is very difficult to get the attorney to accept a settlement!

OK...WHY DID ALL THIS HAPPEN ? ? ?

After dealing with clients for almost 20 years, it still amazes me when one of them says that they never received any summons or had no idea they owed the debt.

I guess that is possible, but ....

Anyway, most likely, here's what happened.

Due to circumstances beyond you control, you just couldn't keep up witht the minimum payments due on your credit cards or other unsecured accounts.

And yes, you may have even used a cash advance on one to help pay the minimum due on the other!

I know, you fully intended to pay all this back, but your circumstances just haven't changed.

The Creditor sent letters and made phone calls, but they were not successful.

So, in some cases, they sell or assign your account to a Law Firm that specializes in debt collection.

Even so, if you had contacted the collector or attorney/collector, you should have been able to negotiate some sort of settlement that would not only save you some money, but stop any legal options!

Each creditor/collector is different and so there are no set amount of settlements.

A SUMMONS doesn't just happen by accident.

The good news is that regardless of the circumstances, there is most likely an alternative to wage or bank garnishment.

A debt collector has the right to collect for unpaid bills.  That makes sense, but misunderstanding about what a collector can and cannot do causes stress and fear. 

If you find yourself unable to keep up with at least the minimum payments due on your credit accounts, before long, those accounts may be turned over to a DEBT COLLECTOR!

This may cause FEAR or STRESS, which is natural, but often unfounded!

Someone has called F.E.A.R. :

•         False
•         Evidence, that
•         Appears
•         Real

You may be in this situation as a result of...

• Unemployment
• Divorce
• Serious illness or Disability
• Trying to make ends meet on a limited, FIXED INCOME of retirement
• or other reasons beyond your control

What happens when you start missing the minimum payments due?

The original creditor will start trying to get you to start making payments again.

Each creditor (Visa, Master Card, Discover, Capital One, etc.) has slightly different processes for recovering past due debts, but all take pretty much the same approach:

They send out letters encouraging you or kind of demanding you to start making payments or even warning you that unless you do "such-n-such", they will escalate their collection efforts to the next level.

And then the calls start.  Lots of calls!

If you somehow have the funds available to catch up, then you may want to contact them and see what can be done, but.......

DO NOT GO INTO MORE DEBT TO PAY OFF THESE DEBTS!

"Robbing Peter to Pay Paul" just results in more and more problems!

However, if you don't have the money to pay your debts (and you probably are in this situation because you just can't keep up), then it is usually best not to bother contacting them and trying to explain your situation.

NEVER FORGET...

Credit card companies are in business for one reason and one reason only, and that is to make HUGE PROFITS!

These profits come from:

• INTEREST
• ENROLLMENT FEES
• ANNUAL FEES
• OVER-THE-LIMIT FEES
• LATE FEES

...and about anything else they can tack on to get more money from us!

OK, then what happens next?

After about 3-4 months, if the calls and letters don't work to get you to start sending them money, they will usually:

• Charge the account off as a loss
  
• Assign it to a collection agency
  
• Sell the account to a DEBT BUYER   (Yes there are hundreds of companies that BUY Millions if not Billions of dollars of debt!), or...
  
• Retain a LAW FIRM that specializes in debt collection

Now these other agencies begin to contact you by mail and phone.

While your account is still with the original creditor, they have the right (in the fine print of the application) to call you.

But once these accounts are transferred or sold to another party,  you have the legal right to stop them from calling 

But, whether these companies are working on a commission basis or have purchased the account, their goal is the same...

GET YOU TO PAY THEM $$$$ !

Depending on your particular situation, you may be able to accept or negotiate a SETTLEMENT.

In fact, they may mail you an offer or you can call and try to negotiate.

A SETTLEMENT is an agreement to accept an amount less than the full balance.

Once this settlement is completed (lump sum or in payments), the account is deemed "settled-as-agreed" or "settled for less than the full balance" and it will be reflected as a ZERO or $0 Balance on your CREDIT REPORT.

If you'd like to know more on how DEBT SETTLEMENT affects your CREDIT SCORE, CLICK HERE:

What Can You Do to Improve Your Credit Score?

But what if you don't have the funds necessary to accept to negotiate a settlement offer?

The collection agency may be patient and keep the account on file for several months.

Or...

The original creditor may RECALL the account and RE-ASSIGN it to another collection agency.

If this happens, then the LETTERS and CALLS will start again.  You'll have to follow the same procedure to STOP THE CALLS.

