We’re Moving to AskTheMoneyCoach.com

The Bad News:  This is the last post we will make to this blog. We might lose a ton of traffic.

The Good News:  All future posts will be made to our new site at Ask The Money Coach.com http://www.askthemoneycoach.com.  We might not lose a ton of traffic thanks to you for helping us spread the word.

More Good News:  You can send your personal finance questions directly to us at Ask The Money Coach.com. Subscribers will get rewarded with free stuff like ebooks and downloads.

How to Stop Foreclosure Using Chapter 13 Bankruptcy

In 2009, there were more than 1.4 million bankruptcy filings in the United States. Most personal bankruptcies are Chapter 7 filings. But with scores of people facing foreclosure, more individuals are filing Chapter 13, because it allows them to keep their homes.

Here are some of the important facts you need to know about filing Chapter 13, especially if you need to stop foreclosure.

Unlike Chapter 7, which completely wipes out personal debts such as credit card bills and installment loans, Chapter 13 is a way to re-organize your finances and pay off your debts (including any overdue house payments) over a period of 3 to 5 years. Chapter 13 is also known as a wage earner’s plan, because individuals in this form of bankruptcy must have a regular income and provide a plan to the court showing that the person can repay all or part of his/her debts.

How Much Does It Cost?

Bankruptcy rules and fees vary from state to state. However, it will probably cost you at least $1,000 (and sometimes as much as $2,500 or so) to hire an attorney and file for protection from your creditors. Bankruptcy laws are complicated, and the vast majority of people should have a qualified bankruptcy attorney handling the process.

The Chapter 13 Process In a Nutshell

Here is a quick and dirty description of what happens when you file Chapter 13.

• Before you file, you must get pre-bankruptcy credit counseling. This can be done in person, over the phone or on line – typically in about 60 minutes.

• To start the actual filing, you must first gather a slew of information, including your creditors’ names, addresses, and the amount of debt you owe to each.

• You must also put together a variety of “schedules,” namely, an income and expense schedule, a schedule outlining your assets and liabilities, and a schedule showing unexpired leases and executory contracts (i.e. those where you have a material unperformed obligation).

• Lastly, you must provide the Bankruptcy Trustee with a statement about your financial affairs. Taken together, these documents will give the Chapter 13 Trustee a sense of your overall financial picture, including one key element: the amount, source and frequency with which you receive any and all income.

Co-Signers are Protected and Do Not Have to File Bankruptcy

If you’re contemplating bankruptcy as a way to stop foreclosure, and your spouse, a relative or a friend is a co-signer on the mortgage, that individual does not have to also file Chapter 13. However, you will have to also include his or her income and expenses in your schedules and statement of financial affairs, so that the Trustee can accurately assess financial responsibility and ability to repay the debt over time.

• Next, you or your attorney will fill out mandatory paperwork for your petition or case file. You create a repayment plan showing how you intend to eliminate all or some of your debt for a maximum period of five years; this repayment plan gets filed with the closest federal court.

• The court then issues an “automatic stay” protecting you from further actions by your creditors. This means they can’t initiate or continue any collection activity against you, including foreclosure, lawsuits, repossession, wage garnishments, or even just harassing phone calls. The good news for co-signers is that with a Chapter 13 petition, the filing also provides a “co-debtor stay,” which means that creditors can’t try to collect a consumer debt from another individual who is also liable with the debtor for the debt.

• In about 30 days after your filing, you must attend a meeting of your creditors. If any show up, they can challenge your claim that you are unable to pay your debts.

• If all goes well, the bankruptcy judge formally approves your debt reorganization plan, after which you start making payments within 30 days. Those payments continue until you complete your Chapter 13 plan.

Is Bankruptcy Really a “Fresh Start?”

While you are in Chapter 13, you are still required to make your monthly mortgage payments on a timely basis. If you don’t, your lender can get that “automatic stay” lifted by the court and can re-initiate foreclosure.

Finally, realize that while bankruptcy is often touted as a “fresh start,” it is not without consequences. Specifically, filing Chapter 13 bankruptcy will hurt your credit rating and stay on your credit report for 7 years after it is discharged. In Chapter 13, your bankruptcy is “discharged” after you complete making all payments. Chapter 7 bankruptcy filings stay on a person’s credit report for 10 years. But the time period is shorter for Chapter 13 filers since those individuals have spent years repaying all or part of their debts.

Again, this information is educational in nature, and is summarized greatly for brevity. Anyone considering bankruptcy should seek the services of an experienced attorney skilled in bankruptcy law.

