Hi,
This blog is not intended for any readers who pay off their credit cards without exception at the end of each month. For the rest of us, to maintain control over our credit card balances, it is a good idea to avoid the following:
1) Consistently charging groceries on a credit card. The reason is that statistics show people purchase food on credit which they otherwise wouldn't purchase if using cash.
2) Putting utility bills on a credit card. Utility bills should be part of the monthly fixed expenses and be paid on a cash basis each month.
3) Making a car payment with a credit card. There are many reasons for this, but a significant one is that it's a sign that "Peter is being robbed to pay Paul".
4) When traveling to places like Las Vegas, many people find it much safer if they leave the majority of their credit cards at home.
5) Avoid using credit cards for large purchases of stock or any other investment vehicles.
To maintain a handle on our financial health at all times, it is necessary to pay for our fixed monthly expenses on a cash basis. It is imperative to maintain the clarity of the difference between our cash position and our credit position. Using credit in lieu of cash is analogous to using chips in Las Vegas in lieu of cash.
Until later,
Alan
Saturday, July 14, 2007
Monday, June 25, 2007
Questionable Bill Collection Techniques (continued)
Hi,
In my last blog, I referred to a few questionable techniques employed by a small percentage of bill collectors. Some additional ones to be aware of are:
1) Bill collectors will often use the term "garnishee wages" as leverage to get a debtor to pay on an account. They often speak as though garnishment of wages will happen overnight. In reality, wages are only subject to garnishment after judgment has been rendered which takes 45-60 days minimum in most states.
2) Another form of leverage used by bill collectors is to mention highly inflated attorney fees that the debtor will be responsible for if a small balance isn't paid in full. For example, a debtor owes a bill of $400.00. The collector calls the debtor and tells him or her that the client is prepared to sue and the attorney fees will be $1,400.00-$1,500.00 to coerce the debtor into paying the bill. In reality, chances are the client will not sue for such a small balance. In addition, the attorney fees would not be as excessive as the collector claims, IE., four times the amount of the bill!
3) Another common form of leverage used is when a collector tells a debtor that a lien will quickly be placed on his or her house. Once again, in most instances, and for most debts, the only way a lien can only be placed on a house is after judgment is rendered and the judgment is registered in the county in which the property is located.
These are just a few more examples of inappropriate collection techniques that are highly illegal, and, if encountered repeatedly, should be documented and reported to the State Attorney General.
Until later,
Alan
In my last blog, I referred to a few questionable techniques employed by a small percentage of bill collectors. Some additional ones to be aware of are:
1) Bill collectors will often use the term "garnishee wages" as leverage to get a debtor to pay on an account. They often speak as though garnishment of wages will happen overnight. In reality, wages are only subject to garnishment after judgment has been rendered which takes 45-60 days minimum in most states.
2) Another form of leverage used by bill collectors is to mention highly inflated attorney fees that the debtor will be responsible for if a small balance isn't paid in full. For example, a debtor owes a bill of $400.00. The collector calls the debtor and tells him or her that the client is prepared to sue and the attorney fees will be $1,400.00-$1,500.00 to coerce the debtor into paying the bill. In reality, chances are the client will not sue for such a small balance. In addition, the attorney fees would not be as excessive as the collector claims, IE., four times the amount of the bill!
3) Another common form of leverage used is when a collector tells a debtor that a lien will quickly be placed on his or her house. Once again, in most instances, and for most debts, the only way a lien can only be placed on a house is after judgment is rendered and the judgment is registered in the county in which the property is located.
These are just a few more examples of inappropriate collection techniques that are highly illegal, and, if encountered repeatedly, should be documented and reported to the State Attorney General.
Until later,
Alan
Tuesday, June 5, 2007
Questionable Bill Collection Techniques
Hi,
The majority of bill collectors that contact consumers and/or businesses are honest, hardworking reasonable people who want to resolve debts in a fair and equitable manner. Unfortunately, there is a small percentage of collectors that use questionable tactics to coerce people into paying their bills. Some of these tactics are as follows:
1) They throw the word "judgment" around, as though it is an action that is going to happen within a few days or weeks. In reality, from the time a bill collector calls, to the time approval is given by a client to proceed with a lawsuit, and the lawsuit is served on the debtor leading to a judgment rendered, on the average 45-60 days have elapsed. In most instances, when the collector indicates that judgment will be quickly rendered, the agency probably has no legal department at all, and likely does not have the ability to sue the debtor.
2) The statute of limitations on judgments varies from state to state ranging from as little as six years to as high as twenty one years. If a collector calls about an account on which judgment has already been rendered, make sure to get the date of the judgment and check to see if the statute of limitations in your state has expired. This information is available on the Internet.
