Wage garnishment is a judgment by the court making it mandatory that a portion of your income be applied to your debt balance. More than 90% of people who are sued by creditors simply do nothing. Of course, this is probably the worst thing you can do when faced with a judgement. Often this results in wages garnished, and little recourse for the consumer.

Before going any further, let’s discuss what a garnishment judgment is. You have a while, usually 20-30 days depending on your jurisdiction, after you are served with a lawsuit to respond. If you still don’t submit an answer to the lawsuit, the court can enter a default judgment giving the debt buyer everything they are asking for.

You didn’t respond, or appear to defend yourself so you have no way of winning. If you haven’t responded or appeared, the creditor wins the case by default. Once this happens, they can legally garnish your wages and pursue additional legal action.

It goes without saying that you should respond promptly and accurately.

How much of your wages can be garnished?

The extent of wage garnishment depends upon the disposable income. A garnishment is determined based on income and disposable income. There are limits to these garnishments, of course. The limits vary state by state and are affected by the type of loan being collected.

In general, either 25% or the amount by which your weekly income exceeds 30 times the federal minimum wage which is currently $7.25 an hour. Whichever of these figures is less is garnished from your paycheck. This garnishment goes directly to the creditor who’s placed it, which could represent credit card and medical bills, personal loans and most other consumer debts.

For example,

• If the weekly disposable income is $290 or more, 25% is collected towards wage garnishment.
• If the disposable income is between $289.99 and $217.51, the amount above $217.51 can be ripped off.
• If it’s $217.50 or lower, the garnishment is restricted.

What to do when you get a garnishment judgment? Is there any recourse?

The first thing to do is to read the judgment carefully to verify the information to ensure that it’s, in fact, your debt and not something you already paid. If it is, calculate the amount which will be garnished and how it will impact the financial situation. If it seems difficult, consult a consumer law attorney or local legal aid to determine the best option for your situation.

If you are facing the garnishment, you should resort to the following:

Contact the creditor or collection agency to validate any debt you are asked to pay and ask for proof of the obligation.
You should be ready to respond to any court summons. Failure to turn up at the court hearing will likely treat a garnishment judgment against you.
To avoid wage garnishment, explore all available alternatives including debt settlement and debt consolidation.

Wage garnishment generally continues until paused by the court order or until the debt is paid in full. It is indeed better to be proactive and try to avoid garnishment by working out a repayment plan with the creditors. It should be noted that if a written answer to the lawsuit is not submitted, it will result in a default judgment for the creditor.

To do list when you actually face a writ lawsuit for wage garnishment:

You actually have a few alternatives when there is no slip-hole and you face the writ lawsuit for wages garnishment judgment.

• You can ask the court to set aside the default judgment and give you an opportunity to challenge it.

If you believe that there is seriously some mistake done by entering a default judgment against you, you can fight the lawsuit stating any of the below 6 genuine reasons of Rule 60.

• Excusable neglect
• Freshly discovered evidence
• Fraud
• Void judgment
• Discharged judgment
• Any other specific reason which justifies release from the default judgment.

You can settle the debt with the creditor for an amount less than what the default judgment is for.

You actually lose the leverage of settling the debt once the judgment is entered. So, now prepare and establish a budget of whatever you are able to do to settle the debt in a lump sum or on a monthly basis.

Finally, you can opt to eliminate the default judgment completely by filing for bankruptcy.

While bankruptcy affects your credit score negatively, sometimes it’s the only option left if the lawsuit being dealt with is only the beginning. It will eliminate most of the debts, as well as the judgment.

The post Are your wages garnished thanks to a past due debt? appeared first on Consumer Debt News.

It’s not at all unusual to have no money left over at the end of the month. By the time payday comes around, many of our accounts are in dire need of a replenish. Most of us live like this and it’s really concerning. More than income or investment returns, your personal saving rate is the biggest factor in building financial security.

According to the rule, you should be spending no more than 43 percent of your before-tax income on all your debt payments. So, if your gross income per month is $4,000, your total debt including mortgage, auto loans, credit card payments, and student loans should be less than $1,720.

Let’s discuss in detail as to where the expenses can be managed to increase the percentage of that band. Or, how to efficiently park the money in savings to get maximum yields after settling all essential and non-essential expenses.

Order of priorities – Money left over doesn’t mean you have to spend it.

If you have no savings account and you’re paying the minimum on your credit card balances, you’re heading towards a non-sustainable lifestyle. Possibly even bankruptcy, eviction, and other major life hazards. Any extra expense like car trouble, interruption in income, medical emergency, marriage, etc. can throw a big monkey wrench in your budget.

So, in order of priorities, this is where any money left over should be going:

• Inevitably, pay off your credit card balance (if you are carrying a balance)
• Start an emergency fund with a goal of 3 – 6 months of living expenses
• Start a retirement account with the goal of saving 10% of your income
• Then you can start saving for intermediate goals: a home, a cruise, or your kids’ college fund.

Essential and Non-Essential Expenses.

Debt-to-Income Ratio

Most households spend a considerable portion of their housing budget on their mortgage which includes charges for both the principal on your loan and the interest. If you have an escrow account associated with your mortgage, your payment may also include charges for property taxes, home-owners, and title insurance.

Homeowners’ Association Fees

Many residential societies require you to be a member of a property association. Homeowners associations charge a monthly fee that pays for maintenance, landscaping and upkeep of the community and common areas. Common areas usually include areas like swimming pools, parks or parking spaces.

