Your Legal Companion to Solving Your Money Troubles

1: How Much Do You Owe?

• How Much Do You Earn?
• How Much Do You Owe?

2: If You're Married, Divorced, or Separated

• Community Property States
• Equitable Distribution States
• Rules for Domestic Partnerships and Civil Unions

3: Create a Budget and Control Spending

• Figure Out Where Your Money Goes
• Make a Spending Plan
• Create Good Spending Habits and Avoid Financial Pitfalls

4: Prioritizing Your Debts

• Secured and Unsecured Debts
• High-Priority Debts
• Medium-Priority Debts
• Low-Priority Debts
• Review Your Worksheets

5: Finding Money to Pay Your Debts

• Cut Your Expenses
• Increase Your Income
• Get Some of Your Tax Refund Early
• Get Your Tax Refund Fast
• Sell a Major Asset
• Sell Smaller Items
• Withdraw Money From a Tax-Deferred Account
• Apply for Government and Agency Help
• Consider a Home Equity Loan
• Use the Equity in Your Home If You Are 62 or Older
• Borrow the Money
• What to Avoid When You Need Money
• Avoid Payday Lender Prepaid Cards

6: Negotiating With Your Creditors

• Prepare a Negotiating Plan
• Communicate With Your Creditors
• Tips for Negotiating With Creditors
• Rent Payments
• Mortgage Payments
• Utility and Telephone Bills
• Car Payments
• Secured Loan Payments
• Insurance Payments
• Medical, Legal, and Other Service Bills
• Child Support and Alimony Payments
• Income Taxes
• Student Loan Payments
• Credit Card Payments
• Negotiating When the Creditor Has a Judgment Against You
• Pay Off a Debt for Less Than the Full Amount
• Don't Write Postdated Checks
• Beware of the IRS If You Settle a Debt

7: What to Expect When You Can't Pay Your Debts

• Eviction
• Repossession
• Tying Up Property Before a Lawsuit
• Lawsuits
• Lawsuits Against Third Parties Who Hold Your Assets
• Liens on Your Property
• Jail
• Bank Setoff
• Intercepting Your Tax Refund
• Loss of Insurance Coverage
• Loss of Utility Service

8: Reducing Mortgage Payments and Dealing With Foreclosure

• Foreclosure
• Nonjudicial Foreclosure
• Judicial Foreclosures
• Right to Cure Default
• Right of Redemption
• The Sale
• Defenses to Foreclosure
• Watch Out for Deficiency Balances
• Alternatives to Foreclosure
• Federal Programs for Homeowners Facing Possible Foreclosure
• Other Mortgage Workouts
• Refinancing
• Selling Your House 
• Short Sales and Deeds in Lieu of Foreclosure
• Finding Other Programs to Help Homeowners

9: Dealing With Debt Collectors

• Creditor or Debt Collector?
• Negotiating Secured Debts
• Before Your Debt Is Sent to a Debt Collector
• When Your Debt Is Sent to a Debt Collector
• Illegal Debt Collection Practices
• How to Fight Back If a Debt Collector Violates the Law

10: Understanding Loan and Other Credit Documents

• Credit Disclosures
• Common Terms in Credit Agreements

11: Student Loans

• What Kind of Loan Do You Have?
• Figuring Out Who Holds or Services Your Student Loan
• Canceling Your Loan
• Postponing Payments
• Changing Your Repayment Plan
• Getting Out of Default
• Filing for Bankruptcy When You Can't Pay
• Consequences of Ignoring Student Loan Debt
• Private Student Loans

12: Child Support and Alimony

• How Child Support Is Determined
• Modifying the Amount of Child Support
• If Paternity Is Disputed
• Enforcement of Child Support Obligations
• Alimony
• Bankruptcy and Child Support or Alimony Debt
• Taxes, Child Support, and Alimony

13: Lawsuits and Collection of Judgements

• How a Lawsuit Begins
• Negotiate a Deal
• Alternative Dispute Resolution
• Defenses and Claims
• What to Expect While the Case Is in Court
• When the Creditor Gets a Judgment Against You
• How Creditors Collect Judgements
• How to Stop Judgment Collection Efforts

14: Bankruptcy: The Ultimate Weapon

• Chapter 7 Bankruptcy
• Chapter 13 Bankruptcy
• The Automatic Stay
• Bankruptcy Exemptions
• Will Bankruptcy Solve Your Debt Problems?
• Getting Help With Bankruptcy

15: Property Creditors Can't Take

• Property Subject to Collection
• Types of Exemptions
• Is Your Property Exempt?
• Claiming Exemptions

16: Rebuilding Your Credit

• Credit Scores and Credit Reports: What's the Difference?
• Credit Reports
• Cleaning Up Your Credit Report
• Your Credit Scores
• Rebuilding Credit Without Getting New Credit
• Rebuilding Credit by Getting New Credit
• Don't Use a Credit Repair Organization

17: Choosing and Managing Credit Cards

• Avoiding Credit Card Traps
• Consumer Credit Card Rights
• Use Credit Card Disclosure Forms to Identify Traps
• Trouble Paying Your Bill
• Should You Get Rid of Unnecessary Credit Cards?
• How to Close a Credit Card Account
• Shopping for a New Card
• Using Credit Cards Wisely
• Cards You Didn't Request
• Rejected and Blocked Cards
• Liability If Your Credit Card is Lost or Stolen
• Unauthorized Use of Your Card by an Acquaintance
• To Dispute a Credit Card Bill
• Debit Cards
• Prepaid Cards

18. Help Beyond This Book

• Looking Up the Law
• Lawyers
• Debt and Credit Counseling Agencies

Glossary

Appendixes

• A: Where to Complain
• B: Contact Information for Useful Agencies, Organizations, and Other Entities
• C: Worksheets

Index

Chapter 1: How Much Do You Owe?

