Mortgage311.org - Advice for Homeowners with an Underwater Mortgage

How to Avoid Credit Card Over Limit Fees

2012-02-23T23:46:00.000-08:00

• Credit limits

Credit issuers can no longer automatically enroll you in over-the-limit protection programs that charge fees for letting you borrow more than you have been approved to borrow.

So when a purchase exceeds your credit limit, your card will be declined. As embarrassing as that may be while you are standing at a cash register, it might keep you from spending more with a credit card than you can afford to pay back.

Credit card issuers do have the option of letting you borrow more than your credit limit in exchange for a fee, but the new law only allows them to charge only one over-the-limit fee in a billing cycle.

If you choose to use this option, you need to know how much you'll have to pay for that service. It won't come cheap.

Purchasing a commercial real estate property - Deciding whether to buy or lease

2011-08-05T18:18:00.000-07:00

Every other year, it seems like the US real estate market suffers through a crash or, rectification, and this underscores a dilemma for the middle and small-sized businesses. Most prospective commercial real estate buyers oscillate between whether to own a commercial property or rent it. In order to finance your commercial real estate property, you have to take out a commercial mortgage loan, after considering questions like ' How much can I borrow for a mortgage?' You must consider your financial capability before taking out the commercial loan so that you do not have to face financial consequences that may have a detrimental effect on your business operations.

Purchasing a commercial real estate property can become a daunting task, and even experts can't predict the best time to purchase in order to maximize returns. Buying a commercial real estate property is a venture that has enough risks, and agents, buyers and sellers can all suffer due to a change in demand. If you're deciding between buying or leasing a property, be aware that there is no easy answers. Read on to educate yourself on this.

Taking an informed decision while purchasing a commercial real estate property
When you're deciding whether to purchase a commercial real estate property, it's crucial to know about the risks and the benefits involved. The last thing any investor would want is to buy a property and then later realize that it would have been better to rent. Some of the risks that you may face include:

Location may have an adverse impact later: The 'hot' neighborhood that you determine while buying your real estate may become a 'not' neighborhood in the near future. Locations are often trendy but suddenly you may see that the locations may go bust and the area that you choose today may become undesirable the next month.
Restrained cash flow: Tenants may stop making timely rent payments, and other times the building may even need some expensive repairs. This may compromise your cash flow and lead to a financial crisis.
Loss of liquidity: By buying a commercial real estate property, most businesses may tie up much of their liquid assets. While it may be pretty hard to sell real estate property during a slump. At the same time, those businesses that own property can sell it and maybe revive their lagging business.

Therefore, if you're keen on getting a commercial real estate property, you must take out a mortgage that suits your budget and that which you can repay with ease. Do take the time to figure out how much you can borrow for a mortgage before taking out that mortgage so that you don't default on that loan later on. Also, before you decide whether to buy or lease a property, take into account the risks and benefits of each decision.

What does LTV (loan-to-value) mean?

2011-07-05T10:08:00.000-07:00

The LTV (loan-to-value) ratio on a mortgage basically describes how much you're borrowing compared with (as a percentage of) the value of the property you're buying.

Sound confusing? It is for a lot of people, but it's actually a lot simpler than you may think. The following chart should help:

Property value	Amount borrowed	LTV ratio
£100,000	£90,000	90%
£100,000	£75,000	75%
£100,000	£65,000	65%
£100,000	£50,000	50%

So basically, your LTV ratio describes the percentage of the property's value that you will be borrowing on your mortgage. The rest of the value will be made up by your deposit.

To work out your LTV, use the following simple formula:

(Amount borrowed ÷ property value) x 100 = LTV ratio

Why is the LTV ratio important?
In general, the higher the LTV, the higher the interest rate (and therefore your mortgage payments) will be.

So, let's say you have £40,000 to use as a house deposit. If you put this down on a house worth £200,000, you'd have to borrow £160,000 to make up the difference - which is 80% of the house value. Therefore you'd have access to mortgage deals with 80% LTV.

On the other hand, if you used that £40,000 as a deposit on a £100,000 house, you'd have to borrow £60,000 - just 60% of the value - meaning you'd have access to 60% LTV mortgage deals.

When it comes to choosing a mortgage, you have a choice: borrow more (on a deal with a higher LTV) and you'll probably pay a higher interest rate, or borrow less (on a lower LTV) and enjoy a lower interest rate.

However, this may not always be the case - you may sometimes be able to find a deal with a relatively high LTV that still offers a lower rate than some lower-LTV deals.

Why are higher-LTV mortgages more expensive?
It's basically a matter of perceived risk. A high LTV means the bank is lending you a relatively high proportion of your home's value.

This could cause problems if your home's value drops for any reason. For example, if you have a 10% deposit (90% LTV) and your home's value falls by more than 10%, selling your home wouldn't raise enough money to fully repay the mortgage - so it's simply riskier from your lender's perspective.

This is what people are referring to when they talk about 'negative equity', and it's a problem that has affected many people in recent years. People in negative equity often find themselves unable to get a remortgage, and it can make things much harder for those who want to sell their home.

Mortgages with a higher LTV have become relatively rare in recent years because of this risk (as house prices aren't particularly stable anymore).

How to opt out of phone books, junk mail, and telemarketers

2011-05-14T13:20:00.000-07:00

When you are under financial stress, the last thing you need in your life are some of the more useless intrusions in your life, phone books you don't use, junk mail you don't open, and telemarketers who don't stop calling. There are several things you can do to get back control of that part of your life, and it is easier then ever to get these pests out of your life.

Stop Phone Book Delivery
Go to the site catalogchoice.org and put in your zip code. You will see a list of phone books that get delivered in that zip code. Sign in, fill out a form, and your deliveries should stop.

Chase Away the Telemarketers
Like roaches and other pests, even the best extermination techniques won't get rid of all of them, but at least you can take some steps to slow them down. Go to the US Federal Trade Commission's (FTC) Do Not Call Regisry at www.donotcall.gov. The best thing about this FTC registration is that our registration will not expire. Telephone numbers placed on the national Do Not Call Registry will remain on it permanently due to a federal law, the Do-Not-Call Improvement Act of 2007. You can also register by phone at 888-382-1222 (call from the phone you are registering).

Most calls should go away after about a month, but some calls will still happen for two reasons: some telemarketers don't follow the rules, and some classes of calls are not covered by the federal law. The classes of calls not covered include Business-to-business calls (the Registry is only for personal numbers), faxes, surveys, and companies with a prior relationship to you (you bought something from them or are making payments to them).

Your state may have a stricter law than the federal law, so it won't hurt to check.

Stopping Junk Mail
Things are a bit more complicated with junk mail. To stop unsolicited offers for credit, credit cards, or insurance, the three main credit reporting agencies have a central number you can call, 888-5-OPT-OUT (888-567-8688) where you can opt out of receiving these offers. You can also fill out a form at www.optoutprescreen.com to do the same thing.

For other kinds of junk mail, you can contact the Direct Marketing Association at www.dmachoice.org to register with their Mail Preference Service.

