Tips And Guide For Debt And Loan Management

The first thing to understand about taxes is that even if you don’t have the money to pay them, your return should be filed on time. Not filing on time, even if you do not have the money to pay the amount due, is just plain dumb. The penalty for not filing your tax return on time is 5 percent per month, whereas the penalty for not paying your taxes on time is only half of 1 percent per month. File on time, even if you can’t pay a penny. Just send in the forms without a check. For example, assume that Marty owes the IRS $10,000. If he files on time and doesn’t send a check, he will owe the IRS another $50 a month (half of 1 percent). If he does not file at all, he will owe the IRS an additional $500 a month (5 percent of $10,000).

The IRS gets millions of letters and phone calls every year. The people you deal with there fit the very definition of bureaucrats. In other words, IRS employees tend to work slowly and methodically in order to compensate for their lack of self-motivation. They are not self-starters.
Compounding the human factor is the computer factor. IRS computers are notoriously inefficient. The organization has many different systems, and the person you have on the phone, for example, may not have access to your records on his or her system.
These two factors combined mean that you have to be patient when dealing with the IRS. Resolving your individual problem may be your highest priority, but it certainly isn’t theirs. Initially, one of the best things you can do when contacting the IRS is to find out whether it has any forms that deal with your situation. There is an IRS form for practically everything, and IRS employees know what to do when a certain form comes in the door: what section to forward it to, which revenue officer handles it, and so on. But employees may have no idea where to forward an angry letter, for example

IRS employees are people like you. They have careers and families. They want to stay employed and advance in their careers. They like to work with people who are reasonable and dislike working with people who are not reasonable. Your first piece of advice then is to treat any IRS employee with whom you deal with understanding and respect (even if she may not deserve it). She has a job to do, and her job requires her to follow certain rules. If she does not follow these internal regulations, she will get demoted or fired.
You may have very good reasons to hate the IRS, but if you come in with guns ablazing, not understanding the rules you are playing by, you will likely shoot yourself in the foot. Even though your IRS contact may agree with you, she may not be able to say yes to you and your proposed resolution (and then again, she may). After you read and digest this chapter and the information in the next chapter, you will be far better equipped in your IRS negotiations because you will know what the IRS can and cannot do.

The IRS, a branch of the United States Treasury Department, has three different computer centers throughout the country, and the organization itself is divided into 10 regional service centers, 63 district offices, and scores of subdivisions. These service centers process over 200 million returns annually and collect more than $1,000,000,000,000 (that’s trillion!) dollars annually.
A slow-moving, huge bureaucracy, the IRS often acts arrogant and may seem ineffectual. The sooner you embrace this reality and learn to play the tax game according to IRS rules, the better off you will be.
The good news is twofold. First, the IRS, in its attempts to become more user-friendly, is often open to a reasonable resolution to your tax problem. Secondly, the IRS offers many programs you may not know about that can help you resolve your situation, sometimes for less than you owe.

Challenging your credit report is legal, but creating a brand-new report is not. Despite that fact, a new breed of scam artists makes such claims as “a brand-new credit file in 30 days.” Do not be misled by these statements. These firms are trying to turn creditchallenged consumers into lawbreakers.
These firms may sell leads about how consumers can change federally issued, the 9 digits taxpayer identification numbers for Social Security numbers or employee identification numbers and then it can be used illegally to create a new and fake credit profiles. Ads for this information frequently claim that the practice, known as file segregation, is legal. However, using a fake ID number to apply a new credit is a crime. Another illegal scam to be wary of is to use a different first or last name and then apply for a driver’s license or state ID card. People are then taught to change their Social Security number by substituting the first three numbers (or state code) with those of another state. This too is fraudulent.
Although it is understandable that you may want a new credit file, exercise extreme caution when you hear such claims. If it sounds too good to be true, it is. If your life were like the game of Monopoly, what you want is to learn how to win the money game. But if you use falsified information to create a new credit file, you will probably go directly to jail without passing “Go.”

