Chicago Bankruptcy Lawyer Blog

Summer is here and thoughts of “we don’t have enough money to do anything fun this summer and we are going to be sooo bored” are probably running through your head. It’s totally understandable to think that, given the state of the economy (and maybe your bank account), but totally wrong, too. You don’t have to sit in your living room staring at each other, wondering what you can do that won’t cost a lot of money, because Debt Diva is here to help.

Let’s start with a pastime that is near and dear to my heart – eating out. Yum! If you enjoy eating out at restaurants (and really, who doesn’t?), then you know that menu prices have gone up recently – food price increases have to be passed on somehow, someway to someone. Guess who? But you don’t have to sacrifice dining out if you do a little advance planning or are willing to try something new.

For great dining savings, such as 2-for-1 deals, $25 worth of food for $10, free appetizer, etc., log onto the website www.restaurant.com and input your zip code. What you’ll get is a listing of local restaurants that offer valuable dining coupons for restaurants in your area. You select the coupon, make your payment, then download and print the coupon. The website often puts out online coupon codes (right now, use the code MEALS for 60% off the price). So, the restaurants may not be the big name chain restaurants that you know, but you never know if a restaurant is good unless you try their food. That little bistro that you spotted on Main Street might just have a great coupon and make it worth a try, and if you like them, you can order up the coupon another time. Be sure to read the restaurant restrictions carefully for each coupon, so you can take full advantage of it.

You’re probably acquainted with those “entertainment” books that are very popular fundraisers. They’re not cheap, are they? Between $25 and $30, last I saw. But the truth is, they provide invaluable savings, and if you are as diligent and vigilant as my sister who keeps her book in her car, then within no time you’ll have paid for the book. There are coupons for fine dining, casual dining (including fast food chain restaurants), attractions (including museums, movie theaters and bowling centers) and shopping coupons (including video stores). Right now, if you reserve the 2009 version of the book, you’ll get the 2008 version free – there’s still 6 months left of 2008 and that could add up to a lot of savings. Visit the Entertainment Book website at http://www.entertainment.com/discount/home.shtml for more information. Oh, and if you preview the book, I found that a few of the dining coupons are immediately printable (when you place your order), so you can download the coupon right away – you can save money tonight!

If you’re on the Valpak mailing list (and really, who isn’t?), you probably get those little blue envelopes on a regular basis. Don’t consign that envelope to the garbage pail without pulling out the coupons first. Visit the Valpak website at http://www.valpak.com/coupons/home for even more money saving coupons which can be printed free for dining, groceries and services.

Finally, if you’ve got a favorite restaurant – be it a national chain or a local pizzeria -- get online, and check whether or not their website has printable coupons. If they’ve got a mailing list, sign up for it, and if they’ve got a birthday club, sign up for that. Coupons will be delivered right to your email box.

Bon Appétit!

-- Debt Diva for DebtStoppers

In many cases, successfully saving money requires you to make a shift in the way you think about savings. These five tips are a surefire way to help you learn to think about your spending habits and increase your saving savvy:

1. Trade-off instead of going entirely without your favorites.
Most people aren’t ready to cut their spending habits cold-turkey, so an easy way to transition to a saving mindset is to learn to tradeoff when you feel you just can’t live without something. If you just can’t survive without your gourmet chocolate bar, agree with yourself to trade something else for it – like buying a generic brand fabric softener, or eating chicken for dinner instead of steak. Learning the art of the trade-off really makes you think about how much you want something, and what sort of sacrifices you’re willing to make for it.

2. Learn the difference between “need” and “want.”
During economically plump times, people tend to use the words “need” and “want” interchangeably. Learn the difference between “need” and “want” and you’re well on your way to saving hundreds every month. You might “need” new clothes; however, you don’t “need” designer jeans – a regular $20 pair from an inexpensive retailer serves the same purpose.

3. Give yourself concrete goals and track your progress.
It’s extremely difficult to save money for the intangible future. If you don’t know what you’re saving for, it’s easy to spend that money today and vow to yourself that you’ll contribute to your savings next month. Don’t fall into this habit. Give yourself concrete savings goals – i.e. “I want to save $2,000 this year so that in 5 years, I’ll have $10,000 to put towards a house.” Giving your savings a definitive purpose and dollar amount means you’re more likely to contribute; especially if you track your progress and see how much closer you are to buying that house or taking that dream vacation.

4. Leave your cards at home.
If impulse buying is your bane, there’s a very simple way to deal with it: leave your credit and debit cards at home. Carry emergency cash of $40, and you’ll be able to do buy lunch or catch a cab – without spending money you meant to be saving. If you find something you absolutely must have, chances are good that the item will still be there if you come back later to buy it. Once you go home and have time to think about it, you might find that you didn’t really need it after all.

