What About Debts?

Managing Your Debt

 

Don't Ignore Creditors

                                                                                            

If you anticipate delays in paying creditors, notify them in writing and propose an alternative payment plan. The worst approach is to ignore creditors.  Consider obtaining a court order restricting both parties' use of credit during the divorce, although the divorce court cannot nullify the debt to a third party.

Establish Your Own Credit, Whether You Need It Or Not

If you can open an account in your own name, do so. Do it before separation if possible. The sooner the better. You need to have control over your own credit standing. If there has been a bad credit history, open a savings or checking account to demonstrate that you can effectively manage your money. In addition, a steady history of paying monthly telephone or gas and electric bills can be evidence that potential creditors can look to in making their decisions about whether to extend you credit or to divide up responsibility for a joint account established during the marriage.

Paying Your Debt

If you have cash, consider paying off debts now, not later.  If you have “marital” property that you can sell, paying off marital debts now with the proceeds of sale may be a wise strategy. It is perfectly permissible to do so. If you agree to be responsible for a debt, you can either sell or liquidate property to  pay off the debt, or you can decide as you go how many adjustments you want to make in your lifestyle to allow for repayment.

Reducing Expenses

Try to reduce your over-all debt and/or your monthly payments if you cannot pay off the debts.  It is easier than you would expect to negotiate with retailers, credit card companies, and finance companies to reduce the interest rate they charge on unpaid balances.                      

Live As If You Are Getting Divorced And Can’t Afford “It”

You can live without some things that seemed necessary a few months or years ago.  Cancel the premium channels on your cable TV. Put utilities on a monthly payment plan. Sell what you don’t need.

Ask for Help

Do not be afraid or reluctant to ask for help. Consider Credit Counseling.  Almost every community has a not-for-profit Consumer Credit Counseling Service or agency that charges fees on a sliding scale according to income. They will  identify the debts you owe and work out for you a payment plan. They do the communicating with creditors. You can relax during dinner. The creditors are happier. You are happier. The counselor is happier. The phone is silent. Your participation in a credit counseling program will not affect your credit worthiness as much as your failure to keep up with the bills. In fact, some creditors will see your willingness to resort to credit counseling as a virtue, because you have probably decided not to go into bankruptcy. Most creditors do not report to the credit bureau when an account is being serviced by a credit counseling office. When they do, the report will notate "financial counseling" or some other similar notation. If you have a bad credit rating, it may even improve, because timely, consistent, monthly payments improve a credit rating and reduce overall debt.

                                                                      

Helpful Links

"Mistakes Not to Make"-   A thoughtful and well organized article to assist with your financial planning.

Repair Your Credit Report

Entitlement To Notice

If you are denied credit, the creditor must notify you of (1) the identity and phone number of the credit reporting agency that issued the report upon which their denial was based, (2) a statement that the credit bureau did not make the decision, (3) notice of your right to obtain a free copy of the report from the credit bureau by submitting a written request within 60 days and (4) of your right to dispute the information in your report.

Remove Inaccuracies

If you have inaccurate information on your report, you can easily get it removed.Each credit reporting agency includes detailed instructions on how to correct errors. If you have inaccurate information on your report, you can get it removed by submitting a request that the creditor reporting the misinformation reinvestigate the facts (plus any additional facts you provide with your request.

Notice Goes To All

You need to write to only one of the credit reporting agencies. The three major credit bureaus must notify each other of the reinvestigation. (In the past, it was your responsibility to notify each bureau.) Credit bureaus are now required to use information supplied by you, as well as your creditors, when reinvestigating inaccurate credit information. Reinvestigations requested by consumers must be completed by the major credit bureaus within 30 days.

Are You Correct?  

If the information is accurate, you probably won't have much success. Most negative information remains for up to 7 years. Bankruptcies can remain on your credit report for up to 10 years. Other public record information can remain for up to 7 years. Most inquiries stay on your credit report for up to two years. . If you still dispute the data reported by a creditor  they  have reinvestigated the situation, the creditor cannot report the information to the credit bureau without indicating that it is still disputed by the consumer.

Repayment Works!

Your best strategy is to repay creditors and then put an explanation into your report, explaining how the original problem developed. Anyone can run into problems (health, job loss, etc.), and creditors will understand, as long as you followed “Rule Number One” ie. you repaid the debt.

Bankruptcy

                                                                                             

Many people accept the colorful new credit cards they constantly receive “pre-approved”  in their mail from “Gold”,  “Silver”, and “Master”. The lenders  promise “savings bonuses” which you can “earn” by being a good, voracious, American consumer. Some people like to extend their “credit life” by using cash advances on the new card, and “rolling” the money from one credit card account to another. Sort of a “PPS” i.e. “Personal Ponzie Scheme”.  Like every house of cards, however, a collapse is only a moment away. When the total debt load reaches a saturation point, no one is willing to send another card, and suddenly, there is no way to make even the minimum payments.

 

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