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Rice and Beans, Beans and Rice

There is bad debt.

There is also good debt.

In today’s media laden world there are more and more financial experts proclaiming the only way to live life in this economy is to be debt free.  Hey, don’t get me wrong I happen to like much of what Dave Ramsey preaches about credit and debt but I disagree about totally wiping out all of your debt, painfully living below your means, and eating beans and rice until you can afford the steak.   That’s no way to live life richly!  Rather it’s my belief each of us to adopt proper personal finance skills in order to keep the bad debt from taking over your life.

In this world there are good forms of debt that we all must use to make life’s freedom possible.   An example of a good debt is the home mortgage which can be leveraged to build equity or for investing in a property that creates you a form of income through rent.  We’ve failed in America in teaching which debt is good and which is bad.  Even consumer credit such as credit cards can be good if properly used.  We need to educate about the differences.

It’s my premise that bad debt is really just bad behavior by the consumer.  We need to be aware of our behavior which is causing damage to our personal finances, credit reports, and scores.  We need to be vigilant about correcting wrongs in the way we handle money and in our credit reports.  We need to educate ourselves about the good forms of credit that add asset value to our personal worths!  We will be discussing and learning strategies in future blog posts!

Until then I want you to reflect on this… living life richly in America today probably includes:

  • Earned Income (Job)
  • Capital Gains (From Investments)
  • Passive Income (From Rental Investments)
  • Credit Cards
  • Other lines of credit
  • Cash

On your journey towards a high personal worth, please order a juicy steak to celebrate the small wins!

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Fast Stop to Collection Calls from Creditors

I have been recently working with a visitor to Creditmania.com who was looking for help in stopping the constant harassing calls from collectors. It had recently gotten so bad that they were receiving upwards of 50 calls per day. Mostly calls from Robo-Dialers that never really left any messages on their answering machine but started the annoying ringing at 8AM and lasted till 9PM. Having found my website in frustration they reached out to me for help with a quick strategy to address this immediate situation. I learned they had some finances available to get bills caught up but not enough to retire some doctor bills that were piling up. I’m outlining below what was used as a strategy that resulted in phone calls going from almost 50 per day to less than 5 almost overnight. I would call that powerful!

If you find yourself in this collections trap please consider using this post as plan to get your road to recovery started. The couple who used this method has agreed to allow me to share a letter they used to make final and partial payments on several accounts and now say the creditors are being very receptive. Where the creditor is not calling off the third party collections agency they will be sending the cease and desist letter that can be found on CreditMania.com.

Step 1 – Get Organized
You’ll need to collect all of your account information. Past due bills or online statements that show where you owe your money. Make a list of these accounts and make sure to investigate if you can pay them online. Online pay is preferable for quick results. Once you make an online payment to retire a balance or even get caught up on late pays the Robo-Dialer will stop calling. There are automatic triggers that tell the computer dialers to call you once you are late or past due on many credit accounts. Use the online system to your advantage.

Step 2 – Budget Analysis
You’ll need to see what extra money in your budget you have to start paying on the outstanding debts. You want to make sure to retire the easy to pay small balances first. Then focus on larger bills that may take more time to pay off. Either way you may need to go on a spending diet in the short term to make this work for you. Example used by the couple above was less eating out and other entertainment spending. Sacrifices will bear positive results so don’t be afraid to give up something to gain peace of mind.

Step 3 – Make the Payments
Okay you have a kitty of bill pay money allocated for this strategy. You will start with the items you can pay online. Many bills can be paid online today and offer great ways to track proof of payments so start there. Then on those with larger balances where you need to set up payment plans use the USPS mail and feel free to use the example letters below. Once your payments are authorized online for instance, the collection calls should stop immediately. If they don’t I would suggest making call to their customer service. There is nothing to fear in calling them at this point as you have made payment to them and should now expect the calls to stop. Demand them to stop calling you.

Step 4 – Follow Through
Where you are asking for payment plans from your creditors be sure to follow through with the payments. This is a second chance to make right your debts and clear up your credit history. It’s very easy to get into this situation and not easy to get out. Once out you should never want to experience that again. So make it your resolution to follow this plan through and through until you owe nobody! That is financial freedom at its best.

Attached: Two Example Letters
Stop The Calls – Make Payments

Stop The Calls – Make Payments V2

Link: CreditMania Cease and Desist Letter (Join our Family of Users to get the entire pak!)

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Debt Repayment Strategy

Truecredit.com recently ran a short article about deciding what debts to pay off first when you are considering your credit & debt strategy. Below is a summary of their recommendations.

These days, everyone seems to know someone who’s been out of work for more than a year or has had to foreclose on a house. With resources scarce, sometimes consumers have to make tough choices about which debts they can pay, and which will have to wait.

