It’s now been over a year since his passing and she’s getting around to really taking a look at her financial situation and how best to handle everything. She asked me if she should just stop making the payments since the accounts were only in his name. So I looked up the laws and it turns out she’s responsible for his credit card debt. Since the credit cards were acquired in California, the following applies:

California is a Community Property State. Community property includes all earnings during marriage and everything acquired with those earnings. All debts incurred during marriage, unless the creditor was specifically looking to the separate property of one spouse for payment, are community property debts.

Here’s the complete list of community property states:
* Arizona
* California
* Idaho
* Louisiana
* Nevada
* New Mexico
* Texas
* Washington
* Wisconsin

So, unfortunately, she’s on the hook for the debt. She’s been really struggling lately to make the minimum payments on these credit cards (in addition to all of her other expenses) with her modest income. It’s going to take her years and years and years to finally pay them off with minimum payments. She’s been dealing with so much since his passing and now that the dust is settling, this grim financial situation is stressing her out very much.

I advised her to do a monthly expenses worksheet to get a clear sense of her cash flow situation. She’s working on that now and then we’re going to take a look at it together to see if debt settlement is right for her.

Afshin K.
BlueChip Debt Relief
A BlueChip Financial Network, Inc. Company

What if you were planning on using that line of credit to help pay off some of your high interest rate credit card debt? Now that option is going away and you might not find out about it until it’s too late. Seems unfair, doesn’t it?

Here’s the article: Lenders Cut Off The Home Equity Tap

Afshin K.
BlueChip Debt Relief
A BlueChip Financial Network, Inc. Company

The reason range from having a high balance on your BofA or other credit cards, a lower credit rating or any other number of reason. Here is a part of the Yahoo article that explains it a little better:

“Bank of America spokeswoman Betty Riess confirms some bank cardholders could be receiving rate increases for reasons other than declines in credit scores, such as running higher balances with their Bank of America cards or with other creditors. She says the increases are part of a “periodic review” that assesses customers’ credit risk. She declined to say if the Charlotte (N.C.) bank had changed its credit standards thereby bumping some consumers’ rates or how many cardholders were being affected by the review. Bank of America has 40 million U.S. credit-card accounts.”

The rest of the article can be found at this link, not sure how long it will be around:Yahoo Store on BofA Credit Card Rate Increase

Well, how do you like that? I think it stinks. I am a BofA customer. I get a pretty good rate on my cards. My balances on my BofA credit cards are currently zero. However, almost on a weekly basis I am getting checks to use for purchases and 0% balance transfers. They want to hook me and then when the 0% period is over jack up the rates to 28%. No thanks. I wonder how many of the 40 million BofA credit card holders in the US are experiencing hardship of one kind or another. If they were barely making it before and paying their bills on time they may not be able to do so for much longer.

Rex E.
BlueChip Debt Relief
A BlueChip Financial Network, Inc. Company

At the end of 2007, The Associated Press reported, “the value of credit card accounts at least 30 days late jumped 26 percent to $17.3 billion in October from a year earlier at 17 large credit card trusts examined by the news service”. That’s not even the total, it’s just 17 out of hundreds of companies. According to the Federal Reserve consumer credit card debt total nearly $1 trillion in 2007. Good luck paying that back.

Keeping up with credit card payments has be come increasingly harder for many Americans. Some have lost a job, have experienced a medical or emotional hardship, or have seen the interest rate on their mortgages increase two-fold in just the past few years. The options are limited and dwindling fast.

Bankruptcy is no longer a solution for many Americans because of a 2005 change to federal law that made it harder to walk away from debt. Those with above-average incomes are barred from declaring Chapter 7 - where debts can be wiped out entirely - except under special circumstances and must instead file a repayment plan under the more restrictive Chapter 13.
Debt consolidation is not a viable option since interest rates have increased so much and home equities have decreased.

Credit counseling is another way to work with your lenders and try to get the interest rates reduced and the payment terms relaxed. However, many of these so called “non-profit” credit counseling companies are setup by the credit card companies to make sure you pay them back not only the original money you charged on your credit cards but the interest expense that was added to plus any late fees.

They encourage borrowers to use their cards with teaser rates and 0% balance transfers and if you are late with one payment they stick it to you with rates as high as 30% sometimes. To make matters worst the interest expense is many times retroactive on even 0% balance transfers. That means that these suckers will charge you that 30% interest on balances from day one that you transferred the balance over. Maybe you made payment for a straight year on time and were late one month. They will go back and see what the amount transferred was on day one and calculate the 30% interested on that original balance for the entire year. Never mind that you were on time for a whole year and were just late one month. This adds up and is huge.For example, if you transferred $10,000 because you went for the 0% balance transfer and were on time for 12 months and were late on month thirteen then guess what you own will owe your credit card company another $3,000 ($10,000 x 30% = $3000). You couldn’t even pay the original $10,000 now you have to worry about $13,000 in credit card debts, and that’s just one card.

Why do the credit companies operate this way when they know that some people will default and not be able to pay them back? Because it’s profitable for them to do so. Last year creditors wrote off hundreds of billions of dollars in credit card debt. Writing off means you consider it a loss and move on. In fact, they write off hundreds of billions every year not just in 2007. These losses are factored in their fees and interest rates and they still manage to be very profitable. Usually after a several months of not being able to get paid they sell the uncollected accounts to collection agencies for pennies on the dollar and take the loss. Then the collection agencies start calling and harassing the borrowers and not always legally.

