Defaulted Student Loans: A borrower’s worst nightmare

Posted on May 20, 2013 by Kate Swenson

The more I learn about student loans, the more I see them as a double-edged sword poised to either help you or beat you down. On the one hand, student loans can be an excellent tool for completing higher education to launch a career and expand your earning capacity. But they can also be a huge burden if you over-borrow money or can’t find a job when the bills come due.

The last thing you want to do is ignore your student loans or allow them to go into default. Once in default, the loans become due in full and will go to collection agencies which can be difficult to work with. At that point, you have far fewer options to repay your loans. Instead, payments can be taken from you through wage garnishment and intercepted tax refunds. Depending on your income, even your disability benefits can be garnished.

WHAT DOES DEFAULT MEAN?

Federal Student Loans: Default refers to the failure to pay student loans. If your loans are federal, the borrower is in default once he/she fails to make payments for 9 months.

Private Student Loans: Private student loans are borrowed through private lenders such as Wells Fargo or Citibank. If you have private student loans, the default period will be defined in your loan contract. But typically, the borrower does not have the luxury of missing 9 loan payments. Instead, you can be found in default as soon as you miss one. Be sure to review your loan contracts or promissory notes carefully to better understand your rights and responsibilities for your private loans.

COLLECTION TOOLS FOR FEDERAL STUDENT LOANS

The federal government has a very long arm when it comes to collecting student loan debt. It has a variety of options and can implement any of them with ease.

No statute of limitations: Once in default there is no time limit or deadline the government must meet to collect student loans. This means if you fail to pay, the government can haunt you until the day you die to collect your student loans.

Wage garnishment: A total of 15% of disposable wages can be garnished. Disposable refers to the amount remaining after all required taxes are withheld. If you earn minimum wage or work part-time, you are entitled to protect at least $217.50 per week, or 30 times the minimum wage ($7.25 per hour). Any amount over $217.50 can be taken as long as it does not exceed 15%.

The borrower may be able to challenge the garnishment due to financial hardship or employment problems. Contact your lender/collection agency to explore this further.

Tax offsets: Generally, any tax refunds due to borrowers who are in default can be seized by the federal government. These offsets may also include special payments such as economic stimulus refunds and the Earned Income Tax Credit. There are defenses to tax offsets but they only apply in limited situations.

Benefit Offsets: To collect federal student loans, the government can also take certain Social Security benefits, certain benefits under the Black Lung Act, and some Railroad retirement benefits.

Notable exceptions: If you receive Supplemental Security Income (SSI), the government cannot take that money. Also, if you receive less than $9000 a year, or $750 a month, the government cannot take any of your benefits. If you earn more, the offset limit is 15% of the total benefit amount. For example, let’s say you receive $850 a month in Social Security or SSDI benefits. The government can take $100 a month as long as it leaves you the minimum benefit of $750 a month.

COLLECTION TOOLS FOR PRIVATE STUDENT LOANS

Although private lenders do not enjoy the sweeping powers of the federal government when it comes to collecting on student loans, their collection tools can be just as effective. Generally, private lenders can use the same tools that are used to collect other types of debts. These include using private collection agencies, reporting your default to all 3 credit reporting agencies, and suing you in court.

Restrictions to these tools include statutes of limitations which limit how long a borrower can be sued for loan default. Also, a borrower’s property or assets cannot be seized without a court order.

However, if you are sued and the lender is awarded a judgment, wages can be garnished (up to 25%) and money can be taken from your bank accounts. If you own other assets or property, they could be taken to repay your student loans.

HOW TO AVOID DEFAULT

Federal Student Loans: There are several steps you can take to avoid defaulting on your federal student loans.

Visit National Student Loan Data System for Students to find out information about your federal loans (number of loans, types, balances, payment amounts, current status).
If you have fallen behind on payments, call your lender/servicer to discuss your student loans. If your income is tight, ask for a forbearance which will give you some time to improve cash flow.
Keep in mind that your default will be reported to the credit reporting agencies and you will be prohibited from taking out new federal loans or grants.
Online resources include MyEdDebt which offers information to borrowers who are in default, and Student Loan Borrower Assistance which offers extensive information about federal loans, FAQs, repayment options, and many self-help packets.

Private Student Loans: If you have private student loans, you could try these ideas to work with your lender.

If you are unsure if you have private loans, check the loan documents to see if there is a co-signer; if yes, they are likely private loans. If you don’t pay the loans, the lender will pursue the co-signer.
Review your promissory notes or loan agreements for the terms and conditions of your student loans.
You can also pull your credit report for free from AnnualCreditReport.com.Private student loans should be on these reports. Note: you might have to pull all 3 – Transunion, Experian, and Equifax.
Statutes of limitations do apply to private student loans. The question becomes can the loan still be collected? If the statute of limitations is not addressed in the loan agreement, it will be determined by the state in which the borrower lives. If the loan is uncollectable, you could negotiate with your lender to settle the debt.
Contact your lender to explore options for more affordable payments. However, be aware that payment options are limited and lenders often expect full payment as scheduled. But call to find out for sure!
Otherwise, consider reducing monthly spending or boosting income to make your payments more affordable.

