Getting evicted from your home is disheartening and a stress filled situation. Evictions occur for a number of reasons, but usually come when you are out of time resources and money. An eviction can lead to a financial judgement against you, even if you are renting. This judgement can be placed on your credit report and affect your credit rating.

As a mortgage is considered a form of long term credit, rent is considered a type of short term credit, being paid monthly. Evictions are a form of repossession of property for nonpayment of credit. The amount owed by you according to the creditor (bank or landlord) can be listed on your credit file with any of the credit reporting agencies.

Evictions and Credit History

Because past due rent can be part of your credit file, bill collectors can open a collection account because of past due rent. The collection account can then remain on a credit report for a seven year term; but be careful here – the time line can go much longer should one of the following happen:

• the account is renewed ahead of the seven year limit, allowing the clock to start over again
• the account is sold, and re-sold to different agencies who will also report the account as a separate unpaid account with a separate time limit of seven years per account.

Collection accounts can be hard to remove from a credit file even when paid. If you pay off the account, the file will show the account as paid but still reflect a judgement against you. Eventually the whole account will be deleted, but if you don’t take proactive measures it will remain on the file longer. Once the account is paid, work with the credit bureaus to get the account removed. You want this account removed as soon as possible because it can affect:

• the ability to rent better units
• the ability to get a home
• insurance premiums
• loan interest rates
• security deposits for utilities or rent

On top of all that, you still need a reference from said landlord to move into a new unit.

Evictions and Judgement

Another potential problem is how people and business look upon you based on a credit problem. Nearly every business or person dealing with rentals or homeowners checks the past credit. Here’s a few issues I have seen happen:

• You may need a paper trail showing proof of consistant and timely payments
• Utility providers may place strict payment guidelines or security deposits before turning on service
• You can be denied service (even essential service such as gas or electric)

So yes, it is very possible for an eviction to affect your credit – even when renting.

Who would want to own a collection agency? For that matter, who would want to be a bill collector? Believe it or not, there is some money in the debt collecting business. Its not a great way to make money, but it is a viable industry due to our inability to handle finances.

How Do Collection Agents Get Your Account?

Collection agencies come in two types – in-house collections and third-party collections. Any initial attempts to collect outstanding debt will likely be from in-house collection agents. If they fail, then a third-party collection agent is brought in.

The in-house collection agent is usually the billing department for a credit agent, large firm or business that offered time payments such as “buy here pay here”. The business uses this type of agent to keep costs low while collecting outstanding debts.

The third-party agencies are also independent collection agents not tied into the business that hires them to collect outstanding debts. These agencies are the ones you hear about most often. NCO Financial Systems and AES are two of the bigger national collection agencies. They work on a percentage or purchase outstanding debt that has been charged-off from the original creditor.

How Does the Collection Agency Make Money Off My Debt?

Collection agents make money through a percentage of collected outstanding debt or they buy outstanding debt for pennies on the dollar, then try collecting the full debt. Either way, if you pay off the full amount owed, they make money. The debt collector makes roughly twenty-five to fifty percent of the full debt as profit.


What if the bill collector can’t collect the debt? They sell it off to another bill collector at the price they paid plus some cost for overhead, then go on to find more successful accounts. This is how you wind up with three or more bill collectors on your past due bills. Meanwhile the original creditor has long written off your account as a loss and you are no longer a problem to them.

How Collection Agencies Collect Debts?

Collection agents use one or a combination of four methods to collect a debt – they can send a letter, visit you in person, report the debt to credit reporting bureaus or sue you for the money. The last one of the four is also the least used due to the cost of litigation and the time consumed. Most often they will send letters, call and visit (usually in that order). They will often create a stream of letters and/or phone calls pushing for results; if this tactic doesn’t work, they threaten a negative credit report on your credit file.

Most of the letters you get will be form letters. Most of the phone calls will be pre-recorded messages. This saves time and money on employees; thus creating efficient collection efforts and taking on the maximum number of accounts.

Collection agents also make use of flexible payment plans to get an agreement in writing. You will see some debt collectors offer discounts up to half of the amount owed to settle the account; they still make something if not break even for the debt so the discount is no loss to them. These options usually appear on very old, or very large debt to cover the agencies cost and clear dated accounts.

