Solving Money Problems

Solving Money Problems 14 th Edition Robin Leonard, J.D. Attorney Margaret Reiter

Chapter 1 How Much Do You Owe?... 1 Learning Objectives... 1 Introduction... 1 How Much Do You Earn?... 2 How Much Do You Owe?... 2 Review Questions... 4 Review Answers... 5 Chapter 2 If You re Married, Divorced, or Separated... 6 Learning Objectives... 6 Introduction... 6 Community Property States... 7 Who Owes What Debts?... 7 Who Owns What Property?... 8 What Property Is Liable for Payment of Debts?... 9 Separate Property... 9 Community Property... 9 Common Law States... 10 Who Owes What Debts?... 10 Who Owns What Property?... 11 What Property Is Liable for Debts?... 12 Review Questions... 13 Review Answers... 14 Chapter 3 Debts You May Not Owe... 15 Learning Objectives... 15 Introduction... 15 You Are the Victim of Misrepresentation or Other Fraud... 15 The Seller Breached a Warranty... 18 Your Car Is a Lemon... 20 Home Mortgage Contracts... 21 You Canceled a Contract... 22 Contracts Not Made at Usual Business Location... 22 Private Student Loan Contracts... 22 Home Equity Loan Contracts... 22 Contracts for Credit Repair Services... 23 Contracts You Can Cancel Under State Law... 23 Other Grounds to Cancel a Contract... 24 Canceling Mail, Phone, or Online Orders... 24 How to Cancel a Contract... 24 You Received Goods You Didn t Order... 25 Canceling Automatic Deduction Payments... 25 Review Questions... 26 Review Answers... 27 Chapter 4 Prioritizing Your Debts... 29 Learning Objectives... 29 Introduction... 29 Secured and Unsecured Debts... 29 Secured Debts... 29 Unsecured Debts... 30 High-Priority Debts... 31 Medium-Priority Debts... 33

Low-Priority Debts... 34 Review Your Worksheets... 34 Review Questions... 36 Review Answers... 37 Chapter 5 Finding Money to Pay Your Debts... 38 Learning Objectives... 38 Introduction... 38 Cut Your Expenses... 38 Cutting Expenses That You Don t Need... 39 Reducing Other Expenses... 40 Increase Your Income... 41 Get Some of Your Tax Refund Early... 41 Get Your Tax Refund Fast... 42 Sell a Major Asset... 42 Sell Smaller Items... 43 Withdraw Money From a Tax-Deferred Account... 44 Apply for Government and Agency Help... 45 Earned Income Tax Credit... 45 Unemployment Insurance Benefits... 45 Health Insurance Benefits... 45 Human Service Agencies... 46 Other Free or Subsidized Government Services... 46 Private Agencies... 47 Consider a Home Equity Loan... 47 Use the Equity in Your Home If You Are 62 or Older... 49 Reverse Mortgages... 49 Deferral Payment Loans... 52 Borrow the Money... 52 What to Avoid When You Need Money... 53 Avoid Consolidation Loans... 53 Avoid Tax Refund Anticipation Checks or Loans... 54 Avoid Pawnshops... 54 Avoid Car Title Loans... 55 Avoid Payday Loans... 55 Avoid Bank and Credit Union Prepaid Cards With Advances... 56 Avoid Easy Solutions to Debt Problems... 56 Review Questions... 58 Review Answers... 60 Chapter 6 Negotiating With Your Creditors... 63 Learning Objectives... 63 Introduction... 63 Prepare a Negotiating Plan... 64 Communicate With Your Creditors... 64 Tips for Negotiating With Creditors... 67 Rent Payments... 68 Mortgage Payments... 68 Utility and Telephone Bills... 70 Car Payments... 70 Purchase Payments... 70 Lease Payments... 71 Secured Loan Payments... 71 Insurance Payments... 72 Medical, Legal, and Other Service Bills... 72 Child Support and Alimony Payments... 74

