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.

When your debt becomes out of control and you don’t know what to do, the best option may be to seek a credible debt relief company. It’s a given that debt settlement may affect your credit, but most people would agree that it’s a better option than bankruptcy.

Now the question is, how can you determine the legitimacy of a debt settlement company? A bad choice may lead to further debt issues, or worse, hefty fees that you can’t afford. Luckily for consumers, heavy regulations have been imposed on the debt relief industry. This certainly doesn’t mean you’re safe, but it does make it easier to find a credible relief company.

While there’s regulations, it’s our job as consumers to find a credible debt relief company.

Let’s discuss the do’s and dont’s of choosing a debt relief company. These questions will help consumers determine if they are legitimate and trustworthy. But, before we get to “how” to choose a company, ask yourself…

Do I need a debt relief program?

If you find yourself struggling with unsecured debt such as credit cards, unsecured loans, medical bills, etc. – debt settlement is a good option for you. Generally speaking, you’ll get the most benefit from a settlement program if your overall debt amount is high. The higher the debt, the better the opportunity for reductions.

The advantage of these companies is that they have trained professionals who negotiate the settlements strategically, to satisfy both parties.

The negotiators have resources to achieve a maximum reduction on your debt.

Because of high interest rates, unsecured debt specifically takes a VERY long time to pay off. And, you end up paying significantly more for credit. Debt settlement offers a quick, interest free path to eliminating this type of debt.

Research about Company’s Credibility and Reputation.

There are a number of companies who are eagerly waiting to trap customers by their false promises. Make sure you are not the one to fall into such pits by ensuring to check the reputation and credibility of these debt settlement companies.

You can achieve this by doing a bit of research and checking their licensing. Credible debt relief companies should be licensed with the Department of Consumer Services and accredited through The American Fair Credit Council.

Terms and Fees charged.

Debt settlement companies are prohibited from collecting any type of up front fees or charges before they settle your first debt. So, you can eliminate any company from your list right away if they ask for a fee up front.

Be sure that the company explicitly specifies the fees they charge and the conditions they apply during the settlement of your debts. Most legitimate settlement companies will charge a percentage of the settled amount. The payment is not additional to you, it’s factored into your single monthly payment in your settlement program.

Beware of the shady procedures and requests.

A settlement company might ask you to keep your funds in a separate bank account. Always bear in mind that these funds are still yours and you are solely entitled to any interest. You can also access and maintain this account at any time. In other word, if a settlement company doesn’t give you full control of your settlement account, look elsewhere.

A settlement company should always contact you before completing a settlement. Remember, they are working on your behalf, so always be notified before a settlement is agreed upon.

Check the highlights of the debt relief program

Before trusting any company to shoulder the settlement tasks, make sure you review the minimum checkpoints listed below. Never fall trap to the debt settlement companies who:

• Boast a “new real debt settlement program” and asks you to pull out your personal credit card. (this is not to be confused with verifying your bank account, which is a common practice of settlement companies to ensure they can open the debt savings account for you.)
• Guarantees that your unsecured debt will be paid off by a specific date.
• Suggests to stop communication with your creditors without fully explaining why this is necessary and how it will affect you.
• Guarantees the payment of your unsecured debts for excessively low rates. A good settlement company will get you a good reduction on your debt. But, if a company tells you you’ll pay $100 of a $10,000 debt, you can rest assured they are not being honest.

Ensure availability of Guidance whenever needed.

So you’ve decided on a settlement company. A good first inquiry is the guidance they provide in case of any disputes or settlements with creditors. The consultants of such companies should be able to guide you and provide clear advice on what to do. They should also educate you about the negative consequences, including potential credit score impact. If a debt relief company tells you your credit score will absolutely not be affected, it’s a  red light.

Responsibilities and procedures of the company.

The debt settlement company should calculate an affordable monthly payment amount needed for successful debt settlement. They’ll analyze your entire financial situation. The process can be tedious, but it’s necessary to be sure it works for your budget, and also allots enough funds for them to do their jobs.