Here’s something from the resource room to help you further:

Credit Collection FAQ

As I read through the news feeds this morning an article from CNN/Money caught my eye.

Fiscal cliff: What should Congress do? – Apr. 30, 2012.

Once again our US Congress may show how financially ignorant they are.

Here’s the basic gist of the story – Ben Bernanke, the guy who runs the Federal Reserve, has officially told Congress and the world that we are economically worse than everyone thought. When you tell lawmakers that there is a $7 trillion financial and economic cliff approaching that amounts to a little more than Willie E. Coyote going over the cliff chasing the Road Runner. We are in serious danger.

For those who haven’t been watching, Europe (mainly Greece and Spain lately) has been on the edge of a repeat of 2008. My opinion – we’re not far behind.

Here’s the exact wording from Bernanke from CNN:

“[I]f no action were to be taken, the size of the fiscal cliff is such that there’s I think absolutely no chance that the Federal Reserve… could or would have any ability whatsoever to offset … that effect on the economy,” Bernanke said.

See somehow the Congress set up scheduled tax hikes and spending cuts that, when put into effect by the end of this year, kill the recovering economy in 2013. But, if they cancel all of it they nearly double the debt over 10 years and we end up with downgrades in credit like Spain and Greece (basically junk bond status).

People who watch these things think tax cuts will be extended and the spending cuts postponed. The problem is this has to be done before New Year’s Eve. Why is that a problem? November is also when we elect the President and Congress; so there’s a big reality that this will just get stalled until after that happens making it “someone else’s” problem. And we then only have like seven weeks to save the economy again. Add to that the fact that lawmakers “have to” have their Thanksgiving and Christmas breaks which take at least a week or two out of the remaining seven.

Add to that the yearly budget fight which starts from now until October when it takes effect, and the debt ceiling will be hit again right about the same time. So expect a nice fight on that as well.

A smart idea suggested to get us through to the end of next year comes from budget expert Stan Collender:

• extend tax cuts and delay spending cuts
• increase the debt ceiling
• pass a continuing resolution to pay for the government

No its not perfect, but it would get us passed the whole damn election year fight and the chance for the US to not do something stupid.

Because of the financial mess that the economy became since 2009, many households are unable to maintain their debt. Low income families have a special problem with debt management after a financial downfall. Some people choose bankruptcy to resolve credit issues, but is bankruptcy the only way out of a debt crisis. I found four ways people with little or no income can manage debt without resorting to bankruptcy.

Debt Counseling

Debt counseling is conducted between the debtor and a reputable debt counseling service. A debt counseling service helps do two things for you to avoid bankruptcy:

• financial education in matters of legal and money issues
• help create plans for repayments and budgets you can live on

The National Foundation for Credit Counseling maintains a database of approved counseling services across the United States. The U.S. Department of Justice also has lists of approved agencies you can work with.


Debt Management Plans

The goal of this alternative to bankruptcy is to consolidate monthly payments while gaining reductions in payments and interest from unsecured debt. In short, you may find yourself borrowing from Peter to pay Paul and it can get tricky. These plans may involve borrowing against your home equity to eliminate your credit card debt. That’s why caution is needed, and I would use this measure as a last resort. If you default on the new payment schedule you could loose the home.

Debt Restructuring

Restructuring debt can be an alternative to bankruptcy. If your creditors are willing to negotiate with you over the debt and payment plan, go this route. Debt restructuring involves:

• negotiating a reduction of debt
• reductions or changes in interest rates
• payment extensions

Most times if you have secured credit items (homes, cars, collateral) creditors will be willing to look at debt restructuring to avoid bankruptcy. The cost of recovery and repossession is higher than talking.

Do Nothing

Now, what if you have no income or no property? The option of doing nothing is a viable bankruptcy alternative because they cannot collect anything. You as debtor must prove lack of income and property to make this work in court. A word of caution over this method though as once income or property becomes available the creditors will restart collections.

As usual lately here’s a couple of places to help you read up on the topic:

University of Missouri: Money Matters Research Trends

Oklahoma State Bar Association: Is There An Alternative to Bankruptcy

Coming into the summer months has made me think about how to keep cool without spending lots of money. This reminded me of when I lived in mobile homes off and on for a few years. Mobile homes, especially those built pre-1979 (like the ones I had), have the ability to hold heat in even without added insulation. The metal framework and roofing materials are the reason for this effect. While good in the winter, it sucks in the spring and summer. Keeping the mobile home cool becomes a priority during hotter months. Five basic principles help keep the mobile home cooler during hot days.