But...

Sometimes your account lands with a Law Firm that specializes in DEBT COLLECTION.

This firm will send the letters and make the calls, but if no agreement can be reached, they may start the LEGAL PROCESS to collect.

A CLAIM will be filed with the COURT in the county where you reside.

A SUMMONS will be delivered to you.  It will state that you have 20 or 30 days (varies by state) to APPEAR and give an ANSWER to the court.

Sounds like you have to go to court within that time-frame or else!!!!

Good time to give disclaimer:

I am not an attorney and am not nor cannot give legal advice. My comments are just my opinion gained over many years of helping people deal with debt.  If you have concerns, please consult an attorney.

"Appear and give and Answer":

If you have clear proof (payment stubs, bank records, etc.) that prove that you DO NOT owe the debt that the PLAINTIFF (creditor or owner of the debt) CLAIMS you owe, then you have the 30 days or so to file your ANSWER with the court.

This ANSWER must be in the proper, legal form your county court demands and usually it is best to have an attorney prepare it and file with the court.

Of course, this takes more money, so don't even start if you cannot prove (no question) that you DO NOT OWE THE DEBT!

But what if you owe the debt the SUMMONS says you owe?

Then you need to contact the attorney's office and try to negotiate either a SETTLEMENT or a REPAYMENT agreement! 

DO NOT IGNORE THE SUMMONS ! ! !

If an agreement cannot be arranged in about 2-3 months, then the attorney will probably apply for a JUDGMENT by DEFAULT. (No one filed an ANSWER), so they win by default.

Many people think that if you get behind on your bills that a creditor can just TAKE MONEY OUR OF YOUR BANK ACCOUNT, GARNISH YOUR WAGES or put a LIEN on your home or other property.

NO,         NO,        NO ! ! !

A creditor, debt collector or attorney cannot just take your money or property!

I hope you are starting to understand that there is a whole lengthy, legal process that has to take place before that could possibly happen! 

 HOWEVER, VERY IMPORTANT...

If you owe taxes, child support, alimony or some other debts, then your bank account, wages and liens can be done without all the above process! 

If your creditor (plaintiff) has been awarded a judgment, now they can apply for a wage garnishment, bank levy or place a lien on your home or other property.

WAGE GARNISHMENT

If you have EARNED INCOME (not Social Security or other Retirement income) then it can be subject to garnishment per the judgment.

In most states, this is usually about 25% of your net (after tax) income. 

BANK GARNISHMENT

Once the plaintiff is awarded a Judgment, they can search for you bank accounts. 

This is usually done by using your social security number.

In 2011,  a law was passed to protect consumers from incorrect bank levies.

If you bank receives a court order to "freeze" you bank account due to a judgment, the bank is required to follow laws on what they can and cannot do.

However, not all banks do so and this can result in a very frustrating situation.  To learn more, click here:

Bank Laws Concerning Levies and Garnishments

PROPERTY LIEN

One of the most misunderstood options a creditor has for collecting a debt (REMEMBER: ONLY AFTER A JUDGMENT IS AWARDED!) is a LIEN.

If a lien is placed on your home, is DOES NOT MEAN that you have to sell your home to pay the debt!

A LIEN is basically a plaintiff taking a position (usually behind a first or second mortgage) on your home.

If you home is paid for, then they would have first position.

What does this mean?

It means that when you go to sell or transfer ownership (give to your children after your death as an example), the amount of the judgment must be paid.

Example:

If you sell the house for say $250,000 and the judgment balance is $20,000, the title company will have to send $20,000 to the plaintiff at closing.

That's why they do a "Title search" when you are buying/selling/refinancing a house in order to see if there are any LIENS.

In this example, you would net $225,00 and the Lien is removed from court records.

OK, let's review:

Can a creditor take anything you own without being awarded a judgment?   

  NO!

If you receive a SUMMONS, do you have to go to court?                                 

NO!

If you receive a SUMMONS, can you still negotiate a settlement or a repayment agreement to stop any other legal options a creditor may have?   

YES!

Can a creditor take money out of your bank account without being  awarded a judgment?                                                                                                           

NO!

Even after being awarded a judgment, can a creditor take money from your bank account that comes from:

• social security
• disability
• retirement
• child support, or
• alimony.                                                                                       
  
  

No ! 

Hope this helps.

Pic Credit

pic 2 credit

If it's not bad enough having too many debts and bills, receiving a SUMMONS is especially stressful!

