Free Debt Relief Articles | Free Debt Relief Legal Articles

Debt Consolidation: Too Good to Be True?

Thu, 11 Dec 2008 01:04:39 GMT

If you are overwhelmed with debt then debt consolidation might seem like a good idea and, in some cases, it is a good idea. However, in order to make sure that your money is protected and that you make an advantageous financial decision it is important to be aware of the potential problems created by some debt consolidation companies.

What is Debt Consolidation?

Simply put, debt consolidation companies allow you to take out one loan in order to pay off your other loans. Reputable debt consolidators offer the advantages of fixed or lower interests rates and the management of all of your debt in one loan.

Student Loan Consolidation

Colleges and graduate schools are expensive and many students come out of these institutions with significant student debt. Federal student loan consolidations are common and well regulated. It is often a safe and advantageous move for people with educational debt.

Other Loan Consolidations: Things to Be Concerned About

However, other types of debt consolidation are not as safe as student loan consolidations. People who wish to consolidate personal debt, such as credit card debt, should be thorough in their investigation of potential debt consolidation companies in order to make sure that they are making good financial decisions.

You should be concerned about anything that sounds too good to be true. You are probably considering debt consolidation because your debt obligations seem overwhelming and the monthly payments are choking your budget. So, it can be enticing when a company offers to lower your monthly payments by combining your multiple debts into one debt for a lower monthly payment. However, the terms set forth by many of these companies often lower your monthly payments but significantly increase the total amount that you will end up paying.

Another drawback to debt consolidation companies is that you often pay them significant fees to accomplish something that you could do on your own. There is no magic to the work that debt consolidation companies do. They restructure your loans by extending repayment terms, negotiating interest rates and paying off the highest interest rate debt first. You can do all of this yourself by simply calling your creditors and you can save yourself the debt consolidation company fees.

How to Protect Yourself

It is important to clearly understand whether your loan is a secured or unsecured loan. In other words, is the debt consolidation company requiring that you put collateral down for the debt? Typically, if the debt consolidation company is requesting collateral it will be your home that is used for that collateral. Are you prepared to lose your home if you cannot make your new monthly payments?

It is also important to carefully read and understand all of the terms set forth by debt consolidation companies. Sometimes, the lower interest rates or monthly payments are temporary and then rise significantly after the initial period has expired.

Once you understand the potential benefits and the common drawbacks of debt consolidation and you decide that you want to proceed with a debt consolidation program, it is essential that you research the potential companies and do business with an ethical and respected company. You can check a company’s reputation by contacting the Better Business Bureau or your state’s attorney generals office.

The Fair Debt Collection Practices Act

Thu, 06 Nov 2008 20:45:53 GMT

From time to time, many well meaning borrowers fall behind on their bill payments. It may be that the borrower has lost his or her job, has run into unexpected expenses or has simply borrowed more money than he or she can afford to repay. Whatever the reason, many borrowers who fall behind in their payments begin to receive phone calls from persistent debt collectors. Often, these calls come at inopportune times and can feel like harassment because the debt collectors can be very assertive.

The law recognizes that creditors need to be repaid the money which they are owed by borrowers and does not erase the debt. However, the law does recognize that the borrower should be treated fairly. In order to help ensure that borrowers are treated fairly, the Fair Debt Collection Practices Act was enacted.

What is Covered by the Fair Debt Collection Practices Act?

The Act applies to all personal household debts such as car loans, medical bills and, credit card bills. It does not apply to business debts.

Which Methods of Debt Collection are Regulated by the Act?

The Act allows a debt collector to contact a borrower by any method including telephone, fax, mail or in person. However, the debt collector cannot call you at inconvenient times or places. An inconvenient time is defined as before 8 am or after 9 pm. An inconvenient place could be a person’s place of employment if the debt collector knows that an employer would be unhappy with such contact.