3) If a collector calls, a reasonable offer to settle the debt in full is made by the debtor, and the offer is rejected due to a payment date that does not meet the collector's criteria, but rather the collector indicates that the file will be turned over to attorneys to proceed with a lawsuit prior to that date, simply contact the original creditor directly and tell the creditor your repayment proposal. It is not unusual for a creditor to become the mediator in a collection agency/client relationship.
If you get a call from a collection agency, the matter is serious and needs to be immediately addressed. If you feel as if the collection agency is not treating you fairly, contact the office of your State Attorney General for an appropriate referral.
Until the next time,
Alan
The majority of bill collectors that contact consumers and/or businesses are honest, hardworking reasonable people who want to resolve debts in a fair and equitable manner. Unfortunately, there is a small percentage of collectors that use questionable tactics to coerce people into paying their bills. Some of these tactics are as follows:
1) They throw the word "judgment" around, as though it is an action that is going to happen within a few days or weeks. In reality, from the time a bill collector calls, to the time approval is given by a client to proceed with a lawsuit, and the lawsuit is served on the debtor leading to a judgment rendered, on the average 45-60 days have elapsed. In most instances, when the collector indicates that judgment will be quickly rendered, the agency probably has no legal department at all, and likely does not have the ability to sue the debtor.
2) The statute of limitations on judgments varies from state to state ranging from as little as six years to as high as twenty one years. If a collector calls about an account on which judgment has already been rendered, make sure to get the date of the judgment and check to see if the statute of limitations in your state has expired. This information is available on the Internet.
3) If a collector calls, a reasonable offer to settle the debt in full is made by the debtor, and the offer is rejected due to a payment date that does not meet the collector's criteria, but rather the collector indicates that the file will be turned over to attorneys to proceed with a lawsuit prior to that date, simply contact the original creditor directly and tell the creditor your repayment proposal. It is not unusual for a creditor to become the mediator in a collection agency/client relationship.
If you get a call from a collection agency, the matter is serious and needs to be immediately addressed. If you feel as if the collection agency is not treating you fairly, contact the office of your State Attorney General for an appropriate referral.
Until the next time,
Alan
Tuesday, May 22, 2007
Judgments
Hi,
The purpose of this blog entry is to take some of the mystery out of judgments. A creditor's last option in collecting a debt is very often done by obtaining a judgment. When a creditor obtains a judgment, it means that a court grants the creditor an order containing multiple remedies to collect an unpaid debt.
To obtain a judgment, a creditor must do the following:
1) Creditor files a lawsuit in the jurisdiction where the debtor lives for the amount of the debt.
2) The lawsuit must be served on the debtor. This is usually done by a process server. If the debtor is successful in avoiding the process server for a period of time, sometimes the creditor may obtain service through publication in a local paper.
3) In most states, the debtor has 21 days to respond in writing to the lawsuit.
4) If no response is given, a default judgment may be granted to the creditor by the court.
5) If, after service, the debtor disputes any part of the amount that the creditor is claiming, he or she may do so through the courts. The matter will be resolved through the courts before judgment may be entered.
Following are some of the remedies available to a creditor if a judgment is obtained against a debtor:
1) Any real property owned by the debtor in the county that the judgment is entered will automatically have a lien placed against it. The creditor also has the right to register the judgment in any county in the state in which the judgment was granted in which the debtor might own property.
2) The creditor may garnish the wages of the debtor.
3) The creditor may garnish the debtor's bank accounts.
4) The creditor may seize any assets that are free and clear of liens or encumbrances.
5) The creditor may have the debtor brought in for examination and deposed of any other assets.
6) If the debtor moves out of state, the creditor may register the judgment in the debtor's new state of residence and proceed against the debtor.
This list of actions is not all inclusive, but gives an idea of liabilities which a debtor may incur if a creditor is awarded a judgment.
Until the next time,
Alan
The purpose of this blog entry is to take some of the mystery out of judgments. A creditor's last option in collecting a debt is very often done by obtaining a judgment. When a creditor obtains a judgment, it means that a court grants the creditor an order containing multiple remedies to collect an unpaid debt.
To obtain a judgment, a creditor must do the following:
1) Creditor files a lawsuit in the jurisdiction where the debtor lives for the amount of the debt.
2) The lawsuit must be served on the debtor. This is usually done by a process server. If the debtor is successful in avoiding the process server for a period of time, sometimes the creditor may obtain service through publication in a local paper.
3) In most states, the debtor has 21 days to respond in writing to the lawsuit.
4) If no response is given, a default judgment may be granted to the creditor by the court.
5) If, after service, the debtor disputes any part of the amount that the creditor is claiming, he or she may do so through the courts. The matter will be resolved through the courts before judgment may be entered.