For more information, including how to deal with defaulted student loans, read “What you need to know about defaulted student loans” by Shannon Doyle.

LSS Financial Counseling may be able to help. Our Financial Counselors will empower you to take action to get back on track with your student loans. Call our toll-free number at 888-577-2227 to schedule an appointment or get started online by clicking below:
Author Barbara Miller with LSS is a Certified Financial Counselor who specializes in Bankruptcy Counseling/Education and is a member of our Student Loan Team.

Saving Money While Fishing

Posted on May 15, 2013 by Kate Swenson

Saving Money Before, During, and After the Season

As you probably already know, fishing can be an expensive hobby. Basic needs for fishing include rods, reels, boats, motors, trolling motors, life preservers, etc, etc. Even a modest fishing enthusiast can spend $2500 or more on these basic start-up materials. My mom always teased my dad, “I could order in fresh Maine lobster every day cheaper than the cost per pound on your walleye production.” My dad always loved that one…

Some of these fancy boat, motor, trailer combos alone can easily surpass $15,000. Everyone out there thinks they are Babe Winkelman, and it often appears to be an exercise in showing off shiny new equipment like depth finders and GPS navigation systems. My grandpa had a sonar GPS, depth finder, and thermometer combo. He used his brain, a little fold up map, a finger to test the water temp, and a heavy weight on his line to test depth. Total cost of about $6 in today’s market.

I have searched and searched for ways to save money and have found ways to offset many of the large costs often associated with fishing season, or should I say SEASONS. Regular angling, big lake fishing, fly fishing, ice fishing; the list goes on and on.

Keep these 3 tips in mind to minimize expenses and still make the necessary purchases for a successful and enjoyable season. These tips also carry over into other potentially expensive hobbies:

Always shop for used and clearance items first, especially bigger depth finders, downriggers, trolling motors, etc.
Find ways to make things at home, especially the disposable items like snacks, food, and even bait.
There are some purchases that are unavoidable or necessary for safety, such as licenses and required floatation devices.

Here’s how these tips apply before, during, and after the fishing season:

Before the season

I have been there, going from store to store, spending a seemingly endless amount of money to prepare for the looming opening day, where dreams are often crushed, but lies of epic proportion are always born.

Why do we all of a sudden “need” every new gadget available? Make a list of necessities. This list is quite short, actually. You need a license, rod and reel, line, lures, and bait. This is all you really need to go fishing. Throw in a life preserver if you are going on a boat or are uncomfortable on shore without one. Everything else is just clever marketing to make you think you need these things.

During the season

Again, keep it practical. Try paddling a canoe or fishing from shore instead of motoring across to the far reaches of some secret lake. And why drive by 857 lakes to get to that special lake in the first place? Less driving means more time on the water. If you don’t know a lake close to you, learn one. This will save you a ton of travel time and money in the long haul.

Remember, check your local laws for license and life vest requirements and NEVER cheap out on safety! Only harvest what you need, and never exceed your local or state laws for harvesting fish.

Be ready for a shore lunch and prepare meals ahead of time to save money and time on the lake. The best meals I can remember are things that were prepared on a small stove or fire on the remote shores. It is a great way to spread out the cost of being gone all day. Be prepared with peanut butter, jelly, and bread just in case the fishing isn’t as good as the weather.

This saves gas, wear and tear, and even gets your blood moving (chances are it is before sunrise). Also, your ability to creep quietly is much better in a canoe than it is riding a boat with a loud motor that is spewing fumes into the air and water. I know these seem like little changes and minor expenses, but they all add up to big savings over the course of the season.

After the catch

You have harvested your fish, and are now ready to turn this into storage ready portions. Many people resort to the freezer if they catch more than enough fish, and some only take what they can eat that day. Keep in mind that smoking fish and then canning it is also an excellent way to store fish for the long term. This also opens up the fishing to include types of fish you may normally not consider for harvest like catfish or larger northern pike.

Buying garage sale canning supplies and a clearance dehydrator, I spent about $80 or so and gained a whole slew of jars and rings, a canning pot, and a nice little dehydrator with four trays and several inserts. Another will get you all the canning lids and spice combinations you could possibly want, with enough left over to buy freezer wrap and a few other necessities. Canned fish, if you have never had it, sounds nasty. But it is actually my favorite way to store and eat several species of fish.

Again, if you are not big into fishing, but prefer other hobbies, keep the general tips in mind. Think creatively and always use a discerning eye to determine needs from wants. You do not need a top of the line rod, nor do you need to buy $300 worth of gear for your new yoga class. Remember, shop carefully, buy clearance or used, and don’t cheap out on safety.

Even small changes can lead to big savings. Our Financial Counselors can help you create a budget and action plan to improve your finances. Call LSS at 888.577.2227 or click the Start Now button below. Don’t wait – start today to improve your financial future!

Author Malcolm Johannessen is a Certified Financial Counselor with LSS Financial Counseling and he specializes in Foreclosure Prevention Counseling and the outdoors. Read Malcolm’s post about saving money while hunting.