One of our clients sent me an email this morning and said...

"I received this subpoena last night.  Kind of freaking out.  What do I do!"

We've been helping people deal with the stress of having to much debt and just not enough money to keep up for many years.

I've written many blogs about what to do with or how to prevent a summons, but wanted to give some insight that may help.

WHY DID YOU RECEIVE THE SUMMONS?

When you miss payments due on your accounts (I'm only talking about unsecured accounts like credit cards, medical bills, etc.) the original creditor will start calling and sending letters.

They may offer a few options for getting you "back on track", but for most people, these don't help or are possible due to your circumstances.

Trying to explain to the agent is usually a waste of time, so I don't advise trying.

If you do, just say something like...

"I've had some things happen and can't make payments right now.  I intend to get caught up soon and would appreciate it if you'd stop calling."

After a few months, most likely your account will be transferred, assigned or even sold to a collection agency.

Now you can at least put a stop to the calls:

DEALING WITH DEBT COLLECTORS

There are thousands of companies that make a lot of money collecting bad or old debts!  These companies may take accounts on consignment, in order to earn a portion of the money they recover.

Or, they may have just purchased the account for pennies-on-the-dollar from creditors who have given up on trying to collect and have just written off the debt as a loss.

The debt collector most likely will be open to a SETTLEMENT.  The amount of settlement is determined by many factors, but on the average, a settlement of 50% to 70% (more or less) may be available.

 DON'T IGNORE A SUMMONS !

To many people take the "hide your head in the sand" approach to their financial crisis.  Although I certainly understand and appreciate how they feel, the debt is not going to go away!

If the calls and letters from a debt collector go unanswered or returned, after a few months, the debt may be:

1. Recalled back to the original creditor
2. Transferred to another debt collection agency
3. Sold or transferred to a Law Firm that specializes in Debt Collection

If your account lands with #3, and if they cannot reach you or an agreement or settlement cannot me negotiated, they may decide to FILE A CLAIM.

Once a CLAIM is filed with your local county court, a SUMMONS is prepared and sent out for delivery.

The delivery may be by a COUNTY SHERIFF or COMPANY PAID TO DELIVER the summons.

Either way, receiving a summons is (like my client said), kinda "FREAKS YOU OUT!"

Although a summons (or small claims order) may differ, most of them state something like the one my client received:

     "YOU ARE HEREBY REQUIRED to appear and defend the Complaint filed against you in the above-entitled cause within 30 days from the date of service of this summons on you, and in case of your failure to do so, Plaintiff (creditor or debt collector you owe) will apply to the court for the relief demanded in the Complaint."

Well, it sure sounds like you have to go to court within 30 days, doesn't it!

But, if you kept reading, it would explain.  (I'll paraphrase and explain to save time:)

It says you must "APPEAR".  Notice the word "appear" is in italics.

It then goes on to explain what "appear" means:

It basically says that if you wish to give proof of why you do not owe the CLAIM being made, you have 30 days to provide the court with a legal document called a "motion" or "answer".  You also have to pay the required filing fee ($165 in this particular county court).

The summons goes on to say that if you have questions you should see an attorney immediately and usually gives a phone number for your state's Bar Lawyer Referral Service.

NOW WHAT?

OK, so you have the summons and understand that you don't have to go to court.  What should you do?

The worst thing you can do is ignore the summons!!!!!!!

If you ignore the summons, a JUDGMENT will most likely be awarded to the PLAINTIFF.

If this happens, the attorney for the plaintiff will seek the legal options available to get funds awarded in the judgment.  These include:

• Wage Garnishment
• Bank Levy of your bank accounts
• Placing a lien against your home or other property

I don't have the space here to address each of these, and there are things you may be able to do if you are facing one or more of these due to a judgment.

The important point is....

DON'T LET IT GET TO THIS POINT!!!

In most cases, some kind of agreement or solution can be negotiated before or even after a JUDGMENT has been awarded.

You may have to repay the entire balance due to avoid a garnishment, levy or lien.

This will most likely be a STIPULATED AGREEMENT that will be filed with the court.

This basically will say that as long as you make the required payments specified int he Stipulated Agreement, the Plaintiff will not continue to seek the legal options described above.

Once the Stipulated Agreement is completed, a LETTER OF SATISFACTION will be mailed to the court and the judgment is removed.

Now, I've explain a lot. What's the main points?