So why debt settlement and why now? Well it’s simple mathematics. The creditors sell off their un-collectable accounts for pennies on the dollar to collectors and lose billions. Based on our experience and discussions with our contacts at the creditors they would much rather settle debt and collect more than the pennies that they would otherwise get from the collectors that buy the accounts from them. That is why debt settlement has become such an attractive option for the borrowers and the banks. Usually the creditors are able to come to an agreement with the borrowers and settle the debt for 30%-50% of the total amount. That is about 30 to 50 cents on the dollar, much higher than what a collector would pay them. So even though are still losing money by settling the debt they are not losing as much as they would if they turned it over to collections. Everybody wins, the creditors and the borrower. Of course the debt settlement company that is helping the borrowers wins too. Which is fair they just helped the bank collect more money and they helped the borrower settle their credit card debt for a much lower amount.

So how do you choose and trust a debt settlement company? Well, carefully. Warning, some of the same people that were involved in the sub-prime borrowing fiasco as unscrupulous mortgage brokers have migrated to different industries. This is one industry that a few have moved over to take advantage of unsuspecting victims. Many people that are behind on their payment are suffering financially and emotionally. They are at a vulnerable stage and are susceptible to falling for lies and promises. Don’t fall into this trap. Do your home work and pick the right company. Here is what we recommend you look for to avoid pitfalls in selecting a debt settlement consultant:

1.Check and see if they are a member of TASC (The Association of Settlement Companies). BlueChip Debt Relief is a member and we abide by all TASC rules and policies. TASC Debt settlement companies act on behalf of consumer debtors to help them clear their debts. They do this by entering into direct negotiations with creditors in order to facilitate the repayment of debts. In return for their services, debt settlement companies are generally paid a fee by the consumer debtor. In order to avoid any hint of impropriety, TASC™ members do not handle, manage, or otherwise control their client’s funds.

2.Do not fall for pressure tactics & promises. Speak to the consultant and get as much info as you can. The FTC prohibits any company from promising you that they will save you a certain percentage or that they will definitely cut your debt by 70%. Don’t fall for the lies. Yes debt settlement is the best option and we can usually save you around 50% but in reality no one knows how the percentages will be affected in the future. Generally they may stay the same but no guarantees.

3. Make sure you have access to your own bank accounts. Do no give our your bank account info or anything like it. The reputable companies will do business in a few different ways. However, none will ask for access to your personal bank accounts. At BlueChip Debt Relief we use NoteWorld to manage individual client accounts. We setup a separate account under the clients name with NoteWorld. The client has complete control over the account and give us power of attorney to pay their creditors when it’s time to settle an account with the clients approval. Simple. DO NOT WORK WITH COMPANIES THAT ASK FOR ACCESS TO YOUR PERSONAL BANK ACCOUNT.

4. Work with a reputable company.There are some debt settlement consultants that work out of their house or similar and do not have the infrastructure or support to be able to provide the same level of service or expertise that a reputable company focused on debt settlement can deliver. Stay away from these companies. You need to work with professionals that you can reach during business hours.

5. Look for a higher level of service and commitment to customer support. Some companies will skimp on support personnel, investment in technology and other areas. Sometimes they may offer a lower rate but many times they don’t even do that. Either way don’t fall for it. You get what you pay for. Yes, you may save a few points on the fees but you may end up losing much more than that. Both in monetary terms and emotionally. Some of these companies do not have the infrastructure and technology to provide the same level of customer support or to go to battle with the creditors day in and day out. If you can’t reach them chances are the creditors you are trying to settle with are having a hard time too. Who do you think will be able to strike a better bargain for you? Yes, you may have saved a few dollars on the fees. Bravo. But, you probably lost thousands because the settlement amount was more than it could have been.

I hope this helps. Debt settlement is a very viable option if you are experiencing a hardship such as: increased expenses, divorce, loss of employment or under employment, emotional distress, medical reasons or any other reason that makes it difficult for you to keep up with your payments. Don’t worry, as the famous saying goes “this too shall pass”. Don’t consider bankruptcy, debt consolidation or credit counseling without first speaking to a debt settlement consultant first. Maybe you’ll decide it’s not an option for you but you’ll never know until you evaluate all the options.

Rex E.
BlueChip Debt Relief
A BlueChip Financial Network, Inc. Company

Rex E.
BlueChip Debt Relief
A BlueChip Financial Network, Inc. Company

If a credit card is obtained using your social security number and it has your company name on it, then BOTH you and your business are responsible for the debt. In other words, the credit card company has a hand in both your pockets.
As long as payments are made in a timely manner, it will not matter, but should you miss a payment, or be late, both your personal credit report and your business credit will suffer. Business cards should be obtained with your federal Tax ID number and only that number.

If a card you already have has your social security number, do not add your business name. When a card is personal, you have options and federal protections against debt collectors, but business cards have no options or federal protections. Credit card debt is one of the most difficult debts to resolve because nearly all small business credit card debt has been obtained using or including social security numbers. Tie it to your business and steer clear of credit cards masquerading as business cards that require your personal information. You are protecting yourself and preparing for any unforeseen financial trouble by leaving a path for business debt management professionals to settle your debt.

Nima N.
BlueChip Debt Relief
A BlueChip Financial Network, Inc. Company