Hidden Costs of Owning a Home

You will also need to cover the cost of maintenance and repairs. A good rule on how much you should spend annually is 1 to 2 percent of your home’s value. You should also plan an emergency fund to pay for unexpected expenses, like a car-repair or plumbing issues.

Discretionary Income

Discretionary income is what is left over from disposable income after the income-earner pays for fixed essential expenses like: Rent/mortgage, transportation, food, utilities, insurance and other essential costs

For most consumers, discretionary income gets depleted first when a pay cut happens. For example, if a person makes $4,000 per month after taxes and has $2,000 in essential costs, he has $2,000 in monthly discretionary income. If his pay gets cut to $3,000 per month, he can still meet his essential costs but only has $1,000 left over in discretionary income.

Whether or not you choose to budget, at least find out how much you’re gaining, or losing, every month.

What is 50/30/20 Budget Rule?

It’s hard to define how much should be left over each month after paying all your personal finances as they are different for everyone. But to generalize it, the 50/20/30 rule is applicable to most of us. According to this rule, up to 50% of your income goes to fixed spending, 20% would go to savings. The last 30% should go to other expenses.

For example, you earn $1,200 every two weeks. After all taxes, it’s $1,000. Your savings goal should be 20 percent of net (after-tax) income or $200 from every paycheck.

On the other hand, if saving 20 percent of your income seems to be implausible, or even impossible at the moment, don’t feel frustrated. Saving something is better than nothing. If you are presently not able to make up to 20% for savings, plan and start from a smaller amount and when the figures in your account show up enough, increase the savings accordingly.

So, how much money left over completely depends on the situation.

The answer is, it completely depends on the person’s situation. We’ve given you some ways to asses, and even improve your discretionary income. The reality is, many people have little to nothing left over each month. Some people choose to allocate all of their money to a specific use, even if that is savings. We’ve known people who make $40k a year manage their money expertly, and enjoy a healthy financial lifestyle. We’ve also known people making six figures that could barely make it to their next paycheck.

The better you manage your money, no matter what you make, the better chance to have money left over every month.

The post Do you have money left over each month after paying bills? appeared first on Consumer Debt News.

To purchase something with the assurance that you will pay in the future is what’s called “Credit”. Generally in this situation, the form of credit will be credit cards. Actually, credit depends on what you buy and where you shop from. This is the reason why marketing executives and businessmen try to attract people who may not fit into their income requirements. They know that, like most Americans, they likely have credit of some kind. Credit gives the average consumer the ability to live beyond their means.

Is credit all the same?

The answer is “NO”. The different kind of purchases effect drastically on your credit score and hence your financial status.

Today, it is very common to pay for anything from big purchases to small items and groceries. With the introduction of the credit card, even those people with meager funds purchase items on credit, and they pay off their bill each month.

Side Note: This is an excellent way to build and maintain credit. Determining a fixed spend amount on a particular purchase each month, then putting it on your credit cards.

How is credit viewed differently based on what you’re purchasing?

The type of purchase on credit reflects whether you are holding a sound position in your business or not. For example, if you use your credit cards for second-hand clothing or retired tires, bail bond services, massages or casino gambling, your credit card issuer makes a note of these purchases as it will give a measure of your creditworthiness. In fact, it measures your financial distress, indicating your efficiency to repay the credit amount!

Here’s a list of few items which might generate a good or bad credit score depending on the type of interest payment.

• Interest rate you will pay when purchasing a car
• Your ability to lease an apartment
• Whether or not you get that new job, if you have to pay a security deposit when setting up utilities

How is your credit score calculated?

Following factors effect on the calculation of your credit score. Each of their weightage contributes differently to your overall credit score. For a more detailed review, see this article.

• Different types of credit
• Payment history
• Credit utilization
• Number of inquiries
• Credit age
• Revolving credit

It is useful for individuals or entities that experience sharp fluctuations in cash flow or face unexpected expenses in which the customer pays a commitment fee to a financial institution when he needs to borrow money. He is then allowed to use these funds when needed.

How is it that I can get approved for an auto loan but not a credit cards?

A good credit report in your arsenal helps you to borrow more money at affordable interest rates. Why? Because based on your credit history, the banks are assured that you are good at handling credit.

On the other hand, Bad credit ratings happen when money borrowed is not paid back on time or when it is simply not paid back at all. This is the reason why a person may be approved for an auto loan but not a credit card. You can purchase an Auto which has fewer interest rates on Auto Credit but to get a credit card, you need to furnish different assurances for repayment of credit card debts.

Why are my FICO Scores different for the 3 credit bureaus?

In the U.S., there are three national credit bureaus (Equifax, Experian and TransUnion) that compete to capture, update and store credit histories on most U.S. consumers. Nevertheless, there is only little difference in the information they collect from the consumers for calculation of the credit scores. But, collection of some unique information by one bureau might lead to calculation of a different score from the other two!

Equifax offers numerical credit scores that range from 280 to 850. The bureau uses similar criteria and input information as FICO to calculate these scores, while Experian does not deploy the exact formula and hence its credit score differs from the other two. This is the reason why these credit bureaus have different credit scores.

Conclusion:

Maintaining low debt levels (especially credit card debts) and paying them off on time are important measures to ensure a good credit score. Having a proper proportion of credit, such as revolving credit and installment credit, can also help your credit scores. Staying on top of your payments regardless of credit type can make you eligible for any type of credit.

Obviously when life throws a curveball, it’s not as simple as just paying your bill on time every month. This is why it’s so important to build a small savings. This savings floats you through tough times so you don’t miss a beat in your debt free plan.\

The post From credit cards to auto loans, credit is viewed differently. appeared first on Consumer Debt News.