How to prepare financially for adopting a pet

Posted on May 10, 2013 by Kate Swenson

I’m a dog person and I treat my pets like family. I’ll be the first to tell you that adding a new member to the family is a huge decision. When you adopt a pet you are committing to care for your pet’s lifetime of needs, so making sure that you are ready for pet ownership and finding a pet that is a good fit for you and your family is important. In addition, planning for the expense is important because according to PetMD you are looking at a lifespan from 11-22 years. Here are some short-term and long-term costs to consider as you prepare for the transition to the wonderful world of pet parenthood.

Adoption Fees

A lot of people don’t know that there is a fee to adopt an animal. These fees cover the much needed care for a pet before they find their forever home. Adoption fees can vary widely depending on the type of animal you are adopting, the demand for that type of pet, and care and services that have been provided to the animal (i.e. spay, neuter, microchip etc). Make sure that you are adopting within your budget. Locally adoption fees are anywhere from $25-$400…so set a limit. Going into debt to adopt an animal is not a good way to start your new relationship.

Pet Registration Fees

Most communities require you to register your pet…another one that isn’t widely known! This fee can be a one-time fee or an annual fee of usually less than $20. This is something you can talk about with your adoption facility or contact your local city or county offices for more information about the requirements in your area.

Pet Deposits

If you are renting a home or apartment or are looking to rent, it is important to know that having a pet will narrow your search to those rentals that allow pets. You will also likely need to put a pet deposit down in order to rent the home with a pet. This can also apply to hotels because if you are traveling with a pet, you may need to pay a little more for the hotel that allows your furry travel companion.

Kennel or Pet Sitters

This is the biggie! As much as I wish they could be, dogs are not people and, therefore, aren’t welcome in everyone’s home or business. So, ultimately, most people eventually have to leave their dogs for an extended period of time. And if you don’t have family or neighbors that you can trust, you may need to kennel your pet or hire a pet sitter. Kennel costs average $20-$50 per day. Plus most, if not all, kennels require certain vaccinations that can add up. This will add to your travel expenses, but it is good to know that your pet is in good hands if you are away.

Food and Supplies

It may seem obvious that quality food will keep your dog healthy, but the right supplies are important too. Having the appropriate collars, leashes, and fencing or runner will keep your pet safe. So make sure that you have a plan for their outdoor safety. You will also want to make sure you are providing suitable toys for your pets, this is money well spent because if you don’t provide something for them to chew on or scratch at, they will find something of yours to fill the void.

Vet

Regular visits to the vet can add up. Depending on the age and type of pet you have, you will likely see the vet once or twice a year. I can think of a few times in my life where my vet bills topped $500! But don’t skip out. Regular trips to the vet for blood tests and screenings will allow your vet to spot a health issue with your pet before it become an emergency. A trip to the emergency vet will be double what you spend at your regular vet clinic so if you notice there might be something wrong get your pet, go to the vet right away. Something else to keep in mind: as your pet ages, the cost for their healthcare will likely increase.

Preventative Care

Another way to keep your pet healthy is to make sure they are protected from common diseases that can affect your pet. For example, heartworm and tick prevention can be very important for dogs. There is a cost for these treatments, but the good news is you can shop around for the best deal on these on-going medications.

My goal here is not to scare you out of getting a dog or other pet. I just want people to be prepared for the financial responsibility that comes with adopting a pet because there is NOTHING better than owning a dog. Good luck and happy adopting!

Are you thinking about adopting a pet and you’re not sure if you can afford it? LSS can help. Call us at 888.577.2227 schedule a budgeting appointment with one of our Financial Counselors. You can also GET STARTED ONLINE right now. Don’t wait – take action today!

Looking for more money saving tips? Visit Sense and Centsibility to read more.

Author Ashley Hagelin is a Certified Financial Counselor and she specializes in Reverse Mortgage Counseling with LSS Financial Counseling.

Budget Help Tip of the Week: Saving at the Grocery Store

Posted on May 8, 2013 by Kate Swenson

Before our last grocery excursion, my wife and I were discussing at which market we would spend our hard earned dollars. After much debating we decided there had to be a better (and cheaper) way to shop. We always decided what we wanted to eat, then made a list, and hoped some of the items would be on sale or at least in season prices. Inevitably we walked away shaking our heads at how much we spent on groceries. These days I try to average under $12 per bag. If I spend $50, I hope to have four or five bags of groceries for my efforts.

We decided to meal plan based on the sales advertised by two of our closest supermarkets. After our meals were chosen and our list was made, we were off to the stores. My wife dropped me off at grocery store A, and she proceeded to grocery store B. At this point she called me and our experiment began. We each had a copy of the grocery list and we proceeded simultaneously through both stores.

The approach is really quite simple: if it was cheaper at my store, I bought it. If she found the less expensive item, then it went into her cart. We were shocked to find a nearly even split of expense between the two of us. She had purchased about $45 worth of items and I had spent about $60. The results: MORE THAN WORTH IT.

