The U.S. Economy Is Batting a Perfect 10 For 10

 

As I crunched some numbers today, it occurred to me that the U.S. economy is batting a perfect 10 for 10 (in a manner of speaking).

Here are some statistics about America’s economy – and its people – that may surprise you. Depending on your perspective, a few of these numbers will make you want to laugh, cry, or perhaps beg for mercy.

10 – The unemployment rate, in percentage terms, in the United States

(Source: U.S. Labor Department)

10 – The number of states in America that face looming budget disasters

(Source: Pew Center on the States)

10 – The amount, in billions, that Facebook is valued at by investors

(Source: The Wall Street Journal)

10 – The amount spent per month, in billions, on the wars in Iraq and Afghanistan since 2001

(Source: The National Priorities Project)

10 – The percent of disposable income that the average American spends on food

(Source:  U.S. Agriculture Department)

10 – The number of Americans, in millions, that are shopaholics

(Source: American Journal of Psychiatry)

10 – The average amount of credit card debt, in thousands, per U.S. household

(Source: Bankrate.com)

10 – The percentage of uncollectable credit card debt that banks charged off in the second quarter of 2009

(Source: Federal Reserve)

10 – The number of Americans, in millions, who are victimized by identity theft each year

(Source: Javelin Strategy & Research)

10 – The number of U.S. households, in the millions, that are unbanked or “under-banked” and use checking-cashing firms or payday lenders instead of traditional banks

(Source: FDIC)

Copyright Lynnette Khalfani-Cox, The Money Coach. All Rights Reserved. http://www.TheMoneyCoach.net

What Happens to Credit Card Debt After Someone Passes Away

A subscriber to my free newsletter a www.TheMoneyCoach.net wanted financial advice for a friend. Here is the person’s questions, and my answer:

Question: You’ve answered an email from me before since I’ve been reading Zero Debt and I hope you can answer another question now.  Today, my question is for a friend. Her father has had lung cancer for a number of years. He’s not doing very well now.

What she needs to know is what will happen to her father’s credit card debt after he passes away.  The credit cards are all just in his name.  Also, her mother is still living.  She has spent a lot of time with her father, taking care of him, and I know she would love to be able to handle all of his financial obligations but she just doesn’t have the means.

Answer: Here’s a good article that answers your question re: your friend’s situation.

http://www.brighthub.com/money/personal-finance/articles/35296.aspx

The bottom line is that: no family members or relatives are responsible for someone’s credit card debt after that person dies, as long as those surviving family members are not joint owners or co-signers of the debt.

Even his wife would not be legally obligated to pay off his credit cards if she is not listed as a co-owner on the account.

I hope this info helps.

How to Shave Off 8 Years from Your Mortgage

A Facebook fan asked me the following question:

Question: While I suspect that you cannot endorse or disparage a particular product, I was wondering of you can offer your thoughts on programs, offered for a fee, that claim to show you how to pay off your mortgage in 8 – 11 years. Generally speaking are these programs legitimate?

Answer: You are correct that I don’t want to bash any particular financial product or service without knowing the specifics of what they’re offering.

However, I can tell you this: If you have a home and you want to pay off the mortgage quicker than 30 years, you can indeed shave off about 8 years from that mortgage just by making one extra payment each year. You really don’t need to pay a fee for this to some third party. You can simply write an extra check to your lender and write a letter to them indicating that you want this additional check to be applied toward your principal balance. It’s a good idea to also send along one of your monthly statements, and to write “Pay toward principal balance” on the check itself. Then keep making your other normally scheduled payments. In addition to outside firms or third parties, your own mortgage company might also offer to set up extra payment arrangements for a fee. But again, you can readily do this on your own without incurring additional costs.

Hope this info helps.

Debt Settlement Companies and Government Grants

A better strategy is to try to negotiate directly with your creditors.

A Facebook fan would like to know my opinion on debt settlement companies and government grants as a way out of debt.

To answer his question about getting out of debt, here are my thoughts.

First, I don’t recommend using debt settlement companies. They typically advise you to stop paying your bills for a few months. Then they go to your creditors and try to negotiate a settlement on your behalf. Their logic is that after a few months of not getting paid, creditors will be eager to take some money (instead of no money), so they will settle for pennies on the dollar, in terms of what you owed. The problem with this is that you do some serious damage to your credit rating. And there’s no guarantee that it will work. Creditors may just decide to sue you, get a judgment against you, or garnish your wages. I think a better strategy is to try to negotiate directly with your creditors. If that doesn’t work, then try credit counseling. A good non-profit credit counseling agency is the National Foundation for Debt Management. (www.NFDM.org). I’m a spokesperson for this organization, and I know that they do good work and are trustworthy.