Last-Minute Holiday Shopping Tips to Save Money, Help Your Credit

If you’re planning to do some last-minute holiday shopping – or even pick up a few bargains after Christmas – make sure you know a real “deal” from a fake one. Clothing stores, electronics companies, toy makers and other manufacturers are very savvy at getting people to spend, and overspend, during the holiday season. So follow these five “do’s and don’ts” to make your holiday shopping experience easier on the wallet, not to mention your credit rating:

• 1. Don’t Be Fooled by Clever Marketing Ploys
  • How are retailers very skilled at enticing consumers to overspend? Some tricks:
    • Using big shopping carts (people tend to load up on goodies with bigger carts versus smaller carts or hand-held baskets/bags)
    • Grouping cheap merchandise with expensive stuff to give the appearance that the cheap stuff is more valuable (so research prices online before shopping to know if you’re really getting a bargain)
    • Marking prices up dramatically then “slashing” them 50% or more
    • Using labels like “premium” “new” and “deluxe” to describe various goods (they’re hoping you’ll pay more for the expensive products that may not be much better – or necessary – than plain-vanilla goods)
• 2. Do Skip the Insurance/Extended Warranty Come-Ons
  • Buying electronics or big ticket household items like computers or TVs?
    • Just say no to the sales pitches for “insurance” or extended warranties
  • This coverage is too pricey
  • Many manufacturers already offer basic coverage (your credit cards frequently do too)
  • If something breaks in the future, chances are you’ll want a new one anyway – and prices will be cheaper
• 3. Do Maintain Healthy Credit Habits
  • Check your credit card balances, terms and interest rates before shopping
    • Many card issuers have increased rates, closed accounts or lowered limits and haven’t yet bothered to tell customers! (you don’t want to get embarrassed at the register because your card has been declined)
  • Don’t fall for the “Do you want 10% off?” gimmick
    • opening a new retail credit card account can lower your credit score up to 35 points
    • retail/store credit cards have higher interest rates than do national cards, like Visa or MasterCard
  • Especially when using credit cards, you should set a budget/limit and stick to it
    • Only charge what you can pay off in 3 months tops. Even better: don’t buy stuff if you can’t pay for it in full when the statement arrives

• 4. Do Know the Pitfalls of Using Your ATM card or Checks
  • Nearly half of all shoppers plan to use debit cards or checks, according to the National Retail Federation (NRF)
  • Watch out for overdraft fees (they average about $27)
  • Realize that some merchants charge fees for certain purchases made with an ATM card
  • Get cash using your own bank’s ATM to avoid the $1 to $3 surcharge at other ATM networks

• 5. Don’t Get Just Any Old Gift Cards
  • Consumers will spend $50 billion on gift cards in 2009, with the average shopper spending $140 on gift cards this holiday season (source: NRF)
  • Certain gift cards have expiration dates, maintenance fees, transaction charges or even so-called “inactivity” fees

• The biggest culprits: gift cards issued by credit card companies, banks and shopping malls (source: NRF)
• Know the drawbacks of any gift cards you buy, give away or receive
• Good news: the Fed has proposed consumer-friendly gift card rules that would take effect in August 2010 – ahead of next year’s holiday season (among the changes; gift cards can’t expire before 5 years; and fees would be banned within the first year that they’re issued)
• In the meantime, if you get a gift card, use it ASAP!

5 Tips on How To Pay Off Your Student Loans Fast

Follow the five tips to help you pay off your student loan faster.

A Facebook fan has asked for some information on how she can pay off her student loans.

Below are some tips regarding student loans. This information is taken from an article I wrote on this topic.

Want to pay off student loans fast?  Then follow these tips:

1. Bite the Bullet Now
2. Consolidate Carefully
3. Use OPM – Other People’s Money
4. Claim Hardship Status
5. Get Help From a National Ombudsman

1.   Bite the Bullet Now

There are four main student loan repayment programs if you have federal student loans – and these four plans let you pay off your debts in as fast as 10 years, or as long as 30 years.

Caution: Don’t make the mistake of just picking the option that lets you pay the smallest monthly payment.

That may help your cash flow in the short term, but in the long run you’ll pay thousands more in finance charges. The best strategy: pay as much as you can possibly afford on your student loans. If you can’t swing the standard
repayment plan, which will allow you to pay off your student loans in a decade or less, at least make extra payments on top of your normal monthly payment. Even if you can only afford to throw an additional $25 or $50 a month on top of your regular payment, every little bit will help. Sending in “extra” payments is a short-term financial challenge, but if you go ahead and bite the bullet now, making sacrifices in the near-run, you’ll be much better off economically in the long haul.