5. Use budgeting software or spreadsheets.
It’s impossible to stick to a budget if you don’t know where your money is going, and most people don’t realize how much cash they spend on frivolous things. Use budgeting software, or just create a spreadsheet to break down your expenses and see where you’re spending the most. Spending $800 a month on food? Eat out less, and buy generic brands at the grocery. Using budgeting software lets you isolate your spending habits and figure out what’s necessary and what you can cut.

-Money Maven

I used to consider myself a shopper extraordinaire, always looking for the sale, the bargain, the best absolute possible price -- I didn’t pay full price for anything. I loved shopping, and I shopped so often that my car could drive to the outlet shops without me. Then, one day, I passed by the local thrift store (for only about the zillionth time, mind you, since it was half a mile from my house), and decided to pull in, as I had a few hours to kill before picking up the kids from school. And from that moment, my whole outlook on shopping changed. Yup. That day, I got a real education in savings.

Now, before you look down your aristocratic nose (as I did) at the thought of shopping in a thrift store, let me clear up a major misconception – it’s not just the poor who shop here. You will be amazed at the number of high-end cars that park in the lot – Beamers and Benzs parked right next to Hyundais and Kias.

I look at thrift shopping as an adventure, since you never know what you will find and the merchandise on the racks and shelves changes from moment to moment. In a thrift store, you can find everything except the kitchen sink… oh, wait, I have seen a kitchen sink, so let me rephrase that – you can find anything. Most thrift stores accept donations at the back door, and the merchandise is usually out on the selling floor the same day.

Unlike regular store shopping, where you find a style you like and then seek out the size you want, you don’t have that luxury here. What you see is what you get. But what you see might be amazing. Without exaggeration, I have seen designer names such as Gucci, Pucci, Hermès, Versace, Lilly Pulitzer, Yves Saint Lauren, Coogi, Dolce & Gabbana and Manolo Blahnik. And when I saw them, I snatched them up as quick as could be – look, even if no one in my family could wear it, I could do something with it (i.e. ebay it, but that’s another story).

Okay, so while the store is not exactly filled with exclusive, outré designer names like those, you will find high end designer names like Ann Taylor, Gymboree, Gap, Banana Republic, Ralph Lauren, Talbots, Oilily, Abercombie & Fitch, Tommy Bahama, Lands End, L.L. Bean, Hanna Andersson, to name just a few. And, generally, the prices at thrift stores are more akin to Walmart’s offerings. No, I take that back, at prices that are way better than Walmart. I would say, generally, that prices are about 10 to 20% of the retail price, and in some cases, even less.

Before you step into a thrift store for the first time, here’s a list of Dos and Don’ts:

• Do keep an open mind – the stores are not fancy, the lighting is usually poor, employee assistance may be non-existent, and everything appears helter skelter – what you lose in ambiance, you gain in savings.
• Do bring cash; many thrift stores don’t accept credit cards or checks.
• Do bring a large bag to carry your stuff around – the shopping carts go fast.
• Do shop early in the day, and shop often.
• Do watch for sales notices, such as half price items on a specific color ticket, or senior citizens day, if you can take advantage of that.
• Do keep the clothing and shoe sizes of your family members written down on a card that you carry in your wallet; check for the European and UK size conversions online, so that you can take advantage of unfamiliar labels.
• Do scrutinize the merchandise – check for holes, stains, missing components or pieces, or anything wrong with it that you can’t fix yourself.
• Do bear in mind that there are usually no dressing rooms, or if there is one, it’s communal. Most women find it easiest to wear a big loose-fitting dress with a bodysuit beneath it, so that they can try clothes on right in the aisle.
• Do note the return policy; the majority of thrift store do not accept returns, and clearly state that all sales are final.
• Do consider re-donating the items you no longer need, and remember to pick up your receipt for tax purposes.

• Don’t be surprised if an item has still got tags on it; I have found that a good 15% to 20% of the merchandise is brand new.
• Don’t buy mass-merchandiser private label clothes. By that, I mean, Walmart, Target or K-Mart – why buy a used Faded Glory or Basic Edition tee shirt for $2.90, when you can buy a new one at the end of the season for the same price.
• Don’t buy anything electric or electronic without having an employee turn it on for you, to see if it works.
• Don’t bypass out-of-season items (coats and sleds in July), as the best deals are often to be found then.
• Don’t buy an infant or child’s car seat, unless you are certain it is brand new and never used, since you can’t be certain its integrity wasn’t compromised in an accident.
• Don’t think too long or too hard if you see something you like; it likely won’t be there the next time.