After reviewing your report, you may find several items that you feel are incomplete or incorrect and should not be on your credit report. As with unfair collection activities, inaccurate credit reporting caused Congress to step in and try and clean up the mess. The Fair Credit Reporting Act (FCRA) now dictates how credit information in this country is accumulated and disseminated.
The FCRA permits you to challenge any entry on your credit report and force the credit-reporting agency to investigate and prove the item.
Write a certified letter to the agency in question (so you can verify when the letter was received) and explain the nature of the dispute. Give the agency your name, Social Security number, and current address. Explain the problem with the report and attach a copy of the report to your letter.
If you can prove that an item is in error, the problem will be easier to fix. For example, Muriel had bounced a check to Spencer’s Hardware, but she cleared up the debt a few months later. When she reviewed her Experian credit report, she saw that the debt was listed as unpaid. Muriel found her receipt for the payment, photocopied it, and sent it along with a letter to Experian, demanding that the item be corrected. It was. The credit-reporting agency must investigate any item that you dispute, even ones that you cannot prove are false. The bureau must then report back to you the results of its investigation within a month or so. If the bureau cannot verify that its version of the disputed item is correct, then, by law, the bureau must remove it from your credit report.
Now, you can probably see where there is a lot of room for abuse here. Some people use this law to dispute every negative item on their report, even if they know items are correct, hoping that the credit-reporting agency will be unable to prove the veracity of at least some of them. However, if a credit-reporting agency suspects that this is your intent, it can legally refuse to investigate a dispute. So challenge only those items that are disputable or unverifiable.
It may take several letters to get an item removed. If a month has gone by from the date the agency received your initial letter, and you have received no response, then write again and demand that the item be taken off your credit report. It is critical that all correspondence is in writing so that you have a paper trail. If an agency refuses to remove an item that you think should not be on your report any longer, then you have several options:

1. You can always go back to the original creditor and see whether it will delete the item. But, unless you have paid the debt in full, removal using this method is unlikely.
2. You can contact the proper authorities. File a complaint with your state’s Department of Consumer Affairs or Attorney General or with the Federal Trade Commission. This option requires time and patience in order to get the item(s) removed and your credit cleared.
3. Your final, and probably best, choice is to sue in small claims court. The FCRA permits lawsuits against both the original creditor and the credit agency (whomever you think is to blame) for reporting incorrect information. If you win, the FCRA allows you to receive money damages for your hassles.

Common errors on credit reports include the following:

• Outdated information. Other than a bankruptcy (which can legally stay on your credit report for 10 years), any derogatory information can stay on your report for only seven years. If something older than that is on your report, it can and should be removed.
• Inaccuracies. Credit agencies make many mistakes. An incorrect mark showing a late payment, a repossession that never occurred, or a mistaken tax lien is not unheard of. In order to rid your report of any mistakes, the first thing you will need to do is to get a copy of your report. Make sure you get a copy from each of the three major creditreporting agencies; there could be mistakes on any one of them. A credit report normally costs about $10. If you have recently been denied credit, insurance, or employment because of a credit report, you can also get a free copy from any of the credit-reporting agencies.

I’m sure you know that everyone has some sort of history about their credit. There are 3 major institutions/companies that constantly keeping track on your financial habits, they are Experian (a.k.a. TRW), Equifax and Trans Union. Each company has a record about you. Credit reports are valuable to new creditors because they show your past financial patterns.
Credit reports include your

• Name
• Social Security number
• Address
• Bill-paying history
• Total indebtedness
• A list of people who have made credit inquiries about you
• A list of who has and has not given you credit
• A list of your current debts

A lot of incorrect information shows up on a lot of credit reports. The big three credit reporting agencies receive more than a billion pieces of credit information every month and produce more than 500 million credit reports every year. The chances are quite high that mistakes on your report are negatively affecting your financial life.

A final option is to merely take no action at all. If you ignore your creditors’ threats, they may make a lot of annoying phone calls and threaten to sue you, but, as we have said, if the debt is not too large, they usually eventually forget about you. If you live month-to-month and have few assets, you are what lawyers call an “empty pocket” or “judgment proof.” No creditor would waste money suing you because the likelihood of ever getting any money back is remote.
In most cases, your creditor will probably write off your debt as uncollectable and get a tax break for it. After seven years, the bad debt will fall off of your credit report.

Maybe the best part of the FDCPA is that it allows you to force the creditor to stop all phone calls. If you have ever been subject to a pit-bull creditor who would not leave you alone, you do not have to be told what a relief this is.
To stop the harassing phone calls, write the creditor a “cease and desist” letter. This letter tells the creditor that he is to stop all further communication with you regarding this debt. Once received, the creditor must leave you alone. Although a creditor retains the right to sue you, he cannot write or call anymore.
Here is what your letter should look like:
Knowing what your rights are and being able to force a collection agency to stop harassing you with one of these letters should make your life much easier and less stressful.