Here is a breakdown of our own budget help experiment: Meal planning (with the help of a Sunday paper to get the ads ahead of time) saved us about $15 on ONE trip to the store. Assuming two large shops a month and a few supplemental trips here and there, I would peg the average savings at $30 OR MORE per month. On top of that, we saved ANOTHER $30 to $50 a month by shopping at both grocery chains at the same time. We did not have to become coupon obsessed or anything drastic, and we easily found a way to save over $50 a month on groceries. What would YOU do with an extra $600 a year?

Little changes can add up to BIG savings. Want to create a budget and get more money saving tips? Call LSS Financial Counseling at 888.577.2227 or GET STARTED ONLINE. Don’t wait to improve your finances – take action today!

Author Malcolm Johannessen with LSS is a Certified Financial Counselor and specializes in Foreclosure Prevention Counseling.

7 Simple Steps to Estate Planning

Posted on May 7, 2013 by Kate Swenson

No one likes to think about when our time will be up, and our final breath is taken. Although we all know death will come someday, many of us avoid thinking about it, and how it may affect our loved ones.

I understand the reluctance to embrace the final unknown. Personally, I hope to hang around as long as possible. But the one thing you never know is when death will knock on your door.

If you are unprepared, your loved ones will be burdened with making final preparations at a time when they are deeply grieving over losing you (hopefully!), or perhaps feeling remorseful due to shortcomings in your relationship. Either of these scenarios can lead to overspending since decisions may be more emotional than rational.

With just a little time and planning, you can save those you care about frustration, money, and time by devising a plan to manage your health care and property if you become incapacitated during your lifetime, or upon your death. The more you do in advance, the fewer decisions others have to make once you are gone.

Consider life insurance

Life insurance can help to cover your family’s expenses when they no longer have income from your regular paychecks. If you have no one to support, you may not need life insurance.

But if you want the financial security that life insurance offers, there are several methods for determining how much coverage you need. One is to simply multiply your current gross income by 10. Another way is to estimate the cost to pay off your debts like mortgages, car loans, and college funds for your children. Then, calculate half of your current gross income and multiply that figure by the number of years your children and spouse will need support. Add the two numbers together to come up with a goal for insurance coverage.

Term life insurance carries a fixed premium for the life of the term, and can be surprisingly affordable, even for large coverage amounts. Be sure to do your research, and comparison-shop. To get you started, visit www.lifeinsurance.org which provides a general overview about life insurance coverage, ideas on shopping for life insurance, and key questions for assessing your insurance needs.

Plan your memorial service or funeral

Although it may feel morbid, start by making decisions in advance such as whether you want to be buried or cremated; plan your service if you want something special, such as a specific location, music or hymns, or write your own eulogy; write your own obituary and update it occasionally; or divide up personal property by leaving a list with someone you trust, or give away items during your lifetime. Finally, talk with your family and friends about your plan so it will be honored.

Prepare advanced directives for medical care

Advanced directives are written instructions stating how you want your health care to be managed if you are unable to speak for yourself. Without one, your health care will be out of your control, and in the hands of those who may have different values or beliefs than you. An advanced directive may also help to prevent conflict among family members over how your medical care should be handled.

Establish a Power of Attorney

Consider designating an agent to manage your finances and legal affairs if you become incapacitated. Laws vary by state but these documents typically let you designate or restrict when a Power of Attorney can be used.

Write a will

Write a will or hire an attorney to do it for you if your situation is more complex. Without one, complete strangers will decide how to split up your estate based on the state law where you live. Also, unless parents appoint a guardian for minor children in a Will, their future will likely be decided by the court if both parents die in an accident. Custody actions can be costly, adversarial, and time-consuming for your survivors.

As circumstances change in your life (marriage, divorce, birth or adoption of a child, moving to a different state, acquiring new property, etc.), it is a good time to review your Will to decide if it should be updated.

Establish trusts

A trust can provide for the financial care of children, or disabled family members. Trusts can also be set up to minimize taxes for large estates, and protect against creditors. There are a wide variety of trust plans to meet different needs.

Other tools?

Use other tools to transfer property at death which may eliminate the need for a probate. Some examples include insurance proceeds or investments with named beneficiaries; making gifts during your lifetime; bank accounts with Pay on Death designations; and joint ownership of property which passes to your joint owner upon your death.

Get Started Today

To get started, you may have access to free legal help through an employee assistance program (EAP). Or, research the internet by typing “estate planning resources” or “estate planning basics” into your web browser. When ready, consult with at least 2 estate planning attorneys to explore options for your situation. Always ask for a free consultation, or how much it will cost to meet for an hour or two.

*Please note that none of this information is intended to be legal advice, but simply food for thought as you prepare for your final life event.

Want more financial tips and tricks so you’re more prepared for the future? Call LSS at 888.577.2227 to schedule an appointment with one of our Financial Counselors or GET STARTED ONLINE. Take action now!

Author Barbara Miller is a Certified Financial Counselor with LSS Financial Counseling and specializes in Bankruptcy Education and Counseling.

Am I Too Broke to File Bankruptcy?