Income Taxes... 74 Student Loan Payments... 75 Credit Card Payments... 75 If You Want to Keep Your Credit Card... 76 If You Want to Settle the Debt or Get Rid of the Card... 76 Charge Card Payments... 76 Reducing Your Minimum Payments... 76 Getting Help... 77 Negotiating When the Creditor Has a Judgment Against You... 77 Pay Off a Debt for Less Than the Full Amount... 77 Don t Write Postdated Checks... 82 Beware of the IRS If You Settle a Debt... 82 Review Questions... 85 Review Answers... 87 Chapter 7 What to Expect When You Can t Pay Your Debts... 90 Learning Objectives... 90 Introduction... 90 Eviction... 90 Repossession... 91 What Constitutes a Default?... 91 When You Have Defaulted... 92 Can You Get Your Property Back?... 93 Will You Still Owe the Lender? Deficiency Balances... 94 Tying Up Property Before a Lawsuit... 97 Prejudgment Attachment... 97 Lis Pendens... 97 Lawsuits... 97 Lawsuits Against Third Parties Who Hold Your Assets... 98 Liens on Your Property... 98 Jail... 99 Bank Setoff... 99 Intercepting Your Tax Refund... 100 Loss of Insurance Coverage... 100 Loss of Utility Service... 101 Review Questions... 102 Review Answers... 103 Chapter 8 Reducing Mortgage Payments and Dealing With Foreclosure... 105 Learning Objectives... 105 Introduction... 105 Foreclosure... 105 The Difference Between Judicial and Nonjudicial Foreclosure... 105 Loan Servicers... 106 Nonjudicial Foreclosure... 106 Judicial Foreclosures... 107 Right to Cure Default... 107 Right of Redemption... 108 The Sale... 108 Defenses to Foreclosure... 109 Watch Out for Deficiency Balances... 109 Alternatives to Foreclosure... 110 Barriers to Negotiation... 110 Tips for Negotiating With Lenders... 110 Short-Term Informal Payment Plans... 111 Federal Programs for Homeowners Facing Possible Foreclosure... 111

Home Affordable Unemployment Program... 112 Home Affordable Refinance Program... 112 Home Affordable Modification Program... 113 Second Lien Modification Program... 114 Mortgage Workouts... 115 Refinancing... 116 Selling Your House... 117 Short Sales and Deeds in Lieu of Foreclosure... 118 Short Sales... 118 HAFA Short Sale Program... 118 Deed in Lieu of Foreclosure... 119 HAFA Deed in Lieu of Foreclosure Program... 119 Other Programs to Help Homeowners... 120 Review Questions... 121 Review Answers... 122 Chapter 9 Dealing With Debt Collectors... 124 Learning Objectives... 124 Introduction... 124 Creditor or Debt Collector?... 125 Negotiating Secured Debts... 126 Before Your Debt Is Sent to a Debt Collector... 126 When Your Debt Is Sent to a Debt Collector... 126 What to Expect... 127 How Debt Collectors Find You... 128 Collection Efforts Must Stop While You Verify Debt... 129 Asking the Creditor to Take Back the Debt... 130 How to Get a Debt Collector to Leave You Alone... 130 How to Handle Time-Barred or Zombie Debts... 132 Negotiating Unsecured Debts... 132 Can a Lawyer Help You Negotiate?... 134 When Collection Turns Into a Lawsuit... 136 Illegal Debt Collection Practices... 136 Federal Law... 136 State or Local Laws Prohibiting Unfair Debt Collections... 138 How to Fight Back If a Debt Collector Violates the Law... 139 Using Right to Verification Violations as a Bargaining Chip... 139 Bringing a Lawsuit... 139 Gathering Proof... 141 Review Questions... 142 Review Answers... 144 Chapter 10 Choosing and Managing Credit Cards... 147 Learning Objectives... 147 Introduction... 147 Avoiding Credit Card Traps... 147 Consumer Credit Card Rights... 147 Use Credit Card Disclosure Forms to Identify Traps... 148 Avoid Over-Limit Fees... 149 Limits on Penalty Fees... 149 Watch Out for Multiple Interest Rates... 149 High Cash Advance Interest Rates and Fees... 150 Introductory Teaser Interest Rate Offers... 150 Balance Computation Methods... 150 Beware of Balance Transfer Offers... 151 High Penalty Interest Rates... 152

