Why Repair Means Everything
When you are working on repairing your finances, you need to follow a certain type of order and have discipline to ensure you reach your goals. It’s good to pay off your debts and stop spending but in order to have total financial freedom there are other areas of personal finance that needs attention.

Repairing your credit should be the ultimate goal you set for yourself. Filter all other activities under that goal and you’ll be well on your way to financial stability. As you achieve better credit, you will also be working through the other steps that need attention and will bring your money matters back on the right track.

Taking the First Step
Credit repair involves a lot of different elements. As you work through each of these individual tasks, you will come out in the other side both debt-free and more financially independent than you likely have ever been.

Here are the steps of repairing your credit and your overall financial outlook:

Order Your Credit History/Score
You need to know where you stand credit-wise before making a move. Order your credit reports from the three major credit-reporting agencies TransUnion, Equifax, and Experian. All consumers have a right to a free annual copy of their credit report or at any time they have been denied credit approval for a period of up to 60 days. Credit scores are never free but for a nominal fee you can access each of your credit scores from the reporting agencies. You do not need to join any memberships in order to get a free credit report so don’t waste your money on the various scam-like promotions.

Evaluate Your Debts
You may think you know who your creditors are and how much you owe but you need to review your credit reports for accuracy and information. Your credit report will show you exactly who your creditors are, where they can be contacted, how long your account has been open, and what your outstanding balance is currently. Sit down with your reports when you have time and review all of your information. Dispute with the credit agencies all of the erroneous information contained on your credit report. The agencies have 30 days to investigate your claim and make changes to your reports. Incorrect information must be removed from your report which can improve your credit score.

Plan Your Debt Attack
Once you know who you owe, you need to construct a plan for paying off your debts in full. This plan should involve setting up a budget for your current expenses if you do not already have one in place. From that budget you should be able to see how much ‘leftover’ money you have to use towards debts. If the amount is insufficient, you’ll either need to cut existing expenses or earn additional income. Configure a plan for eliminating your debts in some kind of order such as the smallest to the largest balance or the highest to the lowest interest rate. Make your plan of attack and stick to it.

Keep Up With Regular Expenses
When you are working to pay off old, outstanding debts, it is just as important you keep a focus on the monthly bills you are also obligated to pay. Missing just one regular monthly payment can drop your credit score and potentially jack up interest rates on your account. That means you’ll have worsening credit and have to pay more money each month. Timely bill payments are a large factor in your overall credit score.

Refocus Your Finances
Once your debts are being eliminated and you find you have more stability in your finances, start figuring out ways you want to use your money for a better future. Saving and investing your money is the only way to ensure a stable present and a healthy retirement. Learn new ways of more effectively managing your money.

Live Within Your Means
The primary lesson every consumer needs to learn is how to live within their means. Overspending and poor management of money is the root cause of debt and bad credit. Learning to live with what you have and stop spending what you can’t afford is necessary for stability in financial matters. Learning your lesson will help you prevent history repeating itself. As you move forward into your next financial phase, one that may require financing or new lines of credit, your improved credit score and better focus on personal finance will ensure you save more money and have plenty more options available to you.

Repairing credit is not difficult but it does take time and some patience to see you through to your goals. Contrary to promotions from some agencies, there is no overnight fix for bad credit. Only hard work and dedication to having better credit and being debt free will turn your personal financial life around.

Ed O’Brien is a seasoned writer in personal finance, specializing in credit repair. You can find more of his articles located at CreditRepair.org.

This article details some methods for avoiding payment on a debt (beating a debt) that I picked up from some sources on the internet. You’ll have to have some courage and confidence to actually go through with such an experiment. However, this method is the best way to avoid payment on a debt that you do not legally owe, or if the collection agency has added bogus fees to the debt in order to immorally drive up the amount they claim you owe. When a collection agency adds all sorts of ‘fees’ to a debt and you continue to make monthly payments, you are agreeing that these ‘fees’ are alright with you. This article assumes that you DO NOT legitimately owe this debt and thus do no actually owe the payments claimed by the collector. We’ll outline five steps for avoiding payment on the debt. See also, all of my articles on Collection Agencies.

** Disclaimer – Debtprison.net does not administer legal or financial advice. The contents of this website are my opinions on collection agencies and how to deal with them. Nothing on this website should be interpreted as legal advice or council. No opinions on this website should be used to replace the advice of your financial advisor or your legal council.