Posted on May 3, 2013 by Kate Swenson

As a bankruptcy counselor, I often speak with clients who are knee-deep in debt, and running in crisis mode. They are considering filing bankruptcy, but are frustrated at the cost to retain an attorney, file a bankruptcy case, and complete the counseling and education requirements. “How can I pay for all of this when I have no money?” A very pertinent question under the circumstances!

Unfortunately, it is very common for people to struggle with debts for so long, they have no money left to file bankruptcy. The most common type of bankruptcy is a Chapter 7 which can cost around $1500. A Chapter 13 bankruptcy can cost twice that much.

Should you file bankruptcy on your own?

I would never recommend filing for bankruptcy protection on your own. Doing so is risky for a couple reasons. First, if your case is not filed properly, it can be dismissed and you will get no relief from your creditors.

Second, you risk losing property or assets that may have been protected if you had good legal help from the beginning.

Some clients tell me they are using a document preparation service. I warn clients that by law such services cannot give legal advice, even though they do. Also, they may not be familiar with your local bankruptcy laws, court rules, exemption amounts, etc. and therefore, may get the paperwork wrong!

If bankruptcy protection is your best option, is it worth wasting more money on a document preparation service when other options may be available?

Are you “judgment proof”?

The first thing to consider is whether a creditor can garnish your wages or bank accounts to collect on a debt. If a creditor cannot collect, you are considered to be “judgment proof.” In Minnesota, where I live and work, a creditor must typically sue and get a judgment before garnishment proceedings begin. There are some exceptions to this such as tax debts and government student loans.

If you do not live in Minnesota, be aware that laws vary state to state about when a creditor can garnish. However, if you do not own much property and have a small income, you may be judgment proof. Also, disability or Social Security benefits are generally protected from creditors. That means you may not have to file bankruptcy because a creditor cannot collect. However, a creditor may still contact you by phone or mail to ask for payment. They can also sue you to try to get a judgment.

You may want to contact a bankruptcy attorney for a free consultation to see if you are judgment proof. Or, see how much it would cost to have this discussion with an attorney. If you are judgment proof, you can send letters to creditors explaining you are “exempt” and hope they stop harassing you over the debts.

Can you come up with the money to pay for your bankruptcy?

Sometimes you can pull together the cash by cancelling pay TV, expensive cell phone plans, or cutting back on other items. It may take a few months to come up with all the money you need, but the temporary sacrifice will be well worth it.

Another option may be to stop paying the debts for a few months. This assumes you still have the cash flow to pay your credit card bills or other debts.

Another possibility is to borrow the money from someone you know, like a friend or family member. This is considered a personal loan. Although the legal obligation to repay the loan can be discharged in bankruptcy, when the bankruptcy process is over, you are free to voluntarily repay that debt, or any other debts you choose. I’m sure your friend or relative would appreciate that!

Still, another option is to cash out part of your retirement fund or take out a 401K loan to cover the costs of a bankruptcy filing. Although retirement funds are typically protected in a bankruptcy, using some of that money may be well worth the relief a bankruptcy can offer. Keep in mind that if you take a withdrawal, you may owe a 10% penalty plus income taxes on the amount taken. If you take out a 401K loan, you typically repay the loan over several months, with payments automatically withheld from your paychecks. So think of it as another monthly payment that you’ll be taking on.

Consider other low cost options

Some legal aid services may offer bankruptcy representation. This is a long shot due to funding cuts for such programs. Even if your local legal aid service does bankruptcies, you must still qualify for their help. Contact your local courthouse for contact information. If legal aid can’t help, ask for referrals to free or low-cost programs you can explore.

Another option may be pro se clinics designed to help those who choose to file bankruptcy without an attorney. Contact your local bankruptcy court to see if it offers such services. Such programs may be scarce but worth looking into.

Whether you’re trying to decide about filing bankruptcy or set up a Debt Management Plan, it’s better to know all of your options before making a decision. Not sure if filing bankruptcy is right for you? Call LSS at 888.577.2227 to talk to a Financial Counselor. They will help you determine realistic options to take action and conquer your debt. Want to get started right now? Great – it’s easy…just click here to BEGIN ONLINE FINANCIAL COUNSELING. It’s free, confidential, and just as effective as phone or in-person counseling.

Author Barbara Miller is a Certified Financial Counselor with LSS Financial Counseling and she specializes in Bankruptcy Education and Counseling.

Are You Due For a Financial Spring Cleaning? Five Tips for a Fresh Perspective

Posted on May 1, 2013 by Kate Swenson

Most of us tend to get at least a small dose of the blues over the long winter months, and sometimes, your finances can suffer neglect as a result.

Symptoms of financial neglect might include:

• Several months’ worth of unopened bills and mail scattered around your home.

• You have not filed your taxes yet, even though you know you will be getting a refund.

• The inside of your purse looks like the inside of a trash can, or every compartment of your wallet is jam packed with so much garbage you could probably fill up a trash bag.

• Excessive shopping for no good reason. For me this might include late night shopping trips to the 24 hour Walgreens - even though I really don’t need anything.