Re: government grants, there are no programs that I know if specifically designed to give people money to get out of credit card debt. Some programs offer grants (i.e. free money) for other things … like financial assistance for starting a business, or monetary help to pay for childcare, that sort of thing. There are government programs to help people pay off student loans, but that’s another story.

Owe More Than Your Car Is Worth? Here are Your Options

A Facebook fan wanted to know what to do because she’s upside down on her car loan, meaning she owes more than the car is worth. Some people call this having “negative equity.” It’s always tough dealing with being upside down in a car payment because, frankly, there aren’t any really good options. Nevertheless, here is a link to a page on the website of www.LeaseGuide.com, a consumer car leasing guide. It offers of the best explanations you’ll find about your choices when you owe more than your car is worth:

http://www.leaseguide.com/Glossary/upside-down-car-loan.htm

Got a financial question? Ask The Money Coach! Find me on Facebook at www.facebook.com/themoneycoach or on Twitter at @themoneycoach.

What to Expect if Your Bank Closes

A Facebook fan read about some local banks closing, and wanted to know how – as an account holder – this will affect her. Here’s what you need to know if your bank fails.

So far this year, 115 banks have collapsed in the U.S., and many of them are local banks. The Federal Deposit Insurance Corp. maintains a “watch list” of problem banks, those with troubled finances. In August 2009, that watch list contained 416 banks, so experts predict that half or more of those banks could also fail. Once a bank that is “undercapitalized” get taken over by federal regulators, it is either run by the FDIC, as is the case with IndyMac, or the institution gets sold off by the FDIC to another bank.

Here’s how bank failures affect you and other consumers.

If you currently have money sitting in a deposit account at a bank, and that bank is FDIC insured, then your money is protected up to $250,000. In 2008, during the height of the biggest financial crisis most of us have ever experienced, the FDIC raised the limits on insured accounts to $250,000 from $100,000. This $250,000 limit – per depositor, per account – will be in place until Jan. 1, 2014, at which time it is scheduled to go back to $100,000. The FDIC insures so-called deposit accounts, which include the following:

• Checking Accounts
• Savings Accounts
• Negotiable Order of Withdrawal Accounts (also called NOW accounts, which are savings accounts that allow you to write checks on them)
• Time Deposit Accounts, (including Certificates of Deposit or CDs)
• Negotiable Instruments (such as interest checks, outstanding cashier’s checks, or other items drawn on the accounts of the bank)

The good news for most people is that even if your bank goes out of business, if you’ve put your money in a FDIC-insured institution, you can rest assured that your money – up to the limits described – is perfectly safe. In fact, since the FDIC’s inception, not a single dime of insured deposits has ever been lost.

Got a financial question? Ask The Money Coach! You can reach me here on Facebook: http://www.facebook.com/themoneycoach

What Creditors Can Do When You’re Broke

Being broke is not a legal reason to not pay a debt.

A Facebook fan who is facing threats from a creditor/bill collector wanted to know what a creditor can do when you don’t have any money. Specifically, she wanted to know if a creditor can sue, get a judgment, and garnish her unemployment checks. The short answer is: They can sue and maybe even get a judgment. However, that unemployment check is “untouchable” and can’t be garnished. Read on for more details about how to handle yourself if a creditor comes after you in court.

First off, you have to know that it doesn’t matter if you don’t have the money. If you owe a bill (or even if you don’t actually owe it), a creditor can still sue you, and the Court can still enter a judgment against you. Being broke – even due to unemployment – is not a legal reason to not pay a debt. As a practical matter, however, if you let a creditor know that you are unemployed, they may be more willing to negotiate or settle your debt.

Either way, here’s what to do if you get a summons or notice to appear in court:

1) First, by all means do answer the summons/complaint. If you don’t, the court can automatically enter a judgment against you for whatever amount the creditor requests.

2) Next … Do show up in court. Even if you owe money, you can make a case in court about why you should be able to pay less. Maybe you are disputing the debt, for example, because you don’t think you owe what they say you owe.

3) Know the statute of limitations. If it’s a very old bill, they may not have a legal leg to stand on, and the judge may throw out the case.

4) Rest assured knowing your legal rights. That bill collector/creditor can NOT garnish your unemployment check. Under federal law, certain income can not be garnished. This includes:

* Social Security
* Retirement Plan Benefits
* Public Assistance (Welfare)

Additionally, unless someone gets a judgment against you for child or spousal support, these forms of income also can NOT be garnished:

* Worker’s compensation
* Unemployment
* Disability benefits

So don’t let any creditor make idle threats, and claim they are going to “take” your unemployment income … they can’t!

Here’s what they can take/garnish:

* A vehicle (to sell)
* Regular wages
* Bank accounts

When it comes to money in bank accounts, though, if the money came from the “untouchable” sources listed above, like unemployment, that money can’t be snatched by a creditor via garnishment. Good luck!

