Home Loan Modifications May Save The Farm

By Clint Goodwin

After being in the mortgage industry from 1999-2004, I became very familiar with what was actually going on. I often wondered how we'd get out of the bad loans that were being done by my clients by the thousands. After a great deal of financial pain, it sounds like there may be a solution via the "relatively new" home loan modification product.

Historically banks have been reluctant to cooperate with borrowers on loans they've signed off on. However, current economic conditions, coupled with the latest bailout bill Washington has recently passed, may make this a much more attractive offer to the banks. Let's face it, it's seldom in the bank's best interest to knock off 2 or 3 points on the interest rate, or even thousands of dollars on the principle of a loan. But it now looks as if this may not cost banks anymore than a little paperwork, thanks to the US taxpayer. Suddenly, this has never been a more viable option than it is now for both banks, and borrowers.

Despite the turmoil we keep hearing about the economy and the credit markets, this particular product may be the shining light that saves both parties. Although it seems the government is still hammering out the details, rest assure there will be a frenzy to see who can get in line to get money first. The rumor is that banks are readily taking these home loan modification applications, and prioritizing them based on who's in the worse shape, and making very attractive offers. That's right, the worse loans get to the front of the line, but this is not to say the better loans don't get help. If you can show some kind of hardship, such as lose of income or a medical disability (there's more), what was once signed off as "A" paper, is now on the table for renegotiation.

I've talked to a few of these loan mod outfits. They're seeing banks settle on 3% rates, and even knocking off 40-60% of the principle (on 2nd mortgages especially). Sound too good to be true? There's almost 1 trillion dollars to spend on saving the American farm, and chances are this may be one of the few opportunities left for the American taxpayer to get some of that money back from Uncle Sam in a very substantial way. Remember, a 1% drop in your rate equates to about 450.00 per month on your payment for every 100K you borrow. Get a 3 point adjustment, and you're getting a hefty monthly bailout!

You can count me in. I submitted my application to Safe House Inc.

http://www.loanrepaircenter.com

My loan is at 6.625%, and have a lose of income claim. They have a simple 3 page form you fill out, and then let you know if you're qualified to get a loan mod. They contacted me and said I was approved. They also have a team of attorneys, and former loan processors who used to be with New Century Mortgage. They can do loan mods for any bank and there's a fee of $2995.00, however, no closing cost. The process is much like a home loan in that you go to the closing table with your attorney to finalize the process. We'll see and I'll keep everyone posted!

Debt Payoff Strategy The Snowball

by Destroy Debt

When considering many of the inventions that we use regularly, the credit card is a relatively new idea; the first credit card that could be used at more than one merchant was issued in 1950. Frank McNamara started the “Diner's Club” credit card company with about 200 card holders, and it was also the start of the vicious cycle many credit card users fall victim to: charging purchases when you don't have the cash to buy them, and then struggling to keep up with the monthly payments because of high interest rates and spending outside of your means.

The average credit card debt held by the typical American is over $8500. As any credit card holder knows, the interest on a credit card causes you to pay more than double the amount you've spent on the card, if you only send the minimum payment and never make any late payments. That number increases when you are late sending payments, thanks to the addition of “late fees”.

Some people attempt to play “credit roulette” to pay down their credit. This is a game where you take out a loan to pay off a credit card, or you transfer credit card debt from one card to another, hoping to take advantage of a lower interest rate or promotional offer. While this will work for awhile, eventually you will have difficulty getting new offers and places to transfer the debt to, or you'll miss the fine print on one of the offers and end up paying more interest than you thought, defeating the purpose of the balance transfer.

So how can the average individual pay off their credit card debt without bankruptcy, without joining a credit counseling service (some credit counseling services are very helpful, but beware of others who charge high fees to combine your credit card debt and end up costing you more money than you would have paid on your own!) and without having to get second and third jobs?

One of the best techniques for paying off credit card debt (and other debts as well, for that matter) is the snowball technique. In the same way that a snowball gathers more snow and grows as it rolls down a hill, your payments to your creditors will grow as you pay off one debt and then apply that payment to your next creditor.

Make a list of each of your creditors, including their minimum monthly payment, the total amount owed, and the interest rate you are being charged. The debt that has the least amount owed will be the first creditor you will concentrate on paying off. You'll pay the minimum amount owed on each of your accounts except for that one, sending as much as you can to this creditor to pay it off.

For example, let's say you have three credit cards. Credit card one has $7,000 owed at 20% interest, and a minimum monthly payment of $80, credit card two has $5,000 owed at 18% interest and a minimum monthly payment of $45, and credit card three has $2500 owed at 21% interest with a minimum monthly payment of $30. You're going to send minimum payments to credit card's one and two, and send as much as you can afford to credit card three, until it is completely paid off. Let's say you can afford to send $100 to credit card three. Once you've paid the account off, write the company and cancel the account. This removes it as ”available credit” on your credit report and helps your credit score. So now you have an additional $100 a month. You'll now concentrate on credit card two, which is now your lowest debt, now slightly less than $5,000. The payment you'll send to credit card two will be $145, since you had already been sending the minimum amount of $45, and you're adding the payment from the first card that you paid off. The snowball has gathered more snow! Now, once you've paid off your second credit card, you will have an additional $145 per month to send to your last credit card, to which you had already been sending $80. The new payment to credit card one is $225 per month- almost three times the minimum amount due.

Using the snowball technique is not an overnight solution, but you most likely didn't obtain all of this debt in one night, either! It is an easy method to apply, and will get you out of debt much faster and at less interest than if you just sent the minimum to each card every month, and works much more effectively than trying to send an additional few dollars to each account every month.

How to Avoid Credit Limit Charges

by Latoya Irby

Most standard credit cards have a credit limit, the maximum amount you can charge without facing a penalty. Though creditors give you a limit for charges, they'll actually let you go over the limit, but charge you for doing so. Going over your credit limit can have some costly effects.