• You’ve stopped paying attention to the balance in your bank account.

• You find random cash lying around your home, your car, or crumpled up in the pockets of your jeans, purse, or wallet.

If any of the above symptoms ring true for you, it might be time for a financial spring cleaning. Please understand that depression is a very real struggle and my suggestions here are not meant to be a substitute for medication, counseling or medical attention. My intention is to give you some concrete steps you can take to get organized and feel more in control of your financial life.

Where do I even begin!?

It can be really overwhelming to face your finances when you’ve been in a state of hibernation all winter long. Usually, when you realize your finances are a bit of a mess, facing the problem head on is the very last thing you want to do. You glare at the unopened bills scattered all over the computer desk, and instead of opening them, you play a video game, take a nap, or maybe go shopping.

My suggestion to all of you avoiders out there is to start with something external that needs your attention, even if it isn’t your finances. All I need to do is take a good look at the inside of my car to get a clue as to what type of mental state I am in. I’ve figured out over the years that the inside of my car is a metaphor for how I am feeling inside. When I feel like a mess internally, the external parts of my life, such as my financial state or the condition of the inside of my vehicle tend to suffer. Perhaps some of you can relate to this?

Tip #1: Pick a task you’ve been neglecting and complete it from start to finish

So, where do I begin? I start by cleaning out my car! Believe it or not, I would rather scrub the carpet on the inside of my vehicle than face my messy financial situation. If you just can’t bring yourself to begin facing your finances, then do something else that would be considered productive and healthy for you. Complete a task that addresses some other neglected area in your life. And sorry - shopping, naps, or beating the latest video game do not apply here. Clean out your car, your purse, your closet, or finish washing those piles of laundry.

You know what you need to do. You know the areas that need your attention, so pick one and just do it! When you accomplish one thing, your confidence goes up, you feel better about yourself, and you will be more likely to accomplish tasks in other areas. The important thing is to start somewhere.

Tip #2: File your taxes if you haven’t already

How many of you usually receive a fairly decent tax refund? According to IRS data, the average American typically receives more than $2,700 back at tax time. Although it might feel good to get that large chunk of dough each year, keep in mind that your monthly paychecks could be less as a result. If you are carrying credit card balances, then you are paying interest every month, while at the same time giving the government an interest free loan on your money.

Talk with a tax specialist about options for adjusting your withholdings, if necessary. Your goal is to maximize your take home pay without owing a tax debt at the end of each year. Perhaps with more income monthly, you can create a spending plan to avoid the need to borrow from high interest credit in the future. If you currently owe credit card debt, additional monthly income could allow you to repay these debts faster.

Tip #3: Clean and organize

Take a good look at your bank statements so you know how much income you have in your account. If you are a person that typically uses a debit card instead of cash when making purchases, you should analyze a few of your bank statements so you have a better picture of your spending patterns.

Clean out your purse and/or your wallet and throw away or file all of those crumpled up receipts you’ve allowed to accumulate. Gather any cash or loose change you notice laying around the house and put it all in one place. On a particularly difficult year for me, I found over $50 worth of cash and change scattered throughout my car and my home. No joke. Make the decision to treat your finances with more respect than this. Keep your money in a neat and organized fashion. Set up a budget to ensure you are spending less than you earn each month.

Tip #4: Take care of your priority bills first

Start by sorting your mail in piles. All of your on-going monthly bills belong in one pile and your old debts will need to go in another. Then, take some time to review that pile of on-going bills. These are the bills you usually pay every month, or every few months, such as rent or mortgage payments, utility bills, insurance, or cell phone plans. When is the last time you took a closer look at your cable bill? Are you currently overpaying? Sometimes all it takes is a phone call to the company servicing your plan to get your monthly payments reduced. Have you ever shopped around for cheaper car insurance?

A little savings here and there can add up to make a big difference to your cash flow. If you are behind on any of your priority bills, then create a plan to catch up. Your monthly bills should be taken care of first before diving into that pile of old collection debts from the past.

Tip #5: Face your debt

Now that your priority bills are in order, you can focus on that stack of statements and letters for outstanding collection debt and/or credit cards. Sort these in piles so you can make a list that includes who you owe and how much for each outstanding debt balance. If you have multiple letters and/or statements for the same debt, you should put these all in the same pile and put the most recent statements at the top.

If the most recent statement you have is over a few months old, you can also request your credit reports for free once a year online through Annual Credit Report.com to get the most recent information. Your credit reports might also list any additional debts that need to be added to your list.

Sometimes, your financial situation might seem worse than it really is because you have not taken the time to face it, or you haven’t explored all of the options available to resolve the problem. At LSS, we counsel lots of people who come in thinking they are on the brink of bankruptcy, and end up leaving with a renewed sense of hope and a little spring in their step!

The Miracle of Debt Management

If you are juggling credit cards with high interest rates, a Debt Management Program (DMP) could be the answer you’ve been looking for! A DMP with LSS might not only reduce all of your interest rates and allow you to repay all of your credit card debt in less than five years, but it also simplifies your life with one consolidated monthly payment and one due date for managing all of your credit card balances!