To successfully plan your strategies with your creditors, you need to come to terms with your total debt amount. Most credit counselors will tell you that people tend to overestimate their debt, and before you can make changes, you need to have a realistic financial picture. So even though you might find this uncomfortable, it’s an important step.

However, having a ballpark idea of your income and debt burden won’t be enough to tackle your debt problem.

Getting precise numbers is a crucial part of the process because once you know exactly where you’re at, you’ll be able to prioritize your debts and decide which strategies to use to solve your money troubles.

You’ll start by comparing what you bring in each month with your monthly expenses for things such as food, housing, and utilities, and debt like credit card and student loan payments.

But you don’t have to do this on your own. We’ll help you figure out exactly how much you earn and what you owe. All you have to do is follow the instructions on the next pages and use the online worksheets. And if you’re married or have jointly incurred most of your debts with someone, fill out the worksheets together. (You’ll find the worksheets mentioned throughout this book in Appendix C.)

How Much Do You Earn?

You’ll start by determining how much income you bring in each month using the first online worksheet—Worksheet 1. After getting a calculator and your paycheck advices, unemployment stubs, and other earning statements, you’ll be ready to enter the monthly amount you receive from each source. If you are paid more often than monthly, use the instructions on Worksheet 1 to convert your earnings to a monthly amount. If you have income that doesn’t fit into one of the categories, list it as “other.”

How Much Do You Owe?

The next step is listing your debts on Worksheet 2. To prepare, gather all billing statements, payment books, and other documents showing your monthly payments and the total amount you owe. It’s essential to be as thorough and complete as possible, so don’t forget past-due notices and added interest or fees. Once finished, Worksheet 2 will reveal how far behind you are on your debts and how much you must pay each month to remain current. Here’s how to fill it out.

Column 1: Debts and other monthly living expenses. In Column 1, enter the type of debt. Don’t enter anything more than once. For example, if you deducted child support as a debt paid out of your paycheck on Worksheet 1, don’t list it again here.

If you’re married, you might not know which debts are yours and which belong to your spouse. If your marriage is intact and you’re having joint financial problems, enter all of your debts in Column 1. If, however, you’re separated or recently divorced, or are married but having individual financial issues, see Chapter 2 for help determining which debts you’re obligated to pay. If you share expenses and maintain a household with someone else, consider combining your income and paying all debts with joint funds, regardless of who incurred the debt (although sometimes this approach causes more problems than it solves). Enter both partners’ debts in Column 1.

Column 2: Outstanding balance. In Column 2, enter the entire outstanding debt balance. For example, if you borrowed $150,000 for a mortgage and still owe $125,000, enter $125,000. Your latest account statement should list your outstanding debt balance. If not, the creditor’s automated phone system or online account information will provide the information you need. If you can’t get the balance and you prefer not to talk to the creditor, use your best guess.

Columns 3 and 4: Monthly payment and total past due amount. . In Columns 3 and 4, enter the amount currently owed on the debt. If the lender hasn’t established set monthly payments—for example, for a doctor’s bill— enter the entire balance due in Column 4 and leave Column 3 blank. If the debt is one you make regular monthly payments on—such as your car loan or mortgage—enter the amount of the monthly payment in Column 3 and the full past-due amount (monthly payment multiplied by the number of missed months, plus any fees or charges that have been added, like over-limit fees or late payment charges) in Column 4.

For credit cards, department stores, and similar debts, enter the monthly minimum payment in Column 3 and your entire balance in Column 4. But keep in mind that you’ll want to make more than minimum payments on your credit cards in the future. (Chapter 10 discusses the danger of paying only the monthly amount required.)

Column 5: Is the debt secured? In Column 5, indicate whether the debt is secured or unsecured. A secured debt is one for which a specific item of property (called “collateral” or “security”) guarantees payment. The most common type of secured debt occurs when you sign a credit agreement (sometimes called a security agreement) that allows the creditor to take a particular item of property under certain specified conditions—without suing you first. Examples of conditions that might allow the creditor to take your property include your failure to make a payment, your failure to maintain insurance on the property, or your failure to comply with the payment agreement in some other way. Typically, you sign a credit agreement giving the creditor a security interest in your property when you finance a car purchase, get a mortgage, get a second, third, or additional loan on your home, or buy an appliance or a piece of furniture with store credit.

A creditor can secure its debt without your agreement by filing a lien against your property in two circumstances. First, the creditor can file a lien if the law expressly allows for it. For instance, a mechanic’s lien allows a worker or material supplier to file a lien against your real property if you or the contractor fail to pay them. Second, a creditor can file a judgment lien against your property if it has sued you and obtained a money judgment against you for the amount you owe.

Unsecured debts are typically bank credit card debt; bills owed for utilities, medical, or legal services; student loans; and spousal or child support. Secured property is usually something significant and costly, like your car or house. The creditor can quickly take the property serving as collateral without filing a lawsuit, so secured debts typically have a high payment priority.

You’ll want to list the collateral the creditor is entitled to take if you default on the debt—it’s usually the property you purchased with the loan. (After reading more about secured debts in Chapter 4, you can come back and review whether you need to make any changes to Column 5.)

Column 6: What priority is the debt? Leave Column 6 blank until you read Chapter 4. It will help you prioritize the debts.

Add it up. When you’ve entered all your debts in the worksheet, total up Columns 2, 3, and 4. Column 2 represents the total balance of all your debts, even though some of it may not be due now; Column 3 represents the amount you are obligated to pay each month; and Column 4 shows the amount you would have to come up with to get current on all your debts.

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