There’s no doubt that many people are finding that their discretionary funds are dwindling sharply, as a result of higher gas and food prices. It’s no wonder, then, that the National Association of Resale and Thrift Stores reported that 75% of their respondents in a national survey said that they showed an increase in sales over the period April 2007 to April 2008, with the average increase per store being about 30%. The survey also showed that 80% of the thrift store respondents had an increase in new customers. Shouldn’t you be among them?

-- Debt Diva for DebtStoppers

June is such an expensive month, don’t you agree? It’s a real budget breaker -- buying presents for weddings, anniversary parties, graduation parties, birthday celebrations and Father’s Day (and may I say, as an aside, that I’m personally relieved that Mother’s Day is celebrated in May when hardly anything else happens and my family can afford to be much more generous!). Not to mention, if you’re anything like me, buying a gift is an exercise in futility – I never know what to buy, no matter how well I know the person.

That’s why I love gift cards so much. It’s just like cash, only less tacky, and the cards themselves are usually so cute and apropos -- a little mortar board and tassel for a graduation, silver rattle for a new born baby, or a rope noose for a wedding. Okay, just kidding on that last one, but wouldn’t that be funny!

Yeah, I love gift cards, giving them and getting them. And I’m not the only one, it seems, more than 50 million Americans purchased a gift card last year, and more than 83% of Americans have used gift cards. Last year, the total value of those gift cards was $26 billion… that’s with a “B.” Interestingly, more than one third of all gift cards are not redeemed – that amounted to $8 billion last year – and goes straight back into the retailer’s pocket, as it were. My Mom is like that; she gets a gift card, sticks it in her wallet and lets it rot. Well, not rot, literally, but gift cards can and do expire, and their value diminishes (thanks to a non-usage fee) after a specific time, getting lower and lower and lower until -- POOF -- it’s evaporated.

Be sure to read the fine print on gift cards; remember, if you don’t use it, you lose it, and the company that issued the gift card – Target, Home Depot, Linens N Things, etc. – gets to keep that money and the merchandise that could have been bought with it. The Federal Office of the Comptroller of the Currency recommends that consumers who plan to buy a gift card be aware of the following before handing that card over to the cashier for activation:

• Applicable fees charged, including those which are assessed after the sale and which may reduce the card value;
• Gift card expiration date;
• Procedures for loss or theft of a gift card;
• Procedures for “problems” arising with use of the gift card; and
• Where the gift card is accepted.

What other “problem” do you think the OCC was referring to? I’ll tell you. It’s the “gift card scam.” Knew that was coming, didn’t ya? Thieves will always find a way. The gift card scam works like this – you walk into a store, grab one of those cute little blank gift cards from the aisle near the register, hand it to the cashier for credit and activation (“Put $50 on that card, will you, please?”), and pay for your purchase. Voila! Mission accomplished: The perfect gift.

Now, what you didn’t know is that the scammers (I'm being kind, they're just thieves, really) grabbed a bunch of those blank cards, hid out in the dressing room for a while where they carefully peeled the cards from the glue dot backing, and copied out the numbers. Then they put the cards back on the rack and waited for someone to buy them. Then, like clockwork, they call the retailer and inquire as to “their” available balance (“Oh, have I still got $50 on that one? Silly me. It must be the other gift card that I used, let me check that one, too”). Once they hear the card has got available credit, off they go to surf the net, where they can use up the entire balance of that card in mere minutes. Voila! Mission accomplished: The perfect crime.

So, how do you protect yourself? Buy a card that’s sealed in cellophane, and that the cashier opens in front of you, or that has an opaque or scratch off coating with a concealed PIN on the back that is removed by the card recipient. What about the gift cards that only the cashier has access to? They might be a tad safer, but only a tad – cashiers get sticky fingers, too, you know.

What’s the ultimate in gift card protection? Buy a gift card online directly from the retailer’s website, and have it e-mailed or snail mailed to the recipient. Or you could buy a bank-issued gift card, which bears a Visa or MasterCard logo; bear in mind, though, bank-issued gift cards usually have higher fees and lots of restrictions.

A lot of people who don’t like gift cards complain that the retailer specific gift cards limit the recipient’s choice, because you have to shop at a specific store. What if you get a gift card for a salon make over, but you need a new air hammer? There’s a remedy for that, too; use a legitimate online gift card service such as www.giftcertificates.com, and buy an “e-SuperCertificate,” which lets the recipient choose from among the hundreds of available retailers.

A final word about using eBay to buy discounted gift cards (i.e. $100 Gift Card for $95 with Buy-it-Now!): Caveat Emptor (so sue me, it was two words). You can’t be 100% certain that you won’t fall victim to a gift card scammer. Granted, there are legitimate sellers who offer an unwanted gift card for sale (I, myself, have done it), but be wary of those sellers who have dozens of them for sale at once. Some have no intention of ever mailing out a gift card, and simply take advantage of the “float” from your payment, until they refund it, which might be weeks later. Read the feedback and note the complaints, even if they’re positive. In simple English: Buyer Beware.