Struggling with tensions of debt payments is no doubt an overwhelming affair. It need not be one. By making yourself equipped with thorough and clear knowledge of settlement procedures you can ensure better financial decisions for your future.

The post How do I find a credible debt relief company? appeared first on Consumer Debt News.

Seeing the credit collection letter when you open the mailbox is a daunting feeling. Their methods seem aggressive, sometimes even threatening. This is because debt collections have to be made for this agency to recoup their cost. After all, they likely purchased your debt from the original creditor, albeit for a fraction of the original amount. Their inability to recover the debt from you results in unpaid unsecured debt, and a loss for the company.

If you have debt in collections, it’s hurting your credit. So, if you want to understand what unsecured debt is, how it affects your credit score and how you can avoid or get out of collections, read on:

What are Unsecured Debts?

Before we go into detail about how collections hurt your credit, you need to understand the concept of unsecured debt. Unsecured debt is any debt that is not backed by collateral and is only based on your credit worthiness, your word, or both.

So, unlike secured debt where the lender can repossess your asset used as collateral, unsecured debt can only be recovered monetarily from the borrower. The original creditor that extended you the credit is now facing a loss. They have not received payment from you, and have no collateral to recoup. When they deem an account “uncollectible”, they sell the account to a collection agency for a fraction of the amount owed.

Your debt is now with a collection agency, who has purchased it from the original lender. This collection agency will now pursue the debt from you, usually aggressively. This process could repeat multiple times. Once the collector that bought the debt has given up, they may sell it to another agency, at an even further reduced rate. This is why the company contacting you regarding a debt changes after a period of time. Obviously, this is not an ideal situation to be in, but it’s important to understand how this is going to impact your credit.

How Defaulting on Unsecured Debt Impacts Your Credit Score?

So now that you know what unsecured debt is, you should have a look at a few factors that arise when your unsecured debt goes into collections:

Credit Collection: When you default on your unsecured debt, eventually your debt goes into collections. You’ll generally know this has happened when the letters and calls from the collection agency begin. And when that happens, the collections are added on your credit report where they stay for up to seven years if not paid.

Lawsuits: If the lenders are not paid their money, they can file a lawsuit. Without collateral to recoup, the lender can sue you personally for the debt. This lawsuit can result in a civil judgment, having a big impact on your credit score.

Reported Late Payments: Even if you are paying your unsecured debt and you make a few late payments, the lender can report them. And the reported late payments also result in loss of credit score points. This is especially true if your payments are 30, 60 or 90+ days late.

How to Avoid Debt Collections on Unsecured Debts?

There are a few things that you can do to avoid getting the debt collector on your back. Have a look at them below:

Pay on Time: The first thing to do is obvious; pay your debts on time. You can make a payment plan, show it to the lender and stick to it. A collection agency is likely to work with you if they see you have a plan to repay the debt.

Negotiate with the Lender: You can also ask your creditor to let you pay a smaller lump sum in a single payment. If they agree, gather some funds by selling a few things and pay the debt. Be sure to always get this agreement in writing from the collection agency to protect yourself. It’s also a good idea to ensure the agency will report the defaulted credit as paid to the credit bureaus.

Debt Settlement: One of the best ways to avoid seeing collection letters is by entering a debt relief program. You can hire a professional company and let them negotiate the debt for you. A good settlement company will drastically reduce your debt amount, time of repayment and interest rates. Of course, keep in mind, it comes with a temporary credit ding.

Final Words:

Make sure to never let your debt go into collections in the first place. Easier said than done, but it is the ultimate goal.  Our advice as always is to seek council with a professional debt consultant if you’re currently troubled by unsecured debt.

The post My Debt is in Collections – How Much does it hurt my Credit? appeared first on Consumer Debt News.

The debt level of American citizens has run up to trillions of dollars and is expected to keep climbing. The government fears the debt crisis, and the average citizen just wants to sleep better at night. With these issues affecting the country, one method that consumers look to is debt relief.