Create a plan

If you are overwhelmed with piles of old collection debts and/or unpaid medical bills, take some time to actually open your mail and sort through these. You might just find that you actually owe less than you thought. This tends to be the case with medical bills or collection debt because you will typically receive multiple statements or letters for the same debt balance.

Once you have a good idea as to who you owe and how much debt you really have, you can explore your options for dealing with it. Our Financial Counselors can help you create an action plan to take care of your debt once and for all. Call LSS Financial Counseling at 1-888-577-2227 to schedule a free appointment or GET STARTED ONLINE now. Get a fresh financial perspective and a plan for moving forward this spring!

Author Mary Mckeague is a Certified Financial Counselor with LSS and she specializes in Budget and Debt Counseling.

Money Saving Tip of the Week: How to Survive Without Cable

Posted on April 29, 2013 by Kate Swenson

Whenever someone finds out that I don’t have cable, I often hear…”how can you live without cable”? On occasion I get a far more sympathetic response. For example, I may get an “oh, I’m sorry” usually accompanied by slight head tilt to add a sprinkle of pity. The truth is there are times when I really wish that I had it. I know this because when I stay with my brother (who is an avid TV watcher) I consume so much HGTV and DIY network that I see the same shows run for the 2nd time! I can’t get enough! However, the average monthly cable bill is $75 ($900/year) and I have plans for that money. Unfortunately, cable just isn’t part of those plans. So here are some tips for coping with a cable-deprived life.

Take “Supplements”

In order to stay strong you must supplement your network TV watching with internet. Most cable networks have websites that allow you to watch episodes of your favorite shows when you want to see them. The benefit of this is like Tivo, you watch it whenever you want. The only drawback to this is that you don’t often get to watch the most recent episode so you will still need to shush everyone at the office when they start talking the episode that was on last night.

Stay Mentally Sharp

Join a book club. I know that this sounds cheesy but I have to say, it changed my life. I am starting to read the list of books that I thought I had no time to read over the last few years and it’s a good reason to get out and socialize. In addition, the next time someone asks you if you caught last night’s episode of the show you have never heard of (because you don’t have cable!) you can say. No, I was at book club last night. They may think you are intellectual or boring but either way, you might avoid the pity head tilt!

Build a Strong Support System

When life gets rough, you really find out who your friends are. In trying times your friends will fall into two categories, those who invite you over for the game that is only on ESPN and those who don’t. There may be others who are living with the lack of cable in their lives and you need to support them too! I suggest holding a support group meeting at the local restaurant with ten TVs…you know they will have the game on there.

If you don’t want to jump in and make a permanent decision, sometimes cable companies have the option to temporarily cancel service, i.e. for 3 months. And summer is the perfect time to try this out. You too can live a happy and fulfilling life even if you don’t have cable. Plus, think about what you could do with the money you can save…

Want other tips and tricks to save money throughout the year? Call LSS at 888.577.2227 or GET STARTED ONLINE right now. It never hurts to get a second set of unbiased eyes on your finances. Take action today to improve your financial situation!

Author Ashley Hagelin is a Certified Financial Counselor with LSS Financial Counseling and specializes in Reverse Mortgage Counseling.

Consumer Alert: 5 Ways to Spot a Loan Modification Scam

Posted on April 25, 2013 by Kate Swenson

Many homeowners are facing a seemingly never-ending sea of document requests and resubmission of paperwork to their lenders. There is an increase in mail and telephone solicitations as well. Many of these solicitors are looking for ways to get money out of you and may not have your best interest in mind. Here are five surefire ways to spot a scam BEFORE you get taken for thousands of dollars!

1. Be aware of any company that guarantees a loan modification or a way to stop your foreclosure.

No company or attorney has this power, and anyone guaranteeing such results has lied to you before you even contacted them. Check with your local housing counselor for ways to work with your lender or how to stop or postpone your foreclosure (laws vary greatly from state to state).

2. Nobody should have to pay for help with their mortgage situation.

Do NOT divert your mortgage payments to a third party whether or not your lender is accepting your payments. If the lender has returned a payment or stopped accepting single payments, start putting payments aside in your own private savings account. Avoid anyone or any place asking for a fee, especially any fees (attorney retainers or otherwise) that are collected before any service is provided. It is illegal in many states to collect fees for services not provided, but one common loophole is to ask for an attorney retainer fee. There is free, HUD-certified housing counseling available in every state, and can be found at HUD.gov.

3. Be aware of companies trying to resemble or represent themselves as government agencies.

It is illegal to represent oneself as a government agency when they are not. Many mailings, websites, and television commercials offer help in “taking advantage of billions in government bailouts” or even use company names with initials that spell HUD or FHA in their telephone numbers and website domains.

4. Be aware of any company that asks you to sign a quit claim deed or release of information.

Do NOT, under any circumstances, sign over the title of your property to anyone!!! Be very careful whom you allow to represent you. Do not authorize anyone to speak to your lender on your behalf unless you are 100% certain they are a HUD-Certified Housing Counselor.