First, your creditor will likely charge an over-the-limit fee of as much as $39 each month your balance is over your credit limit.

Second, your interest rate can increase to the card's default rate, which in some cases is as high as 31%. This increased interest rate makes it more costly to carry a credit card balance beyond the grace period.

Lastly, your credit score takes a hit. Since 30% of your credit score compares your debt level to your credit limits, having an over-the-limit balance will cost credit score points. (See 15 Credit Score Killers.)

Here are some ways to avoid the costs of going over your credit limit.

* Know your credit limit. Not knowing your credit limit is a disaster waiting to happen. It's much easier to go over your limit if you don't know what it is. To find out your credit limit, look at your billing statement. Since creditors sometimes raise and lower credit limits, it's a good idea to monitor your limit regularly.


* Don't expect your creditor to stop you. It'd be nice if your credit card was declined for purchases that put you over your limit. Unfortunately, your creditor will let you exceed your limit. After all, they make money when you do it, so why would they stop you? It's up to you to avoid swiping your card when you're in danger of going over your limit.


* Enroll in balance alerts. Some credit cards send alerts to cardholders when their balance is within a certain percentage or dollar amount of their credit limit. If your credit card offers this type of alert, sign up for it.


* Keep your balance low. A low balance gives you room to make purchases without going over your limit. Not only that, it's better for your credit score. A good credit card balance is 30% of your credit limit or lower. That's a balance of $300 or less on a card with a $1,000 limit.


* If you're not sure, check. Anytime you're unaware of your balance and credit limit, check before making a purchase. Many credit cards have an automated line available 24/7 for checking this type of information. Use the customer service number on the back of the credit card. If you have a cell phone, you can even call from the store before making your purchase.

How to Survive the New Credit Crunch

by Lynette DeNike

If you breathed a deep sigh of relief, believing you escaped financial fireworks set off by the mortgage madness, that relaxing exhale might have been premature. Chances are you will soon be receiving fat envelopes from your credit card companies containing important changes to interest rates, fees, grace periods, and limits.

Why? The same banks that issue the most credit cards rank among the highest volume lenders of adjustable rate mortgages, also called ARMs. These loans typically start with low monthly payments and then reset higher -- sometimes much higher -- between two and five years later. As you've probably read, a growing number of borrowers are finding it impossible to pay the reset cost of these mortgages. Banks are experiencing an increase in delinquent accounts and foreclosures. They are beginning to lose money and are taking some of the following actions:

1. Increasing interest rates. You may see minor changes with interest rates rising only a couple of percentage points. Or you could be offered a new variable rate account with interest changing monthly. But watch out for this killer: a spike interest (up to 34 percent) if a customer makes one late payment on any credit account.
2. Higher late fees and over-limit fees. Because every credit card company is different, it's essential that you read the tiny, boring print explaining your fees. Be certain you know how to prevent these unnecessary charges.
3. Shorter grace periods. A grace period is the time between the date a monthly statement was prepared and the date the payment is due. For many years this was about 25 days. Recently, some lenders have been shortening this payment cycle. Beware of accounts with very short or no grace periods. You risk creating a history as a late payer, which will destroy your credit rating.
4. Lowered credit limits and less frequent limit increases.

If you receive notification of account changes, your recourse is somewhat limited. You have the right to reject the change. This choice will probably require you to close your account. If it is an account you've used regularly and paid on time for the past six months or longer, you want to keep it open because your credit history makes up approximately 30 percent of your credit score.

Purchases that were made under the original account terms will be paid off under those same terms. You can accept the new account terms, pay off the existing balance under the old rules and stop using the account to carry a balance from month to month.

After the old balance is paid off, use the account once a month to make a very small purchase and pay it off immediately. The account will remain active. On your credit report it will reflect an ongoing responsible use of credit. Buying small items that use a tiny portion of your account limit and paying it in full each month means you won't pay exorbitant new interest rates while you are taking action to raise your credit score.

If you must find an alternative to your current credit cards, an online financial data accumulator called Bankrate.com provides a no-cost service that allows consumers to compare credit card terms and availability nationally and by state. Unlike ad-sponsored sites, Bankrate attempts to provide accurate data for every reputable lender. If your credit scores are high, there are still zero percent introductory cards available, although many have shortened the initial low-interest period. Try to lock in the terms to follow the introductory period.

Bankrate negotiates interest rates and fees lower than those offered to the public by many banks. Be sure to mention that you're looking at the Bankrate Web site when you speak with lenders so you get their lower rates.

Do not give anyone your social security number or personal information until you’re ready to open an account. A company with a social security number will check your credit. Each time your credit is checked, between 5 and 30 points get shaved off your credit rating. When you decide which account you prefer, call that bank back and complete the application as a Bankrate referral.

Tighter credit requirements will be with us into the foreseeable future. Now is the time to reduce debt, manage credit wisely, and actively plan for ongoing restrictions.

What Does Bankruptcy Discharge?

by AllBusiness

For bankruptcy purposes, the term discharge refers to the legal eradication of a debt. A debt that is discharged can no longer be enforced against the debtor; however, any liens securing the debt may survive the bankruptcy case.

Normally, a bankruptcy discharge means that the individual debtor’s financial liabilities are erased or wiped out. When a discharge is granted, it protects the debtor from personal liability on the discharged debt. However, a discharge is only allowed for certain debtors and for certain debts. For example, non-individual debtors cannot obtain a discharge in a Chapter 7 bankruptcy. Additionally, if a partnership or corporate debtor is liquidating under Chapter 11, and will cease operations upon completion of the plan, the debtor cannot receive a discharge.

Debtors may be deprived of a discharge if they’ve committed fraud against the court by lying, being uncooperative, or concealing or destroying estate property. In these cases, debtors are denied bankruptcy and will remain liable for pre-petition debts.