Request validation of the debt

Mailing out a debt validation letter (registered mail of course) simply means you are requesting for the collection agency to prove that they have any legal authority to collect on this debt and that you owe it. The Fair Debt Collection Practices Act doesn’t apply to original creditors such as Bank of America, Citibank, Capital one, and Discover Card. A validation letter is used when the original creditor has sold or assigned the debt to a collection agency. It is important that you make sure this collection agency has the legal right to collect this debt. If they can’t prove they possess the legal right then the debtor doesn’t pay. A debt validation letter will also buy you some time. The collection agency is not allowed to pursue the debt while it is being disputed.

Alright so let’s assume the collection agency validates the debt. Now you need to write another dispute letter. In this letter, you should declare that this debt is legally disputed, you do not owe the debt, and that you are now requesting for the collection agency to provide the original contract (signed by you) from the original creditor that proves you owe it. In addition, you are requiring a break down of the amount they claim you owe – including the original creditor default amount and the resulting interest and fees. If they fail to provide this information within 30 days you will consider their claim invalid.

If they send a response letter they will not provide the information you requested (at least I’ve never heard of any collector providing such a response). If so – write one final letter and explain that their claim is not valid and was evidenced by their inability to provide the information you requested and for them not to contact you again.

Now you can wait for a summons for civil court (there’s no guarantee they will pursue a civil judgment). In fact there’s a decent chance your debt will simply get sold to another collection agency and this process starts over. See also, How to avoid a lawsuit from a collection agency.

The Sworn Denial

If you receive a summons for civil suit it will say something like ‘we, the collection agency, are taking the debtor to court, and we swear that the amount of money we claim he owes is correct.’ This is called a sworn account or an affidavit of debt. Basically the company says “Yeah we promise that the dude owes us this amount of money.” Now you need to write up a letter of sworn denial, have it notarized, file it with the court, and send a copy to the collection agency.

For a good illustration explaining the necessity of the Sworn Denial click here.

This needs to be a statement in writing that you FILE with the court where you have been sued. It can be a simple statement, but it needs to be typed, signed, notarized, and filed with the clerk of the court and a copy sent to the collection lawyer. It needs to be a graduated denial. In other words, it needs to say, I deny this is my debt and if it is my debt, I deny that it is still a valid debt and if it is a valid debt, I deny the amount sued for is the correct amount.

When a sworn denial is filed, the debt collection attorney can not rely upon a sworn affidavit of account, but must instead produce a live witness to testify about the debt. The requirement of a live witness changes the dynamic of the collection action considerably. The likelihood that the action will go no further now increases again.

Request a Discovery

The next step is to request a Discovery. In law, discovery is the pre-trial phase in the lawsuit in which each party (YOU) through the law of civil procedure can request documents (copy of the contract or agreement upon which the debt is based) and other evidence from other parties or can compel the production of evidence. With the Discovery you are requesting the collection agency produce the paperwork which indicates that you owe this debt. This would include an original signed contract and an explanation of the dollar amount.

If the debt is a credit card debt, it is likely that the debt collection attorney will not be able to secure a copy of the original agreement or if he is, he will not be able to do so timely. Most credit card signature agreements are scanned or if older, microfilmed and stored away in electronic archives. If it is an old debt which has been sold to a debt purchaser the likelihood of retrieving the original signed agreement decreases dramatically. If you are being sued in a small claims type court where discovery is not permissible, ask for the agreement at trial.

Go to Court

From Debtcollectionlawyer.blogspot.com

The vast majority of debt collection suits proceed to default judgment because no one shows up to dispute them. Show up and ask for a trial. And remember, the worst thing that can happen is the same thing that would have happened if you hadn’t appeared at all, a judgment. You can’t make it worse. If the attorney doesn’t have his live witness available, oppose the case being continued. Tell the judge you’ve taken off work to be there and are ready to go forward. If the judge does continue the case to a new trial date, show up again.

You will need to educate yourself. You won’t be able to equip yourself to spar with an attorney, but knowing a little is better than knowing nothing. You will need to read the Rules of Procedure that govern the court and the Rules of Evidence for that jurisdiction. Look them up online. The Rules of Civil Procedure will govern how the trial is conducted. The Rules of Evidence will govern what the Judge is allowed to see and hear. If you do have a trial and the creditor produces a live witness, attack the witness first and the debt second. The witness can only testify from personal knowledge.

Generally, the witness has no personal knowledge about you or your account, but only knows what’s in the file he got from the collection department. If he is going to testify without personal knowledge, but from the records and documents of the business, then he has to have a basis to do so. He needs to be the regular keeper of those books and records and be familiar with how they are kept and their contents.