--Debt Diva

Last week, the Associated Press published a series of article about current foreclosure levels. Foreclosures in May jumped 50% from the same month last year and almost 10% from April – showing that the housing market continues to go downhill. Some analysts predict that the housing market will hit bottom by the end of the summer, while others think that it’s only going to get worse; with a record 3 million homeowners currently behind on their mortgages, and another 450,000 entering the final stage of foreclosure, it seems as though the housing slump may be a long way from hitting bottom.

These articles went on to predict that the housing crisis will affect nearly 10% of American homes over the next five years, with a record of almost 6.5 million homes falling into foreclosure.

6.5 million people at risk of loosing their homes.

It really makes you stop and think. That’s 1 in 10 current homeowners who will likely loose their homes within the next five years. Will you be one of them?

At first, the sluggish economy affected primarily low-income homes with sub-prime mortgages. Sub-prime mortgages are a discussion for another day, but suffice it to say that it’s not terribly surprising that these were the first homes affected. With sub-prime homeowners already struggling to meet rising mortgage payments when an ARM resets to a higher level, little things like $4 per gallon gas and rising food costs are bound to cause issues. Banks and analysts pooh-poohed the troubles, citing the higher risk in the sub-prime market. (And for the record, there’s nothing wrong with a sub-prime borrower; lenders, however, seem to dismiss them more easily.)

Now, though, it’s not just the sub-prime market that’s in trouble. In the past several months, amidst rising gas prices and a declining economy, more people have faced layoffs, job loss, rising fuel and food costs and have had to learn a difficult juggling act to meet all of their financial obligations. Even people with conforming loans and a cushion against hard times are beginning to feel the housing crunch, with a growing number contributing to the record foreclosure rates. People with good jobs and ‘low risk’ mortgages have been joining the ranks of foreclosure in the past several months.

What does this mean for you? Practically speaking, if your home is at risk for foreclosure, you’re not alone. Millions of homeowners are currently caught up in the midst of the housing crisis. Until the government steps in and takes a hand in the mortgage industry, it’s not likely to recover.

If you’re facing foreclosure, bankruptcy can help you save your home. Bankruptcy can’t erase your mortgage debt, but foreclosure proceedings cannot proceed while your bankruptcy is pending. If you’re having trouble making your mortgage payments because you have too much overall debt, including a high load of unsecured debt, bankruptcy may be able to help you restructure your debts so that you can resume your mortgage payments and keep your home.

-Money Maven

In my next life, I want to come back as the owner of a rent-to-own operation. I’ll make a fortune! I mean, if I do this right, I can make some really decent profit – well, maybe “decent” isn’t the word for it (how about obscene?), but profits are profits, you know what I mean? “How are ya gonna do that?” you may well ask. Well, since I’m in a good mood, I’ll share… I’ll buy a really nice 20” name brand color television set from a retailer for about $250, and then sell it to some sucker, er, I mean consumer, for a little over $1,000 over the course of a year or so. Let’s say $13 a week (that’s not too bad, anyone can afford that!) for 78 weeks and then the TV is theirs. Total rent-to-own price = $1,014. Dang! After the 20^th payment, I’m at break-even. Yippee!! And, if they cancel the contract and return the TV to me (or I repossess it – heh heh heh), I can do it all over again. Think of the possibilities! Plasma TVs, game consoles, microwave ovens, washer/dryers, computers, furniture – everyone has got a need, and there’s got to be someone to fill it, so why not me? Well, I’ll tell you why not me. Because I’m not a skank, I’m not greedy, and I’ve got a conscience!

Those rent-to-own (RTO) franchises that you see all over the place (I won’t name any names, but you know them since the word “RENT” is prominent), are just another way of fleecing and defrauding the public out of their hard-earned cash. It involves one party (the desperate consumer) in need of a specific appliance or furniture, and without the means for immediate replacement of the necessary item, and another party (the unscrupulous renter) who will be more than happy to “help.”

The premise is simple; you rent your item over the course of a fixed period, paying a small, affordable fee, by the week or by the month, until you own it. Sounds like a good deal right, right? Kind of like lay-away, except that you get the benefit of having the TV or washer or sectional couch in your house right now, instead of when you’ve finished paying it off. Except that it’s nothing like lay-away. Lay-away doesn’t rip you off – you will pay the listed price of the purchased item in installments, with perhaps some small lay-away fee added in. That’s it. When you’re finished paying, the item is yours. Rent-to-own offers instant gratification, that’s true. But that’s the only real benefit in it.