Certain debts are not dischargeable under Chapter 7, including:
* debts resulting from fraud, misuse of funds, embezzlement, or larceny
* debts that arise under false pretenses, including bogus representation, fraud, or false financial statements
* debts for certain taxes
* certain debts that result from the purchase of luxury merchandise or cash advances
* obligations a debtor neglects to list in the bankruptcy schedules
* alimony, child support, and other debts arising out of a divorce or separation
* student loans
* orders of restitution and debts resulting from willful and malicious injury

In cases of Chapter 11, debtors may receive a discharge of all debts that occurred before the plan was confirmed. However, in cases of individual debtors, the exceptions to discharge established by Section 523 of the Bankruptcy Code pertain. For more information on this topic, check out Chapter 11 Bankruptcy and Discharged Debts.

In Chapter 13 cases, and with a few exceptions, obligations detailed within the plan will be discharged when all payments under the plan have been made. The only debts not discharged under Chapter 13 are:

* criminal fines and restitution
* obligations not listed on the debtor’s bankruptcy schedules
* debts for spousal maintenance, alimony, and child support
* student loans
* debts related to drunk driving convictions

These exceptions apply to individuals only; corporations are not eligible for discharges. That said, under Chapter 7 corporations are allowed an orderly liquidation directed by the trustee, and without shareholder expense. Creditors are guaranteed compensation in accordance with available resources and according to claim priority. In addition, the corporation’s previous management is assured that assets remaining after all Chapter 7 expenses have been paid will be used to pay taxes, for which they as individuals may be legally responsible.

Dischargeable debts for Chapter 7 include:

* auto accident claims
* business debts
* guaranties
* income taxes that aren't priority taxes
* judgments
* leases
* medical bills
* negligence claims
* personal loans and credit card debts
* tax penalties over three years old

Debts that are not dischargeable include:

* accident claims involving intoxication
* child or family support
* criminal fine or restitution
* debts listed in a prior bankruptcy where the debtor was denied a discharge
* penalties (other than tax penalties) payable to the government
* recent taxes
* student loans
* trust fund taxes
* unscheduled debts

A creditor who wishes to contest the discharge of the debts must promptly take the action necessary to advance his claim.

The Truth about Debt Settlement and Your Credit

by DebtShield

Misinformation about credit and an incomplete understanding of debt settlement can muddle facts about how this debt relief option can affect your credit score. Fortunately, as consumers learn more about their credit score, and its influence on their financial lives, they want to know how debt settlement could affect it. Financial education and awareness can build a better understanding of the real correlation between debt settlement and your credit.

Debt settlement can be a viable debt relief option for people who cannot manage to repay their debts and want to avoid filing bankruptcy. Many people who qualify for debt settlement already have poor credit because they are, or are about to, fall behind in their payments. For people who have maintained good credit, debt settlement can be damaging. Creditors send your account to their collections department, if they haven’t already, and they may report to the credit bureaus that you are missing payments. It is important to understand your credit may be negatively affected before enrolling in a debt settlement program.

But perceptive is important. Here are some points to consider:

• If you are behind on payments to your creditors, your credit is likely already damaged.
• You may be able to get out of debt faster with debt settlement than with credit counseling and rebuilding your credit may be easier once you’re out of debt.
• If you are truly in financial distress, your credit may suffer with or without debt settlement.
• As with debt settlement, other debt relief options can also have an affect on your credit.

If you have great credit and the ability to pay off your debts, you are probably not qualified for a debt settlement program. Otherwise, take a look at the larger picture to balance your desire for good credit and your need to reduce your outstanding debt.

Some people may have specific reasons for avoiding damage to their credit. For example, if you are planning to buy a home in the near future, damaged credit could interfere with your plans. The bottom line is to decide what’s more important: maintaining decent credit with the ability to obtain loans and additional credit, or, attempting to reduce your current unsecured debt.

Debt settlement programs are designed to settle all of your enrolled, unsecured debts, so you can begin rebuilding your credit right after you graduate. Depending on your situation and your goals, temporary damage to your credit may be worth it to get out of debt.

If your credit is your only concern, you may want to consider the bigger picture before you completely rule out debt settlement as a debt relief option. Your present and potential credit standing and your overall debt situation must all be considered before you commit to any debt relief option.

If you have questions about debt settlement, you can learn more about the process and learn whether it’s the right solution for you.

How to Stop Debt Collector Harrassment

by: Debbie Dragon

There are some debt collectors who take their jobs very seriously, but completely ignore regulations designed to protect consumers. They will do or say just about anything to get their clients (debtors) to repay their debts. Debt collectors are typically hired by lenders to attempt to collect a debt on their behalf, although sometimes, debt collectors are another department within the same company. In 1977, the Fair Debt Collection Practices Act was passed to provide protection from consumers from abusive third-party debt collection practices. Here is the protection this act provides to you – and what to do if a debt collector is in violation of any of these provisions:

What Debt Collectors CANNOT Do:

• Call you at work if you've specifically told them your employer doesn't approve of phone calls at the workplace.
• Call you before 8am or after 9pm.
• Lie to you
• Imply that you've committed a crime.
• Conceal their identity.
• Ignore a written request from you that asks them to stop contacting you via telephone.
• Harass or abuse you.
• Send you a notice about a court judgement that isn't real.
• Call someone else, other than your spouse, to talk about your debt.
• Use profanities when talking to you on the phone
• Threaten you or your personal property with violence.
• Publish a listing (except to credit reporting bureaus) regarding your debt.
• Contact you if you have an attorney to represent you regarding your debt.
• Threaten to garnish your wages if they have no intention of doing so.
• Add fees and additional charges to the amount you owe.

Are Your Fair Debt Collection Practices Act Rights Being Violated?