Unpaid Small Bills and Your Credit Score

A Facebook fan considering applying for a mortgage wanted to know how seriously her husband’s credit rating would be impacted by a court judgment for a small bill of just $109.00. Here’s what she needs to know – and you too, if you ever are facing court action concerning a debt.

A "public record" can do very serious damage to your credit rating, easily knocking down your credit score 100 points or more.

A “public record” — such as a bankruptcy, charge-off, repossession or court judgment against you — can do very serious damage to your credit rating, easily knocking down your credit score 100 points or more. In this instance, you have three options, all of which may be necessary to repair your spouse’s good credit. 1) You can dispute the information with the heating company. 2) You can also dispute the information with the credit bureaus (TransUnion, Equifax, and Experian) if necessary. Also, 3) You can contest this judgment with the court, on the basis that you were never properly served (i.e. never legally notified that you needed to appear in court). Start with the courts. See if they’ll dismiss the judgment on the grounds of improper service. If that gets you no where, go to the creditor and negotiate with them. As a final tactic, dispute the information with the credit bureaus. Two important points to note: It sounds like you’ve pulled your husband’s credit scores — perhaps his Vantage Scores, or some other credit scores, because FICO scores range from 300 to 850 points, and you’ve indicated your spouse’s scores were 839 and 714, after previously having been around 915. Get your FICO scores also to see what those are. The FICO scores are the ones mortgage lenders and other creditors most frequently use. Lastly, under FICO’s new credit scoring model, small bills of $100 or less will be disregarded when it comes to calculating your credit score. However, since the bill your husband allegedly owed was for $109, and since it turned into a judgment, it will still present a problem for him. One last-ditch effort might be to try to get the heating company to agree that the original bill was for less than $100. That way, even if it still shows up on your credit report, it won’t hurt your husband’s FICO credit score. This is assuming, of course, you also get that public record eliminated from his report. Good luck!

More Banks Bite the Dust

As of Oct. 2009, more than 100 banks have failed in the U.S. this year, costing depositors millions of dollars. Most people know that the FDIC insures deposits up to $250,000, but many consumers may not realize that this $250,000 in protection applies to the total of all your regular accounts – checking and savings – that you have with a given bank; not to each individual account. Right now, there are more than 400 banks on the FDIC’s “Watch List” – meaning they’re financially shaky. What should you do? Keep tabs on your bank by staying abreast of the news, and learn more about limits to the FDIC coverage, by checking out the “Failed Bank Information” section on the FDIC’s web site (www.FDIC.gov).

For more information, read my article called “With Hundreds of U.S. Banks Still in Jeopardy, Credit Crunch May Last Decades.”

FHA Loan Guidelines

There is no federal income limit for an individual or a couple to qualify for an FHA loan.

A Facebook fan who is about to get married had asked me whether there is a limit in the amount of income to be able to qualify for FHA. It seems that they were advise to only put the fiance’s name on the mortgage as their combined income would disqualify them from getting the FHA loan. Further, they would like to confirm whether there is any truth to the rumors that the $8,000 tax credit will be extended or doubled.

First of all, congratulations on trying to buy your first home – and on your upcoming wedding in 2010.

You indicated that only your fiance’s name would be on the mortgage because you were told that your combined income is too high for an FHA loan. If this is what you were told, then the gentleman you are working with appears to have given you misinformation regarding FHA loans.

There is no federal income limit for an individual or a couple to qualify for an FHA loan. It doesn’t matter how little or how much you make, as long as you meet FHA’s rules regarding your debt-to-income (DTI) ratios. Under FHA guidelines, no more than 31% of your gross income can go toward your housing costs, and 43% of your gross income can go toward your housing plus other monthly debts that are on your credit report (like your credit card payments, a student loan, or a car note).

The only thing I can think of that this gentlemen might have been referencing is that if you have large debts, then putting you on the mortgage could throw off your combined debt-to-income ratio, making the two of you ineligible to qualify for an FHA loan, based on their DTI requirements. Also, the FHA does have loan limits related to the median price of a property. But those loan limits are fairly high, over $400,000 in most states. In other words, the FHA program caps the size of the mortgage you can get to just north of $400,000 in most areas. But this loan limit (on mortgage size) does not impose any restrictions on how much income you or your fiance can make. You can learn more about FHA loans at: www.fha.gov.

Regarding your second question, whether or not the $8,000 tax credit, will be extended or doubled, my answer is: There is talk in Congress right now to expand the credit, but the reality is that none of us knows whether that will pass or not. If you are seriously in the market for a home, and you and your fiance find a place you like, I would not hesitate to put in your offer and go ahead and try to close, as you’ve suggested you would like to do, before Nov. 30th. This way, you will get the benefit of that $8,000 tax credit, because there’s no guarantee that it will be extended. It all depends on what happens in D.C. and whether or not the politicians think it’s necessary to spur the housing market.