Avoid Deferred Interest Deals... 152 Annual and Other Fees... 152 No Grace Period... 152 The Minimum Payment Trap... 153 Trouble Paying Your Bill... 153 Should You Get Rid of Unnecessary Credit Cards?... 154 How to Close a Credit Card Account... 155 Shopping for a New Card... 155 Using Credit Cards Wisely... 156 Cards You Didn t Request... 157 Rejected and Blocked Cards... 158 Blocked Credit or Debit Cards... 158 Rejected Credit Cards... 158 Liability If Your Credit Card Is Lost or Stolen... 158 Unauthorized Use of Your Card by an Acquaintance... 160 To Dispute a Credit Card Bill... 161 Resolving Disputed Charges With the Credit Card Billing Error Process... 161 Resolving Disputed Charges With the Credit Card Claim or Defense Process... 163 Debit Cards... 165 Prepaid Cards... 166 Review Questions... 167 Review Answers... 169 Chapter 11 Understanding Loan and Other Credit Documents... 172 Learning Objectives... 172 Introduction... 172 Credit Disclosures... 172 Common Terms in Credit Agreements... 173 Acceleration... 173 Attorneys Fees... 173 Balloon Payment... 174 Confession of Judgment... 174 Cosigner or Guarantor... 174 Credit Insurance... 174 Mandatory Arbitration... 175 Prepayment Penalties... 176 Pyramiding Late Fees... 176 Right to Cancel... 176 Security Interest... 176 Wage Assignment... 177 Waivers of Exemptions... 177 Review Questions... 180 Review Answers... 181 Chapter 12 Student Loans... 182 Learning Objectives... 182 Introduction... 182 What Kind of Loan Do You Have?... 182 Federal Student Loans... 183 Private Loans... 183 State Loans... 184 Figuring Out Who Holds Your Student Loan... 184 Canceling Your Loan... 185 School Closure... 185 False Certification... 185 Unpaid Refunds... 186

Permanent Disability... 186 Death... 187 Participation in a Volunteer Program, a Teaching Program, Military Service, or Another Public Service... 187 Postponing Payments... 187 Deferments... 187 Forbearances... 188 Changing Your Repayment Plan... 188 Repayment Plans... 189 Direct Loan Consolidation... 190 Getting Out of Default... 192 Filing for Bankruptcy When You Can t Pay... 193 Consequences of Ignoring Student Loan Debt... 193 Where to Go for Help... 194 Private Student Loans... 194 Review Questions... 196 Review Answers... 197 Chapter 13 Child Support and Alimony... 199 Learning Objectives... 199 Introduction... 199 How Child Support Is Determined... 200 Modifying the Amount of Child Support... 201 Legal Reasons That Justify a Support Change... 201 Step 1: Negotiate With Your Child s Other Parent... 202 Step 2: If Negotiations Fail, File Modification Papers... 202 When You Can Stop Paying Child Support... 203 If Paternity Is Disputed... 204 Enforcement of Child Support Obligations... 204 Your Income May Be Automatically Withheld... 205 Your Income Tax Refund Could Be Intercepted... 206 Liens May Be Placed on Your Real and Personal Property... 206 You May Be Required to Post a Bond or Assets to Guarantee Payment... 206 The Arrears May Be Reported to Credit Bureaus... 207 You May Be Publicly Humiliated... 207 You Might Be Denied a State License or U.S. Passport... 207 You Might Be Held in Contempt of Court and Jailed... 207 Your Wages May Be Garnished and Other Assets Seized... 208 The Arrears Might Be Sent to the State Enforcement Agency... 209 You Might Be Criminally Prosecuted... 209 Alimony... 209 Bankruptcy and Child Support or Alimony Debt... 210 Taxes, Child Support, and Alimony... 210 Review Questions... 211 Review Answers... 212 Chapter 14 If You Are Sued... 214 Learning Objectives... 214 Introduction... 214 How a Lawsuit Begins... 214 Should You Hire a Lawyer or Represent Yourself?... 215 Service of Court Papers... 216 Understanding the Complaint... 216 When Is Your Response Due?... 216 Should You Default?... 217 Negotiate... 217