You have several options to prevent your account from ever getting to becoming a judgment.

• You can't ignore the debt.
• It will not go away!
• If you receive a summons, don't panic!

If you are overwhelmed, we may be able to help:

Photo Credit

Given the right circumstances, a Debt Settlement Program is an option that can give you freedom from debt!  

Here's how a debt settlement program works:

Let's face it, credit and credit cards are something most people deal with every day.   

You know how that can go....

You get an offer for a credit card with 0% and fees (for 6 to 12 months at least).  All you have to do is fill out the form and submit.  

At first, you use the card to buy some items that may be just a little bit too expensive for you you right now, but, with a minimum payment of only $50 or so,why not?

But, you get another offer (or two, or three, or four...) and you figure:

"I can afford a $200 or so each month...Why not?"

I actually took this picture...kinda says it all:

Sure, you can afford the total minimum payments due each month of about $200.

But what happens if one of the following happens (as has done with most of my clients):

• Loss of Employment
• Divorce
• Major injury or illness
• Total Disability
• Death of Spouse or Partner
• Too little fixed income after retirement!

Just to name a few!

Pretty soon, you just can't keep up with all the payments due (beside the mortgage or rent, utilities, groceries, etc.)

NOW WHAT DO YOU DO?

When your cannot keep up with the minimum payments, it doesn't take long to realize that you are in trouble!!!  

A lot of people start taking cash advances from one card to make the payments on the others.  This is just putting off the inevitable!

You may be able to take out a second mortgage, but this has dangers as well.  Be very careful here!

Please don't be fooled into getting one of the "PayDay Loans"! 

These "lender traps" may end up costing you very high interest rates (I've seen them as high as 85%), making it almost impossible to ever repay!

A Debt Settlement Program may be the answer. 

Here's the basics:

If you haven't stopped making of payments to your creditors, rather than continue this process, you will start making a payment (really a deposit) to an account set up for you at an FDIC bank.

Two things will happen:

• Your account will start to grow, which will allow for negotiations (more later).
• The creditors and debt collectors will be calling and sending letters.

Yes, your "original" creditor (Visa, Citibank, Home Depot,etc.) can legally call you about your account.  You gave permission (all the fine print) when you signed up.

But, once your accounts are transferred to a debt collector (usually 3-4 months), you can put a stop to the calls.  This will help:

You will also be getting letters from your creditors or debt collectors.

They may offer some kind of "hardship plan" to help you get caught up, but most of these are just a trick to get you to keep paying, and paying, and paying!

Debt Collection companies (and sometimes the original creditor) are usually willing to accept a SETTLEMENT for less than the balance due.

Why would they do that?

The original creditor may just want to clear up old debts and charge off your account as a loss to their over-all profit/loss for tax purposes.

They have figured in how much "loss or breakage" they can accept and still be profitable!

They may have ASSIGNED your account to a debt collector who will get paid a percentage from what they are able to collect from you.

The original creditor may also charge off your account and SELL the account to a debt collector who is also a DEBT BUYER.

There are millions (possibly Billions) of dollars of "debt" bought and sold for literally "pennies-on-the-dollar".

Whether you account was assigned or sold to a debt collector, you can see that they may be open to a settlement. 

Example:

You have a Citibank Card with a balance of $10,000.

It was sold to XYZ Debt Collection Services for $500...that's right..."pennies-the-dollar"!

Do you think they might be open to a settlement of say...$3,000 - $5,000? 

Sure, check this out:

As time goes by, one-by-one, your accounts are settled and your Credit Report shows a $0 balance!

Does this happen over-night?  

Of course not!  Depending on how much debt you have and your particular financial situation, a Debt Settlement Program may take 4 or 5 years to help you finally become...

DEBT FREE!

But, doesn't that sound great?

A Debt Settlement Program is not the answer for everyone, but may be just what you need!  It's easy to find out:

Photo Credit

Receiving a summons can be a very stressful situation!  Here's what you should know about a summons and more importantly, what you need to do about it:

It seems like a week doesn't go by that a prospect or one of our clients receives a SUMMONS.

Most of the time, a SUMMONS is delivered to you at home.  But in some cases, it may be mailed by certified mail or delivered to your place of employment.

Before I explain what you need to do, you need to know why this is happening and what you can do to prevent it in the future!

When you find yourself in a financial hardship due to any number of reasons, most likely, you just can't afford to keep up with the minimum payments due on your credit accounts.