The Fair Debt Collection Practices Act offers protection to consumers who are in debt – but only if they know how to use it. If your rights under the FDCPA are violated, you have up to one year to file a lawsuit against the debt collector. If you are awarded the case, you will be reimbursed for attorney fees, actual damages, and up to $1,000 additional money.

If you think your rights have been violated by aggressive debt collectors, you can do something about it under the Fair Debt Collection Practices Act.

Credit Card Debt Reduction: Highest Interest Rate or Lowest Balance?

by Miranda Marquit

Which credit card should I pay off first? The one with the higher interest rate? Or the one with the lowest balance?

As with most debates about personal finances, the answer depends on your personal situation, and what works best for you.

The case for highest interest rate first

This is the route that most financial money-crunchers will tell you to take. A higher interest rate means that you are growing your balance faster, and paying more money to the credit card company and less to the principal. You will pay less money in the long run by eliminating the card with the highest interest rate first, and then moving on down the line.

The case for the lowest balance

For some people, though, getting out of credit card debt is about the psychology of having all of those credit cards. And many people need to feel as though they are making progress. My husband and I fall into this camp. When we got rid of our credit debt, we started with the lowest balance. This meant that we paid of a credit card much faster than we would have if highest interest was our plan. Paying off that first credit card gave us a rush -- and the motivation we needed to keep going.

In the end, you need to do what will work best for you. Consider your preferences, and the psychology you have when it comes to money. Then choose the course of action that will best motivate you to pay off your debt.

Top 6 Ways To Get Out of Debt

by Debbie Dragon

It's certainly easy enough to get yourself into debt, but when it comes to becoming debt free most people struggle for their entire lives without every fully experiencing a debt free existence.

Here are 6 things you can do right now to increase your possibility of becoming debt free.


Try consolidating your debts if you have many accounts with small balances on them. It can be a nightmare to keep track of numerous credit cards and loan payments each month, which increases your potential for sending a payment late. If you are able to get a larger loan to consolidate all or most of your smaller accounts, you will have one payment to make each month. You can save on interest if the new loan has a lower interest rate than each of your individual creditors, too!

Try the snowball payment method. The snowball method has you pay all of your creditors the minimum payment except for the creditor that you owe the least amount of money to. On that account, you pay as much as you can to pay it off as fast as you can. Once the account has been paid off, you apply that accounts payment to the next account in line- and the payments you are able to send “snowball” bigger as you pay off each of your accounts. You do pay more interest using this method- but you can generate momentum- after you pay off your first account quickly, you are compelled to keep at it! To save on interest, you can use the snowball method of payment but pay your accounts in the order of the highest interest account first!

Use automatic payment scheduling. Many credit cards and loan companies allow you to schedule your payments to automatically be paid from the checking or savings account of your choice. There may even be an incentive for doing so, like a lower interest rate or other discount since it's less work for the billing department. By doing this, you don't have to remember to send the payments out on time and you save on the cost of the stamp. Take it a step further, and schedule your payments on a weekly basis rather than monthly, and watch how much interest you save!

Pay your mortgage bi-monthly. As long as your mortgage company does not have a prepayment penalty, you should consider sending bi-monthly payments instead of one monthly payment. Just be sure that your mortgage company will apply the payment when you send it, and not hold it until the end of the month. Sending two payments each month doesn't mean you have to send extra money if you don't have it to send, but by simply dividing your regular monthly payment into two payments rather than one lump sum will save you a considerable amount of money on interest and therefore pay off your mortgage faster. If you get paid bi-weekly, this is how you should pay your mortgage payment. You'll end up paying 26 half-payments each year, which means you end up paying an extra mortgage payment each year without really noticing!

Reduce unnecessary spending. In order to increase the amount of money you have each month to make it possible to pay more to each of your creditors, you should look for ways to reduce unnecessary spending. If you're buying a coffee three days a week on the way to work, consider making it at home instead and save $2 a cup. It doesn't seem like a lot of money, but over time it does add up and can help you pay down your debt quicker.

Consider a part time job. If you are really serious about paying off your debt, you might consider getting a second job. Keep in mind- if you have to travel all over the place to go from one job to the next; you probably aren't going to make enough to offset the expenses involved in the traveling. But if you're able to find part time work online, including ebay, writing, making posts on forums- or whatever skills you may have- the money you make can be applied directly to your creditors as additional payments.

Ten Tips to Getting Out of Debt

For some, job layoffs and unforeseen external factors have loaded them up with debt. For most, however, debt is the result of extraneous spending, poor money management, or both.

Here are ten tips to getting out of debt. Some are easier to follow than others, but all are designed to help alleviate the problem:

1. Create a realistic monthly budget for your expenses. List all monthly bills and necessities and make sure they are covered by your monthly income. Allow only the money remaining after the bills are paid to be spent elsewhere. Stay within your budget guidelines.

2. Pay off the balance on the credit card with the highest interest rate first (unless the balance on any card exceed 50 percent of your credit limit). First, pay all balances to below 50 percent of the card limit because balances above this level cause your credit score to diminish. Then pay off the balance on the credit card with the highest interest rate. If the account was opened within the past year and you have additional older accounts, close it after it is paid off. Next month do the same with the card that has the next highest interest rates. Continue until you reach the credit card with the most favorable terms (i.e., low interest rates). Use this as your preferred account. You need only four open accounts to establish a positive credit history.

3. Learn to use cash instead of credit cards. Have one primary credit card and use it only for emergencies or major necessities, such as a new refrigerator if the current one stops working. Put your credit card in a safe place, not available for everyday use. Also, do not accept increases on your credit card limit above an amount you can easily pay off in three months.

4. Use direct deposit for your paychecks. Also have a limit on how much you will allow yourself to withdraw each week and month.

5. Cut down on your discretionary expenses. This includes dining out, overusing your cell phone, and other such unnecessary expenses.