1. Shading

Man made shades, awnings, can shade windows or doors. Awnings keep the sunlight from directly filtering through the glass, heating up the glass and reflecting into the house. Your best bet here is to install them on the west and south sides where the sun rises; if not, the sun has time to heat the glass and then reflect into the home trapping the heat inside.

Natural methods include vines, bushes and tress. Set up trellises in front of windows and allow the vines to grow up the trellis. If you let the vines grow directly up the sides of the mobile home they can start pushing their way into the molding and siding. Trees that drop their leaves during the fall are great for cooling a mobile home in summer. Pick tree varieties that reach between 25 and 50 feet high, then plant these at least 10 feet from the mobile home. Ideas include maple, oak and aspen for shade trees.

2. Sunblocks

Heavy shades, curtains or window treatments inside the home can block out direct sunlight and heat. Use darker colors or thicker material to keep the heat out. Window blinds also work if you keep them facing downward. If you don’t like these options, you can also try sunscreens or heat-reflecting film applied to the windows. Each of these will reduce the amount of heat entering the mobile home as they redirect the sun’s rays.

3. Airflow

Many people forget about cross ventilation. In the right direction, cross ventilation can cool a mobile home. Airflow from the shaded side should flow in and then exit out the opposite side. To do this, open windows on both ends of the home, keeping the remaining windows shut. Set up fans in the direction you want the air to flow. When the sun shifts over the horizon, turn the fans around and reverse the air flow. Don’t forget your exhaust fans and roof vents too! These allow hot air to escape because heat rises to the roof and out of the home.

4. Maintenance

Yes maintenance factors in keeping your mobile home cool and saving money. Maintenance of both cooling appliances and the exterior of the home help reduce cooling costs with mobile homes. Air filters in air conditioning units should be maintained and cleaned. Dehumidifiers should be used to reduce moisture in the air; humidity raises the air temperature. Paint the exterior siding and/or roofing white to redirect sunlight and heat away from the house. Use lighter colors inside the house because darker colors tend to hold heat.

5. Work Flow

Here’s another concept many people forget. Appliances such as ovens and dryers raise indoor temperatures quickly as they throw off heat. If you use these appliances during the day they will make the mobile home hotter inside. Wait for the sun to set before baking or drying clothes. Use a clothes line if possible. Make foods for several days in advance to avoid cooking each day.

Living in a mobile home can, at times, seem more costly and trouble than it looks. But if you use some careful consideration and thought you can reduce how much money it takes to cool a mobile home.

Here’s some further reading if you want to look up more information.

Carolina County: Tips for Keeping Mobile Homes Cool; June 2007

Federal Citizen Information Center: Cooling Your Home Naturally; October 1994

U.S. Department of Energy: Landscape Shading

It is a common misconception that you need a certain amount of debt to file bankruptcy. Filing for bankruptcy has no rule on the amount of debt owed. The inability to repay your debts is what makes the bankruptcy filing necessary. Your situation will determine if you file for Chapter 7 or Chapter 13 with the two main determinations being your income and ability to repay debts.

Bankruptcy Myths

Beyond the misconception that you can’t go bankrupt if you owe taxes, which I covered in a post about Bankruptcy and the IRS, the other myth is that you will loose your home if you file bankruptcy. Both are false.

• The IRS becomes a creditor in a bankruptcy proceeding just like everyone else. So your past-due taxes are now considered part of the bankruptcy.
• You can file exemptions to keep necessary items such as your primary residence, tools, work related items or vehicle if you must have them to maintain income.

Filing for Chapter 7 Bankruptcy

At one time Chapter 7 was the most common personal bankruptcy form filed. Why? Because the debt owed was often dismissed and the debtor ended up owing nothing regardless of the ability to pay any of the debt back. People would run up thousands of dollars in credit card debt and walk away free and clear. The reason was that creditors could only recover losses from available assets that you claim in court. Not so much today.

Filing for Chapter 13 Bankruptcy

Chapter 13 bankruptcies take into account your stable income and the ability to repay debt. This is the bankruptcy filing most creditors would like to see everyone file, although its not always possible. This is where the mortgage foreclosure mess of 2009 struck and caught so many people.