At first, after the creditor doesn't receive the payment that is due, you will get a statement with a warning (along with extra LATE FEES and added INTEREST) telling you how much you need to send in this month to catch up.

When you can't make that payment (and of course, you can't), you may start getting calls from a representative of the company.

I know you would like to explain your situation and would like to get a "little sympathy", but most of the time, the rep just doesn't care.  

I suggest that you either ignore those calls or if you just can't resist, say something like:

"I'm going through a very hard time and just cannot afford to make any payments at this time.  I plan to get caught up in the near future, but for now,  please stop calling me!"

Don't wait for an answer, just HANG UP.

Most likely, the calls will either stop or slow down and now you'll start getting letters.

These letters may threaten to "charge off" your account and turn it over to a debt collector or to an attorney.

This usually happens after 3-4 months of non payment, but sometimes, they may wait 6 months or more.

But, at some time, they will send these accounts to a collection agency or a law firm that deals mainly with debt collection.

Now, you will start getting calls and letters from them.

You can also put a  stop the calls now (before, the original creditor had the right to call you).

This will explain:

If your circumstances don't change, and you can't negotiate a repayment or settlement agreement with the collectors, they may decide to start their "legal options" by filing a claim.

Once the claim (legal claim that you owe the debt) a SUMMONS will be delivered or sent to you.

The SUMMONS is going to say something like:

"You must APPEAR and give an ANSWER to this claim."

Without going into a long explanation, this basically just means that if you don't owe the money the PLAINTIFF is CLAIMING, you (the DEFENDANT), must provide PROOF to the court.  

This must be done in a short period of time (usually 20-30 days from the date of delivery) and it must be in "legally correct form" which usually requires an attorney's help.

Most of the time, you (the Defendant), owes the money, so when you don't give an ANSWER to the court, then the the attorney may apply to the court for a date in order to be awarded a JUDGMENT by DEFAULT.

Before this happens, here's what you need to do....

Even if the summons has been delivered, the creditor (plaintiff) may still be willing to accept a SETTLEMENT or a STIPULATED AGREEMENT:

Debt Settlement

Depending on your particular circumstances, you may be able to negotiate a settlement/reduced payment of the balance.

For example, if you are retired and receiving only Social Security or Retirement benefits as your only source of income, these funds are 100% EXEMPT from any levy or garnishment even if a judgment has been awarded!

If you are disabled, and only receiving SSI and/or Disability Benefits, these are also 100% EXEMPT from any levy or garnishment.

There are several other situations where you may have LEVERAGE to negotiate a settlement.

It's not easy, but very possible.  We do this everyday for many of our clients:

Stipulated Agreement

If you cannot negotiate a settlement, the law firm may apply to the court for a WRIT OF GARNISHMENT.  

With this, they can GARNISH YOUR WAGES and/or  FUNDS IN YOUR BANK ACCOUNT!  For most people, this would be devastating.

Many times, a creditor (or attorney for the plaintiff), may be willing to agree to a series of payments to repay the debt instead of garnishment.  Of course, by now, the balance is much more due to interest, fees, court costs, etc.

As long as you meet the terms of the agreement, the attorney will not go forward with a garnishment or bank levy.

As you can see, a SUMMONS is serious and you can't ignore it!

I hope this information has helped, but if you feel like you need more information, then click here:

Photo Credit

If you think it is hard to make ends meet now, what would you do if you had 25% of your paycheck taken as a result of a garnishment?

Before I show you how to deal with a wage garnishment here in Oregon (or for most any state), let's get some things straight:

THIS GARNISHMENT DIDN'T JUST HAPPEN!

I can't tell you how many times one of our clients calls to tell us that a debt collector or creditor just garnished their paycheck and they had no idea it would be happening.

OK, I know that in some VERY RARE CASES, they may have not received or seen the SUMMONS that came in person or by registered mail, but in most cases, they got it, but just ignored it.

Brief review of the collection process and how this happened:

If you find yourself in a very difficult financial situations due to a number of things, such as:

• Loss of employment
• Divorce
• Death of spouse or partner
• Illness or disability
• Too little income after retirement

...and, you simply cannot keep up with the minimum payments required by your creditors, here's what usually happens:

When you miss a scheduled payment, you may get a phone call or letter.

If you don't reply or miss another, you ABSOLUTELY will get a phone call or letter....lots of em'!!!

(I'll show you how to ultimately put a stop to these calls later, but for now, let's keep moving through the process that could lead to a WAGE GARNISHMENT.)