You can also limit how a debt collector contacts you by writing the collector a letter. If you write a letter stating that you do not want the debt collector to contact you any further then the debt collector may send you one more letter acknowledging receipt of your letter and informing you of how he or she intends to proceed. For example, the letter might state that they intend to file a lawsuit against you for the money owed.

A debt collector may not discuss your debts with anyone other than you or your attorney. A collector could contact your friends or family to try and find out your whereabouts and how to contact you but a collector may not disclosure the fact that you owe money.

Most importantly, a debt collector may not harass you by threatening violence, using profanity or threatening to publicize your debt. Likewise, a debt collector may not be untruthful with you in an effort to collect money by claiming that you will be arrested or by sending you papers that appear to be from a court or government agency that are not in fact from one of those entities.

What Can You Do if You Believe the Act Has Been Violated?

You have several options available to you if you believe a debt collector has violated the law. You can report any alleged violations to your state’s Attorney General’s office or to the Federal Trade Commission. Either office can help you determine if the actions that you describe by the debt collector are against the law and will allow you to file a complaint against a debt collector.

You also have the right to sue a debt collector in court for alleged violations of the Act. You can do this individually or as part of a class action group against a particular debt collector.

It can be very stressful to owe money. Debt collectors have a legitimate role in trying to collect on a debt for a creditor who is legally entitled to the money that was lent. However, the Fair Debt Collection Practices Act makes sure that the debt collector’s actions are free from harassment, intimidation and illegal practices to protect the rights of the borrower.

What You Need to Know About Predatory Lending

Thu, 11 Dec 2008 01:06:17 GMT

In difficult economic times, many people will pursue whatever legal means are necessary in order to meet their families’ financial obligations. Sometimes, that means taking out additional loans to pay off existing debts or taking out loans with unfavorable terms. However, while some of those loans promise short term solutions they often pose long term problems and borrowers should borrow with caution.

People commonly refer to lenders who engage in the practice of loaning money with unethical or illegal terms as “predatory lenders.” There is no common definition of predatory lending. Any loan that unfairly, unethically or illegally takes advantage of someone because they are not in a position to understand the loan terms or because they are not in a position to seek a loan elsewhere may be considered a predatory loan.

Common Types of Predatory Loan Practices

In order to protect yourself from the harm that can be caused by a predatory loan, it is important to understand how predatory lenders try to take advantage of borrowers.

They Lie. Predatory lenders might lie about the terms of the loan or they might appraise your property at a level that is significantly higher than it is really worth. Or, lenders might encourage you to lie and state that your income, occupation or assets are significantly different than they are in fact. Then, you enter a loan agreement based on untrue facts and cannot afford to make the payments.
They Take Advantage of You. Some predatory lenders assume that their borrowers will either not understand the terms or that they will accept whatever loan terms are offered. For example, a lender might add in high fees for services that are not part of the loan agreement. Or, a lender might charge higher interest rates for borrowers who do not speak English well and who might assume that everyone pays the same astronomical interest rate.
They Pressure the Vulnerable. Unethical lenders might convince you that without their help you will lose your home. They target those who having trouble paying their debts or who have suffered a medical emergency or personal tragedy that make paying the bills difficult. They may assure you that they will help you. Instead, they loan you more money at a rate that you cannot afford to repay.

How to Avoid a Predatory Loan

Predatory lenders can be sneaky and it can be difficult to avoid a bad loan. However, the following tips will help you lower your chances of entering into such a loan.

Read Every Word. The best way to avoid entering into a predatory loan is to read every line of the proposed loan agreement and to ask questions about anything that you don’t understand or is not written as agreed upon.
Never Sign Blank Documents. Do not give the lender the chance to bind you to terms that you are unaware of or might not agree to if they were written and reviewed by you.
Shop around. Do not let a lender pressure you in to signing anything before you are ready or dissuade you from comparing terms with other lenders.
Educate yourself. Before you buy a home, attend a workshop conducted by credit agencies that are approved by the US Department of Housing and Urban Development (HUD) or do research on trusted websites.
Know with Whom You are Doing Business. Ask for references and check them thoroughly prior to entering any kind of agreement.