Newest changes on credit card fees and interest rates

2010-08-22T17:42:00.000-07:00

Earlier in 2010, the federal government passed laws that changed how consumers get treated when it comes to credit card fees and interest charges. The changes have come in phases, with the latest changes starting on August 22, 2010.

Penalty fees
The new law limits late payments or over-the-limit purchases. You can't be charged more than your payment or the amount over the limit. For example, if you had a $10 minimum payment, your penalty fee can't be more than $10. The typical maximum penalty fee is $25. If a customer goes over the limit again within six months, the maximum penalty goes to $35. When it comes to going over your limit, the penalty will be no more than the amount you went over. For example, if you spent $15 more than your max. The charge for that cannot be more than $15.

Credit card rate increases
If your credit card company raises your interest rate, you will have to be told why. Your card issuer also has to review the rate increase every six months, and if you deserve it, the rate has to be lowered. Any rate hike after the beginning of this year would have to be reviewed.

Gift card protections
Starting August 22nd, all prepaid gift cards must be good for at least five years. If you have a gift card and with an expiration date on it sooner than that, any leftover money must be honored for at least five years. You can also request a free replacement for any expired gift card.

No more inactivity fees
These fees will now be banned. Even if they are called by another name, such fees are no longer allowed. For example, if your card has an annual fee that's waived if you spend a certain amount, that is an inactivity fee and that will not be allowed.

Short Sale on Your Income Property? - You May Owe the IRS Big Time

2010-04-24T14:18:00.000-07:00

Remember last month when I talked about how you may owe taxes after a short sale on your personal residence? The same problem may happen if you have an investment property with problems. Depending on your situation, especially how much you owe on your property and to whom, you may have a huge tax problem on your hands.

Plenty of help for a primary residence
Over the past few years, there have been a number of new laws and government programs set up to help homeowers. For example, the Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure, qualify for this relief, and these advantages will be in place until 2012. Also, as the economy continues to be rough for the average taxpayer, there will be continued political pressure to provide relief in the form of tax breaks and rule changes.

Why investment properties are different
To put it simply, an investment property is not a primary residence, so many of the breaks that homeowners get when it comes to tax breaks for forgiven debt doesn't exist. For example, if you are personally insolvent on the day that you do a short sale on a personal residence, you probably don't owe any taxes on the value of the forgiven debt. If the same thing happens with an investment property, it isn't a personal residence, and you may owe on the forgiven debt.

Nightmare scenario: you lost money but still owe taxes
There are many ways that this can happen, and the following is an easy to follow example. An investor bought a four-unit apartment house for 0% down three years ago, and the rent from the tenants easily covered the mortgages and other costs. In the last year, two very bad things happened - real estate prices dropped 30%, three of the tenants moved out or just stopped paying rent, and you are bleeding money like crazy. You find another investor who takes it off your hands, and you think you are lucky because the mortgage holder allowed a short sale on your property.

Things look great until a few months later when you get the 1099C from the mortgage holder and you realize that the forgiven debt is considered income, and you owe taxes on the difference between the purchase price and the sale price. The only problem is your apartment house was your only significant investment, and after you sold it and took care of all the other costs, you were living paycheck to paycheck. You have a tax bill that is is equal to your annual income, and Uncle Sam doesn't want a sad story, he wants you to show him the money.

How to deal with this problem
The best way to deal with the problem is to avoid it by not selling the property. If this is not an option, then it is time to get either creative or proactive. Creative would be working with the mortgage holder to change the terms of the deal, or working with real estate management company to find paying tenants. If you have no choice but to sell, then at least prepare for the consequences by contacting the IRS about your situation. They will still want their money, but they may be open to negotiating a payment agreement with you.

Short sellers, who get lenders to forgive a portion of the debt in order to complete a sale, are also at risk because lenders will often leave their options open to come back and collect later. If you are involved in a short sale, make sure to review your agreements carefully, preferably with the help of a competent professional.

Photo credit: Wikipedia

Recovery Act can save you money on your 2009 tax bill

2010-03-29T09:19:00.000-07:00

In February 2009, President Obama signed into law the American Recovery and Reinvestment Act, or Recovery Act, into law. One of the benefits of the law is that you may be able to get tax credits or tax reductions for your 2009 taxes.

To give you an idea of what benefits you can get, you can review the tax savings checklist on the White House web site that will give you an idea of what benefits you can get.

If you go through this checklist, you will have an idea of what you should look for when you do your taxes. A tax program like TurboTax, or a tax professional, may be able to find these benefits as well, but you should still go through this checklist so you will know what to look for or what to ask when it comes time to do your taxes.

Video about the Tax Savings Tool

First time homebuyer? - You may get $8,000 back from the IRS

2010-03-28T10:42:00.000-07:00

Last November, the US government passed a law that lets any eligible taxpayer get an $8,000 deduction on your 2009 taxes. The credit reduces your tax bill or increases his or her refund, dollar for dollar. The first-time homebuyer credit is different from most tax credits in that if you are eligible whether or not you owe any taxes. For a home buyer, this is the closest thing to free money that you will see any time soon.

Top 10 things you should know
1. You must buy – or enter into a binding contract to buy a principal residence – on or before April 30, 2010.

2. If you enter into a binding contract by April 30, 2010 you must close on the home on or before June 30, 2010.

3. For qualifying purchases in 2010, you will have the option of claiming the credit on either your 2009 or 2010 return.

4. A long-time resident of the same home can now qualify for a reduced credit. You can qualify for the credit if you’ve lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the new home is purchased and the settlement date is after November 6, 2009.

5. The maximum credit for long-time residents is $6,500. However, married individuals filing separately are limited to $3,250.

6. People with higher incomes can now qualify for the credit. The new law raises the income limits for homes purchased after November 6, 2009. The full credit is available to taxpayers with modified adjusted gross incomes up to $125,000, or $225,000 for joint filers.

7. The IRS will issue a December 2009 revision of Form 5405 to claim this credit. The December 2009 form must be used for homes purchased after November 6, 2009 – whether the credit is claimed for 2008 or for 2009 – and for all home purchases that are claimed on 2009 returns.

8. No credit is available if the purchase price of the home exceeds $800,000.

9. The purchaser must be at least 18 years old on the date of purchase. For a married couple, only one spouse must meet this age requirement.

10. A dependent is not eligible to claim the credit.

Your situation may be different, but basically you can get the full benefit if

For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

Special IRS requirements

Because of the documentation requirements for claiming the credit, taxpayers who claim the credit on their 2009 tax return must file a paper — not electronic — return and attach Form 5405, First-Time Homebuyer Credit and Repayment of the Credit (see the Form 5405 instructions), and a properly executed copy of a settlement statement used to complete the purchase.

Check out the IRS Video

Where to go for more information
IRS information page on this tax credit
IRS news release March 18,2010
IRS news release Novemer 24, 2009

Do you qualify? - Take the quiz
You can take the Zillow quiz in the right column of this site to see if you qualify.

Government makes it easier to get at your Social Security Check

2010-03-08T12:34:00.000-08:00

Until recently, if you got a Social Security check from the federal government, there were limits to what the government could do to take money out of your check to pay off debts you may have owed to Uncle Sam. According to a recent story in the Wall Street Journal, defaulted student loans, unpaid farm or small business loans, unpaid income taxes, and even money veterans may have owed the government for health care were just some of the government debts that could have been paid out of that check.