The creditors wants to do whatever they can to get you to start making payments again.

You may get a letter offering to "bring your account current if you make "such-n-such" payment by a certain date.

Or, they may say to call them to look into a "Hardship Program" (which I really don't like).

But if you just can't afford any payment after paying  rent, utilities and buying groceries, WHAT NOW?

In most cases, the original will CHARGE OFF the balance of the debt you owe them.

This means that they are going to report to the 3 major credit bureaus:

• Experian
• Equifax
• TransUnion

...that they didn't pay them back as promised and they have lost a lot of money!

Your account will most likely be transferred or sold to a debt collection agency.  This may even be a Law Firm that only deals with debt collection.

Now, you start getting calls and letters from the debt collector, but the good news is that now, you can LEGALLY STOP THE CALLS.

As long as your account was with the original creditor, they had the right to call you about your account.

But, once that account is charged off and placed with a collection agency, you have the right, according to the Fair Debt Collection Practices Act, to demand that they stop calling you. 

The letters will continue, but the annoying, and sometimes HARASSING phone calls will stop.  Here's how you do it:

But, just because they have stopped calling doesn't mean that they have stopped trying to collect!

If they cannot get you to start making payments to them (they may even offer a reduction in the balance...called a SETTLEMENT) then they may decide to FILE A CLAIM against you in your county's courthouse.

The debt collector's CLAIM say that you have not fulfilled the promise to repay this debt and they are going to seek legal action against you....sue you!

You will get a SUMMONS, and it will state all of the above and it will state that you have 20-30 days (varies by state) in order to give an ANSWER.

OK, lots of "big words" there, so let me give a simple definition:

SETTLEMENT  

This is when the creditor and/or the debt collector agrees to a substantial reduction of the balance to settle this account, once and for all.

If your interested, here's some actual examples of settlements we have negotiated for some of our clients:

CLAIM   

The Debt Collector or in some cases the original creditor files a claim in court that you owe them money. When this happens, you get "served" a SUMMONS.

SUMMONS

The summons names you as a DEFENDANT and the Creditor or Debt Collector is the Plaintiff.  They have "claimed" that you owe this debt unless you can prove it, and I mean, absolutely prove it with copies of canceled checks, etc.

ANSWER

If you know, for certain AND CAN PROVE IT....FOR CERTAIN, then you have the legal right to file AN ANSWER with the court.  Not only does it cost you a FILING FEE (I believe it is about $165 here in Oregon), it has to be legally correct. 

In other words, you may think about hiring an attorney to prepare the ANSWER. And, of course, that costs more money!

But, IN MOST CASES, you really do owe the money, so giving an "ANSWER" is not necessary.

So, NOW WHAT?????

If you cannot negotiate a settlement or arrange a repayment agreement, the Plaintiff (debt collector), may decide to just go forward with a court date in order to be awarded a JUDGMENT.

Once the JUDGMENT has been awarded to the Plaintiff, they can apply for a WRIT OF GARNISHMENT.

This Writ of Garnishment is sent to your employer and your employer has no choice but to honor it.  This means that they are going to withhold (after all of the other withholdings) another 25% of your net, take-home paycheck!

So you see, this garnishment didn't just happen....there was a long process and it could have been stopped numerous times along the way!

What too many people do when they finds themselves in a terrible, financial hardship is to "hide their head in the sand" rather than seek numerous solutions.

Believe me, the last thing most creditors what to do is to have to spend the time and money to file a claim, follow up with calls and letters to you, and possibly spend more money in setting a court date, paying an attorney to represent them, etc.

Last week, we had a client call us to say that she had neglected to act on a summons she had received and the creditor (plaintiff) had been awarded the judgment....acted on the judgment....and her HR department sent her a message that her check would be garnished about $500!

We were able to contact the attorney for the collector and negotiate a repayment plan (you rarely get much, if any of a reduction/settlement after a judgment has been awarded) whereby our client agreed to pay only $200 per month until the balance was paid.

She could not handle the loss of $500, but she could make $200 work.

FINALLY....

Here in Oregon (or in any state for that matter), the best way to deal with a garnishment is to not let it get to that state.

But, if it has, then you may be able to get a reasonable repayment agreement in place.

If you need help or guidance, let us know:

Photo Credit

Now that you've made the decision to enroll in a debt settlement program, what happens next?

Once you have looked at all of your options and decided to enroll in a debt settlement program, you cannot just sit back and do nothing. 