When people come upon hard economic times, they are understandably anxious to meet both their financial and personal obligations. So, some people enter into agreements that take advantage of their situations. However, each individual needs to be careful not to do business with a predatory lender who can create more problems and make a bad situation even worse.

Dealing with Debt

Thu, 06 Aug 2009 02:23:49 GMT

Dealing with finances is never easy, and for all too many Americans, debt problems have become a major issue in their lives. With the current economic crisis, rising unemployment rates, and steadily increasing costs of living, many people are experiencing the positive and negative effects of credit, debt, and the contracts that are created as a result of financial transactions. Whether you are juggling your bills in an attempt to keep ahead of your creditors, or you find yourself in a position where some debts must go unpaid, you must be aware of your legal rights and responsibilities with regard to your finances.

Debts and Contract Law

All financial transactions create legal contracts involving both the creditor and debtor. Taking out an auto loan, borrowing money to buy a home through a mortgage lender, and becoming approved for a new credit card are all examples of entering into contracts that give you, the debtor, certain rights, but that also give your creditors certain rights if you fail to live up to your contracts. Any violation of such contracts on your part can have serious consequences. Therefore, it is essential that you make yourself aware of these consequences, particularly before taking on additional debts.

Issues to Consider

As you consider your current finances, particularly in terms of your existing debt, you should ask yourself the following questions:

What are my obligations for taking out any sort of loan or line of credit?
How will late bill payments or unpaid bills affect my credit score?
What rights do I have as creditors begin contacting me about unpaid debts?
What will be the effect of a lawsuit and/or judgment against me as a result of an unpaid debt?
Do I have any other recourse for dealing with debt other than filing for bankruptcy?
Is filing for bankruptcy an essential or potential option for dealing with my debts?

Once you have discovered the answers to these essential questions, you will be able to better deal with your finances and debts, and reach the solutions that are best for you and your family.

Your Responsibilities When You Borrow Money

If you choose to purchase some item that you cannot afford to pay for in cash, you take on certain responsibilities as a result of borrowing money from a bank or other financial institution. When you enter into a loan, you become obligated to that creditor to repay the loan, at a specified rate of interest, according to the payment scheduled to which you agreed. Whether you have opened a new credit card account, signed a promissory note on a home loan, or purchased a new automobile on a line of credit, you have promised to pay the creditor according to the terms set by your contract, which, in turn, are often affected by your credit score or rating.

Debt and Your Credit Score

The credit industry assigns a risk value to you as a debtor based on your past credit history, which directly affects your ability to obtain credit, whether it is in the form of a mortgage, an auto loan, or a credit card. Simply put, if you have always paid your bills on time and in full, you are a better risk for a bank than a person who has a history of not paying his or her bills. Therefore, a person with a higher credit score is likely to be rewarded with better contract terms, such as lower interest rates, lower payments, and higher credit limits, than a person with a negative credit history. As a result, it is important to keep in mind that the credit card account on which you defaulted at the age of nineteen is likely to reappear and have a negative effect on your credit score when you are ready to purchase your first home, even ten years later.

Your Rights as a Debtor

There may come a time in your life, however, when you are unable to pay some or all of your bills in a timely fashion. Unemployment, health problems, and divorces can all intervene and cause financial problems that you never expected. In this situation, you should be aware of the Fair Debt Collection Practices Act (“FDCPA”) and the rights that it gives you, even if you are unable to pay your bills. The FDCPA prevents creditors from harassing you regarding unpaid debts, by doing such things as calling you at work and threatening you. Therefore, the FDCPA is an important tool in preventing unwanted and unneeded stress that you might already be feeling as a result of your financial situation.