Until recently, one of the biggest limitations was that in most cases the government could only collect on debts that were less than ten years old. Because of changes in the law caused by the 2008 Farm Bill, that is no longer the case. Prior to those changes, only federal student loan delinquencies weren't subject to the ten year statue of limitations.

While the news will be bad for some, it doesn't have to be catastrophic. For example, for most debts, the government can withhold a maximum of 15% of your benefits, and the reduction in benefits can't drop below $750 per month.

Why is the government doing this?
As is often the case with changes in federal laws and regulations, if you follow the money, the changes may make sense. The Wall Street Journal reported that in 2001, roughly 1.6% of the delinquent debt collected by the Treasury Department came from withholding Social Security payments rather than other sources like federal tax refunds. In 2008, the percentage went up to 10.8%. Given the aging of the population and increasing unemployment, perhaps the Treasury department and elected federal officials are looking to Social Security payments as a bigger growth area than tax refunds, and and changing the rules to make it easier to put their hands on it.

What if you are affected?
The good news is that if you the government starts to hold back some of your Social Security payments, and you think that they might be wrong, you have the right to review and copy your files, negotiate a different payment arrangement, and apply for waivers due to a disability or other hardships.

You may still owe money after a foreclosure or short sale

2010-03-07T14:00:00.000-08:00

So your house was under water and you thought you could deal with your problem by having a short sale and moving on with your life. Maybe you got foreclosed on and you thought that the nightmare ended then. Think again. You may be on the hook for paying off part or all of the remaining mortgage, even years later.

Foreclosure is not the end of the story
Most states, like Florida where about half of the homes are underwater, allow mortgage holders to collect on the unpaid portion of the mortgage after a foreclosure. In Florida, the courts give mortgage holders up to five years to seek a favorable judgment, and up to 20 years to collect. It may be different in your state, Arizona, California, and about one in three of the remaining states prohibit collection efforts on a primary residence after foreclosure.

The government may help you, but not that much
The federal government started the Home Affordable Modification Program to help homeowners who have financing their mortgage at a lower rate, but it is pretty restrictive. Your first mortgage can't be more than 125% of the current market value of your home, your mortgage has to be guaranteed by Fannie Mae or Freddie Mac, and you have to have no late payments in the previous 12 months. If you are either seriously underwater by more than 25%, or if you are already in the foreclosure process, you're (sorry) out of luck.

Who is most likely to get hit?
Not surprisingly, banks and mortgage holders would prefer to go after people who have assets or income. Homeowners who can afford to make payments, but decide to walk away from an underwater mortgage, sometimes called a rational default or a strategic default, are at risk if they don't have any other serious financial issues and have otherwise good credit.

Short sellers, who get lenders to forgive a portion of the debt in order to complete a sale, are also at risk because lenders will often leave their options open to come back and collect later. If you are involved in a short sale, make sure to review your agreements carefully, preferably with the help of a competent professional.

Those who have been foreclosed upon may also be at risk. Because the details of each foreclosure are very different, if you have been foreclosed upon or at risk of having that happen, check your mortgage agreement details very carefully to get a realistic idea of what issues you may be facing down the road.

Photo credit: respres

Short Sales and Taxes - IRS Gives You a Break

2010-03-02T00:02:00.001-08:00

If you have to sell a house with an underwater mortgage, your lender may forgive a portion of the debt. If this happens, the IRS looks at the forgiven debt as income that may be taxable. The good news for many homeowners is that the government may cut you some slack and not may you pay taxes on the forgiven debt.

The Mortgage Debt Relief Act of 2007 allows many homeowners to exclude income from the discharge of debt on their principal residence. This isn't only for short sales. You may get a tax break even if you debt is reduced through mortgage restructuring, or if part or all of a mortgage is forgiven in a foreclosure.

This provision applies to debt forgiven from 2007 through 2012. Up to $2 million of forgiven debt is eligible for this exclusion if you are married and filing jointly, and $1 million if married filing and separately. This tax break applies only if the forgiven debt is directly related to a decline in the home’s value or the taxpayer’s financial condition.

The following are the most commonly asked questions and answers about The Mortgage Forgiveness Debt Relief Act and debt cancellation:

What is Cancellation of Debt?
If you borrow money from a commercial lender and the lender later cancels or forgives the debt, the amount that you didn't pay back is normally reportable as income because you no longer have an obligation to repay the lender.

Here’s a simple example of forgiven debt. You borrowed $10,000 but defaulted after paying off $2,000 of the principle. If the lender can't collect the remaining $8,000, that amount is considered taxable income in most cases.

When is cancellation of debt not taxable?
The most common situations when cancellation of debt income is not taxable is when it involves:

A qualified principal residence (This is what the Mortgage Debt Relief Act of 2007 and applies to most homeowners.
Debts discharged through bankruptcy.
Insolvency (when your total debts are more than the fair market value of your total assets).
Non-recourse loans, which is a loan where you are not personally responsible because the property being financed is used as collateral.

Your particular case may be more complicated, so if you are confused, hire professional tax or legal help.

What if I don't tell the IRS?
Don't count on getting away with it by not telling the IRS. The lender is usually required to report the amount of the canceled debt to you (using Form 1099-C) and to the IRS. The amount of debt forgiven must be reported on IRS Form 982 and this form must be attached to your tax return. If you don't report it, and the IRS expects to see you mention it in a tax return, you could be headed for an audit.

Related Resources
More information, including detailed examples can be found in Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Also see IRS news release IR-2008-17.

How to Avoid Mortgage Repair and Rescue Scams

2010-02-26T10:22:00.000-08:00

During the boom times, one of the biggest dangers for consumers were the shady mortgage companies that offered mortgages that were bad for homeowners but very good for the mortgage companies.

Scammers are targeting people having trouble paying their mortgages. Some claim to be able to “rescue” homeowners from foreclosures, while others promise loan modifications for a fee. If you get this kind of a pitch, watch out.

What does a scam look like?
Every scam is different, but most have some kind of of promise that sounds too good to be true, like the following:

“We can stop your foreclosure!”
“97% success rate!”
“Guaranteed to save your home!”

Scams often involve you paying an up front fee for a promise of saving you more money later. Don't believe it. Don’t pay any business, organization, or person who promises to prevent foreclosure or get you a new mortgage. Some might give you sweet sales pitch and after you pay up they stop returning your phone calls. Others may string you along before disclosing their charges. Bottom line, if they ask for a fee, walk away.

Deal with your mortgage servicer directly
Some scammers offer to handle financial arrangements for you, but then just pocket your payment. Send your mortgage payments ONLY to your mortgage servicer.

Don’t Pay for a Second Opinion
Have you applied for a loan modification and been turned down? Never pay for a second opinion. Instead, look for options that don't involve you paying someone to look for a solution for you

Make sure you deal only with official organizations
If you are looking for help or advice from a local, regional, or national government organization or nonprofit group. Make sure that you are dealing with a real one and not a fake. Some con artists use names, phone numbers, and website addresses to make it look like they’re part of the government or of a nonprofit. If you want to contact a government agency or a nonprofit, don't follow any links in an unexpected email or on a suspicious looking web site. Type the web address directly into your browser and double check any address you're not sure about. Use phone numbers listed on agency websites or in other reliable sources, like the Blue Pages in your phone directory. Don’t click on links or open any attachments in unexpected emails.