Here is what you need to be doing:

Debt Settlement is the best option for those who have accumulated too much debt and cannot keep up with the minimum required payments.

In a nutshell, most (if not all) of your unsecured accounts will ultimately be turned over to a collection agency.  This unusally occurs about 120-180 days from your last payment.

At first, you will get several calls and letters from the debt collector.

These calls can be very frustrating and annoying, so you should take advantage of a law from the Fair Debt Collection Practices Act (FDCPA) that says that if you make a written request to the debt collector to stop calling you, they must stop or face very serious fines from the Federal Trade Commission!  Here's how to do that:

If the calls do not stop, then you should contact your state's attorney general's office to file a complaint.  If you live in Oregon (as we do), here is the link:

How to File a Complaint with the Oregon

You will continue to receive letters from the debt collector.

It is VERY IMPORTANT that you send the latest letter (s) to the Debt Settlement Company you have retained to negotiate settlements for you.

The easiest and fastest way to do this is by email or fax.  But, if you cannot email or fax, then you can mail the letters.

When you enrolled in the debt settlement program, you stopped making payments to your creditors (most likely, you had done so already) and began making a payment to a FDIC Insured Settlement Reserve Account through your debt settlement company.

As your fund grows, the negotiator will begin contacting your creditors to work out a reasonable settlement.

Depending on a number of circumstances, your settlement should be somewhere around 50% of the current balance.

If your reserve account has enough funds, the settlement may be paid in a lump sum.

But, if not, a good negotiator can still negotiate a very good settlement and pay it over a period of time (with no additional interest or fees).

Here are a few examples of actual settlements we have negotiated for our clients:

Once a settlement has been completed, the creditor/debt collector is supposed to report that the account has a $0 balance and was "settled-as-agreed" to the three major Credit Reporting Bureaus.... Equifax, TransUnion and Experian.

Unfortunately, not all debt collection agencies follow through and your credit report may be showing incorrect information.

About 2 months after the settlement is completed, you should request a FREE Credit Report to make sure it is being reported correctly.

Click on this link to request a Free Credit Report:

ANNUAL CREDIT REPORT

Your debt settlement company will provide you with proof of payment and help you open and complete a dispute.

Sometimes, a debt collector may decide to FILE A CLAIM with your county court about your debt.

If this happens, you will receive a SUMMONS.

Please DON'T PANIC!

The summons will state that you have a limited time to APPEAR AND ANSWER the claim against you.

It sounds like you will have to go to court, but this is not so. 

An ANSWER is a legal response to the CLAIM that you can prove that you do not owe the debt.

Most of the time you know you owe the debt and therefore you will not need to do anything.

Again, and this is VERY IMPORTANT, if you receive a summons, contact your debt settlement representative right away!!!!

The debt settlement company will contact the attorney for the debt collector and most likely will still work out a reasonable settlement.

I can't stress enough how important it is NOT TO IGNORE a summons.

After helping people for 15 years, the only time a client has a WAGE GARNISHMENT or BANK LEVY is that they failed to inform us that they had received a SUMMONS!

A quality, professional debt settlement company should welcome and answer any questions or concerns you may have.

You should be able to contact them via phone or email and receive a reply in a short period of time.

Here are some things to look for in a Debt Settlement Company

As time goes by, one by one, your debt will be settled.  Depending on the total amount of debt you had and how much you could afford to deposit into your settlement reserve account, your program may take anywhere from 36 - 60 months.

Remember....

The goal of debt settlement is to...

• protect you from wage garnishments or bank levy
• prevent you from having to resort to bankruptcy
• help get you out of debt

Yes, getting settlements that substantially reduce the balances is great, but not necessarily the main goal.

FINALLY:

A good communication line between you and your debt settlement representative is critically important to a successful program.

Although it may seem like it is taking a long time, ultimately you will be debt free and your credit scores will begin to improve...but it just doesn't happen over night!

Here is what some of our former clients have said:

A FEW TESTIMONIALS

If you are just beginning your search for information about debt settlement, we can help. Just click on the button below:

Photo Credit

You have several options for improving your credit score. 

Take a few minutes to see what you can do!

It seems like everywhere you turn you see an ad about your credit score. 

Some of don't just offer to get your credit score (for Free or small monthly fee), but also may claim to be able to improve your credit score dramatically in a short period of time.

Although there are several companies that will provide you with a Free Credit Report, did you know that we all can get a FREE CREDIT REPORT annually?