Consequences for Breaking a Contract

If you are unable to pay your bills for a period of time, though, it is likely that you have broken the contracts under which you agreed to pay for certain items. Breaking legal contracts does give creditors remedies against you for your failure to pay, including suing you in court if you break a contract by not making your payments as agreed. If you have purchased an item that secures a loan, such as a vehicle or a new stereo system, the creditor has the right to not only sue you, but also to legally repossess the item securing the debt. Likewise, if you default on a mortgage loan, you could be subject to a mortgage foreclosure action, which results not only in a judgment against you that you must repay, but the loss of your home altogether. Again, any sort of legal action, repossession, foreclosure, and/or judgment against you will negatively affect your credit score, perhaps for years to come.

Alternatives to Bankruptcy

Fortunately, there are some solutions to your debt problems, which may differ according to your situation. Credit counseling may be helpful to you as you begin to sort out your debts, and get you back on track to paying your bills. Some credit counseling agencies also offer debt management plans, by which you make certain payments to the agencies, who, in turn, negotiate with your creditors and apply your payments toward your debts. Keep in mind, however, that for-profit credit counseling agencies are not all legitimate, and you’ll want to investigate such an agency thoroughly before using its services.

Filing for Bankruptcy

Finally, for people facing massive debts with no realistic hope of repayment without court intervention, bankruptcy is an option. Obtaining a Chapter 7 bankruptcy discharge essentially erases all of your qualified debts, with the exception of certain priority debts such as income taxes, student loans, and child support. You might also file for a Chapter 13 bankruptcy discharge, which sets up a long-term payment plan in order to satisfy your debts in part or in full, as overseen by an appointed bankruptcy trustee. In either case, however, you may be able to retain some assets that are exempted from the bankruptcy process, which will help permit you to begin rebuilding your life in spite of your finances.

How to Find a Reputable Credit Counseling Agency

Thu, 11 Dec 2008 01:07:38 GMT

Not all credit counseling agencies are the same. Some credit counseling agencies provide very useful information for their clients that can help people manage their debts. However, there are also some unethical businesses that claim to be credit counseling agencies that actually do their customers more harm than good. Therefore, it is important for people who are looking for a reputable credit counseling agency to research any potential agencies and to find one that is qualified to meet the consumer’s needs.

There are several ways to find useful and legitimate credit counseling agencies that can help you make sense of your debt and organize a path for recovery. You might want to check on counseling agencies with which you are thinking about doing business in the following ways:

Look at the U.S. Trustee Program. Any consumer who files for bankruptcy must have completed counseling by an approved credit counseling agency (absent certain emergency circumstances.) So, if you are thinking about filing bankruptcy then it is important to receive your credit counseling from an agency approved under the U.S. Trustee Program. Even if you do not think that you will be filing for bankruptcy, this list of agencies might be useful to you because they are considered to be reputable agencies by the US Department of Justice.
Look at the National Foundation for Credit Counseling (NFCC) or Association of Independent Consumer Credit Counseling Agencies (AICCCA) Directories. The NFCC and the AICCA put all of their member credit counseling agencies through thorough and demanding accreditation processes in order to gain membership in either organization. Both the operating practices and the effectiveness of counseling are investigated and considered in the accreditation process.
Check Your State Attorney General’s Website. The Attorney General’s office in each state keeps records about complaints against businesses including credit counseling agencies. It can be useful to determine if other consumers have filed complaints against an agency.
Check With the Better Business Bureau. Like the Attorney General’s Office, the Better Business Bureau handles complaints against businesses including credit counseling agencies. The Better Business Bureau will also tell you if the agency responded to the complaint and if the complaint was resolved.
Get Personal Recommendations. Sometimes the best recommendations come from people that you know. If you know that someone whom you trust has had a bankruptcy or personal financial problems in the past few years then it might be useful to speak with that person about their credit counseling agency experiences.
Interview Potential Agencies. Ask specific questions about the services they provide, their fees and their policies. Reputable firms will be willing to answer your questions so that you know exactly what you are hiring them to do.