There are different kinds of debt relief programs, from debt consolidation to debt settlement and even Chapter 7 Bankruptcy. The one you choose will be dependent on your kind of debt. However, in this article, we will study debt settlement specifically and the associated debt relief program fees.

What is Debt Settlement?

Debt settlement is a system where a negotiated settlement is made between you and your creditors so that you pay them significantly less than what you originally owed. This applies specifically to unsecured debt; credit cards, personal no-collateral loans, payday loans, store credit cards, and more.

You may be wondering, why would anyone settle for less than what you actually owe? The creditor will allow a negotiated settlement to be paid instead of the full amount when they believe you are not going to pay them back. Remember, this is an unsecured debt so there is no collateral for a creditor to repossess in order to recoup their loss. It’s better to receive part of their money than to receive nothing at all.

The debt settlement company acts as the middle-man and receives a percentage for helping you negotiate settlements with your various creditors. They set you up with an escrow account that you make monthly payments to. As the funds build, the company settles your debts for significant savings.

Many people believe that debt settlement is the best debt relief program for people with lots of unsecured debts like credit card debts. The truth is, while debt settlement is better than debt consolidation for unsecured debts, sometimes Chapter 7 Bankruptcy is the right choice. This is an unpleasant route nobody wants to travel, and your best bet is to first speak to a debt relief company to see if they can help.

How do they make money?

Now that we have understood a little about debt settlement, let’s look at how debt settlement companies charge debt relief program fees from customers. Typically, debt relief program fees should be a percentage of the negotiated settlement or a percentage of the difference between the negotiated settlement and the original debt owed.

For example, if you owe $10,000 and you approach a debt settlement company to help, they can negotiate with your creditor to a lower balance of $5000. The settlement company will generally charge you 25% on the $5000 which equals $1250. This means you end up paying $6250 to be out of debt instead of $10,000. The speed at which this happens is greatly increased as well. Paying off $10k in unsecured debts will generally take 8 to 12 years with the interest. With a good debt relief program, not only do you pay far less, it’s complete paid off in about 24 to 48 months.

This is just an example so that you can grasp the basic concept of what actually happens. Settlement companies with a good negotiation department can often settle unsecured debts for surprising amounts.

Also, debt relief companies are not legally allowed to ask for money as down payment before they settle your debt. If any debt settlement company asks you to negotiate payment before they settle your debt, that’s a sure sign that they are illegitimate.

Before you worry anymore about the ongoing consumer debt crisis and reoccurrence of the 2008 market crash, worry more about understanding debt relief and getting the best settlement you can get. Good luck.

The post How Do Debt Settlement Fees Work? appeared first on Consumer Debt News.

A debt collection agency can be very persuasive if you’re not cooperating with them. In other words, you’re not making the payments. In this article, we’ll cover what a collection agency is, how to avoid them, and what to do if you’re already with one.

Debt collection is when a financial account has been sent to a third party for collection. This usually happens after the original lender has spent a certain amount of time attempting to recover the debt themselves. That third party is the debt collection agency that recovers the debt for their client (lender) from the borrower. A debt collection agency can also buy the debt from the lender for an amount significantly less than the original debt. The debt is sold by the original lender in an effort to recoup some of their losses on an unsecured debt.

This debt collection agency then becomes the sole owner of the debt. All money recovered by this company goes to them, not the original lender. It’s usually more cost effective for the lenders to hire the collection agency instead of pursuing payment on the delinquent accounts themselves.

Why Debt Ends Up in Collections

You now know what a debt collection agency is, and how they acquire your debt. But, the real question is, why does your debt end up in collections? Well, it’s a long road that usually starts after 30 days of the due date on which the debt should’ve been paid. The overdue payment is then usually reported as delinquent, and you start to get calls and notices asking for the payment. This is also the time this debt begins negatively affecting your credit.

If you ignore these calls and notices, typically after 180 days the lender considers your account insolvent.  This lender could be a bank, medical provider, or a credit card company. This is where the lender either hires a debt collection agency to recover the payment or sells the debt to the agency. That’s how your debt ends up in collections, and why these agencies are so aggressive in recovering the debt.

