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Frequently Asked Questions About Debt
What is foreclosure and how does it work?
If you fall behind on your mortgage payments, your lender can start foreclosure proceedings to legally regain possession of your home. If you’ve already received a warning that foreclosure proceedings will begin if you do not catch up your payments, contact us for a counseling session immediately.
If you are behind on mortgage payments, but have not received a notice from your mortgage company, contact us for a counseling session. We can help you analyze your financial situation, give you advice about the foreclosure process and alert you to the scam artists that prey on people whose property has been posted for foreclosure.
The mortgage company must follow certain rules to take back the house, the sooner you act, the more choices you have available to you.
1. Beware of companies and people offering advice on foreclosure avoidance.
2. Watch out for companies or individuals that offer to refinance your home.
3. Don’t fall for those companies or individuals who offer to negotiate with your mortgage company. They ask to be paid up front the amount of one of our house payments. They don’t intend to negotiate and will put you off until the last minute before the foreclosure sale then send you to an attorney at the last minute. You lose your money and they get a referral fee from the attorney.
4. If you’re offered a re-finance deal that ‘looks too good to be true’ – believe us – it is! When you’re already in financial trouble, your credit score is already shot, this is when unscrupulous creditors take advantage of your stressful situation. Don’t make deals with these creditors.
5. There are specific legal procedures that creditors must follow when foreclosing on property. They must file certain papers and give certain notices to you. Pay attention to your mail. If you receive notice of a certified letter, sign for it and read it! These procedures vary from state to state. Search the Internet for information on your state's foreclosure laws, or better yet contact an attorney.
How can I get rid of tax debts, student loans or back child support?
Some debts we can never escape… student loans, child support, some taxes. The challenge is to get them paid. The sooner these debts are paid the less they cost and the quicker the headaches they cause will end.
In taxes – some taxes you will never get rid of, you can’t even discharge them in bankruptcy. The IRS is powerful. It can seize funds in your bank account and garnish your wages. Ignoring taxes owed can complicate and frustrate your life if liens have been filed against your property by the IRS. Tax liens against your property must be satisfied.
Student loans must be repaid. Like some taxes, they cannot be discharged in bankruptcy. Have you consolidated them? Are you making regular payments. Like the IRS, government backed student loans can garnish your wages to make your payments. Don’t let these debts get out of control. Make an appointment with one of our counselors or take our financial management class to learn about your spending habits and how to set goals to make sure they are repaid.
Child support laws in every state set heavy penalties for non-payment. Interest rates on child support arrearages can be a heavy burden to bear.
What is unsecured debt? (credit cards, deficiencies, judgments, medical) How can I ever repay all these?
The basic difference between secured and unsecured debts is that unsecured debts have no tangible property or any other kind of product that is attached to that debt, whereas secured debt have collateral that can be foreclosed upon or repossessed to pay the debt. Common examples of unsecured debts are credit cards, medical bills and store cards where there is no security pledged for the debt. Mortgages and auto loans have tangible items attached, i.e.: your house or auto.
Unsecured debts have no collateral. When you borrow money for a car, the car is “collateral” for the debt. If you don’t pay it, the creditor has the right to take the car from you. If the car is repossessed or you surrender it back to the creditor, you may owe a deficiency which is the amount of money you owed on the debt above the value of the car. Deficiencies become unsecured debts.
When you receive medical services, you may owe for payment of these services, but there is no collateral to take from you to pay the debt. Credit cards are considered unsecured debts. You signed for the charge or service, but most likely there is no collateral to take back from you to pay the credit card debt. If a creditor sues you and receives a judgment and you have no assets the creditor can seize to sell and pay on the judgment, then it is considered an unsecured debt.
If you cannot pay your debts, get help to determine how to proceed. Begin by consulting with a Mesquite Group counselor. Maybe your situation is not as serious as you fear. Bankruptcy may be an option, but you should consult an attorney to determine your rights and responsibilities should you file bankruptcy.
The following information may be of value to you about in coping with your debts. Click on the PDF Document "Ways to deal with your difficult financial situation."
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