The federal government also wants to take these scam companies out. Check out this interview with the Federal Trade Commission from early February 2010.

Gift Card Rules Will Change, But Not That Much

2010-02-24T02:35:00.000-08:00

Starting on August 22, 2010, rules on prepaid gift cards will change, but not all that much. The biggest changes are that they can't expire within five years of activation (unless the agreement explicitly says otherwise)

Inactivity fees will be limited, but not eliminated. You can't be charged any kind of inactivity fee or service charge unless there has been no activity for a 12-month period, or unless the fees or charges were disclosed up front (read the agreement carefully). If there are fees, there can be no more than one per month.

If it looks like a gift card, it may not be a gift card when it comes to these rule changes. These expiration rules don't apply on prepaid phone calls, reloadable cards, loyalty or award cards, cards issued for special events or venues like an amusement or theme park, or cards issued in paper only.

The bottom line is before you buy a gift card, or if you receive one for whatever reason, be sure to read the fine print to make sure that the card will work for you.

Under 21? - Getting a Credit Card Just Got Tougher

2010-02-21T14:09:00.000-08:00

Last year, the US Congress passed a law that makes it a lot tougher to get a credit card if you are under 21. How tough is it? Starting February 22, 2010, several things will change:

You will need income, assets, or a cosigner: You will have to show proof that you have the means to pay your credit card bill, such as income from a job or other assets. If not, you will need to have an adult cosigner on your credit card. That cosigner will be fully responsible for paying the bills of the card holder, so unless that person really loves you or trusts you, don't count on them being a cosigner.
No more offers in the mail: Credit card companies will no longer be allowed to send prescreened credit card offers in the mail to anyone under 21.
Fewer college giveaways: Companies marketing credit cards to college students can't give away free stuff on or near the college, or at college-sponsored events.

How bad is this for students and younger people? Mortgage311.org thinks it is a good thing for most younger people. Those that do have the income or the assets won't be affected, and those that don't should either be motivated to have an income or to create financial assets, or to manage life without credit cards.

Having a cosigner, typically a parent, for a young person should not be an issue if that young person is both financially responsible and has a parent who can provide financial support as well as guidance for the responsible use of credit.

The biggest losers are the credit card companies who will have much less of an opportunity to convince financially inexperienced young people with no money or job that having and using credit is a good thing.

Are You and Employee or a Contractor? - What You Don't Know Can Cost You

2010-01-16T10:51:00.001-08:00

If you're working as a contractor with a company, one thing you have to do is make sure that you are classified correctly so that you don't get into tax trouble. There are two general kinds of workers, employees and independent contractors. The big difference between the two is how you get paid and who is responsible for paying your taxes.

Tax Issues for Employers and Contractors
Employers are responsible for paying certain state and federal income taxes for their employees. Independent contractors are responsible for paying for all of their taxes. If you think that you are an employee when in fact you are some kind of independent contractor, you may have unpaid taxes and that could get you in serious trouble with the IRS. You may owe the taxes plus penalties, and if you can't pay, it could lead to other problems you don't want to have.

Are You Really a Contractor or an Employee?
If you were hired as a contractor, you may really be an employee. To find out if you are an employee, look at how the company is treating you. To figure that out, look at how the company is controlling your behavior, how finances are handled, and your relationship with the company.

Behavior
You are probably an employee if the company controls:

* When and where to do the work
* What tools or equipment to use
* What workers to hire or to assist with the work
* Where to purchase supplies and services
* What work must be performed
* What procedures to follow when performing your work

Finances
You are probably an employee if the company:

* Buys or controls most or all of the equipment and resources
* Reimburses you for most or all of your expenses
* Guarantees you a regular wage
* Pays you when resources to do your work are not available
* Doesn't allow you offer or provide your services to others

Relationship
You are probably an employee (even if your contract says that you are an independent contractor) if the company:

* Has employee-type benefits like paid vacation and sick days
* Hires you for an indefinite period or on a permanent basis
* Can control or direct what you do for the company

IRS Classifications
The IRS classifies workers into several categories, and if you are not sure what class you are in, review the for basic IRS classifications below:

Employee
Independent Contractors
Statutory Employee
Statutory Nonemployee

What to Do if You have a Wrong Classification
If you thought that you were a contractor and realize that you are really an employee, you should discuss this with your company and straighten things out. If you no longer work for that company, you should take some steps to deal with your possible tax situation. If you visit the IRS web site, you can find some basic steps to take to make sure your former employer pays its share of your taxes. You should also talk with a tax professional to see if you will need their services.

Two Basic Kinds of Scams: Pyramid Schemes and Ponzi Schemes

2010-01-07T00:30:00.000-08:00

If you have your back against the financial wall, with overdue bills, threats of a layoff, or a house heading toward foreclosure, you may be tempted to look for business opportunities or investment opportunities that look like they can make you a lot of money in a short period of time. The good news is such opportunities exist, the bad news is that at best most of these opportunities won't make any money for you, and some of them are outright scams.

Participating in an honest and legal investment or business opportunity can be a very positive experience even if it doesn't make you any money. If your up front risk is low, and the amount of insight or education you get is high, pursuing these kinds of opportunities can be a positive thing for you. However, if the opportunity is a scam, you should stay away from it and not even consider it.

The most popular types of scams usually have one the following characteristics: they involve investments where you are promised huge, low risk returns on a financial investment, or it is a business opportunities where your profits depend on how many people you can convince to join the opportunity. The first is sometimes called a Ponzi scheme, and the second is a pyramid scheme.

What's a Ponzi Scheme
A Ponzi scheme is a financial investment where the profits for early investors are paid for by later investors. There is usually no real investment going on, and the people running the scam usually get paid by taking a commission or fee from each investor.

What's a Pyramid Scheme?
This is a business or other activity where most of your profits are based on getting others to join the scheme. While there may be a product or service involved in this business opportunity, the emphasis is on getting others to join, and often there is an up front cost to join the opportunity. The people running this kind of scheme may get paid from fees from other members, or from requiring members to spend significant amounts of money on inventory or other required costs.

What's the Difference Between a Ponzi Scheme and a Pyramid Scheme
Ponzi schemes usually only require your money to join, while Pyramid schemes often require both your money and your active participation to stay involved. It can be difficult to tell them apart, because sometimes they have characteristics of both kinds of schemes, and often elements of these schemes can be quite legitimate.

Another complication with Pyramid schemes is that there are legitimate business models that have many of the same characteristics. For example, multilevel or network marketing businesses are ways to sell goods or services through distributors. Typically, you act as a distributor of a product or service, and you’ll get commissions not only from the sales you make, but also from the sales of the people you recruit to become distributors. These recruits sometimes referred to as a downline.