Don’t simply accept his answer when the debt collection lawyer asks him if he is the regular keeper of those books and records and be familiar with how they are kept and their contents and he says yes. Ask him how long he has been with the company, in that job, what he does on a daily basis, when he first saw your file, if he knows from personal knowledge if it’s a complete file, etc. You must destroy his credibility and ability to testify about the papers he has in front of him. If you can do that, then the debt collection attorney has no case. If the witness is actually a good witness and you can’t prevent him from testifying from your file, then you need to know your defenses to the debt.

The best defense is the Statute of Limitations. The Statute of Limitations is the time limit that an aggrieved party has in which to file a lawsuit. It is a drop dead deadline. Find out what your state is and whether the creditor is beyond that date. If they are, ask the court to dismiss the suit.

Appeal the Judgment

If you feel like the judgment wasn’t fair you have the right to appeal it. You should appeal the judgment immediately (ask the court for the exact amount of time). An appeal can take a long time to work its way through the system – months or years. The elapsed time is valuable and no collection action such as garnishments can occur while the appeal is pending (unless you live a jurisdiction that requires you post an appeal bond to stop collection during an appeal).

Related Articles

* Will Debt Follow you Abroad?

* What is a Junk Debt Buyer?

* Restrictions on Wage Garnishment for Debt Collection.

* The Fair Debt Collection Practices Act

* Reasons not to file Bankruptcy or Settle Your Debts

* Can you go to jail for not paying your debts?

* How to settle your debts on your own

* How to deal with collection agencies

* Sample Debt Validation Letter

Many people have emailed me asking if they could go to prison for not paying their credit card debt. It seems that some collection agencies are trying to intimidate debtors with the threat of arrest and imprisonment. A collection agency representative might comment “if you don’t start making payments on this we can take you to court and put you in jail.” There’s a lot of information on this subject and I will attempt to organize it in an intelligent manner. The correct answer to this question is - it depends!  If you have any questions after reading this article please leave a comment at the bottom of this page.

See also all of my articles on Collection Agencies.

See also DebtPrison related article How to deal with Collection Agencies.

Failing to make payments on debt is not considered a crime in the United States. The U.S. hasn’t utilized a debtor’s prison since the 1850′s. Some countries will still place a debtor in prison for failing to make payments. However, the U.S. government has a vested interest in making debt a desirable circumstance, therefore debt is not criminalized. In order to go to prison you must be convicted of criminal behavior. Laws regarding these issues will vary state to state. See also DebtPrison related article How to settle your debts on your own.

Here are your options with debt you’re defaulting on:

1.  Settle your debt (but you’ll need some cash).

2.  File bankruptcy (an often nightmare).

3.  Ignore it and possibly go to jail for contempt of a court order (very rare).

4.  Start paying it back in full.

If you need immediate advice on bankruptcy or debt settlement, then please call 877-231-4384. This is a toll-free number. A representative will help evaluate your financial problems for free and can even connect you with a local attorney. You can also fill out our free bankruptcy evaluation form by clicking here.

What will most likely happen

It’s always been my understanding that your creditor can take you to civil court and obtain a judgment against you saying that you owe the debt.  Through the judgment the collector can then garnish your wages or even get liens against your assets. But getting to this point of wage garnishment or liens against assets is time consuming and usually never occurs.  That’s because the collector has to go through a process that I’ll explain later in the article.

Going to jail for contempt wasn’t something that I thought could occur, but then I’ve read some comments from my readers below.  I’m assuming there’s more to the cases than just the average default. It seems that in some rare cases an arrest warrant can be issued for contempt of court.  I think this is somehow related to your not showing up in court, but from what I’ve read these arrest warrants are very uncommon.

This was stated by Sherri below in the comments “They tried to take me to court in 2000 ish. I tried to set up a payment plan and the guy told me he would not allow a payment plan and wanted me to ask friends and family to pay the bill. This week I got a letter in from the sheriffs dept stating it was a warrant for arrest. The attached paperwork was showing a court date for 12/20/07. In which I NEVER received any paperwork stating I had a court date in Dec.”

And this was stated by Deb “I owe around 3,000 in credit debt, and a sheriff keeps banging on my door leaving me a note from the sheriffs dept, what the hell is this all about? And can they arrest me in my own home?”

I have no way of knowing specifically what occurred in the two above mentioned cases that led to the Sheriff’s Dept. getting involved.  In general, the negative outcomes (negative credit reporting, wage garnishment, liens, or jail) often depends on the amount of money involved and the aggressiveness of the creditor.  The more money involved (almost always in excess of $1,000) the more likely the creditor or collection agency will pursue legal action.