Lump Sum Settlement... 217 Settlement Involving Installment Payments... 219 If the Negotiations Hit a Sour Note... 219 Alternative Dispute Resolution... 219 Defenses and Claims... 221 Statute of Limitations... 221 Other Defenses... 222 Counterclaims... 223 What to Expect While the Case Is in Court... 225 Discovery... 225 Summary Judgment... 226 Settlement Conference... 226 Trial... 226 When the Creditor Gets a Judgment Against You... 226 Components of a Money Judgment... 227 How Long Judgments Last... 227 How Judgments Are Enforced... 227 Stopping Judgment Collection Efforts... 235 Review Questions... 238 Review Answers... 240 Chapter 15 Bankruptcy: The Ultimate Weapon... 242 Learning Objectives... 242 Introduction... 242 Chapter 7 Bankruptcy... 242 The Chapter 7 Bankruptcy Process... 242 Who Can File for Chapter 7 Bankruptcy... 243 Chapter 13 Bankruptcy... 243 The Chapter 13 Bankruptcy Process... 243 Who Is Eligible for Chapter 13 Bankruptcy?... 244 The Chapter 13 Plan... 244 The Automatic Stay... 244 Bankruptcy Exemptions... 245 Will Bankruptcy Solve Your Debt Problems?... 245 Which Debts Will Be Wiped Out... 245 Which Debts Will Remain... 246 What Only Chapter 13 Bankruptcy Can Do... 246 Getting Help With Bankruptcy... 246 Review Questions... 248 Review Answers... 249 Chapter 16 Property Creditors Can t Take... 250 Learning Objectives... 250 Introduction... 250 Property Subject to Collection... 250 Property You Own and Possess... 250 Property You Own but Don t Have on Hand... 251 Property You Have Recently Given Away... 251 Property You Are Entitled to But Don t Yet Possess... 252 Future Claims... 252 Property That Is Only Partially Exempt... 252 Your Share of Marital Property... 253 Types of Exemptions... 254 Is Your Property Exempt?... 255 List Your Property... 255 Value Your Property... 256

Calculate Your Ownership Share... 256 List Liens... 256 Calculate Your Equity... 257 Determine What Property Is Exempt... 258 Claiming Exemptions... 260 Review Questions... 262 Review Answers... 263 Chapter 17 Rebuilding Your Credit... 265 Learning Objectives... 265 Introduction... 265 Avoid Overspending... 265 Figure Out Where Your Money Goes... 266 Make a Spending Plan... 267 Prevent Future Financial Problems... 268 Understand Credit Scores and Credit Reports... 269 What Is in Your Credit Report?... 269 Who Can See Your Credit Report... 270 The Three Cs... 271 Clean Up Your Credit Report... 271 Get Free Copies of Your Credit Report Regularly... 272 Additional Times You Can Get Free Credit Reports... 272 Review the Contents of Your Credit Report... 273 Dispute Incomplete or Inaccurate Information in Your Report... 275 How to Complain About a Credit Reporting Company... 275 Consider Adding a Brief Statement to Your Credit File... 275 Add Other Information to Your Report... 276 Add Positive Account Histories to Your Report... 276 Add Information Showing Stability to Your Report... 276 Your Credit Score... 276 How Credit Scores Are Calculated... 277 How to Get Your Credit Score... 277 Rebuilding Credit Without Getting New Credit... 279 Open Deposit Accounts... 279 Use Credit Cards Carefully... 279 Build Credit in Your Own Name... 280 Rebuilding Credit by Getting New Credit... 281 Get a Secured Credit Card... 281 Get an Unsecured Credit Card... 281 Work With Local Merchants... 282 Obtain a Credit Union or Bank Loan... 283 Avoid Credit Repair Organizations... 284 Review Questions... 285 Review Answers... 287 Chapter 18 Help Beyond This Book... 289 Learning Objectives... 289 Introduction... 289 Looking Up the Law... 289 State and Federal Laws... 290 Court Decisions... 290 Use Background Resources... 292 Online Legal Research... 292 Lawyers... 294 What Lawyers Can Do for You... 294 How to Find a Lawyer... 295

What to Look for in a Lawyer... 296 How Much Lawyers Charge... 296 Debt and Credit Counseling Agencies... 297 Consumer Credit Counseling Service... 297 Shopping for a Credit or Debt Counseling Agency... 298 Finding Credit and Debt Counseling Agencies Through the U.S. Trustee... 299 Review Questions... 301 Review Answers... 302 Appendix A Where to Complain... 305 Appendix B Contact Information for Useful Agencies, Organizations, and Other Entities... 309 Appendix C Worksheets... 313 Glossary... 333 Index... 337