The rent-to-own industry is huge, a multi-billion dollar one, and there are more than 10,000 of them nationwide. Sadly, very few states have any legislation governing these rent-to-own franchises, and until they do, consumers will continue to fall prey to them. Fortunately, politicians are fighting against them, and Senator Charles Schumer of New York has introduced federal legislation that will significantly curtail their activities and protect the most vulnerable of consumers from this, as he calls it, “renegade” industry. Part of the recommendations include disclosure of all fees and interest rates (expressed as an Annual Percentage Rate to make comparisons simple), standardized pricing of the merchandise, and adherence to federal lending laws, among other protections.

Is it necessary? Absolutely, yes. Bear in mind that RTO franchises can charge up to 300% on what they call “leasing” fees – they don’t call it interest, because people would start screaming highway robbery, but whatever you call it, it's outrageous. That 300% doesn’t even take into account processing fees, set-up fees, delivery charges, damage waiver fees, late fees and penalties. And, if those aren’t enough to scare you, did you know that if you’re late paying, the RTO franchise has the right to repossess your item at any time, and did you further know that in some states that they can have a warrant sworn out against you if you’re late, and charge you with theft of their merchandise? Scared now, right?

You have other options – you don’t have to settle for these rip-offs. Consider the lay-away plan at your local mass merchandiser, or set savings aside every week or month until you can pay for it outright. Need immediate gratification? Thrift shops, yard sales, newspaper or online classified ads can satisfy that need. There’s also an online network of people who recycle the things they don’t want any longer, and they may be perfect for you; just visit the website www.freecycle.org and subscribe to a local member group to see the offerings available in your neighborhood. These items are FREE; all you have to do is find a way to get them.

One final note, if you’re considering renting to own, visit the website for the RTO franchises first. Notice, there are NO PRICES on anything. Nice pictures, but no prices. I’m a firm believe in the old adage, “if you have to ask the price, you can’t afford it.” Ain't it the truth!

-- Debt Diva for DebtStoppers

Yesterday, I got a chatty email from my mom, saying (quite casually, I thought), that she had gotten a call the night before from someone from Capital One who asked her if she had recently made three small charges to Napster. Now, unless Napster started selling the Greatest Hits of Hoyle Nix, my 71 year old mother is more likely to get a snake tattooed on her butt than subscribe to them, so the obvious answer to that question was no, not her charges. Then the Capital One guy proceeded to tell her that they suspected fraud on her credit card account, and that her credit card would be reissued and that she should review her account for other charges as soon as possible. He gave her a phone number to the Capital One fraud department and his badge number. Are your hackles going up yet? Mine did.

I know, I know, it might have been a legitimate phone call – Capital One wants to cover their, um, assets against unauthorized spending (which they have to write off) as much as any other credit card company, but in this day of internet phishing, VoiP (voice over internet protocols) vishing and general credit card scamming, you can never be too careful, and it bears consideration and mentioning.

First things first, if you should get a phone call from a so-called representative of your credit card company, get the individual’s name, badge number and phone number to call back. Then, independently check out the phone number – go to the credit card company’s website, or check the phone number on the back of the credit card itself, or look on your statement. If the numbers are the same, thank the heavens that someone was watching over your account, and call back, because you’ve probably had your credit card compromised. If they’re different phone numbers, call up the number you’ve independently found, and ask for the fraud department to verify the individual’s employment there.

Now, some scammers have no information at all when they call you, and they’re on a fishing expedition, pure and simple. The conversation will start off that your Capital One (or Chase Manhattan or Washington Mutual, etc.) credit card may have been fraudulently used (or so they’re hoping). They may recite a credit card number, and ask you to confirm it. “Why no, that’s not my credit card number – my credit card number is blah blah blah blah blah and it expires on blah blah.” Thank you! Caught a whopper!

How do they know which credit card you’ve got? Lucky guesses. How many millions of Americans take advantage of those annoying “Capital One You’ve Been Pre-Approved!” letters that they get in the mail every week? They’re filling up mail boxes from Portland, ME to Portland, OR. Wish you could stop them, don’t you? Guess what, you can by signing up at http://opt-out.cdt.org/.

Unless you’ve initiated a phone call to your credit card company, NEVER give out any information over the phone – these scammers are trawling for some little snippets of information that allow them to use your credit card. They might even have some information already, such as knowing your credit card number or where you grew up, that will lull you into a false sense of security. And that 3-digit security code on the back of your credit card, the real credit card company knows it already because it’s in their computer system, and you don’t need to read it to them to verify that you’re in possession of the card.

So, let’s say you got one of those phone calls, what next. If it’s for real, work with the credit card company to reissue new cards as soon as possible, check over your statement carefully, and make sure you sign the affidavit that the credit card company sends you, so that they can reverse any unauthorized purchases. If it’s not for real, you either need to watch your account very very carefully, or request that the account be closed for fear that it was compromised.