It can be a difficult process to find a reputable credit counseling agency. However, this type of counseling is required if you are filing for bankruptcy and it can help you develop a plan to get out of debt even if an immediate bankruptcy is not planned.

What are credit counseling agencies?

Wed, 31 Dec 2008 02:15:12 GMT

Credit counseling agencies may be able to help you if you are having trouble paying your debts. Credit counseling agencies also can be an alternative to filing bankruptcy proceedings, or, in some cases, are a required step to filing bankruptcy proceedings. These are generally non-profit organizations whose goal is to provide you with the tools necessary to managing and paying off your debt. Getting you out of debt includes not only a plan to repay your debts, but also education and counseling to prevent you from getting into debt again in the future.

Some organizations that call themselves credit counseling agencies, however, charge high fees and may not always provide you with the assistance that you need. Therefore, when choosing a credit counseling agency, you should be careful to choose an agency that is approved by the Federal Trade Commission and/or your state’s consumer protection agency. You can also check with your local Better Business Bureau to see if any complaints have been made about the credit counseling agency, and to see if the credit counseling agency is licensed as per the requirements of your state. Once you have decided to work with a particular credit counseling agency, you should make sure that you carefully read any agreements before signing them. You’ll also need to be aware of any fees that the agency is charging you up front or on a monthly basis, as well as the consequences if you are not able to make your payments as agreed. Once you know all of this information, you can better decide whether to use a particular credit counseling agency.

Typically, a credit counseling agency will help you enter into a debt management plan (DMP) with your creditors, or the people to whom you owe money. Under a DMP, you make certain payments to the credit counseling agency, which then pays the money to your creditors according to a schedule. As a part of this DMP, your creditors might charge a lower interest rate, or waive certain fees.

Once you have entered into a DMP, you should be sure to make your payments to the credit counseling agency as agreed. The credit counseling agency should provide you with a periodic statement that shows how your payments are being applied to your debts. If you are having trouble making the payments that you agreed to, then you should contact your credit counseling agency immediately.

Unfortunately, some less reputable credit counseling agencies might not make the payments to your creditors as agreed, or might even close down altogether. If the agency closes, you should notify your creditors that it has closed, and start making payments directly to your creditors again. You should also stop making payments to the credit counseling agency according to the terms of the DMP. If, on the other hand, you find that the credit counseling agency is not making the payments to your creditors as scheduled, you’ll need to contact your creditors immediately and make arrangements to pay the creditors directly.

Understanding Debt

Wed, 19 Aug 2009 21:09:24 GMT

Life is often stressful and overwhelming for a debt holder. Worry, anxiety, and fear often color every part of a debt holder’s life and the debtor has trouble thinking about anything other than the money that he or she owes to creditors. For these reasons, it is important to confront the debt and create a legal plan to deal with the financial future.

Potential debtors who are still at the stage of deciding whether or not to go into debt should understand the different kinds of loans available and the legal implications of agreeing to borrow money from different types of creditors. Potential and current debtors should also understand the importance of their credit scores and how those scores are calculated. Debtors who are having trouble repaying their loans have several options available to them including: being free from creditor harassment, engaging in credit counseling, and creating debt management plans. Finally, debtors need to be aware of legal actions that they can proactively take, such as bankruptcy, and actions that may be taken against them, such as lawsuits to collect an unpaid debt.

In order to ease their stress and plan for their financial future, debtors should understand:

· The Consequences of Signing a Loan Secured by Collateral: if you secure a loan with collateral such as your house, your car, or your boat then the lender has the right to foreclose on the property if you fail to repay the loan according to the terms of the loan. In other words, your mortgage lender can foreclose on your home and you could lose title and possession of your home or the owner of your auto loan could repossess your car if you fail to make your car payments. If the value of the collateral is not enough to repay the loan then the creditor can usually sue the borrower for the difference that is owed. Secured loans generally have priority over unsecured debts, such as credit card debt, if a borrower files for bankruptcy.

