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Blogging for Change Blogging For Change
by Tanisha Warner on October 11, 2012

Money puzzle

When it comes to your finances, the only thing more dangerous than a lack of information is a wealth of misinformation. Because of the complex nature of financial laws, responsible consumers with good intentions can find themselves unintentionally making costly mistakes.

In an effort to help you avoid making decisions that could be hazardous to your financial health, we address six of the most common misbeliefs as they relate to credit and debt:

  1. There is an easy way to fix bad credit. No person or company can legally remove accurate items from your report for a fee. The Fair Credit Reporting Act (FCRA) states that delinquent account information can remain on a consumer's credit bureau file for a seven-year timeframe that starts 180 days after the account becomes delinquent.
  2. Bankruptcy discharges all debts. Debts not dischargeable in bankruptcy will generally include back taxes less than three years old, student loans, alimony, child support and debts incurred through fraud. To avoid foreclosure or repossession, you must ask the bankruptcy courts permission to "reaffirm" your mortgage loan and lease agreement and continue to make your home and auto lease payments. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 require a bankruptcy counseling certificate as a prerequisite for filing.
  3. A collector can’t call others about your debts. It may be hard to swallow; however, according to the Fair Debt Collection Practices Act (FDCPA), your collector is permitted to contact other people. They are only supposed to do this to find out where you live, what your phone number is, and where you work. Fortunately, the collector may not divulge the reason for the call to anyone other than you or your attorney. Also, if you don’t tell them otherwise, they can call you at work.
  4. A divorce decree matters to your creditors. Your divorce decree is an agreement between you and your spouse (not your creditors) on how your debts and assets will be divided. Since your creditors were not involved in the settlement and had no input on the results, the contracts you signed with your creditors have not changed and cannot be changed by the divorce decree. Whoever signed the original contract with the creditor will still be obligated to pay the debt after the divorce. That means you are still obligated on these debts and the creditors can report the derogatory status of these accounts on your credit bureau file.
  5. Your creditors cannot change your interest rate. According to the CARD Act of 2009, credit card issuers can make key contract changes to the account terms and agreement, including rate increases, with 45 days' notice. You should also know that many creditors will now raise your interest rates if your credit score declines, even if you have paid their particular account on-time and as-agreed.
  6. If your car gets repossessed, that’s the end of your responsibility. After a vehicle is repossessed, the lender will most likely sell it at auction to the highest bidder and apply the proceeds of the sale to the balance owed on the car. If the sale price is not sufficient to pay the balance due, there will be a “deficiency balance” remaining. You would be legally obligated to pay this deficiency balance. If you do not pay this balance, the creditor can possibly sue you in an effort to try to collect.

Fortunately, making financial decisions doesn’t have to be confusing. Visit our financial education section to learn more smart money moves.


James Barton says:
October 12, 2012
Website: ?

I am 86 retired making payments on cr cd debt $80000 of $2104/mon which will pay off the debt by mid- 2016. [see actuarial table]. It has been difficult to make this payment. I need hearing aids $4000 and '92 Camry needs $2000 repairs to make it run again. What would be the consequences if I stopped servicing this debt ? Mortgage is current as are other incidental debts. Wife is 72 cr cds were in her name only. She has a job that pays house hold COL plus MMI. I have only SSA.

Jessica @ MMI says:
October 13, 2012

Hi Michael - Communicating with your lender is definitely the most important thing to do when you realize you're having difficulties, so I applaud you for remaining in contact with them. Many lenders have hardship programs for those experiencing temporary setbacks, so I would suggest asking them if they offer a repayment plan. I would also encourage you to revisit your budget. You may find that there are areas where you can make adjust your spending to better allow you to make your payments. Remember, you can always contact one of our counselors if you need budgeting help!

Jessica @ MMI says:
October 13, 2012

Hi, James! I'm really glad you reached out to us. I would strongly recommend that you speak with your counselor prior to stopping payments. Your counselor will be able to review your situation with you, as well as your best alternative options. You may find there's a better plan or program for your new situation. Please don't hesitate to contact us with any further questions! I wish you and your wife the best of luck!

Michael Ottey says:
October 12, 2012

My car payment is $350 a month with only $5000 left to pay on it, I have been late a couple of times, is there anyway I can get them to lower the monthly payments, it seems as if they are not willing to work with me on anything, they continue to suggest I borrow the money whenever I'm late. What other solutions if any do I have?

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