While it’s true that you don’t have to pay for unauthorized charges on your credit card, the hassle of canceling the old and re-issuing a new card, calling all creditors with automatic recurring payments that are debited from your credit card – magazine subscriptions, medical or insurance payments, etc. – and the worry that your good name and financial reputation has been besmirched, should make you doubly vigilant about monitoring your personal credit card information. And last, but not least, the tedium of cleaning up your credit report, which may have been damaged by the unauthorized charges, especially if your card was used to or beyond its maximum limit. You can include a statement on your credit report attesting to the theft of your account, but that may be a case of too little, too late, especially if you were in the process of refinancing your property or applying for credit elsewhere.

If you feel you’ve been the victim of a phishing, vishing or fishing expedition, contact the Internet Crime Complaint Center (IC3) at http://www.ic3.gov/ and follow the guidelines to file a complaint. The IC3 works hand-in-hand with the Federal Bureau of Investigation to stop these scammers, and they need all the help they can get.

-- Debt Diva for DebtStoppers

If you’ve been looking into credit repair programs, you’ve probably seen countless warnings to “Beware unscrupulous credit repair companies!” Plenty of resources warn you to look out for credit repair companies who take your money but fail to provide the services you need, but few resources tell you about the little-known dangers of credit repair companies. Did you know that contrary to what they tell you, a credit repair company can actually be damaging your credit further? Before you consider using a credit repair company, think about these warning signs:

Credit counseling companies can ruin your credit.

Some credit repair or debt relief companies set up a plan where you pay them a large monthly payment, and then they disburse your payment to your creditors. In return for their services, the credit repair company takes a chunk off the top of your payment. Why would you pay a credit repair company to make payments that you could make yourself? Most credit repair or debt relief companies that discuss this consolidation tell you they can get creditors to agree to repayment plans that you would never get.

Beware these repayment plans.

What these companies don’t tell you is that the payments they send may not be enough to meet your creditor’s minimum payments. The only way a creditor is legally obligated to accept a low-monthly-payment repayment plan is through bankruptcy. If your credit repair or debt consolidation company is sending less than the minimum payment without the approval of your creditor, the creditor may report your payments as late payments, delinquent or even a charge off. If your creditor is reporting your payments late month after month, that’s a serious hit against your credit report. And worse – if you’re making less than the monthly minimum payment, a creditor can go to court and seek a judgment against you!

As for the so-called “non-profit” credit counselors; think again before you think they’re not making money. Many non-profit credit counselors are paid by your creditors for negotiating a payment plan, so they earn their fees directly from the creditors – they’re not just in it out of the goodness of their hearts. If you’re thinking about using a non-profit service, clarify any potential sources of revenue – including revenue from creditors – that might constitute a conflict of interests. If they’re not in it solely to help you, you could get bad or misleading advice.

Credit repair is something you can do yourself.

Beyond debt relief or credit repair repayment plans, there’s another way in which credit repair companies don’t do you any services. If you’re paying a credit repair company to clean up your credit, you’re paying for a service that you could be doing yourself! Credit repair companies don’t do anything that consumers can’t do themselves with a little time and patience. You’re much better off saving your money and applying it towards your outstanding bills. No credit repair company can improve your credit overnight, and the only way to legally make your debt go away is through bankruptcy.

If it sounds too good to be true, it probably is.

Like with many things in life, if a credit repair company sounds too good to be true, it probably is. Credit repair companies make ridiculous claims that they can’t back up, just to get consumers to give them money. Some credit counseling services offer legitimate services, but credit counseling and credit repair are two distinctly different services. If you’re in doubt, consult a legal professional about your debt scenario.

-Money Maven

If you’ve been looking into credit repair programs, you’ve probably seen countless warnings to “Beware unscrupulous credit repair companies!” Plenty of resources warn you to look out for credit repair companies who take your money but fail to provide the services you need, but few resources tell you about the little-known dangers of credit repair companies. Did you know that contrary to what they tell you, a credit repair company can actually be damaging your credit further? Before you consider using a credit repair company, think about these warning signs:

Debt relief companies can ruin your credit.

Some credit repair or debt relief companies set up a plan where you pay them a large monthly payment, and then they disburse your payment to your creditors. In return for their services, the credit repair company takes a chunk off the top of your payment. Why would you pay a credit repair company to make payments that you could make yourself? Most credit repair or debt relief companies that discuss this consolidation tell you they can get creditors to agree to repayment plans that you would never get. Beware these repayment plans.

What these companies don’t tell you is that the payments they send may not be enough to meet your creditor’s minimum payments. The only way a creditor is legally obligated to accept a low-monthly-payment repayment plan is through bankruptcy. If your credit repair or debt consolidation company is sending less than the minimum payment without the approval of your creditor, the creditor may report your payments as late payments, delinquent or even a charge off. If your creditor is reporting your payments late month after month, that’s a serious hit against your credit report. And worse – if you’re making less than the monthly minimum payment, a creditor can go to court and seek a judgment against you!