Following are some of the remedies available to a creditor if a judgment is obtained against a debtor:
1) Any real property owned by the debtor in the county that the judgment is entered will automatically have a lien placed against it. The creditor also has the right to register the judgment in any county in the state in which the judgment was granted in which the debtor might own property.
2) The creditor may garnish the wages of the debtor.
3) The creditor may garnish the debtor's bank accounts.
4) The creditor may seize any assets that are free and clear of liens or encumbrances.
5) The creditor may have the debtor brought in for examination and deposed of any other assets.
6) If the debtor moves out of state, the creditor may register the judgment in the debtor's new state of residence and proceed against the debtor.
This list of actions is not all inclusive, but gives an idea of liabilities which a debtor may incur if a creditor is awarded a judgment.
Until the next time,
Alan
Friday, May 18, 2007
Caught In The Minimum Payment Trap
Hi,
The last two blogs set the table for how one can get caught making minimum payments on credit cards. Today I am writing about being caught in the trap. After the cardholder receives an additional credit card he or she gets some instant gratification from being able to cover monthly expenses. Thirty days later two credit card bills arrive and once again, due to lack of cash, only the minimum payments are made. Before long, the card holder has maxed out the second credit card. In many instances this scenario will continue over a one to two year period resulting in the individual maxing out seven to ten bank cards to the tune of $40,000-$50,000. The last resort that some borrowers choose is to transfer the balances from existing maxed out cards to new cards. This is a perfect example of "robbing Peter to pay Paul". Once the borrower has exhausted all means of generating cash from credit cards, he or she might resort to tapping into his or her home equity. By the time the borrower applies for a home equity loan, the borrower's credit score has declined considerably and he or she will only be able to borrow on a non-conventional high interest mortgage. The result of the home equity loan is that the borrower has access to cash covering expenses for a few months, but without substantial income, falls behind and soon finds himself or herself in financial chaos. This scenario has unfolded around the country on numerous occasions over the past thirty years. I have written the last three blogs for the purpose of letting new credit card holders some of the pitfalls of using credit cards.
Have a good weekend!
Alan
The last two blogs set the table for how one can get caught making minimum payments on credit cards. Today I am writing about being caught in the trap. After the cardholder receives an additional credit card he or she gets some instant gratification from being able to cover monthly expenses. Thirty days later two credit card bills arrive and once again, due to lack of cash, only the minimum payments are made. Before long, the card holder has maxed out the second credit card. In many instances this scenario will continue over a one to two year period resulting in the individual maxing out seven to ten bank cards to the tune of $40,000-$50,000. The last resort that some borrowers choose is to transfer the balances from existing maxed out cards to new cards. This is a perfect example of "robbing Peter to pay Paul". Once the borrower has exhausted all means of generating cash from credit cards, he or she might resort to tapping into his or her home equity. By the time the borrower applies for a home equity loan, the borrower's credit score has declined considerably and he or she will only be able to borrow on a non-conventional high interest mortgage. The result of the home equity loan is that the borrower has access to cash covering expenses for a few months, but without substantial income, falls behind and soon finds himself or herself in financial chaos. This scenario has unfolded around the country on numerous occasions over the past thirty years. I have written the last three blogs for the purpose of letting new credit card holders some of the pitfalls of using credit cards.
Have a good weekend!
Alan
Thursday, May 17, 2007
The Minimum Payment Trap Part 2
Hi,
Yesterday, I discussed the simple version of the minimum payment trap. Today I'm going to discuss a more complicated and common minimum payment trap. This is how a more complex version of the minimum payment trap unfolds:
A relatively new cardholder uses his or her card for a couple of years and pays off the balance faithfully every month. At the end of two years, the cardholder's credit limit has been quadrupled. In addition, he or she has received numerous additional solicitations to obtain other money cards from different banks. Two and a half years into activating the first card, the cardholder has an emergency that requires him or her to use most of the credit limit on the card. He or she does not have the financial resources to pay it off at the end of the month, as he or she has been doing for the previous thirty months. When the bill arrives, he or she does the right thing, and pays every available dollar on the credit card, but still leaves a substantial balance. The following month, the cardholder's car breaks down. The card holder needs to max out the credit card to get the car fixed. Once again, when the bill arrives, the cardholder does the honorable thing and sends every dollar he or she can to reduce the balance, however a substantial balance remains. The next month, the card holder gets laid off from his or her job. Due to the amount of money put on the credit cards over the last two months, his or her savings have been almost wiped out. When the next bill arrives, the card holder succumbs to the infamous box in bold letters saying "minimum payment due" because he or she needs all the cash on hand. Over the next two months, the cardholder realizes that gainful employment is not coming as soon as he or she expected. During this time, the cardholder is still receiving solicitations for more credit, and due to his or her need for immediate cash, takes advantage of the offers. I will continue "part 2"
tomorrow.