2.   Consolidate Carefully

Anyway with student loans receives lots of offers in the mail from lenders seeking to consolidate your student loans. If you do consolidate you loans, do so wisely. You’ll have to keep your private loans and federal loans separate; you can’t consolidate those two groups of loans. But be careful which loans you roll into one bigger loan. For instance, let’s say you took out federal Perkins loans while you were in school. In most cases, you wouldn’t want to combine a Perkins loans with other types of loans. The reason: Perkins loans have better “loan forgiveness” benefits for people who go into teaching, and you can lose those benefits if you consolidate them.

3.  Use OPM – other people’s money

If you’ve been in the workforce for a few years, and you haven’t made a real dent in your student loans, get the government or your employer to pay off your college debts. The government’s Office of Personnel Management
(www.opm.gov) runs the Federal Student Loan Repayment Program. If you work for a govt. agency, they’ll pay off $10,000 per year worth of your student loans, up to $60,000. A private employer can do the same thing. Your boss
can pay your student loans as a benefit or a perk to retain you as a happy and loyal employee. Ask about this possible benefit during your next performance appraisal.

4. Claim hardship status

Most people don’t know that they can claim economic hardship status, based on their personal circumstances, and get their student loan payments greatly reduced – or maybe even eliminated. If you’ve had a string of bad luck, say you went through a divorce, got laid off, then had a car accident — all of which impacted your finances, you can qualify. Also, having a protracted hardship, such as a lengthy medical illness, the department of education may say it’s not worth it to make you pay off your loans – and they can cancel out your loan indebtedness. To start the process of  claiming an economic hardship fill out a simple 2-page form called a Statement of Financial Status. Find it online at the Department of Education:

www.ed.gov/offices/OSFAP/DCS/forms/fs.pic.pdf

5.  Get help from a national Ombudsman: http://www.ombudsman.ed.gov

This is the website for the Federal Student Aid Office of the Ombudsman.  This agency’s role is to help you resolve difficulties you may have with you student lender or loan servicing company. If you have complaints about your lender or disputes you haven’t been able to settle, the Ombudsman will listen to your grievances, and if they’re justified, contact the lender on your behalf.

The 529 Plan: A State-Sponsored College Savings Plan

A 529 Plan is the the single best way to save for a college education.

One of my lucky readers just got $5,000 from a family member — not for her, but for her young daughter’s college education. Her question: what to do with it? My answer: Put it in a 529 Plan.

A 529 Plan is a state-sponsored college savings program. In my opinion, these are hands-down the single best way to save for a college education.

Here’s how a 529 plan works. You basically put money into the plan and it’s invested in mutual funds. The mutual funds are managed by professional investment advisers who are selected by the state. A 529 plan is offered by every state in the country, and you can pick any one; it doesn’t have to be a 529 plan from the state in which you live. For example, in our case, we live in NJ, but we picked the New York plan for our 3 children because we think it’s a very good one.

Some highlights to know:

• The money you put into a 529 plan grows tax-free
• All the money comes out tax-free as long as it’s later used for higher education (i.e. tuition, room/board, lab fees, books, supplies, etc).
• Money in a 529 plan is portable — meaning your daughter can take it with her and use it any any college in the country (it doesn’t have to be a college in her state, or in the state in which the 529 plan was set up)
• Money in a 529 plan is transferable. Let’s say your daughter decides not to go to college (fingers crossed; that won’t happen!). But assume she doesn’t for whatever reason. If you have another child, you can transfer the money in the 529 plan to him, so that he can use it for college. Even if you or your husband decide to go back to school, you could use the money to pay for your expenses.