As for the so-called “non-profit” credit counselors; think again before you think they’re not making money. Many non-profit credit counselors are paid by your creditors for negotiating a payment plan, so they earn their fees directly from the creditors – they’re not just in it out of the goodness of their hearts. If you’re thinking about using a non-profit service, clarify any potential sources of revenue – including revenue from creditors – that might constitute a conflict of interests. If they’re not in it solely to help you, you could get bad or misleading advice.

Credit repair is something you can do yourself.

Beyond debt relief or credit repair repayment plans, there’s another way in which credit repair companies don’t do you any services. If you’re paying a credit repair company to clean up your credit, you’re paying for a service that you could be doing yourself! Credit repair companies don’t do anything that consumers can’t do themselves with a little time and patience. You’re much better off saving your money and applying it towards your outstanding bills. No credit repair company can improve your credit overnight, and the only way to legally make your debt go away is through bankruptcy.

If it sounds too good to be true, it probably is.

Like with many things in life, if a credit repair company sounds too good to be true, it probably is. Credit repair companies make ridiculous claims that they can’t back up, just to get consumers to give them money. Some credit counseling services offer legitimate services, but credit counseling and credit repair are two distinctly different services. If you’re in doubt, consult a legal professional about your debt scenario.

-Money Maven

Sharkie: Yo! It’s the day after payday. I came to collect the $500 I loaned you last week.

Desperate Borrower: Oh, man! I know I just got paid, but I’m still short on cash.

Sharkie: Ya got any preference as to which knee cap I do?

Desperate Borrower: Listen, can I pay you on my next payday, in two weeks instead?

Sharkie: Okay. I guess I can do that. But you got to pay me $125 right now for giving you an extension.

Desperate Borrower: But if I pay you $125 now, I won’t have enough for food for my kids!

Sharkie: That ain’t my problem. You want me to roll-over the loan or what? C’mon, c’mon! I got dozens of other “collections” to make today.

Desperate Borrower: Yeah, yeah, I want the extension. What choice do I have?

“What choice do I have?” While that’s a hypothetical situation, it may hit fairly close to the mark for a lot of people. The only difference is in the threat – it’s a check that’s going to bounce versus a knee cap that’s going to be broken. What a choice. Sadly, for a lot of people who are living paycheck to paycheck, it’s the only choice. Even if you’ve been able to budget well and have been capable of stretching your paycheck and living within your means, without a cushion for an emergency, to whom do you turn if you need an extra $300, $500 or even $1,000?

Many people turn to the payday loan centers that are popping up in all areas of the country, but which seem to dominate in most urban and distressed areas – they’re in the strip malls, and next to the barber shops and beauty parlors, and even in the local 24-hour convenience stores. And, why not? It’s easy money to get – all you need is proof of a job with a steady paycheck, a checking account and a ton of personal information and references. You apply for the unsecured, very short term loan – typically less than a month -- fill out the form, sign on the dotted line and leave a signed, post-dated (to your payday) check for the full loan amount. Then, less than an hour later, you’ll be able to walk out with the money you borrowed. But, not all of the money you borrowed. The payday loan center has already withdrawn their fee, which can be as high as $25 for every $100 borrowed. So if you ask for $100, you get $75; if you need $100 exactly, you’ve got to get a loan for the more than $125.

When your payday comes around, you agree to repay the full loan amount and in return, you will get your check back. Now, you should know that in some states, it’s illegal for you to even write a check on funds you don’t have. It’s called fraud. While the principle behind a payday loan centers is entirely predatory (in my opinion), the loan centers that can be considered unscrupulous bottom-feeders will think nothing of depositing your check as soon as you’re considered late in repaying the loan. The result – your bank charges you an NSF (non-sufficient funds) fee, the depository bank charges the payday loan center a Returned Deposit Item fee which will be passed back to you, and you’ve committed fraud and could be legally prosecuted, with resulting fines or jail time. That’s absolutely frightening.

If you know that you can’t make the payment on time, what do you do? You ask for a roll-over or extension. And there begins the vicious cycle of payday loan debt, because you’ve got to pay the fee again. So, that desperate borrower, who needed to borrower $500, when he initiated the loan, he paid $125, then when he got an extension, that was another $125 – that’s $250 worth of interest or fees on a $500 loan. You can see how things can escalate, can’t you? What if it has to go beyond that first roll-over?