Not all multilevel marketing plans are pyramid schemes. Those that are legitimate often emphasize training and development of the distributor, charge very low fees for entry, and put much more focus on delivering a product or a service to customers rather than on recruiting more distributors.

Joining something that you think is a pyramid scheme or Ponzi scheme is risky for two reasons. First, only the few high level people running these schemes tend to make any money, and second, they are illegal in most US states and in most parts of the world.

How Can You Tell if an Opportunity Is a Pyramid Scam or Ponzi Scheme?
There is no easy way to do this because most illegal schemes share many of the same elements as a legitimate business. Understanding any business or investment opportunity takes a bit of common sense, a basic understanding of how to run a business or make an investment, and at least a little bit of patience. If you do the following things, you will likely be able to spot either a bad legitimate opportunity or an obvious scam:

Look for unrealistic promises: There are no guaranteed profits in business or investing, so if anyone gives you this kind of guarantee, don't believe it. Also, if the people offering the opportunity brag about how much money you can make with little work or experience, don't believe it without some proof.

Ask questions: Don't be afraid to ask tough questions. If you don’t understand something, ask for more information until it is absolutely clear to you. The people running the business or who are involved in the business should be willing to answer your questions. If they are not, then back away from the opportunity.

Study the company’s track record: Look for newspaper or magazine articles about the company. Do an online search on the company, or its competitors to get a good idea of the information available about the company, including basic facts like who owns it and how long it has been in business.

Check out online opinions; Check out blogs, Twitter posts, and other information that can give you an idea what fans or even enemies think of the company.

Research the company's products or services: Find out what the company sells, or what type of investment it offers, to see if it makes sense to you. If the company is offering a common product at a much higher price than your local store, it probably is a bad idea to work with this company even if it is totally legitimate.

Look at the details of the deal: Ask your sponsor for the terms and conditions of the plan: the compensation structure, your potential expenses, support for claims about how much money you can make and the name and contact information of someone at the company who has details about the terms and conditions and can tell you how much the average distributor makes before and after expenses. Get this information in writing. Avoid any plan where the reward for recruiting new distributors is more than it is for selling products to the public. That’s a time tested tip-off to a pyramid scheme.

Find out your responsibilities: In most financial investments, all you risk is money. If you are joining an organization and actively recruiting others, then you should see what the company says in writing about your responsibilities. If you have to buy inventory or sell products or services, find out things like the company’s refund policy. Also, see if the company require you to buy training or marketing materials or pay for seminars. Find out how much time and money other distributors spent on training, marketing materials and seminars when they joined the plan, and whether the plan requires you to participate in periodic training. You should also find out what happens if you opt out of the training or are no longer active in the business?

Take your time: Don’t pay or sign any contracts the first time you run into an opportunity. Take your time to think over your decision. If you start to feel like you are dealing with used car salesmen eager to close the deal in the next five minutes, then you should probably look for opportunities elsewhere.

New Payday Loan Rules Make It Harder to Get Loans

2010-01-05T11:29:00.000-08:00

In the US, payday loans are subject to laws and regulations of each state, and some states are more aggressive when it comes to creating laws and regulations to protect consumers from what may be considered unfair or predatory practices.

Washington is one of the more aggressive states, enacting several laws an rule changes in the last year that favor consumers or limits what payday loan companies can do.

In 2009, the state implemented several changes, including limiting fees to a maximum of $50. In addition, the fee must be charged in advance and can't be financed. In other words, if there is a fee, the borrower has to pay it up front before getting a loan.

Washington state also added additional regulations concerning loan collections. Previously, when a payday loan company collected its own debts it was not subject to the state’s collection agency practices act which has many protections for consumers. With a change in the law, these companies had to behave like other collection agencies and not participate in harassing or intimidating behavior when collecting their debts.

As of January 1, 2010, the following additional rules took effect in Washington:

The total loan amount (for one or more loans on an account) was limited to $700 or 30% of the borrower’s gross monthly income, whichever is less.
A borrower could take out no more than eight loans in a 12-month period.
All payday loan companies had to enter borrower data in a central database, which prevented lenders from making larger loans or more loans than is legally allowed.
Borrowers who could not pay back their loan as agreed could replace their previous payment plan with an installment plan with a longer payback time with no additional fees. That installment plan option also became available at the borrower’s request at any time before their loan is due.
A borrower in default on a loan or in an installment plan on an existing loan is not longer allowed to get additional loans.

What This Means for You
Borrowers in Washington state have additional breaks and protections if they are late in paying their loans, but significant restrictions in what kinds of loans are now allowed.

If you are not in Washington state, and either have a payday loan or thinking about getting one, check the laws in your state or community to see what kinds of protections and limits you have and what changes may have happened at the beginning of this year.

Interview with Rich Dad Author Robert Kiyosaki

2010-01-05T10:55:00.000-08:00

As many of you know, Robert Kiyosaki is the author of the book Rich Dad, Poor Dad, and is a big fan of providing financial education in plain English. The following is an interview from Al Jazeera television where he discusses his financial education philosophy with host Riz Khan.

Part 1

Part 2

What Are the Key Airline Security and Terrorists Databases?

2009-12-29T01:08:00.000-08:00

With the recent arrest of a suspect in the failed bombing of Northwest flight 253, one of the questions asked was why was this person allowed to get on an airplane if his name was in one of the US databases of suspected terrorists? What follows is a very brief description of four databases that are relevant to the recent bombing situation.

Terrorist Identities Datamart Environment (TIDE)
This is the US government's central repository of information on international terrorist activities. The database includes people who commit terrorist activities, who plan such activities, or perform supporting activities such as fund raising providing safe houses. The suspect, Umar Farouk Abdulmutallab, was added to this database last month, and there are about 500,000 unique individuals in the database, of which 95% are non-US citizens. For more details, you can view the fact sheet on this database.

Terrorist Screening Database(TSDB)
only individuals who are known or reasonably suspected to be or have been engaged in conduct constituting, in preparation for, in aid of, or related to terrorism. This database consolidates information that used to be located in several different US government agencies. It is more restrictive than the TIDE database, and contains about 400,000 names. The suspect in the bombing was not one of them. The FBI has a list of frequently asked questions about this database.

Selectee List
Maintained by the Transportation Security Administration (TSA), this database contains the names of individuals who must undergo additional security screening before being permitted to board an aircraft. This list, which has about 14,000 people, is a subset of the TSDB.

No-fly List
As the name implies, this is a list of people who are not allowed to board an airliner. Like the Selectee List, this No-fly list is maintained by the TSA and is a subset of the TSDB. This list has fewer than 4,000 names.

So far, the US government has admitted that there was insufficient information available on the suspect to place him in any of the last three lists, including the no-fly list. Also, the suspect's US entry visa, which was granted in 2008 before he was placed on the TIDE list, was not restricted or revoked after being placed on that list.

Food Stamp Use at Record Levels in the United States

2009-12-23T13:31:00.000-08:00

Nationwide, food stamps reach about two-thirds of those eligible, with rates ranging from an estimated 50 percent in California to 98 percent in Missouri.

There are 239 counties in the United States where at least a quarter of the population receives food stamps, according to an analysis of local data collected by The New York Times.