Which Chapter Can I File For?

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 created a ‘means test’ and a ‘best effort rule’ as a way to filter out those who were actually able to repay some of the debt.

The ‘Means Test’

This test is set up in two parts, of which you must pass both to file for Chapter 7.

• Your overall income is used to determine if you can repay at least 25 percent of unsecured debt such as credit card debt. The court subtracts needed exemptions such as rent, food and utilities from your income before anyone else is paid.
• Your income is then compared to the median income for your state. If your income is greater than the median income, you must file for Chapter 13 bankruptcy, if you are under you are allowed to file under Chapter 7.

The ‘Best Effort’ Rule

This bankruptcy rule was designed so you, as the debtor, attempt your best effort to repay unsecured debt. Under the Best Effort rule creditors receive a repayment plan that gets them at least what they would have gotten under Chapter 7. The court uses your disposable monthly income to determine your ability to repay; all monthly disposable income is put into repayment since it is deemed as a high priority to get you out of debt. To find your disposable monthly income the court uses a calculation.

• For debtors under median income the monthly disposable income is multiplied by 36
• For debtors over the median income the monthly disposable income is multiplied by 60

The answers to all this math tells the court and you how much, and how long, the payments will be.

Priority Debt and New Debt

Any mortgages, leases, taxes or support payments you have are considered priority debt and are taken out of the total monthly income before the math is done for the unsecured debt. So, you shouldn’t loose your property or wind up in more trouble due to repayments.

But, at the same time, the law also requires you to seek a judge’s approval to take on any new debt. If home repairs are needed, tools or a car to maintain income, you can usually get this.

Here’s a few references to look over that give you a much better idea of how much debt is required to file bankruptcy.

Moran Law – Bankruptcy Myths

Moran Law – Chapter 13

NOLO – Chapter 7

CNN/Money – Bankruptcy Law

Many people worry about what the IRS will do come tax time in regards to their bankruptcy filing. But in most cases the IRS becomes a creditor and is subject to the same bankruptcy law as every other creditor. If you owe taxes when you file bankruptcy the IRS is dealt with under bankruptcy law. Canceled debts are considered income, but certain circumstances can make that income tax-exempt.


Discharged Taxes

If proper guidelines have been followed in filing tax returns, the taxes you owe the IRS can be discharged during bankruptcies. You must prove the following three things:

• proof of no tax fraud
• proof of yearly tax filings
• any tax owed must be listed as a liability with the bankruptcy court

Taxes and fees that can be discharged include:

• penalties for not filing
• late payments/deposits
• late estimated payments
• income tax, excise tax and gift tax that is more than 36 months and listed as deficient for 240 days by the IRS

Debt as Income

If an obligation to a creditor (other than the IRS) is canceled or forgiven, that amount becomes income to the IRS. The income then becomes taxable for the current year. Whatever tax benefits you had when you owed the debt are reduced or disappear. A few exceptions do exist:

• if you incurred the debt during active military service
• if you suffered from natural disasters such as hurricanes, floods or fires and the property is completely destroyed
• if you are a student and are required to work for certain employers, your student loan may be cancelled
• normally deductible debts are cancelled
• if you become insolvent debts may be cancelled
• if the debt is qualified farm or real property business debt or principal residential debt it may be cancelled

Tax Filing Rules for Bankruptcies

Under IRS rules there are four Chapters within IRS tax law dealing with bankruptcy. Depending on how you approach bankruptcy will determine how the tax laws apply to you. The most common personal bankruptcies are Chapter 7 and 11. While both create a bankruptcy estate Chapter 7 uses a court appointed trustee to liquidate nonexempt items, while Chapter 11 allows you to retain “debtor-in-possession” and manage the estate yourself.

Finding Help

If you are facing both bankruptcy and the IRS you should not handle it completely alone. Check with the IRS or locate a tax attorney. The IRS information can be difficult to understand, so write down any questions you have after looking over the information. Ask for clarification for your specific situation from the tax attorney or trustee handling your bankruptcy. IRS publication 908 covers all tax law regarding the IRS and bankruptcies.