Usually the process follows these guidelines:

You have defaulted on your payments.  Your creditors collection division calls you daily to try and talk you into making a payment.  After a year or two they give up on the phone calls and letters.  They can’t get you to pay so they (this could now be a collection agency, not the original creditor) sue you in civil court.  This can happen even if you are in a debt settlement program.  It’s a lot of trouble and expense for them to sue you, so normally they won’t bother unless they figure they can get some money out of you.

Keep in mind that there are rules that collection agencies must follow according to the Fair Debt Collection Practices Act.  If they don’t follow the rules you can actually hire an attorney and file suit against them! For example, if they have your phone number, they are not allowed to call your family, friends, or employer (if you request them not to).  Also, you can write a cease and desist letter which instructs them to only communicate with you via U.S. snail mail.

Scenario 1 – You don’t show up and the judge rules in favor of the creditor and against you.  This judgment is an acknowledgement that you owe the money.  I’ve read that 80% to 90% of judgments are never collected!  This is because the judgment is usually just an acknowledgement that you owe the money, and that is all.  In order to collect another court date must be assigned to perform a ‘writ of execution’.  If they summons you for this, and you don’t appear, they may issue a bench warrant for your arrest.

A writ of execution is a common court order granted by a court in an attempt to satisfy a judgment obtained by a plaintiff. When issuing a writ of execution, a court typically will order a sheriff or other similar official to levy property owned by a judgment debtor. Such property will often then be sold in a sheriff’s sale, and the proceeds remunerated to the plaintiff in partial or full satisfaction of the judgment. It is generally considered preferable for the sheriff simply to confiscate money from the defendant’s bank account. If the judgment debtor owns real property, the judgment creditor can record the execution to “freeze” the title until the execution is satisfied.

If you don’t show up for this one you may be arrested for contempt of court.  This is the part of the process where the facts will be laid out.  This is the part where they get your employment information for wage garnishment or asset info for liens.  But bear in mind, most collections will not get to this point.  It really just depends on how aggressive they are on your particular case.  And many people are actually in a position where they cannot be collected on.  Perhaps you are disabled and on limited income.  Chances are they can get a judgment but will never be able to collect.  There is also a federal minimum (I think this figure is 30 hours of minimum wage pay per week), which if you make below, they cannot collect.  For example, if minimum wage is $5.80 per hour, times 30 hours, comes to $174/week or $702 per month.  If you make that or less they cannot touch you.  Money that is in IRA’s, custodial accounts, trusts, annuities, and insurance contracts are often untouchable.  See also, Restrictions on Wage Garnishment for Debt Collection.

Scenario 2 – You go to defend yourself against the creditor.  You explain why you do not owe the money.  Or you explain that you owe the money and cannot pay it because of personal circumstances.  The judge may or may not rule in favor of the creditor.  If you don’t owe the money or really can’t pay – just walk into court and defend yourself, you’ll be glad you did.

Please understand that the garnishment of wages depends on many factors such as: your level of income, possibly your spouses income may be considered, and the number of dependents you have.  To read about someone’s personal experience in using debt settlement companies read Tell Debt Settlement Companies to Kiss Your Ass.  If this article doesn’t convince you to stay away from these companies, I don’t know what will.

Can you be arrested at airport returning to U.S.?

I’ve seen this question come up quite often.  Some people moved away from the United States into another country.  However, they left behind tens (or hundreds) of thousands of dollars of debt.  Now they need to re-enter the U.S. for a vacation or to visit family.  They are worried about an outstanding arrest warrant related to the debt.    If you are concerned about this possibility try performing an information search on yourself at a site like this one.  Perhaps avoiding entering the state where you used to live would be a good idea.  Now if you have a warrant for fraud (related to your debt) the possibility for arrest may carry a bit more weight since this is a criminal, not civil arrest warrant.  Keep reading to learn more about fraud and other issues related to debt and jail.

Fraud

Also, if you obtained debt by committing fraud you can go to jail. For example, let’s say you just moved into a new apartment. Mail for the previous tenant is still arriving at your apartment. A credit card offer comes in the mail for the previous tenant. You fill out the application, mail it in, and start using this new credit card which is in someone else’s name. This is fraud and if convicted you could serve time in prison. This happened to my cousin. He moved out of his apartment and the following tenant received his mail and ran up thousands of dollars in retail charges. He had to get a lawyer involved and it took years to get this completely removed from his credit report.