The counties are as big as the Bronx and Philadelphia and as small as Owsley County in Kentucky, a patch of Appalachian distress where half of the 4,600 residents receive food stamps.

From the ailing resorts of the Florida Keys to Alaskan villages along the Bering Sea, the program is now expanding at a pace of about 20,000 people a day.

More than 36 million people use inconspicuous plastic cards for staples like milk, bread and cheese, swiping them at counters in blighted cities and in suburbs pocked with foreclosure signs.

Virtually all have incomes near or below the federal poverty line, but their eclectic ranks testify to the range of people struggling with basic needs. They include single mothers and married couples, the newly jobless and the chronically poor, longtime recipients of welfare checks and workers whose reduced hours or slender wages leave pantries bare.
In more than 800 counties, it helps feed one in three children. In the Mississippi River cities of St. Louis, Memphis and New Orleans, half of the children or more receive food stamps. Even in Peoria, Ill. — Everytown, U.S.A. — nearly 40 percent of children receive aid.

While use is greatest where poverty runs deep, the growth has been especially swift in once-prosperous places hit by the housing bust. There are about 50 small counties and a dozen sizable ones where the rolls have doubled in the last two years. In another 205 counties, they have risen by at least two-thirds. These places with soaring rolls include populous Riverside County, Calif., most of greater Phoenix and Las Vegas, a ring of affluent Atlanta suburbs, and a 150-mile stretch of southwest Florida from Bradenton to the Everglades.

Like many states, Ohio has campaigned hard to raise the share of eligible people collecting benefits, which are financed entirely by the federal government and brought the state about $2.2 billion last year.

A recent study by Mark R. Rank, a professor at Washington University in St. Louis, startled some policy makers in finding that half of Americans receive food stamps, at least briefly, by the time they turn 20. Among black children, the figure was 90 percent.

Across the country, the food stamp rolls can be read like a scan of a sick economy. The counties of northwest Ohio, where car parts are made, take sick when Detroit falls ill. Food stamp use is up by about 60 percent in Erie County (vibration controls), 77 percent in Wood County (floor mats) and 84 percent in hard-hit Van Wert (shifting components and cooling fans).

By contrast, in the federal cash welfare program, states until recently bore the entire cost of caseload growth, and nationally the rolls have stayed virtually flat. Unemployment insurance, despite rapid growth, reaches about only half the jobless (and replaces about half their income), making food stamps the only aid many people can get — the safety net’s safety net.

Almost 90 percent of beneficiaries nationwide live below the poverty line (about $22,000 a year for a family of four). But a minor tempest hit Ohio’s Warren County after a woman drove to the food stamp office in a Mercedes-Benz and word spread that she owned a $300,000 home loan-free. Since Ohio ignores the value of houses and cars, she qualified.

Food Stamp Use by County

----------------
http://www.fns.usda.gov/FSP/applicant_recipients/eligibility.htm
As of Oct. 1, 2008, Supplemental Nutrition Assistance Program (SNAP) is the new name for the federal Food Stamp Program. The new name reflects the changes we’ve made to meet the needs of our clients, including a focus on nutrition and an increase in benefit amounts. SNAP is the federal name for the program. State programs may have different names.

To see if you might be eligible for Supplemental Nutrition Assistance Program (SNAP, formerly food stamp) benefits, visit our pre-screening tool.

For Households in the 48 Contiguous States and the District of Columbia Oct. 1, 2008 through Sept. 20, 2009. To get SNAP benefits, households must meet certain tests, including resource and income tests:

Resources

Income

Deductions

Employment Requirements
Special Rules for Elderly or Disabled

Immigrant Eligibility
Resources:

Households may have $2,000 in countable resources, such as a bank account, or $3000 in countable resources if at least one person is age 60 or older, or is disabled. However, certain resources are NOT counted, such as a home and lot, the resources of people who receive Supplemental Security Income (SSI), the resources of people who receive Temporary Assistance for Needy Families (TANF, formerly AFDC), and most retirement (pension) plans.
Licensed vehicles are NOT counted if they are:
used for income-producing purposes,
annually producing income consistent with their fair market value,
needed for long distance travel for work (other than daily commute),
used as the home,
needed to transport a physically disabled household member,
needed to carry most of the household's fuel or water, or
if the household has little equity in the vehicle (because of money owed on the vehicle, it would bring no more than $1,500 if sold).
For all other vehicles, the fair market value over $4,650 or the equity value, whichever is more, is counted:
one per adult household member, and
any other vehicle a household member under 18 drives to work, school, job training, or to look for work.

For all other vehicles, the fair market value over $4,650 or the equity value, whichever is more, is counted as a resource.
Income:

Households have to meet income tests unless all members are receiving TANF, SSI, or in some places general assistance. Most households must meet both the gross and net income tests, but a household with an elderly person or a person who is receiving certain types of disability payments only has to meet the net income test. Households, except those noted, that have income over the amounts listed below cannot get SNAP benefits.

(Oct. 1, 2009 through Sept. 30, 2010)

Household size

Gross monthly income
(130 percent of poverty)

Net monthly income
(100 percent of poverty)

1
$1,174 $ 903

2
1,579 1,215

3
1,984 1,526

4
2,389 1,838

5
2,794 2,150

6
3,200 2,461

7
3,605 2,773

8
4,010 3,085

Each additional member
+406 +312

Mortgage Defaults Increasing in Late 2009

2009-12-13T09:27:00.000-08:00

http://www.mortgagebankers.org/NewsandMedia/PressCenter/71112.htm

Title: Delinquencies Continue to Climb in Latest MBA National Delinquency Survey
Source: MBA
Date: 11/19/2009
WASHINGTON, D.C. (November 19, 2009) — The delinquency rate for mortgage loans on one-to-four-unit residential properties rose to a seasonally adjusted rate of 9.64 percent of all loans outstanding as of the end of the third quarter of 2009, up 40 basis points from the second quarter of 2009, and up 265 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey. The non-seasonally adjusted delinquency rate increased 108 basis points from 8.86 percent in the second quarter of 2009 to 9.94 percent this quarter.

Top Line Results

The delinquency rate breaks the record set last quarter. The records are based on MBA data dating back to 1972.

The delinquency rate includes loans that are at least one payment past due but does not include loans somewhere in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the third quarter was 4.47 percent, an increase of 17 basis points from the second quarter of 2009 and 150 basis points from one year ago. The combined percentage of loans in foreclosure or at least one payment past due was 14.41 percent on a non-seasonally adjusted basis, the highest ever recorded in the MBA delinquency survey.

The percentage of loans on which foreclosure actions were started during the third quarter was 1.42 percent, up six basis points from last quarter and up 35 basis points from one year ago.

The percentages of loans 90 days or more past due, loans in foreclosure, and foreclosures started all set new record highs. The percentage of loans 30 days past due is still below the record set in the second quarter of 1985.

Increases Driven by Prime and FHA Loans

“Despite the recession ending in mid-summer, the decline in mortgage performance continues. Job losses continue to increase and drive up delinquencies and foreclosures because mortgages are paid with paychecks, not percentage point increases in GDP. Over the last year, we have seen the ranks of the unemployed increase by about 5.5 million people, increasing the number of seriously delinquent loans by almost 2 million loans and increasing the rate of new foreclosures from 1.07 percent to 1.42 percent,” said Jay Brinkmann, MBA’s Chief Economist.