So, you don't have to go through a third party company or pay for this service if you don't want to.

But let's say that you already have your credit report and not only is your credit score a little lower than you thought it was, you also see some errors on what is being reported.

What can you do to improve your credit score?

Before we get started, you must understand that a credit report is nothing more than a snapshot of you credit history at a particular point in time.

Lenders rely on the information contained in a credit report to determine if and how much money they are willing to loan you.

I wrote an article/blog recently addressing the concept of "Pay for Deletion" on a credit report.  Basically, you offer a creditor or debt collector a sizable settlement to not only settle the account for less than the balance, but also to delete the account from your credit report.

I'm not going to get into that here, but if you'd like more information, click on my blog link above.

There are several factors that go into calculating our credit scores:

Payment History, which accounts for about 35% of your credit score.

The first thing any lender wants to know is whether you've paid past credit accounts on time or are late or just have not made any payments in a long time!  Your payment history is very important!

How much Credit are you paying on now?

Just because you have credit accounts now doesn't necessarily mean that you cannot get more credit.  But, if you have $25,000 of available credit and have used up $20,000 on various credit accounts, you are using 80% of your available credit now and may not be able to get more.

How long have you been using credit?

To a lender, the longer you have been using credit, and more importantly, how you have handled your credit in the past, gives them a pretty good idea of how you are going to handle the credit you are applying for now.

What type of credit are you using?

Your credit score takes into account the various "loans" you have, such as:

• Mortgage
• Auto
• Student
• Revolving, etc.

New credit, or actually, too much new credit, may hurt you credit score.

Beware of opening and/or applying for too many new credit accounts in a short period of time!

Many people believe that opening several credit accounts (store cards, credit cards, etc.) will help them get better scores.  Actually, this is a negative!

If you have a couple or even a few cards or accounts, don't try to get too many more in short period of time.

OK, so you check out your credit report and are disappointed with the score and see errors as well.

Each of the 3 major credit reporting bureaus allow you to DISPUTE legitimate errors on your credit report. 

Items such as:

• An account showing a balance that you paid off a long time ago.
• An account that was in collections that you paid off or settled but there is still a balance showing.
• An account with a balance that you have not (or been unable to make any payments on) for longer than your state's Statue of Limitations for collection of credit accounts.
• A judgment that you had paid off or settled.

Although creditors and debt collectors are supposed to report that an account has been paid off, settled or satisfied to the 3 major credit bureaus as well as to the court where the judgment had been recorded, many time they do not follow through!

First, you MUST HAVE PROOF that shows that there is an error and you are requesting that it be corrected.

I know that there are many so-called "debt repair" companies that claim to be able to remove negative information and improve your credit score dramatically.

BE VERY CAREFUL OF THESE TYPES OF CLAIMS!

The Federal Trade Commission has some great information for consumers!  They have an article entitled, "Credit Repair: How to Help Yourself", where it states:

You see the ads in newspapers, on TV, and online. You hear them on the radio. You get fliers in the mail, email messages, and maybe even calls offering credit repair services. They all make the same claims:

I agree 100%!

Once you have copies of canceled checks, a statement from the creditor or debt collector show a $0 balance or that the account has been "settled-as-agreed", then you need to turn them into a .pdf document.

In a minute, you are going to go online to open your dispute. (Yes, you can mail or fax your dispute, but I don't recommend it.)

You want to be able to clearly show where the error is by making a copy of the page with the disputed item circled. 

PLEASE DO NOT SEND YOUR ENTIRE CREDIT REPORT!

The credit bureaus deal with thousands of disputes daily and what you want to provide to the agent who is reviewing your dispute is clear, easy to understand documentation that there is an error and they will correct it right away!

So, BEFORE YOU GO ONLINE TO OPEN YOUR DISPUTE....  you need:

• Brief, concise explanation of why you are disputing this error.
  
• Clear, easy-to-understand proof that the account has been paid as agreed.
• Or, proof of your last payment showing that the statute of imitations has expired and therefore the item or account should be removed.

Once you have all of this saved as a .pdf document (if you don't know what that is...get some help!), then go online. 

Here are the links to the 3 major credit reporting agencies:

Equifax Dispute

TransUnion Dispute

Experian Dispute

If you have followed these instructions, you should get a letter or see online that the disputed item has been corrected.

If not, then contact them until it is!!!!

Good luck!

Photo Credit