How to Recover From Debt Collection – Options for Debt Help Collections:

When it comes to recovering from debt as a borrower, there are three things you can do that may help you get out.

Creating a payment plan: You can always comb through your personal finances and see how much you can set aside for debt repayment each month. Make sure to use realistic numbers because missing a payment can send your whole plan into a spiral. Once you have your number, create a complete plan comprised of monthly payments and the total time it will take to make them. Now propose your plan to the collection agency, and if they agree, you can get started.

One Lump Sum Payment: If you get a tax refund, an inheritance or are able to gather the whole debt amount, you can make one big payment to get out. Make sure to get everything in writing when you pay off the debt in full for your own protection. Also be sure to verify the debt will be removed from your credit report upon satisfying the agreed upon amount.

Debt Settlement: The third and maybe more comfortable approach is by hiring a debt settlement company. A good debt settlement company will settle your debt for a lesser amount than what’s owed. This amount is payable either on installments or in one single payment. The benefit is that the amount is significantly lower than what you actually owe, and the interest rate is eliminated. The interest on most unsecured loans makes them nearly impossible to pay off quickly, debt settlement fixes that.

Over to You:

No matter what you do, make sure to first look at your own finances and get your budget right. Then, decide how you will approach the debt collection agency. You can always get help from a professional settlement company to make things easier. If you decide this is the path for you, we can confidently recommend both Consumer First Financial and Freedom Debt Relief for your settlement needs.

The post What Happens If My Debt Goes Into Collections? appeared first on Consumer Debt News.

Bankruptcy is a legal status. This status has been imposed after a court order if a business or individual fails to repay it’s debts. Indeed, this sounds like something really bad if you are living in America as it affects your reputation and damages your credit rating. Once you’ve filed, applying for and receiving additional credit becomes very difficult. Here’s some additional information about bankruptcy and its various types.

In America, once bankruptcy is declared, this status remains on your credit report for 10 years. This doesn’t mean you won’t qualify for new credit a couple years afterwards, but there will be a significant cooling down period before you’re considered again. And, we probably don’t need to mention this, but it’s also not good for your credit score. With that said, in some cases bankruptcy could be a good option for a consumer.

When bankruptcy does make sense for a consumer?

Bankruptcy is not the end the world and it can be recovered from. Declaring bankruptcy absolves you from any type of unsecured debts, prevents foreclosures, and stops other debt collection activities. Although this could be expensive as you have to pay the lawyer fees, sometimes it’s worth the cost to “reset” your credit.

The time to declare depends on many factors. Some of these could be your mortgage, your current credit score, the danger of foreclosure or even being harassed by bill collectors. If you want to get rid of all of these things, and have explored all possible debt relief options, bankruptcy may be the best bet for you. This will not only eliminate your debts, but also help you to save your home and silence the collectors who may be harassing you. But, it may also be creating long term damage to your credit score.

How does bankruptcy affect my credit?

It has been believed that bankruptcy can actually give rise to your credit score, which is generally true, but in the short term only. Usually, the credit score is already battered at the time of declaring. Following a successful bankruptcy, all the debt has been removed which gives an artificial rise in the credit score. In the real world, the credit score has been declining for many years as a result of borrowing additional loans, obtaining credit, credit cards, and even other financial activities.

What other options are available?

For a person who does not have enough money to pay the debt, they should first consider a reputable debt settlement program. When we compare debt settlement vs. bankruptcy, debt settlement could be a great option. It is a settlement in which third-party companies pay the debt to your creditors on your behalf. It’s usually a significantly lower amount than you owed, and negotiated by the company who pay on your behalf. In addition, a debt settlement company can eliminate interest rates, drastically reducing your total cost and time to repay.

If you choose debt settlement over bankruptcy, you could be saving yourself from up to 10 years of negative credit history and difficulty obtaining credit. It does not only lower the amount of debt, but also helps you to avoid bankruptcy. The fees for debt settlement are usually far less than bankruptcy, and the damage to your credit that may incur from a settlement program usually recovers quickly.