When you’re basically living hand-to-mouth, any little emergency can really set you back. But be honest with yourself, before you walk into one of those “legalized” loan shark outlets -- if you didn’t have enough money to cover the expense this week, how will you ever have enough next week? Sell your kid? No, you don’t have to do that. What you need to do is call up the credit card company, or the bank, or the store with the charge card, or the utility company or whomever you owe the original debt to, and tell them the truth -- you’ll be late with the payment and ask if you can work out a repayment schedule – believe me, they want their money and will be willing to do this. Even if you're charged late fees, it’s not going to be the usurious fees of the payday loan center. And your patella gets to stay in one piece.

-- Debt Diva for DebtStoppers

With millions of consumers in significant debt, credit counseling scams are a lucrative source of cash for unscrupulous agencies. People often ask us about the difference between a bankruptcy and credit counseling services. Depending on the type of bankruptcy that you qualify for, you may completely erase your debts or follow a court-approved payment plan to repay your debt. Credit counseling services vary, but many offer a debt repayment plan whereby they contact your creditors and attempt to arrange monthly payments. With a credit counseling service, you typically pay the counseling agency a monthly lump sum, which they disburse to your creditors. If you're considering a credit counseling service, look out for these warning signs of potential credit counseling scams:

•    Beware guaranteed results.
Federal law prohibits credit counseling agencies from guaranteeing results. A good credit counseling agency can tell you likely results and outcomes, but results are entirely dependant on the credit bureaus and your creditors, so credit counseling agencies cannot 'guarantee' a specific outcome. Not only is it impossible to guarantee a specific result, but it's against the law. Only a bankruptcy attorney can force creditors to accept a payment plan that you can afford or erase your debt entirely.
•    Don't pay money up front.
Again, this aspect of credit counseling services is regulated by law. Unless the credit counseling firm is run by an attorney or CPA or is a registered non-profit organization, they cannot request money up-front for services. Be very clear about the structure of a credit counseling agency to ensure you're not being asked to pay fees up-front, unless it's a legitimate non-profit or attorney or CPA-run firm.
•    Research the credit counseling service.
How long have they been in business? Is it a member of the Better Business Bureau? Willingness to provide information about the company is a good sign in the right direction, and reluctance to freely offer this information is a warning signal. If the company is registered with the BBB, go to their website and check them out for consumer complaints. Look for credit counseling services that have been around for at least a few years, as this indicates that they're probably not a 'fly-by-night' organization that will take your money and run off with it.
•    Discuss your financial situation.
Make sure you discuss your specific financial situation with the credit counseling service. If a credit counselor tries to get you to sign up for a specific debt repayment plan without asking about the specific details of your financial status, you're probably not getting services tailored to your needs by a trained professional.
•    Creating a 'new identity' is fraud.
If a credit counseling service tries to have you establish a new social security number or use an employer identification number (EIN) for new credit applications, don't do it. Both of these methods to 'establish a new identity' are considered fraud, and you could go to jail for using these methods to clear up your credit.

You take your health seriously. You get an annual physical and go to the doctor when you're worried about a health problem. You discuss healthcare options with your doctor, determine what works best for you, and follow that advice to ensure continued good health or treat chronic medical conditions. Most people recognize when it comes to health care that an ounce of prevention is worth a pound of cure. Catching health problems early and eliminating risk factors for serious health conditions could save your life, as well as drastically improve your quality of life in the future.

Why don't people realize that the same rule applies to financial health?

Managing your finances is an organic process. Your bills change from month to month, and your income may fluctuate. Unexpected things come up. You may need to tap into your savings to cover an unexpected car repair. Before you know it, your savings could be gone and you might be in debt way over your head. Financial status changes over time, and the key to managing them well and preventing a true crisis is to evaluate your financial state periodically and determine the best course to managing your financial health. Our no-obligation personal debt analysis is the financial check-up you need to determine whether you're financially healthy, or in need of a serious treatment plan.

Many people have no idea where they stand financially, in terms of outstanding debt and earning potential. They look at monthly payments and income and don't even consider whether they're making progress on paying down debt – they simply make the payments without thinking about it. Most of our clients come in with boxes and shopping bags full of receipts and bank statements that they've never even looked at, and when we compile these numbers and give them the final total, the number comes as a complete shock.

The first step to ensuring your financial health is to get an idea of the big picture. Our debt relief professionals can give you the financial diagnosis that will enable you to make smart decisions about handling your debt. You don't have to wait for serious trouble to start in order to practice sound financial judgment. Don't wait for foreclosure to begin, or to start missing payments and getting collection letters from creditors. You owe it to yourself to get a free personal debt analysis to determine exactly where you stand. If you're financially healthy, you'll take comfort in knowing it and have no obligation to take any further steps. If you're on a path of financial trouble, our debt relief professionals can explain your options and help you find the solution for your financial issues.

You get an annual physical. Don't neglect your financial health. Fill out our online Debt Analysis Form to schedule a much-needed financial check-up.