If you’ve got to postpone paying money you owe, start by assessing which debts have the least favorable terms. Look at interest rate and benefits, such as tax-deductible mortgage interest vs. non-tax-deductible auto loan interest. Calculate which non-repayments would cause the least amount of damage. Take into account the affect on your credit score and what that would mean for future loans.

Unsecured debts
You won’t lose your home if you don’t pay unsecured debts, like hospital or credit card bills. But you should start by trying to negotiate with the lender. Some hospitals are willing to work out a payment plan to give you breathing room. Credit card companies will sometimes be willing to accept a lower payment from a long-time customer. If you can’t negotiate better terms and you don’t send payments, your credit score will suffer. Eventually the account could be turned over to collections and/or you could be sued.

“Strategic default” not such a great strategy
If you owe more on your mortgage than your home is now worth, a “strategic default” could seem to promise freedom. Some homeowners think they could buy someone else’s foreclosed property at a much better price than their home, but in this economic climate even buyers with excellent credit have difficulty obtaining mortgages. So defaulting isn’t a very realistic option. In general, try to negotiate and explain, and buy yourself time if you can. Remember that lenders and creditors are not unaware of the grim economic conditions many of us face, and you won’t be the first to ask for an extension or different terms.

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The 7 Year Clock is Ticking – Credit Reporting Limits

I have been writing a lot lately about disputing expired items on your credit report. I encourage you to do so especially if your states statute of limits has been reached on the debt owed. If so it is no longer collectible as a valid debt. So if the debt is no longer valid I suggest the strategy of disputing an aspect of the credit file item that is inaccurate and ask for its immediate removal. This could be inaccurate date, amounts owed, account numbers or anything that is invalid. Keep this in mind that even if your states SOL is expired the item can still remain on your file for 7 years total. It only makes sense to dispute it in advance of this as the credit reporting agencies have no desire or inclination to remove on their own. This is something you can do yourself with some skillful written notices. DON’T try to get things removed via email, forms, or phone. Only deal with this in writing.

Finally, As part of your credit repair and restoration journey you must make critical decisions on whether to pay up on past debts. In some cases is really makes sense to make good on what you owe but you must weigh the consequences first. For example if the debt is recent enough and the SOL is long ways off it might make sense to use the debt settlement strategy. However if the SOL is nearly met on this debt you probably should not make any deals to repay it. It is important to know that any items that are about to drop off your credit file due to the age could instantly have the 7 year clock restart if you make a one dollar payment on that debt. So don’t feel like you must settle a debt that has reached the SOL or 7 years on your file. If your conscience is getting the best of you think about it this way. The original creditor has already written this off as a bad account/receivable. They took a tax deduction on this transaction or transactions many years ago so you are not hurting their feelings. They have also received a sum of money form a collection agency that took a flyer on this account in hopes of reaping incremental revenues. So you are not hurting them. NO in fact you need to look at your decision as stepping stone of your learning process to never let yourself get into this position again.

Make the right choices along your journey will enable it to be more successful. Choose to make changes now and accept patience as this is not an overnight trip! Find our strategies and sample letters on our website at CreditMania.com.

From the Fair Credit Reporting Act:

§ 605. Requirements relating to information contained in consumer reports [15 U.S.C. §1681c]
(a) Information excluded from consumer reports. Except as authorized under subsection
(b) of this section, no consumer reporting agency may make any consumer report
containing any of the following items of information:
(1) Cases under title 11 [United States Code] or under the Bankruptcy Act that, from
the date of entry of the order for relief or the date of adjudication, as the case may
be, antedate the report by more than 10 years.
(2) Civil suits, civil judgments, and records of arrest that from date of entry, antedate
the report by more than seven years or until the governing statute of limitations
has expired, whichever is the longer period.
(3) Paid tax liens which, from date of payment, antedate the report by more than
seven years.
(4) Accounts placed for collection or charged to profit and loss which antedate the report by more than seven years.2

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State Statutes of Limitations for Expired Debts

When dealing with an old debt, it’s important to know your limits!

Once a debt passes beyond the statute of limitation in your state, a debt collector no longer has the right to sue you for payment. You may still have a moral obligation to pay back an old, forgotten debt, but you can’t be sued over it. Any debt collector who threatens to sue you over a debt that is beyond the statute of limitation in your state is in violation of the Fair Debt Collection Practices Act. Keep in mind in most states the clock starts once the date of last activity is recorded. Such as last actual payment.

The chart below offers a state-by-state roundup of statutes of limitations for delinquent credit card debts which considered open accounts. For a complete list of all debt types please go to my website at CreditMania.com and signup for the free letter pack. In the pack is the special SOL file for you to print out and keep for your reference.

Statute of Limitations by State

SOL for all 50 States

Click Photo Above to See Larger Version

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