Can I really eliminate my debts by purchasing a “debt elimination certificate”?

Wouldn’t it be great if you could pay $2,500 to someone who could wipe out all your debts — even your mortgage? That’s what some debt ehmination specialists are offering. But if you take your “debt elimination certificate” to your bank and tell them that you don’t owe anything anymore, they won’t find it a bit amusing. They may even confiscate your bogus certificate and call the
FBI.

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If I file for bankruptcy, does my spouse have to file, too?

If you are jointly liable for most of your debts, you’ll want to file for bankruptcy together. Otherwise, the spouse who doesn’t file will end up with the debts. If you have debt in your name only, however, you can file by yourself. That way, you don’t both damage your credit history.

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Will everyone know if I file for bankruptcy?

Bankruptcy is a matter of public record, but unless you are famous, or your friends regularly read the legal notices, chances are that very few people know you’ve gone bankrupt. In fact, you might be surprised if you knew how many of them have gone bankrupt at some time, too.

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Why do I need to know my total liabilities?

Knowing your liabilities is a key component of knowing where you stand financially. To calculate your total liabilities, add up EVERYTHING you owe. Start with your mortgage and credit card balances. Then, add your current balance on installment and auto loans, loans against life insurance policies, student loans, and margin loans - even taxes and bills you owe. Don’t forget any taxes you would have to pay on profits from selling investments.

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Can I get help for my compulsive spending?

Compulsive spending can mess up your life in many of the same ways that substance abuse or other addictions can. You can get help, however. Debtors Anonymous is a nonprofit organization patterned after the highly successful 12-step program that Alcoholics Anonymous uses to help people stop drinking. They have free meetings in virtually every metro area each night of the week to help people with compulsive spending. Visit the Debtors Anonymous Web site or write to its national headquarters at P.O. Box 920888, Needham, MA., 02492-0009. 781-453-2743

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What about these ads for companies that promise to consolidate my debt and lower my monthly payments?

Be very careful of promises to consolidate your debt into one big loan with lower payments. If you’re having trouble meeting your bills, you’ll probably be better off using a non-profit credit counseling group, such as the nationwide Consumer credit Counseling Services, to help you get out of debt. Some debt consolidation companies have a reputation for delivering far less than they promise and leaving you worse off than before.

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If I’m in financial trouble, can I renegotiate my debt with my creditors?

Renegotiating with your creditors can help you buy more time or settle your debts when you can’t keep up with your bills. Be honest and explain your situation to your creditors, and they may allow you more time to pay, drop late fees, or even settle for less than the full amount owed. Creditors would rather settle than spend money trying to collect -- and possibly get nothing.

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What can I do if my creditor won’t work with me to settle a debt?

If you make a proposal to a creditor to settle your debt but the creditor rejects it, you may want to find someone to help. A Consumer Credit Counsel ing Service - CCS) counselor can intervene on your behalf. Or, if you are in serious debt trouble, consider hiring a lawyer. The fact that you have a lawyer may get the creditor’s attention. They would rather settle with you than have you declare bankruptcy, leaving them with little or nothing.

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If I owe the IRS more than I can pay in back taxes, how do Ii negotiate a settlement for an amount that I can pay?

If you are working and earning enough to pay the IRS over time, they probably won’t negotiate on back taxes. If you are disabled, retired, or otherwise verifiably unable to pay the taxes owed, however, they will negotiate. In any case, they are more likely to negotiate for a reduction of interest and penalties than for the taxes themselves. Get in touch with your local collection division. If the amount you owe is large, you may need to get a tax attorney.

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Does a Chapter 7 bankruptcy get rid of all my debts?

Sorry. Chapter 7 bankruptcy filing -- the so-called straight bankruptcy -- doesn’t get rid of all types of debt. You’ll be stuck
with:
• Most taxes and customs.
• Any unpaid withholding.
• Any Social Security taxes and penalties.
• Student loans less than five years old.
And if you have debts from fraud, embezzlement, or larceny, or from “willful and reckless acts,” you’re still on the hook.
If the proposed new bankruptcy reform passes, you’ll have to pay your car loan if it’s less than 30 months old, plus you’ll
probably have to pay more of your old credit card debt.

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Can I save taxes by paying off credit-card debt with a home equity loan?

Yes. Interest on credit card debt is not tax deductible. However, home equity interest is fully tax-deductible up to loan amounts of $100,000. So, paying off your credit card debt with a home equity loan can be a smart move - assuming you are careful not to rack up the credit card debt again.

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My husband recently died. How should I handle the bills that are coming addressed to him?

First, make sure the bills are legitimate. It’s hard to believe, but con men scan obituaries and send phony bills to either the deceased or the survivor, hoping the bill will be paid without question. If you receive an unfamiliar bill addressed to your husband, write the creditor and ask for an explanation. Don’t pay a bill until you’re satisfied that it is legitimate If you have a good cash reserve, you may have no trouble paying all your and your husband’s bills. If you can’t pay all the bills now, make an itemized list and decide which bills must be paid and which can be delayed. Pay mortgage payments, utilities, and health and property insurance premiums first. If money is short, or if you are waiting for your finances to be settled, consider writing to the creditors and explaining your situation -- that you know you owe them money and plan to pay it, but you will have to work out a plan based on your changed circumstances.

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I own a small business. Should I form a limited liability company?

Forming a limited liability company is worth considering. It may protect you from some lawsuits and the company’s creditors.
As a sole proprietor, you are personally liable for all business debts, including those from most lawsuits. As the owner of an
LLC, however, you generally only risk the amount you have invested in the company. An important exception, however, is any loan for which you personally co-sign.

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