With a 529 plan, the money is controlled by you (the donor), and is counted (for financial aid purposes and tax purposes) as an asset in your name; your daughter is listed as the beneficiary. This can help in three ways:

1. First of all, because you control the money, she can’t just have it when she’s 18 or 21 (the legal “age of majority” in most states). With some funds, like trusts, when a young person turns 18 or 21, they can essentially tell mom & dad “I want a new car” or “I want to travel and find myself” and then proceed to blow their college savings on those things… and there’s nothing the parent can do, because legally the money belongs to the child. That’s not the case with 529 plans.
2. Also, since the asset is in your name, that can help with student financial aid down the line when your daughter does go to college. All schools look at your families finances, and determine something called your EFC, or Expected Family Contribution. In the simplest terms, that’s the amount of money they expect you/your family to put toward paying for college. (Then the school offers other aid, like scholarships, grants, work study, loans, etc.). Well, in determining your EFC, many colleges will count 20% of an asset owned by a child/student in the calculation for the EFC. However, only 12% of an asset owned by the parent counts toward the EFC. Again, each school is different. But this is a general guideline.
3. Thirdly, many states offer a tax break to you, as the donor, for making a 529 contribution. Same deal applies for grandparents and others who contribute.Tax benefits vary, of course, based on factors such as amount contributed, income, age, and marital status.

For more info on 529 plans, visit this website: http://www.savingforcollege.com/

And remember, if you have a child: it’s never too early to start saving for college!

Financial Bootcamp: Learn How to Defend Yourself against Creditors, Bill Collectors, and Avoid Scams

Defend yourself against creditors, bill collectors and from being scammed.

It’s hard enough to struggle to pay your credit card bills, rent/ mortgage and utility bills.  It is even harder to maintain a decent credit rating and keep your name and reputation in tact amid the credit crunch.  The last thing you need is to:

• Have unscrupulous bill collectors harass you at your job, call you at all hours of the day and night on your home or cell phone.
• Receive a summons to appear in court to answer a lawsuit over a debt you thought was already settled years ago.
• Have zombie debt collectors attempt to wreak havoc on your credit score by reporting you to the credit bureaus over a debt that was settled or has long expired due to the statue of limitations set by your home state.
• Find out that you can’t get a job due to an error on your credit report.
• Discover that you can’t get credit or a lease due to inaccurate information on your credit report.
• Learn that you’ve been scammed and have become the victim of identity theft.

This teleseminar will address all of these and related topics to help you defend yourself, your reputation, members of your family, yes, even your family, from abusive bill collectors, judgments, scams and more!

Here’s a quick summary of some of the topics we will cover:

1. How to negotiate with creditors.
2. How to get a better credit card interest rate and save money even if you have been previously late making a payment.
3. Understanding the Fair Credit Reporting Act and your rights under it.
4. What creditors can and cannot do to hurt your credit rating.
5. How to boost your credit score by correcting the most common basic errors that appear on many credit reports.
6. How to quickly enhance your credit rating with rapid re-scoring.
7. What to say to bill collectors to stop them dead in their tracks.
8. Credit Report Scams to avoid at all cost.
9. Your personal finance questions posed during the final 30 minute q&a of the workshop.
10. Tips to reduce your debt and cut your spending.

Sign up now for this 90 minutes teleseminar for just $19.95. This Financial Bootcamp is happening on December 9th, 2009 at 8:00 pm – 9:30 pm EST.

The first 10 people that sign-up for this teleseminar will also receive a free copy of Lynnette’s MP3 How to Slash Your Taxes or Settle an Old Tax Bill.

You will receive dial-in instructions within 24 hours after your payment is processed.

How to Best Dispute a Medical Debt

Try to negotiate a settlement with the collection agency. Offer to begin a monthly payment plan that you can truly afford.

One of my newsletter subscribers had a question about how to best dispute a medical debt. She found out that a collection account for $1,879 appears on her Equifax credit report, based on a $2,000 surgery she had back in 2004. This individual (who is also unemployed) said she’d paid monthly on the bill at various points over the years, but then all of a sudden she stopped being sent monthly statements. So her question was:  Should I dispute this bill with Equifax, or should I go directly to the collection agency?

Here’s my reply.

Don’t start with a dispute to the credit bureaus over this matter — since you said this is a bill that you know you do, in fact, owe.

Start with the collection agency. Try to negotiate a settlement with them. Offer to begin a monthly payment plan that you can truly afford. Alternatively, if you can afford a lump sump payment to knock out the bill, even better — because you’ll also be better positioned to improve your credit rating.

If you have some cash on hand to make a lump payment on your medical bill, you can make a settlement offer of pennies on the dollar. For example, if your outstanding medical debt is still $1,879, you can say something like: “I have $900 that I am prepared to send you as payment in full for this debt. But in exchange for me making this lump sum payment, I would need you to DELETE all negative references to my credit reports.” This way you’ll be paying less than 50% of the bill, plus clearing up your credit report.