I don’t have all the answers. And by no means try to represent myself as a tax pro; but hopefully this little bit of information helps someone find a general direction and some peace of mind. Anybody with more expertise feel free to chime in.

Not keeping track of personal finance records can cost lots of money

In today’s world there is often a huge amount of paper generated for financial transactions. Many times your personal finances are judged by the financial information presented. This includes your tax information. Knowing the documents to keep, and the length of time to keep them, ensures your personal finances are maintained and the IRS requirements for personal finances and tax information are met. This is the best way to avoid costly mistakes and hardship on your end.

Personal Taxes

The IRS requires that you maintain records of personal finances and taxes for a maximum of three years after you file the information. The problem with this is that if the IRS finds they need to go back farther than that to verify information, they can go beyond the three year limit. Because of this possibility accountants often recommend keeping financial information for seven years.

The IRS will only audit you if they believe you are off by greater than 25% according to their own site. Hang onto your pay stubs for a year after the tax year they were part of; and keep them with the corresponding W-2. After the year passes, destroy the stubs but keep the W-2 with the tax filings.


Banking and Investments

Keep receipts of your credit card purchasing until you get the bill showing the charges on them. Keep your banking, investment and retirement statements until the yearly report arrives. Once the yearly reports arrive destroy everything else. Keep the yearly bank statements for seven years in case of an IRS audit. These become the supporting documentation for your taxes.

Utilities

Personal financial information also covers utility payments. Keep your utility bills for a 12 month period. In other words, every month should have the preceding eleven months showing payment. Toss out the oldest bill once the newest one gets paid. You can keep multiple years to track costs and use over time if you are in the same place for awhile.

Your utility bills won’t be needed by the IRS for any tax information. But, if you apply for various government aid you will need the previous three to six months payments to show need. Heating assistance, food stamps and rent assistance are the three biggest of this group.

Housing or Big Ticket Items

Major purchases such as homes, cars, furniture, jewelry or electronics are usually covered by some form of insurance. Because of the insurance, you should keep receipt of every purchase listed on any insurance documents for as long as you own the item. Any payments for repairs or service should be kept with the purchase receipts also. If you have an insurance claim, you will need all of these receipts to prove the value of the item.

Trustees or Guardianship

If you have trustee or guardianship duties you are likely making personal finance decisions over another persons money. With this responsibility you gain charge of their personal financial information and their tax information; this duty extends for the length of their remaining life under your care.

If you find yourself in this position, keep all yearly records for the person you are caring for as you would yourself. This will prove income and expenses. This will also help avoid legal trouble should anyone accuse you of fraud. Keep all records and information until the estate is settled and all of the personal financial information is turned over to the court. Once this occurs, your obligation is complete and any remaining documentation in your possession can be destroyed.

Hopefully that gave you some help with this upcoming tax season and throughout the remainder of the year. Keeping personal finance information is not something to take for granted – although many people (including me at various points in time) can do.

Convenience can erode dollars and financial stability

While in the convenience store paying for the newspaper I noticed the price of cigarettes; the cheap ones were around $4.67, not that far up from the price of gas. The name brands (Newport, Marlboro etc) are about a dollar higher.

I then came up with an odd conclusion – that at the current price increases in this country, a gallon of gas would be the same as a pack of cigarettes sometime this year. I’m thinking summer. Convenience is now catching up with habits. What I thought was funny is that soon it would cost the same to die from carbon monoxide as it would from smoking.

This got me thinking more when I got home. Americans are good for complaining. Usually its about how someone else is causing them financial pain due to raising prices – their dollars are not keeping up with what they consume. And what they consume is causing more debt. The problem is not the dollars and debt, its the convenience of having things and immediate gratification of it. Convenience stores don’t sell stuff that is good, they sell “quick and easy”. The fact that there are so many of them in any given town is the physical appearance of convenience, dollars and debt. People don’t think about the dollars, just the convenience – which drives the debt. Leading to my next point.


Convenience is not necessity. Nope. Usually something deemed as convenience is often something we can do without, or at least using a lot less of. The price of convenience is often related to the amount of underlying work or effort a person would rather not deal with. People would rather pay the $4 per gallon of gas to go buy the $5 pack of cigarettes than just quit and avoid the trip all together. That’s why stuff at convenience stores are always higher than everywhere else. That’s also why you see long lines at McDonald’s around lunchtime instead of people making lunch at home.