6. Evaluate your living situation. Your housing costs should be no more than 33 percent of your household income, including mortgage payments, property tax, and both property and homeowner's insurance. You can shop around for lower insurance rates, refinance your home mortgage, and look for more economical utility plans.

7. Avoid borrowing money to get out of debt, especially consolidation loans. Many people think this is a way of helping them get out of debt. However, consolidation loans are simply a means of combining debt. You could end up losing everything because you’ve tied it all up in one loan. If you must borrow, see if a friend or family member can lend you money, since the interest rates should be low or nonexistent.

8. Contact your creditors and try to work out repayment plans. Many creditors are willing to work with you in a manner that will help them get their money without having to resort to debt collectors.

9. Become a savvy shopper. Look for deals, bargains, and savings. You’d be surprised at how much you can save if you take the time to shop around. Check out the price comparison Web sites such as Shopping.com and BizRate.com.

10. Look for extra ways to make some money. From part-time work to a garage sale to taking in a boarder, there are many ways to bring in some additional income.

If all else fails, seek out help from a debt reduction specialist or counselors who can help you formulate a plan for getting out of debt and staying out. Just make sure that you check out the service in advance. Many companies are simply taking advantage of people in debt and charging them high service charges. Typically, these companies can get you debt free in about 3 years and charge 15% of your debt amount as their fee. If you stay disciplined and complete their programs, this is not a bad way to go once you consider all of the savings on time and money.

How to Save Money and Get Out of Debt

By *01 WriterGig

Ready to get serious about managing your money? Wish you have a healthier savings account? If too much debt is causing you stress and concern, take the steps necessary to turn around your finances. Not only will your bank account look better, you'll sleep better too with the stress of debt out of your life. Here's how to save money and get out of debt.

Step 1 - Tally up your debts, your monthly income and your set expenses (bills that are constant). Estimate your other expenses, such as groceries, gas, clothes and extras. Look back at bank account statements and credit card bills to get a feel for how much you spend in the different

Step 2 - Make a plan. If the word budget scares you, think of it as a plan for how you will allot or spend your hard-earned money. How soon can you save money get out of debt? The sooner you have a plan, the quicker this process will be. Decide now how much you will spend in each category every month. Make sure there is some money earmarked for savings.

Step 3 - Use cash for variable expenses, such as groceries and incidentals. Take the cash out weekly and allot it to envelopes marked with the categories. Spend wisely. Once the cash is gone, it's gone until the next dispersement. No dipping into other envelopes or the bank account.

Step 4 - Save $1,000 in an emergency fund. Pay minimums on your debt while you save your money for emergencies. It's important to have this cushion in the bank so that in the case of an emergency (unexpected car repair or medical expanse) you don't have to turn to credit cards once again.

Step 5 - Cut up your credit cards (but don't close the accounts if you have an outstanding balance or still owe money on them). Stop using them online, too. Use your debit cards for budgeted online expenses.

Step 6 - Have a weekly budget meeting with your spouse or yourself if you're single. Be accountable to each other.

Step 7 - Pay off your smallest debt first, adding anything extra to that debt each month until its gone, while still paying the minimum on your other debts. Once the first debt is paid off, put everything that was going toward it to your next debt. Dave Ramsey calls this the "debt snowball" because as you pay off the smaller debts, you free up more and more money to pay off the larger ones.

Step 8 - Stay motivated. Keep working toward your goals and remind yourself monthly of the progress you've made. Get intense, Get rid of your debt so that you can be free of those interest payments and begin spending your money on the things that matter as you save for your future.

Step 9 - Use manufacturer's coupons, combined with the best grocery store sales, to save money on your food bill. Since a large portion of your disposable income goes to buy food, this is a good area to trim. See resources, below, for a great coupon source website.

Step 10 - Plant some of your vegetables and herbs instead of buying them. Even replacing 1/4 of your summer vegetables with home grown ones will add up to a big savings. Do you live in an apartment or small house? If you have a balcony or deck, you can at least have a decent container garden. Start with tomatoes in large pots. Small savings will help you save money and get out of debt more quickly.

How to Compare Debt Settlement vs. Bankruptcy

By eHow Personal Finance Editor

Debt is a part of life, but too much debt can make life difficult to enjoy. Two potential solutions to resolving this problem and starting your financial life anew include filing for bankruptcy or using a debt settlement company. Before you commit to either option, it's important to know the pros and cons of using a debt settlement company versus filing for bankruptcy to help alleviate your financial woes.

Determine the Extent of Your Debt Problem

Step 1 - Request a copy of your credit report from one or all three major credit reporting agencies in the U.S. The companies are TransUnion LLC, Equifax Credit Information Services, Inc., and Experian.

Step 2 - Review your credit report and check for inaccuracies, such as incorrect personal information, accounts that do not belong to you and even accounts listed with balances that are actually paid in full. It's also important to know your FICO score, which is a credit score system. The acronym 'FICO' is derived from the name of the software used to calculate the score. While FICO scores range from 300-850, the average score is somewhere in the high 500s.

Step 3 - Determine how much debt you have by adding up the balances of all of your credit accounts, loans, both secured and unsecured, and even collection accounts.

Step 4 - Use this information when making your decisions about filing for bankruptcy or employing a debt settlement agency to help alleviate your financial problems.

Examine Your Monthly Finances

Step 1 - On a sheet of paper, list all of your monthly income including paychecks, alimony/spousal support, child support, bank, investment and rental interests or income. If you work overtime or receive bonuses, include that information, too. If you opt for filing bankruptcy, you will need to include your average monthly income from the six months prior to filing in your bankruptcy petition, so it's important to get these numbers no matter which solution you opt for, bankruptcy or credit counseling.