· The Consequences of Signing a Credit Card Agreement or Promissory Note: a credit card agreement or promissory note is a contract. You are obligated to repay the money that you borrow according to the terms of your contract. If you default on those obligations then your lender may seek a legal judgment against you. If you file for bankruptcy then unsecured creditors are entitled to be paid after your secured creditors and priority claims have been satisfied.

· Credit Scores and How They are Calculated: A credit score is a number that indicates whether you are likely to be a good credit risk or a bad credit risk. Low credit scores can affect your ability to get loans and can cause you to pay a high interest rate if you do get a loan. Typically, your payment history is the most important factor in determining your credit score. Other factors may include the amount of your outstanding debt, the length of your credit history, and how many loans or credit cards you have recently applied for. You can request a free credit report annually from the three major credit bureaus: Equifax, TransUnion and Experian. Your credit score is available for a fee.

· The Right to be Free from Creditor Harassment: Creditors have a right to collect the money that is owed to them but they do not have the right to harass borrowers. The Fair Debt Collections Practices Act prohibits creditors from harassing debtors to collect the money that is owed and provides debtors with a legal cause of action if a creditor does resort to harassment as defined by the Act. For example, creditors may only contact you by telephone between the hours of 8 a.m. and 9 p.m. Creditors may not contact you in any way other than through litigation after you have provided them with written notice that you do not wish to be contacted about a debt. Similarly, creditors cannot contact you at work if you have advised them not to and they cannot contact you directly if you are represented by an attorney. It is never acceptable for a creditor to harass you, threaten you, or publicly embarrass you. You have standing to file a lawsuit against any creditor who violates your rights.

· Credit Counseling and Debt Management Plans: professional credit counselors can work with debtors to create a debt management plan to get out of debt and manage finances in the future. Individuals who file for bankruptcy are usually required to have participated in credit counseling within six months of filing bankruptcy. The credit counseling must be conducted by someone in the Department of Justice’s U.S. Trustee Program, unless bankruptcy is being filed in Alabama or North Carolina where a different system of approved credit counselors exists. You should expect that your pre-bankruptcy credit counseling will include a review of your assets and liabilities, a discussion of bankruptcy alternatives and a personal budget plan. In most cases you will be required to file a certificate of credit counseling completion when you file for bankruptcy.

· Bankruptcy: if you do not have the money to repay your debts and cannot work out other repayment arrangements with your creditors, then bankruptcy may be your only option. You have to file bankruptcy with the U.S. Bankruptcy Court for the jurisdiction in which you live. Individuals may file for Chapter 7 or Chapter 13 bankruptcy protection depending on their circumstances and long term goals. In a Chapter 7 proceeding, the bankruptcy trustee will collect and sell all of your nonexempt assets and use the proceeds to pay your creditors in a predetermined order determined by the bankruptcy code. In a Chapter 13 proceeding, a repayment plan is negotiated that has the debtor repaying his renegotiated debts over a 3 -5 year period. While bankruptcy is designed to give debtors a fresh start, the courts take special precautions to make sure that only debtors who truly cannot pay their bills are eligible so as to prevent abuse. When making the decision about whether or not to file bankruptcy it is important to remember that bankruptcy can affect your credit score for up to 10 years and that it is much more difficult to obtain a mortgage or other type of loan with a bankruptcy on your record.

If you are living with the stress and anxiety of debt that you cannot repay then the very worst thing that you can do is to pretend that the debt is not there. Instead, contact your creditors and consider the options and consequences described above so that you can make a well reasoned decision that is best for you and your family.

Free Consolidate Financical Debt Relief Articles

Thu, 26 Nov 2009 08:08:19 GMT

Free Consolidate Financical Debt Relief Articles