Perhaps you have ‘borrowed’ your sister’s credit card to go out and spend a couple of grand without her knowing about it. In this case you could be fined and or imprisoned for fraud. This type of conduct is also considered criminal in nature.

You could possibly be looking at prison if you ran up thousands of dollars of debt on credit cards with no intention of paying it back. Recently the federal government changed the law regarding filing bankruptcy on credit card debt. The new law makes it harder to erase the debts you owe to credit card companies. Before this law went into effect, bankruptcy courts received a record number of new filings. Broke Americans were all trying to file for bankruptcy before the new law kicked in.

At the time I had an acquaintance that had in fact, filed bankruptcy on debts to various creditors, worth over $60,000. We were discussing the new law and he suggested that I run up tens of thousands of dollars in credit card debt. When the bills came due I would simply file bankruptcy before the new law took effect. Many people did exactly that. If the credit card company can prove that this was your intention, then some judges would find you guilty of fraud – taking out loans that you had no intention of repaying. However, it is usually difficult to prove that someone had no intention of repaying the debt. For example, if you applied for six credit cards, maxed out the limits for a total of $15,000, and then never made a payment, you could be in serious trouble. It would be obvious that your intent was criminal.

In general if it can be proved you received money or goods by deceptive practices you may be eligible for a criminal conviction.

Find more bankruptcy specific information before making a final decision, at Totalbankruptcy chapter 13 and chapter 7 website pages.

You could also be imprisoned for the following:

If you violate a court order (a judgment against you to pay child support).

If you are convicted of willfully failing to pay your income tax to the government.

If you are attempting to hide assets or income to avoid paying a debt for which there is a judgment against you.

Bankruptcy related acts that can result in criminal penalties include:

If you defraud tenants

If you forge a bankruptcy judges signature

If you commit perjury during the creditor’s meeting

Keep in mind that there is a difference in a judgment (civil court decision about money you owe another party), and a verdict (criminal court conviction of a crime). In a civil court case the outcome will largely depend on the judge and his interpretation of the circumstances.

Simply defaulting on your debt is not a crime

If failing to pay your debts equaled prison time then half the people you know would be in jail. Even the author of this article, although my debt is caught up now and will be soon be paid off in full. Many people have lost their jobs or had unexpected medical issues force serious changes to their financial lifestyle. Through no fault of their own a debtor may no longer be able to make the minimum payments. This is not a crime and one cannot go to jail for these reasons. Like I said earlier, collection agencies will do anything they can to convince you to send them a payment. If you have credit card debts or medical bills that you can no longer pay, you can’t go to jail. This is why we have debt settlement, bankruptcy, and ruined credit scores.

Although you can’t go to jail for failing to pay your debts, there is a list of negative consequences you may be eligible for;

Collection Agencies can call your phone several times a day.

They can even call your place of employment, asking for you or where they can find you.

They can call your neighbors and ask them if they know where you are.

They can sue you in civil court for the balance of debt you owe them.

They can win a judgment in civil court against you for the debt owed.

Through the judgment they can garnish wages from your paycheck.

Through the judgment they can garnish your banking accounts.

They can (in some states) get a lien against your assets (house) and sell it to pay off the debt.

They can report the collection information to credit bureaus which lowers one’s credit score.

So the short answer is no – you can’t go to jail for simply not paying your debts, unless you are in contempt of court (very rare). But, creditors and collection agencies can make your life a living hell. So it’s in your best interest to get this situation handled in a manner that benefits you.

Remember that some debt collectors will scare you anyway they can to force you to pay up. The best advice I can give is to educate yourself about your options. Take the time to read information across the web about debt and collection. There are a lot of articles out there – most of them are accurate and truthful. Go forth and be debt free!

Protect your family — let a bankruptcy lawyer help you explore whether Chapter 7 bankruptcy or Chapter 13 bankruptcy will offer you the most financial clarity. The first step to financial renewal is completing this free evaluation form.

Related Articles

*  Restrictions on Wage Garnishment for Debt Collection

* The Fair Debt Collection Practices Act

* Get Everything in Writing: Collection Agencies and Their Lies

* Reasons not to file Bankruptcy or Settle Your Debts

* Can you go to jail for not paying your debts?

* How to settle your debts on your own

* How to deal with collection agencies

* Sample Debt Validation Letter

* Information on Credit Card Balance Transfers

* How I Escaped Credit Card Debt

* What You Should Know About Credit Cards

* How to seek bargains for food and clothes

* Steven Palazzo, Mississippi, Property Rights, and Eminent Domain