Step 2 - On another sheet of paper, list all of your mandatory monthly living expenses, such as for housing, transportation, insurance, prescriptions and doctor visits, utilities, groceries and education-related costs. Don't include payments for credit card debts, entertainment, or other items that are not necessary for your day-to-day survival. Definitely do not list an expense twice. That means if you used your credit cards to buy prescriptions, include that cost in your mandatory expenses list. However, if you used your credit card to buy a shirt, do not list the purchase on your mandatory expenses list at all, unless it was necessary for say, work.

Step 3 - Subtract the total of your monthly living expenses from your total monthly income. A balance indicates you have expendable income you could potentially use to pay down your debts. A zero or negative balance indicates you do not have expendable income that could be used to pay down your debt.

Step 4 - These calculations are important for helping you formulate your decisions about filing for bankruptcy or seeking the aid of a debt settlement agency.

Determining if Debt Settlement is Right For You

Step 1 - Determine if you could pay down your debts with your current income. If your income does not exceed your housing expenses, utilities, gas, groceries, and basic financial needs for the month, debt settlement is not a viable solution for you. However, if your monthly income exceeds your basic living expenses, debt settlement may help you resolve your financial crisis.

Step 2 - Determine if your debt situation qualifies for debt settlement services by examining the total amount of unsecured debt you owe. To qualify, you will usually need to owe at least $7,500 in unsecured debt. However, the qualifying balance will vary by debt settlement company. Make sure you ask each debt settlement company about their unsecured debt balance requirements to determine which debt settlement company is right for your situation.

Step 3 - Look for reputable debt settlement companies. Companies that charge huge fees up-front are companies to be avoided. Opt for debt settlement companies endorsed by the Better Business Bureau, or some other reputable pro-consumer group. Make sure to check that their fees are reasonable for the services rendered.

Step 4 - Compare the services each company offers. Look for companies with a sound history of effectively negotiating with creditors. Ask for references or case studies you can examine that prove the company's track record. If company representatives are hesitant to provide you with that information, walk, don't run, out their door.

Step 5 - Examine the pros and cons of committing to a debt settlement program. Ask the debt settlement company if by hiring them to represent you to negotiate your debts will your various creditors how your life might be impacted. Will those harassing creditor calls stop? (possible, but no guarantees. Creditors can still contact you for the collection of debts they are owed unless or until you file bankruptcy). Also, inquire how a debt settlement program will impact your credit in the future and what the long-term side effects to your credit might be.

Step 6 - Make sure you are prepared for the drawbacks of debt settlement programs such as the potential for increased creditor calls, possible collection lawsuits initiated by creditors, damaged credit and tax problems. If you don't think you can handle these possibilities, then you should probably look for another debt solution.

Determining if Bankruptcy is Right For You

Step 1 - Determine if you have any other options for resolving your financial crisis short of filing bankruptcy. Look online for other solutions to your debt problems such as debt settlement, debt management and nonprofit assistance. In addition, attorneys who practice bankruptcy law have begun to offer debt settlement services to clients who might have filed a bankruptcy before the Bankruptcy Code was overhauled in October, 2005, and find the new laws too onerous.

Step 2 - Determine if you qualify for bankruptcy by reading the most current version of the U.S. Bankruptcy Code, found in Title 11 of the U.S. Code. However, the revamped Bankruptcy Code is extremely complex to understand, so don't be surprised if you aren't able to comprehend much of what you are reading. The Bankruptcy Code can be found online. Many books attempting to explain the Code in plain English have been written, so check out your local library or bookstore for some helpful titles. Even if you discuss your financial problems with an attorney who specializes in bankruptcies, you might still want to read up on the law for yourself.

Step 3 - Determine which bankruptcy chapter you qualify for by reading the descriptions of each type of bankruptcy, as well as by reading the rules and regulations associated with each. This information can be found at your local library, bookstore, online, or by talking with an attorney who handles bankruptcies in their everyday practice.

Step 4 - Court costs for filing bankruptcy are different depending on which chapter you file. Currently, a Chapter 7 bankruptcy costs $299 in filing fees while a Chapter 13 costs $274, although Congress can change those fees at any time. It will also be important to learn how much an attorney will charge you to represent you in your bankruptcy. If you meet with a bankruptcy attorney, they will likely give you a written fee quote for their services either at your first meeting or perhaps in the mail. Do not expect to be able to email a bankruptcy attorney for a price quote on what they would charge for their services. Bankruptcy is an extremely complex area of law and an attorney well familiar with the law's complexity wouldn't likely give you a fee quote over the phone or in an email without knowing your entire financial picture. Would you call a doctor to ask how much it would cost to set your broken arm? Do you think the doctor would even come to the phone, and secondly, do you think they should or would give you an answer? They don't know how broken your arm is by talking to you on the phone and a bankruptcy attorney doesn't know how bad your financial situation is until they meet with you to discuss it.

Step 5 - Another important consideration is deciding whether filing for bankruptcy will resolve your credit problems. Depending on the types and amounts of your debts, a bankruptcy filing won't necessarily rid you of your duty to pay some of your bills, even though you filed for bankruptcy. Keep in mind that a bankruptcy filing remains on your credit record for ten years but a bad debt is only supposed to stay on a credit report for seven.

Tactics For Paying Off Debt Collections

by Latoya Irby

A debt collection is one of the worst entries on your credit report. A collection is a severely past due account that will make it difficult for you to get approved for new credit and loans.

If you have a collection account on your report, it’s likely affecting your credit score. This is especially true for more recent collections. You can improve your credit score by getting these collection accounts deleted from your report or reported as “Paid” or “Current.”

Before you pay off a collection account, first negotiate with the debt collector to have your credit report updated to something favorable. The only unacceptable scenario is to pay the collection without having having fact reflected in your credit report.

Here are some possible payment scenarios and outcomes, listed from most ideal to least ideal (but still acceptable).