Until then,
Alan
Yesterday, I discussed the simple version of the minimum payment trap. Today I'm going to discuss a more complicated and common minimum payment trap. This is how a more complex version of the minimum payment trap unfolds:
A relatively new cardholder uses his or her card for a couple of years and pays off the balance faithfully every month. At the end of two years, the cardholder's credit limit has been quadrupled. In addition, he or she has received numerous additional solicitations to obtain other money cards from different banks. Two and a half years into activating the first card, the cardholder has an emergency that requires him or her to use most of the credit limit on the card. He or she does not have the financial resources to pay it off at the end of the month, as he or she has been doing for the previous thirty months. When the bill arrives, he or she does the right thing, and pays every available dollar on the credit card, but still leaves a substantial balance. The following month, the cardholder's car breaks down. The card holder needs to max out the credit card to get the car fixed. Once again, when the bill arrives, the cardholder does the honorable thing and sends every dollar he or she can to reduce the balance, however a substantial balance remains. The next month, the card holder gets laid off from his or her job. Due to the amount of money put on the credit cards over the last two months, his or her savings have been almost wiped out. When the next bill arrives, the card holder succumbs to the infamous box in bold letters saying "minimum payment due" because he or she needs all the cash on hand. Over the next two months, the cardholder realizes that gainful employment is not coming as soon as he or she expected. During this time, the cardholder is still receiving solicitations for more credit, and due to his or her need for immediate cash, takes advantage of the offers. I will continue "part 2"
tomorrow.
Until then,
Alan
Wednesday, May 16, 2007
A Word of Caution About The Minimum Payment Trap for New Cardholders
Hi,
One of the biggest risks for new credit card holders is falling into the minimum payment trap. The minimum payment trap can be described as the following:
The card holder is very careful in making purchases that he or she can pay off with their monthly paychecks. The minimum payment trap begins when a cardholder purchases an item or items that that exceed his or her ability to pay off with the end of the month paycheck. The majority of the time, the purchases are prudent and made financial sense. A good example is when he or she comes across a sale of needed office attire that is significantly reduced in price. When the credit card bill arrives, the card holder is aware that there will be a large balance due. He or she usually has the best intentions of paying a significant amount of money on the bill and getting things back on track over the next few months. When the bill arrives, the number that jumps out on the statement is next to the phrase "minimum payment due." It is, of course, substantially lower than the card holder had anticipated he or she would have to pay. In many instances the minimum payment is no more than interest on the credit card with just a small principal reduction included. A portion of new card holders might succumb to only making the minimum payment each month. These card holders will find, on an annual basis, that the balance on their credit card might very well remain the same, even though they have made twelve payments over the year. For these credit card borrowers, after a year of making minimum payments, a very interesting phenomenon takes place. The credit card company increases the borrowers credit limit "for making timely" payments. Many times this scenario is repeated on a year by year basis until such time as the borrower is buried in a mountain of debt with no chance of getting out from under it. Tomorrow I will talk about "the minimum payment trap- part 2!!!".
Until then,
Alan
One of the biggest risks for new credit card holders is falling into the minimum payment trap. The minimum payment trap can be described as the following:
The card holder is very careful in making purchases that he or she can pay off with their monthly paychecks. The minimum payment trap begins when a cardholder purchases an item or items that that exceed his or her ability to pay off with the end of the month paycheck. The majority of the time, the purchases are prudent and made financial sense. A good example is when he or she comes across a sale of needed office attire that is significantly reduced in price. When the credit card bill arrives, the card holder is aware that there will be a large balance due. He or she usually has the best intentions of paying a significant amount of money on the bill and getting things back on track over the next few months. When the bill arrives, the number that jumps out on the statement is next to the phrase "minimum payment due." It is, of course, substantially lower than the card holder had anticipated he or she would have to pay. In many instances the minimum payment is no more than interest on the credit card with just a small principal reduction included. A portion of new card holders might succumb to only making the minimum payment each month. These card holders will find, on an annual basis, that the balance on their credit card might very well remain the same, even though they have made twelve payments over the year. For these credit card borrowers, after a year of making minimum payments, a very interesting phenomenon takes place. The credit card company increases the borrowers credit limit "for making timely" payments. Many times this scenario is repeated on a year by year basis until such time as the borrower is buried in a mountain of debt with no chance of getting out from under it. Tomorrow I will talk about "the minimum payment trap- part 2!!!".
Until then,
Alan
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