In closing – Bankruptcy or Debt Relief?

Both have their merits, and their downsides. Bankruptcy often seems like a quick and easy way out from under your debt, but remember not everyone qualifies and the long-term damage may not be worth it. Debt settlement will also affect your credit, but quite temporarily, as the settlement company you choose pays off your debts, your debt to income ratio and payment accounts improve, reviving your credit score. Do your due diligence in researching your options before making any decision that can have a long-term impact on your credit.

The post When is Bankruptcy a good option? appeared first on Consumer Debt News.

These early companies created a negative reputation for the industry and more importantly, they preyed on average consumers struggling with debt. Nowadays we have organizations like the AFCC, along with far more rigid federal regulations that ensure YOU, the consumer are protected.

This is not to say, however, that you shouldn’t do your homework on a company before choosing to work with them. A debt relief company should have a good reputation; looking for reviews and testimonials of past clients is a good place to start your research.

In this article, we’ll be sharing 7 questions that you must ask a debt relief company. Concise and honest answers to these questions can assure you it is a legitimate debt relief program and they will eventually get you out of your crisis. If their answers to these questions do not satisfy you, don’t hesitate to walk away!

What are your debt settlement fees?

Many people don’t know, but it is illegal for debt settlement companies to charge you debt settlement fees for their services upfront. If their answer includes any sort of up-front or excess fees, or a percentage prior to settling, move on . Also, your debt settlement fees should be about 18% to 25%, so you can also use their response to know if you are being taken advantage of.

How long have you been doing this?

This question helps you to determine the experience level of the debt settlement company you are working with. This question should also be followed with “How much debt have you helped settle?” so that you can get a clear picture of what they can do.

These numbers should ideally be visible on their website or other marketing material. Honest debt relief companies are transparent about their settlement stats, they should have nothing to hide.

Are you part of the AFCC?

The American Fair Credit Council is an organization that helps in debt settlement accreditation for all members. They ensure that their members perform their duties ethically and in accordance with all rules and regulations. This debt settlement accreditation organization enhances the trust of people who wish to work with one of their members.

So, if the debt settlement company is not an accredited member of this organization, you might have a little reason to worry. Note that it is not required by law to be a part of the AFCC, good settlement companies acquire this accreditation independently.

Can you guarantee that I won’t get sued?

No legitimate debt relief company can make this guarantee. If the debt settlement company guarantees you that you won’t get sued by your creditors, you should think twice. In fact, legitimate debt relief companies will have a process in place to coach you through this when or if it happens.

How will you make the payment to my creditors?

Debt settlement companies settle your debt in one lump sum, or a few monthly payments. If a debt settlement company tells you that it can pay your creditors monthly to prevent them from taking legal action against you, then that company is not a legitimate debt relief company.

Once you’re in a settlement program, the company is not paying your normal monthly payments. They are building your funds in an escrow account to settle your debts at the right time, and for the right amount. This is where the experience comes in, and why that question is on this list.

When will my debt settlement be completed?

They need to give you a time frame that is specific to your debt alone. No one can make assumptions by comparing your case to other people’s cases. A good company will work with you to build a settlement path that not only works for you, but gets you out of debt as quickly as possible.

Don’t forget, they aren’t making any money until they settle your debt.

How much of an impact will it have on my credit score?

Debt settlement will usually have an impact on your credit score, and the debt settlement company should be transparent and clear on that. A trustful company will be able to explain to you how and why your score may drop, and also how it will recover. If they don’t (or can’t) then it’s probably not a legitimate debt relief company.

Asking these questions will help you determine if the company you’ve chosen is following federal regulations, honest, and has their accreditations in order.  While there are many out there to choose from, some of the most reputable we’d reccomend are Consumer First Financial and Freedom Debt Relief.

The post 7 Questions you should ask a debt settlement company appeared first on Consumer Debt News.