5. Do not share personal information with any third party that contacts you first.

You should not give your date of birth, account numbers, or even your zip code to anyone that calls you or knocks on your door. These crucial pieces of information are used by your lender to verify your identity as a caller. Be careful of seemingly innocent questions like pet or kid names, your high school or favorite sports team, etc. These are often used as security verification questions when you (or someone else!!) tries to log in from an unrecognized computer or device.

Remember to “trust your gut”.

Your instincts are usually right and you should listen to that nagging voice in your head when something just doesn’t feel quite right. If you feel you have been approached by a scammer, get any identifying information you can and share it with your state’s Attorney General, Department of Commerce, and/or your local HUD-Certified Housing Counselor. For example, the Minnesota Attorney General has a downloadable/printable complaint form right on their website.

Want FREE and unbiased help regarding your mortgage? Call LSS Financial Counseling at 800.777.7419. We have HUD-Certified Housing Counselors available to help you determine realistic options regarding your mortgage.

Our Financial Counselors can also help you create an action plan if you’re looking to pay down your debts and improve your finances. GET STARTED ONLINE or call 888.577.2227 today!

Author Malcolm Johannessen with LSS is a HUD-Certified Housing Counselor and specializes in Foreclosure Prevention Counseling.

Student Loans and Credit Scores: What Every Borrower Needs to Know

Posted on April 24, 2013 by Kate Swenson

Everyone knows that the cost of getting a college education is expensive. And unfortunately, costs continue to climb. If you get a graduate degree, your total student loan debt could resemble the amount to buy a home. Yet, many borrowers don’t realize that the status of their student loans can, and will affect their credit scores. The general rule is you should treat your student loans like any other credit obligation to remain in good standing.

A study by the Pew Research Center found that more than 22 million households, or 19%, had student loan debt. That household number is double from what it was just 20 years ago.

According to a FICO study, consumers are also borrowing more. In 2005, loan balances averaged $17,200. In 2012, just 5 years later, average student loan debt jumped to $26,500. This difference is a whopping 54% or $9300 increase in dollars owed.

SO, EXACTLY HOW DO STUDENT LOANS AFFECT YOUR CREDIT SCORE?

Deferred student loans are still considered in your credit rating, although the deferment status is neither positive nor negative. A deferred status means your loans are considered current.

Student loans are typically reported as installment loans, meaning repayment occurs in fixed monthly amounts. Therefore, loan balances will factor into your credit score but less so than revolving accounts like credit cards.

Late payments, or loan defaults, will ding your credit scores. Some borrowers mistakenly believe that if you have federal loans, it won’t hurt to make late payments or even miss a few. But that is simply untrue. If loan delinquencies are reported, it will definitely affect your credit rating. Missed payments are more likely to have a big impact on credit scores of borrowers with short credit histories such as recent college graduates.

Don’t ignore your student loans, even if you can’t pay. Default generally occurs when the lender does not receive a payment for 270 days. Once you’re in default, ugly things can happen. Your full loan balance becomes due rather than one monthly payment. This means you are supposed to pay it ALL immediately. Your credit score will take a big hit and your federal or state tax refunds can be taken to repay the loans. The government can also garnish your wages, which means you may not be able to pay your other bills. So, avoid default if at all possible!

Addressing student loan delinquencies/defaults

• Understand the “big picture.” Not only should you know how much total debt you owe, but you also need to know what types of loans you have. There are 3 main types of student loans: direct loans, government-backed loans, and private loans. You can find out which types of loans you have by using the National Student Loan Data System. This website contains information on all federal loans. If you can’t find a loan there, it is likely a private loan.

Direct loans are borrowed from the federal government and typically have lower interest rates than private loans. They may also be subsidized, meaning the government pays your interest as long as you are in school or in a grace period.

Government-backed loans are no longer available but many borrowers still owe these. These loans are borrowed from a private lender but they are backed by the federal government. This means if you don’t pay, the lender will be reimbursed by Uncle Sam.

Private loans are issued by private lenders without government reimbursement. These loans typically carry higher interest rates and offer few options other than the standard repayment plan. Private student loans should show up on your credit report, which you can pull for free once per year from all three credit reporting agencies by going to AnnualCreditReport.com

• Find out if any federal programs can help you. There are several loan program repayment options for federal loans. Visit StudentAid.gov for information about each plan to decide what works for you. Another excellent resource is Student Loan Borrower Assistance.org with FAQs about any student loan topic you can imagine. I also recommend using these resources before borrowing any money to get a better idea what the programs are all about. It is always best to understand what you are getting into before signing on the dotted line.

Finally, if you’ve done all the research, but want some expert advice on what to do, call LSS Financial Counseling at 888.577.2227 to talk with one of our Student Loan Specialists. We may be able to help you get back on track if you have fallen behind and/or help you review repayment options to find the best fit.

LSS can also help you create a plan of action to improve your overall finances…click HERE to get started. Take action today to create a better future!

Author Barbara Miller with LSS is a Certified Financial Counselor and specializes in Bankruptcy Counseling/Education and Student Loans.