So meanwhile as you complain about the cost of gas, cigarettes, fast food or whatever – remember that we Americans allowed this. Convenience, debt and “quick and easy” has surpassed the amount of dollars earned for a reason.

Growing vegetable gardens has become extremely popular with the current emphasis on self-sufficiency, economics and the environment. While urban dwellers may not be able to use a regular garden plot they can make use of other types of gardening. Companion gardening and sequence planting are two efficient growing methods that urban gardeners can use to create high yield urban gardening. When combined with imaginative uses various planters, containers and baskets, these methods can create a sustainable garden for anyone wanting a garden.

1. Companion Gardening for a High Yield Urban Garden

The first step into high yield urban gardening is to start with identifying plants that can grow together. There are many that can be beneficial to each other in sharing nutrients, space and resources. Examples would be planting carrots around beans, peas and lettuce; planting celery with cabbage, spinach, bush beans and tomatoes; or chives with carrots, grapes or potatoes. The result of the companion planting creates a good high yield urban gardening effect. Look at the pages in the source list below to get a complete list. Once you have an idea what plants go with other plants you can move on to planning when to plant using sequence planting.

2. Sequence Planting for a High Yield Urban Garden

Next comes the understanding of sequence planting. Planting in sequence makes the most use of soil for the greatest amount of days possible through the season. An example is planting peas, then beets when the peas are finished, followed by cauliflower when the beets are harvested using the same soil from start to finish. Sequence planting is done by matching the growing periods of different vegetables. Write down the vegetables you want, with the number of days each needs from seed to harvest next to them. Pick out the spring planting vegetables first since these are the first in the soil and the first to plant. Pick out the winter vegetables next since these are the last to plant. On scratch paper write the total days for your growing season at the top. Pick one of the spring vegetables and write the corresponding number on the scratch paper. Pick a winter vegetable, making sure it is not from the same plant family to avoid depleting the soil of nutrients, and write that number under the first number. Add these two numbers. Subtract that total from the number at the top of the page. That gives you the amount of time between the two for another vegetable to grow. As an example using a 130 day season with a 5 foot section of garden – radish is a spring vegetable with a 30 day harvest date; turnips are a fall vegetable with a 40 day harvest date. Add the two numbers to get 70 days; subtract 70 from 130 to get 60 days in the middle. You can plant lettuce, greens or kale as the middle crop using the same 5 feet as they all mature within 60 days.


3. Planters, Containers and Baskets for High Yield Urban Gardening

Using both companion planting and sequence planting you can reduce the needed space for high yield urban gardening. To further reduce the space requirements you can avoid the ground completely by using planters, containers and baskets. This also allows you to spread out the garden around to any available space where there is an open outside area or window. Window boxes are good for small vegetables such as radish, chives, kale, beets and other small plants. Hanging baskets can hold cucumber plants, vine tomatoes, peas or pole beans where the vines hang over the side. Large deep pots can be used as locations for bush vegetables. Tires can be stacked in patio corners and used to grow potatoes, herbs, tomato and onion. Set up the container to hold the largest plant in the planting schedule or group created above. Fill the containers with potting soil and mulch or compost.

4. Maintenance and Care of the High Yield Urban Garden

A quick word about maintenance and care of your urban garden: Watering is important. Keeping the soil moist, but not wet is critical to having enough moisture in the soil. Avoid standing water. Put about an inch of mulch or compost over the soil to help in moisture and temperature retention. Keep the soil at an average temperature of 70 degrees; keep all the plants in the sun for at least six hours daily. Check outdoor crops daily for insects, weeds and disease. Spray the leaves to remove pests. Snip off diseased or damaged leaves, runners or stems to keep the remaining plant healthy.

Using the methods mentioned above you can create your own viable garden in under one season. The harvest alone will far outweigh the cost, time and effort of getting your urban garden started.

Companion Gardening Resources:

Gardens Ablaze: http://www.gardensablaze.com/Companions/CompanionYield.htm

Garden Simply: http://www.gardensimply.com/comchart.shtml

Sequence Planting Resources:

National Sustainable Agriculture Service: http://attra.ncat.org/attra-pub/continuousharvest.html#succession

National Gardening Association: http://www.garden.org/ediblelandscaping/?page=succession