Ideal

Negotiate with the debt collector to have the account deleted from your credit report in exchange for payment. Send a written request (a pay for delete letter) to the collector offering a settlement payment if the collector deletes the account from your credit reports. Wait for a written response from the collector before taking any action.

If you prefer, you can contact the collector by phone to negotiate pay for delete. However, you risk inadvertently saying something to the collector that conveys responsibility or liability for the debt. You don't want to do this if you're beyond or nearing expiration of the statute of limitations. Even if you choose to negotiate by phone, you still need to have the agreement in writing. Have the collector mail or fax you a letter including the terms of the agreement before making a payment.

MyFico forums has a sample pay for delete letter you can use. Remember, debt collectors don’t have to remove accurate entries from your credit report.

Next best thing

Most collectors want payment in full and will not delete the account from your credit report for a settlement payment. When this is the case, offer to pay the account in full in exchange for the collector deleting the account from your credit report. Again, send your request in writing and wait until the collector responds in writing before making a payment.

Not as good, but still ok

Ideally, you want the entry completely removed from your credit report. Unfortunately, not all collectors are willing to do this even in exchange for payment. If you cannot have the entry completely removed, you should have it updated as “Paid in full.” Offer the collector a settlement payment some % less than the full amount owed. Get the collector to agree to update the account as “Paid in full.” The agreement should be in writing.

Acceptable

Settle the account with the collector and accept an update of “Paid. Settled.” Keep in mind that a settled entry on your credit report will not boost your score as much as “Paid in full.” If you want your account to state “Paid in full” but cannot get the collector to do so for partial payment, then pay the account in full.

Acceptable

Pay the collector in full. Be sure to keep proof of payment. Monitor your credit report to make sure the collector updates the account as paid. If the collector does not update the account, dispute the account with the credit bureau, providing proof of payment if necessary.

Your Rights When In Collections

The Fair Debt Collection Practices Act, FDCPA, dictates how debt collectors can act when collecting a debt from you. These are things a debt collector can't do. If you need to reference the law, citations have been provided.

1. Ask you to pay more than you owe

The collector cannot misrepresent the amount you owe. [15 USC 1692e] § 807(2)(a)

2. Ask you to pay interest, fees, or expenses that are not allowed by law

The collector can't add on any extra fees that your original credit or loan agreement doesn't allow. [15 USC 1692f] § 808(1)

3. Call repeatedly or continuously

The FDCPA considers repeat calls as harassment. [15 USC 1692d] § 806(5)

4. Use obscene, profane, or abusive language

Using this kind of language is considered harassment. [15 USC 1692d] § 806(2)

5. Call before 8:00 am or after 9:00 pm

Calls during these times are considered harassment. [15 USC 1692c] § 805(a)(1)

6. Call at times the collector knew or should know are inconvenient

Calls at these times are considered harassment. [15 USC 1692c] § 805(a)(1)

7. Use or threaten to use violence if you don't pay the debt

Collectors can't threaten violence against you. [15 USC 1692d] § 806(1)

8. Threaten action they cannot or will not take

Collectors can't threaten to sue or file charges against you, garnish wages, take property, cause job loss, or ruin your credit when the collector cannot or does not intend to take the action. [15 USC 1692e] § 807(5)

9. Illegally inform a third party about your alleged debt

Unless you have expressly given permision, collectors are not allowed to inform anyone about your debt except:

• your attorney
• the creditor
• the creditor's attorney
• a credit reporting agency
• your spouse
• your parent (if you are a minor)

[15 USC 1692c] § 805(b)

10. Repeatedly call a third party to get your location information

The collector can only contact a third party once unless it has reason to believe the information previously provided is false. [15 USC 1692b] § 804(1)

Expensive and Credit-Score-Damaging Ways to Get out of Debt

By LaToya Irby

The easiest way to recognize a “stupid” debt repayment method is to think about whether the debt is actually paid off when the method’s complete. As you think about ways to get rid of your debt load, ask yourself, “Is this just a quick, easy solution to tide me over or will this really, once and for all, get rid of the debt?” Here are some of the worst (and most costly) ways to “pay off” your debt.

1. Borrow from your 401K

You shouldn’t borrow from your 401K period, much less to pay off your debt. Let’s talk about what happens when you borrow from your 401K. First, you can’t contribute to it anymore until you’ve repaid the loan. Second, your take home pay is less (because you have to pay back the loan) until the money’s paid back. Third, if you leave your job, you’ll have to pay the entire loan immediately or you’ll end up with early withdrawal fees and income taxes.

2. Refinance your mortgage

Another bad idea, especially if your debt was unsecured to begin with. Tying bad debt to your home’s equity isn’t smart. When you couldn’t pay your credit card debt, you ended up with a trashed credit rating. Securing your debt with your home means you lose your home and get a trashed credit rating when you can’t make payments.

3. Consolidate with a high interest loan

Debt consolidation may be a solution if you can get a loan at the right terms. If the only loan you can get has a higher interest rate than the average of your other debt, leave it alone. Your monthly payments may look lower, but that’s only because the loan is spread over a long repayment period. If you add up the interest you’d pay over the life of the loan, you’ll see that you’re spending more money that if you hadn’t consolidated with that loan.

4. Transfer your balances to other credit cards

Transferring balances to credit cards with those low introductory rates only makes sense when: you are financially able to pay off the balance before the introductory rate expires and you will not use the card to make purchases or take out cash advances. If you can’t transfer the balance under those conditions, it won’t work for you. And, forget about shuffling your balance to a new credit card with a new teaser rate, the balance transfer fees negate the interest savings.

The solution? The best way to pay off debt is to create a realisticbudget, and negotiate a payment plan with your creditors. This can be done yourself, or with a reliable debt settlement company. Make sure you checkthem out with the BBB, and the fees are no more than 15% of the debt amount over 9 months or more.