“Prime fixed-rate loans continue to represent the largest share of foreclosures started and the biggest driver of the increase in foreclosures. 33 percent of foreclosures started in the third quarter were on prime fixed-rate and loans and those loans were 44 percent of the quarterly increase in foreclosures. The foreclosure numbers for prime fixed-rate loans will get worse because those loans represented 54 percent of the quarterly increase in loans 90 days or more past due but not yet in foreclosure.

“The performance of prime adjustable rate loans, which include pay-option ARMs in the MBA survey, continue to deteriorate with the foreclosure rate on those loans for the first time exceeding the rate for subprime fixed-rate loans. In contrast, both subprime fixed-rate and subprime adjustable rate loans saw decreases in foreclosures.

“The foreclosure rate on FHA loans also increased, despite having a large increase in the number of FHA-insured loans outstanding. The number of FHA loans outstanding has increased by about 1.1 million over the last year. This increase in the denominator depresses the delinquency and foreclosure percentages. If we assume these newly-originated loans are not the ones defaulting and remove the big denominator increase from the calculation results, the foreclosure rate would be1.76 percent rather than 1.31 percent reported.

“Once again the states of Florida, California, Arizona and Nevada have a disproportionate share of the mortgage problems. They had 43 percent of all foreclosures started in the third quarter, down only slightly from 44 percent both last quarter and the third quarter last year. They had 37 percent of the nation’s prime fixed-rate loan foreclosure starts and 67 percent of the prime ARM foreclosure starts. As of the end of September, 25 percent of the mortgages in Florida were at least one payment past due or in foreclosure.

“The outlook is that delinquency rates and foreclosure rates will continue to worsen before they improve. First, it is unlikely the employment picture will get better until sometime next year and even then jobs will increase at a very slow pace. Perhaps more importantly, there is no reason to expect that when the economy begins to add more jobs, those jobs will be in areas with the biggest excess housing inventory and the highest delinquency rates. Second, the number of loans 90 days or more past due or in foreclosure is now a little over 4 million as compared with 3.9 million new and previously occupied homes currently for sale, although there is likely some overlap between the two numbers. The ultimate resolution of these seriously delinquent loans will put added pressure on the hardest hit sections of the country.”

Change from last quarter (second quarter of 2009)

The seasonally adjusted delinquency rate increased 43 basis points for prime loans (from 6.41 percent to 6.84 percent), 107 basis points for subprime loans (from 25.35 percent to 26.42 percent), and two basis points for VA loans (from 8.06 percent to 8.08 percent). The delinquency rate for FHA loans decreased six basis points (from 14.42 percent to 14.36 percent). The non-seasonally adjusted delinquency rate for FHA loans however, increased 134 basis points this quarter (from 13.70 percent to 15.04 percent).

The non-seasonally adjusted percentage of loans in the foreclosure process increased 20 basis points for prime loans (from 3.00 percent to 3.20 percent), and increased 30 basis points for subprime loans (from 15.05 percent to 15.35 percent). FHA loans saw a 34 basis point increase in foreclosure inventory rate (from 2.98 percent to 3.32 percent), while the foreclosure inventory rate for VA loans increased 22 basis points (from 2.07 percent to 2.29 percent).

The non-seasonally adjusted foreclosure starts rate increased 13 basis points for prime loans (from 1.01 percent to 1.14 percent), increased 16 basis points for FHA loans (from 1.15 percent to 1.31 percent), and increased 19 basis points for VA loans (from 0.68 percent to 0.87 percent). This rate decreased 37 basis points for subprime loans (from 4.13 percent to 3.76 percent).

The seriously delinquent rate, the non-seasonally adjusted percentage of loans that are 90 days or more delinquent, or in the process of foreclosure, was up from both last quarter and from last year. This measure is designed to account for inter-company differences on when a loan enters the foreclosure process.

Compared with last quarter, the rate increased 82 basis points for prime loans (from 5.44 percent to 6.26 percent), 216 basis points for subprime loans (from 26.52 percent to 28.68 percent), 89 basis points for FHA loans (from 7.78 percent to 8.67 percent), and 37 basis points for VA loans (from 4.69 percent to 5.06 percent).

Change from last year (third quarter of 2008)

The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country.

Sometimes the IRS Will Audit You for Not Making Enough Money

2009-12-06T19:12:00.000-08:00

The other day, I read a story that was almost too crazy to believe. The IRS audited someone because they just couldn't believe that a hard working family can live in a high cost city while earning less than poverty level wages.

A December 6, 2009 story in the Seattle Times tells the story of a how the 2009 tax return of hard working single mother of two who got audited because the IRS believed that it was not possible for her family to get by in Seattle with her income alone and thought she may have unreported income. The story describes how the IRS had their own charts that showed a family needed about $36,000 a year to get by.

The story gets more bizarre. Her 2006 and 2007 returns were found deficient for the same reasons, and she was slapped with a $16,000 tax bill. Read the full story for the gory details, but the bottom line was that the IRS was interpreting the law incorrectly, but it took $10,000 of her money and her parents money to get the IRS to figure that out.

Poverty in Seattle
Seattle is not a cheap city to live in. An average looking three bedroom house in a bad neighborhood can easily be worth $300,000. In spite of the higher than average prices, about 10% of the people in Seattle live in families that make less than poverty level income. The US government, specifically the department of Health and Human Services, says that for most of the US, the poverty level in 2009 for a family of three is $18,310. While the woman in the story was slightly above this level, she earned enough money to take care of her kids, but did so by in part by living in one of her parent's houses and getting by without a car.

Lessons Learned
What can you take away from a story like this? One lesson is that sometimes the IRS gets it wrong, and if they get it wrong for your return, it may take a lot of money and time to figure it out. Another is that you don't have to have a high income or great wealth to get audited. If the IRS wants to come after you, there isn't much you can do. The best thing you can do is to be prepared by filling out your tax returns to the best of your ability, and to keep any paperwork or receipts that you think you may need.

You May Not Have to Pay Some of Your Old Debts

2009-12-03T10:41:00.001-08:00

A term that you may have heard on your basic cop show is something called a statute of limitations. What works on cop shows works in financial life as well. Each state has a statute of limitations on money that you owe for some kinds of debts. If you stop paying on those debts, after that period of time, which varies from state to state, you can no longer be sued by your creditor to get money from you.

The Statute of Limitations is Not an Excuse to Avoid Paying
This is not a free ride, you should be a responsible person and intend to pay any bill that you have. If you have the money to pay it, go ahead and do it, even if you think that the person or the company that you owe the money to is greedy, evil, or unworthy. The bottom line is that a deal is a deal.

What Kinds of Debts Have a Statute of Limitations?
Depending on your state, the statute of limitations rules depend on the kind of agreement you have. Basic kinds of agreements include:

- Oral Contract: This is a verbal or handshake agreement to pay back money loaned to you.

