Brent’s Credit and Debt blog

The debt collector can get a lot of information about you.  However, do they have the right to see your bank records?

My latest Ask Brent video addresses this.  You can watch it here: httpv://www.youtube.com/user/MyCredEd.

Remember to ask your questions about credit and debt in the form to the right.  I will answer via blog or video as soon as I can!

When you fill out the form, your question goes straight to my email inbox.  I am an email addict, so I will see it quickly.  If I put your question into a video, or answer it in a blog, I will send you and email back to let you know the answer is ready.

Recently, I have been getting a bunch of questions about credit, debt, foreclosure, bankruptcy, and other topics about credit.

The first couple of entries are already on YouTube, and you can see them here: httpv://www.youtube.com/user/MyCredEd

It can take a long time to write a blog entry, and I just don’t always have the time.  So, I decided to go ahead and release some videos that answer the questions.

Here is how this works:

See the form to the right?  You ask your question there.  Just type in what you want to know, and I will work on answering it.  Now, I can’t guarantee that I will answer every question, but I will do my best.

When you fill out the form, your question goes straight to my email inbox.  I am an email addict, so I will see it quickly.  If I put your question into a video, or answer it in a blog, I will send you and email back to let you know the answer is ready.

I am working hard to grow this blog, and I want to grow it in a way that helps you.  So, please ask your questions!

Again, you can find the videos on YouTube right here:

http://www.youtube.com/user/MyCredEd

Well, it is over.  You filed bankruptcy, and met with the trustee, and your bankruptcy case is over.  You now either have a schedule of payments with a Chapter 13, or you wiped most of your debt clean with a Chapter 7.

But there may be a few assets that you decided to keep that you have to re-affirm.  When you re-affirm the debt, you are promising to pay the debt off according to a new payment amount and schedule.  It may be the same as it was, but it may not.

When I re-affirmed my truck, my credit union offered to let me do a ‘cram down’.  I was upside down on my truck, meaning I owed more than it was worth.  The difference was about $4,500.00.  My credit union knew that I was unlikely to want to keep the truck, since it was no longer worth what I owed.

If the credit union had taken the truck back, not only would they have lost the extra money I owed on it, but they also would have lost the money paid to the auction house that sold it, and whatever the lower amount was that it sold for.  My banker told me they were looking at losing about $8700.00 on the truck when all was said and done.

So, they opted for a different route.  By bringing my truck loan down to the current market value, I saved money, they saved money, and they would make a bit back on the interest that I paid.

For me, this was a great deal.  I got to keep the truck, and my payment was reduced.  For my credit union, It was a decent end to a bad situation.

If you are re-affirming a debt, and the debt has a well-define market value, be sure you talk to your lender if you owe more than what your property is worth.  It may be easier to keep your debt than to try to get a replacement for your property.

Make sure you take a hard look before you do this though.  My truck had some problems that I still had to get fixed, and it ended up that I could have gotten a loan for a different car.  It wouldn’t have been as nice, but there would have been no cash out of pocket for the new vehicle, while I had to pay for repairs to my truck.

You may have heard of ‘junk’ categories before.

You can find junk bonds, junk dealers, and junker cars.  The term means the same thing:  an item of low or poor value.

Well, now we have junk debt.  Junk debt is debt that is either uncollectible through ‘normal’ means, or debt of very low value.

I’ll give you an example:

I got a letter 2 days ago from a law firm.  They claim I owe $40.00 from a parking ticket 7 years ago.

Think about it.  They paid about a buck to send the letter.  They probably bought the debt for about $8.00.  So, they stand to make about $30.00 if they can collect the whole thing.

But they have 2 problems.  First, the statute of limitations in my state is 6 years.  So they can’t sue me.  Second, they will have to prove it is mine, and that I didn’t pay it.  Both of these are tough to get past if you know how to deal with the debt collector.

Low margins.  Old debt.  No legal recourse.  Seriously, this is junk.

So why do they buy it?  Well, many people look at these old accounts, and settle for much less.  A $20.00 payment is a huge profit for the collector, and costs less than the movie you buy when you are checking out of Wal Mart.

That one happened to be cheap.  But how about bigger ticket items?

Utility companies, library fines, parking tickets, local taxes – all these things are being sold as junk debt.  Many of the accounts are decades old, and they are virtually un-provable.  The firms that buy these accounts have a hard time collecting, but almost all of what they collect is profit. Many people just go ahead and pay when they get the bill, just so it ‘won’t show up on their credit report’.

Why do I care?  These debts can be reported to the credit bureaus.  If the old debt is reported, it will affect your credit scores negatively.  As someone who is concerned about credit, you need to avoid this at all costs.

If you are notified you owe an old debt, you need to contest the debt.  Make sure the debt is actually yours, and don’t settle with what the collection company tells you.

Remember, these can end up on your credit report, but usually they are so old they can’t stick.  You can get them cleaned up, and get rid of them, with out paying, but you need to understand how to clean those credit reports up.  Make sure you do the research and understand how to fix the problem.  Or, just read my book!

I hate those letters.  I used to get them a lot.  They tell me that I have been denied, yet again, for the credit card that I wanted.

It was my fault.  My credit scores were terrible.  I couldn’t really blame the companies that I applied with.  I had a bankruptcy, and late payments, and car repossession, and a foreclosure, and over limits, and things like that.  But I am a really nice guy, and I have a job!

They don’t care.

As far as a creditor is concerned, I am a set of numbers.  I have a score, and a few ratings, and a number of payments that were late 30, 60, or 90 days.  All they care about is those numbers, and the dates those numbers occurred.

But, I was trying to rebuild my credit!  I had learned about credit, and become responsible.  My payments were on time, I paid more than I had to, and I NEVER went over my limit!  It’s true, I didn’t really need any more credit, but I wanted more to build my scores with.

What to do?  Well, I decided to go with the personal touch.

I took that denial letter, and I called them!  I called GE Credit.  The customer service person that I talked to was very pleasant, listened to my explanation, and told me he couldn’t help.  He invited me to write a letter to explain my case, and promised they would review it.

I wrote down the address, thanked him for his time, and wrote a letter.  I explained what had happened in my life, what I had learned, and how I was moving forward to improve my credit situation.  I sent the letter, and waited.

A couple of weeks later, I had a new card!  They liked my letter enough to give me a line.  $500.00 to start, but it WAS a start.

That credit will stay with me for a long time.  I use the card very little, but it is a big part of my credit-building toolbox.  And all it took was a 5 minute phone call, and a single letter.  And 27 cents for a stamp (oh, the good old days of cheap postage).

If you get a denial letter, show them you are a serious credit consumer with a plan.  Let them know that you recognize your failures, and have a plan for success.  You may not get the result you want, but on the other hand they may just award you that card of your dreams.

Just don’t expect an unlimited credit line from Amex.  It isn’t going to happen.  Yet.