Dos and Don'ts Of Using Credit Cards Responsibly

By LaToya Irby, About.com

Most of us aren't born knowing how to use credit cards. Still, it’s important to learn the rules of the credit card game – preferably before you start playing. These do’s and don’ts of credit card usage encourage healthy spending habits for new and experienced credit card users alike.

Don't

• Use your credit card to make everyday purchases. Items like food, clothing, and gas shouldn't be purchased with a credit card. Using your credit card as a substitute for cash is a habit that can quickly lead to debt. For ordinary purchases, leave your credit card in your wallet and use cash or debit card instead.



• Get into the habit of making minimum-only payments. Making only the minimum payment each month increases the amount of time it will take to pay off your debt. It also increases the amount of interest you end up paying. To pay your debts off quicker and cheaper, you should pay as much as you can on your balance each month.



• Use your credit card to buy things you can’t afford. Living a borrowed lifestyle is the quickest way to get into debt. If you can’t afford a purchase today, chances are you won’t be able to afford it tomorrow, or even next month.
  



• Close out a credit card without knowing how your credit will be impacted. There are times when closing a credit card can hurt your credit score. Avoid closing cards that still have a balance or those that make up a significant amount of your credit history.
  
  

Do

• Make wise decisions about purchasing items you need versus those you simply want. We’ve all used the word “need” to describe something we really just wanted badly. Using your credit card responsibly means recognizing which things you need and which you just want.



• Let your creditor know in advance if you won’t be able to make your monthly payment on time. The worst thing you can do is simply forgo your credit card payment, no matter the reason. Most creditors will assist you if you let them know before you miss your payment. Simply call your creditor, briefly explain the situation, and ask that any late fees be waived.
  



• Stay within 30% of your credit limit. A large part of your credit score considers the amount of debt you have. Keeping your balances low helps you maintain a good credit score. Not only that, lower balances are easier to manage than those that are higher.
  
  


• Negotiate a lower interest rate. Especially if your current rate is higher than offers you receive. Your interest rate determines how much you pay for carrying a balance on your credit card. Evaluate the interest rate on your credit card periodically to be sure you are getting the best deal possible.
  
  

Fighting Financial Bad Habits

Many consumers find themselves in a debt quagmire because they have one or two bad financial habits and let those habits spiral out of control. A great long-term form of debt help comes when consumers face these bad habits and fix them, and see the added bonus side effect of taking care of their debt. Just a few examples of bad financial habits follow.

Procrastinator. This can take form in several ways. One way is when you procrastinate about signing up for a 401(k) through your job, or put off amending your life insurance policy when you get married or add to your family. Or it could be even when you procrastinate about adding up your debt to see a final total amount of what you owe. This is an easy fix. Just email your HR representative to find out about opening a 401(k), or contact your life insurance agent, or sit down with a pad and paper (or excel spreadsheet) and your bills and take a deep breath and add it all up.

Money-Melts-in-Your-Hands. It is all too easy to do a little internet shopping on your lunch break, or page through a catalog looking for your nephew’s birthday gift and ending up ordering other things you just had to have. But it’s not fun to watch your bank account shrink as a result. Impulse shopping is a hard habit to break, but it can be done.

Debt Help Tip: For really bad impulse shoppers, it might not be a bad idea to pop the credit cards into a baggie with water and then freeze them. That way, if you want to make a purchase with the card, you’ll need to defrost the card first.

Thanks for reading!

Mike Welton
Financial Advisor-MyDebtIQ.com

1-888-998-1226

Room For Improvement?

If you’re suffering the ill effects of a not-great credit score, it might not be easy to understand why someone with a really great credit score could be interested in credit score improvement.

There’s a number of reasons that someone with a high credit score would want to pursue an even higher score. There are several benefits to having a very high score, not the least of which is it really truly saves you money. Some of the benefits include:

1 - The Very Best Rates on Loans or Credit Cards. The higher your score, the more likely you are to qualify for the best offer.

2- Really Great Perks. While you may have gotten the best possible interest rate on a mortgage, it’s always possible that the lender will be happy to knock off some fees or perhaps even qualify you for a bigger amount of money.

3- Building a Safety Net. As all too many Americans have discovered, there are numerous unexpected life events (e.g., sudden unemployment, death in the family, etc.) that can cause drastic financial reverses. Those consumers with very high credit scores are more likely to emerge from such events with credit scores intact, or at least not ruined.

Credit Score Improvement: All this said, there’s no need to go for total perfection with your credit scores. Many creditors (and the credit bureaus) agree that the slight difference between very high and perfection just won’t make a difference in your everyday life.

Thanks for reading!

Mike Welton
Financial Advisor-MyDebtIQ.com
1-888-998-1226

Preventative Help With Debt

Although the bulk of people seeking debt help are those already in debt trouble, we think it would be helpful to help those people who are not yet in trouble, but could be. Specifically, recent college graduates and even current students. For these young people, we’d like to offer the following tips for preventative debt help.

Consolidate student loans. If all your student loans are from the same lender, you’ll have to consolidate with that lender. If you have multiple lenders, shop around for the best consolidation deal.

Pay your bills on time. Even if you don’t have much credit history to your name, it’s smart to keep it as clean as possible.

Think Hard about your future. Oftentimes, recent college graduates who are unsure about their career plans decide just to go to graduate school, hoping it’ll best guide them to a career later on. However, that can be a very expensive way to test out a career.

Smart vs. Stupid. Debt, that is. Smart debt would be your student loans, unless you’re flunking out. Stupid debt would be any debt beyond basic living expenses: Every dollar you borrow to eat out instead of feeding yourself, to buy the newest video game systems or cell phones, to go out drinking, and to have someone paint your nails is stupid debt.

Debt Help Tip: Smart management of your money is an excellent way to keep from getting into a debt quagmire later on down the road.

Thanks for reading!

Mike Welton
Financial Advisor-MyDebtWorkshop.com