If the collection agency agrees, get everything IN WRITING (you write the letter spelling out the agreement) before you send that money. This strategy is called using a “Payment for Deletion” to clear up your credit. It often works, because collection agencies usually get collection accounts in one of two ways:

1) the account was “assigned” or transferred to them from a creditor, and they get paid on a commission basis, based on the dollar amount that they can collect from the debtor; or

2) they bought your debt for pennies on the dollar (they likely secured your $1,879 medical debt for just a few hundred dollars, if that). So any money they get above the amount they spent acquiring the debt represents a profit for them.

One last point: you said you were originally told your surgery was $2,000 …. that was 5 years ago, and you indicated you were paying it on at various times over the years. So if the amount they claim you owe is $1,879 (only $121 less than your original debt), it sounds like they probably tacked on considerable interest charges, penalties, and other fees. Try to negotiate on this basis also. State your case (i.e. you were never sent bills, tell them that you are unemployed, but only if you really still are, etc.) and then request that all late fees and finance charges be eliminated from the bill. That will help you knock down the debt. Also, if you end up not being able to reach any resolution, and you do in fact, dispute the AMOUNT of debt that you owe, then that’s when you would go to the credit bureau and dispute this item on your credit report. If you can’t clear this matter up, be aware that any negative references on your credit report stays there for seven years from the time you last went delinquent (i.e. if you last payment was made in Nov. 2008, this item would stay on your credit report until Nov. 2015).

Hope this info helps. Good luck!

Another Financial Scam: This One Involves Walmart

Another financial scam is making the rounds. This one involves Walmart. And it’s happening just in time for the holidays. Here’s the con: Some no-good thieves are calling people on the phone and saying: “You’ve won a $200 Walmart gift card!” To collect your gift card, they say, you just have to pay $1 for shipping and handling, and the gift card will be sent to you. Needless to say, this is totally bogus. Anytime a stranger calls you on the phone claiming you’ve “won” something, and then asks for your credit card – or any personal information – red flags should start going off in your head and you should literally be able to hear sirens and alarm bell whistles. The old “give me your credit card number” scheme is classic con artistry at its best — or should I say worst? This is just another form of identity theft.

Thanks to Dan, from South Carolina, a subscriber to my free newsletter (http://www.TheMoneyCoach.net) for alerting me about this scam occurring a lot down in Columbia, SC. He says the scam has been so prevalent there that it was recently reported on WIS-TV in Columbia. I know times are tight and a lot of people are broke. So the idea of “winning” a gift card from Walmart (one of my favorite places to shop!) is definitely appealing. But let’s remember the old adage: If something sounds too good to be true, it probably is.

I predict that this scam will increase in popularity as we progress into the holiday season. It can (and will) likely involve any popular retailer that has gift cards – Target, Macy’s, Sears, The Gap, Home Depot, etc. One final word: I couldn’t find a reference to the story from WIS-TV. (I’ve asked Dan to forward me a link or more info). But I did find a lot of complaints about this scam on 800Notes.com. Here’s a link for more details. http://800notes.com/Phone.aspx/1-877-469-7415

Optimize Your Health Insurance Plan

Q: It’s open enrollment season for health insurance. What should I compare policies on to make sure I get the best one for the price?

A: Generally, you want to look at price, coverage, and ease of use. Clearly, affordability should weigh heavily in your decision, but don’t let that be the sole criteria. If you have a preferred doctor, make sure he or she accepts the plan you’re considering. Also, look at the prescription drug costs in the plan, the deductible you have to pay before benefits kick in, and the overall amount you can be expected to shell out in any given year…

Read the rest of this post on Health.com

Optimize Your Health Insurance Plan – Healthy Living – Health.com.

Would You Willingly Pay The Govt to Reduce The National Debt? Some Gladly Do

Interesting Reuters story about people who willingly – even gladly – fork over their hard-earned money to help slash America’s multi-trillion-dollar national debt. It seems there’s a federal office in West Virginia that accepts public donations to lower U.S. debt. Before you laugh, consider this: that office raked in $3 million in 2008 in voluntary contributions. My first thought was: Well, I guess these people didn’t have debt of their own! Which would, of course, be a rare thing in a society where:

* the average household has $10,000 in credit card debt

* the typical car loan is more than $27,000

* the typical mortgage debt exceeds $200,000 (based on national stats)

* the average college grad leaves school with more than $20,000 in student loans

Read on, though, and you’ll discover who these individual donors are … and why they contribute in this way. You might be surprised by who’s giving. http://tinyurl.com/yll4ktk