- Written Contract: You agree to pay a debt or loan under the terms written down in a document signed by you and your debtor.

- Promissory Note: This is a written loan payment agreement with scheduled payments and interest on the loan spelled out in the promissory note. A mortgage are one type of promissory note.

- Open-ended Accounts: These are revolving lines of credit with varying balances and sometimes varying limits and interest rates. Credit cards are one kind of revolving account.

Statute of Limitations and Credit Cards
If you stop making credit card payments for whatever reason, the credit card company can sue you for payment. The statute of limitations starts is the date of your last payment. For example, if your last payment was on September 11, 2001, and the statute of limitation in your state for credit card debt is 10 years, your credit card company has until September 11, 2011 to sue you to recover the unpaid credit card balance.

What Is the Statue of Limitations In Your State?
That information is described in state laws, and you can go to any public library and find that kind of information out for the kind of debt you owe. If your situation is complicated, contact a credit counselor or even a lawyer to figure out your situation. Please note that the initial consultation with these kinds of professionals is usually free. Also, there may be nonprofit or community based organizations that that can help you get the information for free.

Other Things to Consider
Your situation will be different for each debt. For example, an unpaid debt may stay on your credit report long after the statute of limitations has passed. For some kinds of debts such as mortgages or car loans, the company that you owe may take other actions like foreclosure or repossession long before the statute of limitations runs out. Also, a sneaky debt collector may lie to you and say that the statute of limitations does not apply to you. When in doubt, contact someone who can give you expert advice about your situation.

Please note: That some states consider credit card agreements to be an oral contract,other states consider it a written contract, and some states have specific laws pertaining to credit card lawsuits. If you have unpaid credit card debt and are concerned about your legal rights, a lawyer can brief you on the specific laws for your state.

Walking Away from a Mortgage a Good Idea? - One Professor Thinks So

2009-11-30T00:06:00.000-08:00

University of Arizona law professor Brent White has the radical idea that people who keep paying on underwater mortgages do so to avoid the shame of foreclosure and because of what they think that foreclosure will do to their financial life.

He goes beyond that to say that these kinds of emotional reactions are actively cultivated by the government and others in order to encourage homeowners to honor their financial obligations and to ignore other options that may be legal and make more sense financially.

At the same time, he believes that financial institutions make rational, logical, unemotional decisions based on maximizing profits or minimize losses. His bottom line is that these different ways of approaching the problem makes homeowners suffer more than banks.

Deciding to Stay or Walk
If you want to read the whole paper, feel free to download it. Mortgage311.org has reviewed the paper (rather quickly) and found a few interesting things. He talks about what a homeowner should think about when considering whether to walk away from a mortgage, including what is the current value of one’s home, what is the the cost to rent a similar home, how long the owner intends to stay in the home, and the estimated appreciation or depreciation of the current home.

He states that with this kind of information, plus information on their current mortgage payments, that it would be simple to make a purely financial decision to stay or walk. He also says that one of the biggest worries, a drop in credit score, can be overcome in a couple of years after a foreclosure.

Real Life Is More Complicated
Anyone who has an underwater mortgage and who is able to keep up payments knows that the decision to stay or go is more complicated than just a financial decision. If you walk away from a home mortgage, that means you have to find somewhere else to live, and if it is far enough away, you have to find new schools, hair salons, grocery stores, and maybe even a new job.

If you find yourself in a situation where you have to decide to stay or walk, it won't be an easy decision no matter how much data you have. Before you have to make that decision, it may be better to find another solution, from negotiating with your lender to cutting back in other areas. Whatever you do, make a decision based on both logic and emotion, and make sure you don't make the decision before you have had time to really think it over.

The Credit Revolt Movement - Things to Think About Before You Join

2009-11-21T01:24:00.000-08:00

Ann Minch, who had been a loyal bank customer for over a decade, and with more than six years using their credit card without any late payments or over limit charges, got a notice from her bank that that credit card interest rate would jump from 12.99% to over 20%. Although she carried a balance on her card, she had never missed a payment or charged beyond her credit limit. It looked as though the bank raised the rates as a way to increase their revenue. She is not alone. Across the US, banks are increasing their interest rates and fees, lowering credit limits, and in some cases canceling accounts of card holders who have not done anything wrong.

In many cases, the behavior of individuals doesn't matter. The banks are dealing with normal changes that come with recessions, things like more customers defaulting on loans, they also have to deal with changes coming in early 2010 that will make it harder for banks to change the rules on consumers. Between now and next year, one of the areas where they have an opportunity for profit are from those credit card holders who carry a balance on their cards and who pay at least the minimum every month.

The Beginnings of a Debtor's Revolt
Ann Minch did two things. She decided to revolt against what she thought was an unfair practice be refusing to make any more payments until the bank changed her rate back to the old rate. She also made a YouTube video in September 2009 that had almost half a million by mid-Novmember.

What Happens If You Revolt and Stop Making Payments
Ann's actions attracted a lot of media attention, and that attention probably led the bank to change her rates to the old rates. It's too early to tell if her actions lead to a broader debtor's revolt or to changes in banking policy. One thing is certain--if you follow Ann's lead you may not get the result she got and things may get worse for you. Your bank could cancel your card, and your credit score could go down, making it harder to get a loan or to open up another credit card account.

Whether you stop making payments or keep making payments, the banks will not go away, nor will your need for credit. If you are having trouble with your bank over your credit card, you should think of things to do that won't affect your credit score or leave you stranded with out a credit card.

Things You Can Do if Your Credit Card Goes Bad
If your bank or credit card company has done things like increase your rates, add fees, reduce your credit limit, or has started to hassle you in other ways, there are a bunch of things you can do:

Talk to your financial institution - You can always ask the fees be taken off, rates reduced, or credit limits changed. If your bank, credit union, or credit card company is reasonable, there is no reason to revolt.
Close the Account - If you don't want to deal with your current credit card, close your account and go somewhere else. Before you do, make sure where you are going has rules you can live with.
Transfer Your Balance to Another Card - If you already have another card that allows you to transfer a balance, then you can do that before you close down your old card. Make sure you check to see if there are any fees or other issues you have deal with on the old card or the new one.
Get Another Card - If you don't have an alternate credit card, you should start looking for one as soon as your current credit card company starts adding restrictions and fees or raising your rates. You should definitely do this while you are in good standing with your other card. If you join the debtor's revolt and stop making payments on your old card, your credit score could drop and you may have problems finding another card on good terms.
Pay Your Card In Full Each Month - If you don't carry a balance, it really doesn't matter what kind of interest rate your credit card charges. So long as your credit card doesn't do anything else to you like charge fees just to have a card, or reducing your credit limit, you should be OK.
Stop Using Credit Cards - If you have cards you don't use or need, then close down those accounts. Also, if you use several cards and have trouble keeping track of each account, simplify your life and reduce the number of cards you use. If you can do your normal activities without using a credit card, you may want to kick the credit card habit and go without. Be careful with this step, since many activities such as buying online, ordering by phone, renting cars, or buying plane tickets may be a lot more difficult if you don't have a credit card.

Resources
What Is Your Credit Score and How You Can Make It Better
Understanding Credit Card Balance Transfers