Time-Barred Debts

You know that old credit card from 6 years ago that yet another company is trying to collect on? Well, you may not have to pay it. And, whether you pay it or not, there are a few things you should know about old unsecured debts.  

First of all that Debt collectors are salivating at the possible financial windfall of your tax refund, and efforts to collect may be more aggressive at tax refund time, or as your debt nears the 6 year aging deadline. 

The idea of collecting on dead-in-the-water debt is very appealing to a debt collection company. The fair debt collection practices act (FDCPA) defines debt collection companies as any entity which collects debt on a regular basis.  This could be a debt collection agency's, attorney office, or a company buying unpaid debt.

Before you give up your tax refund to a collection company, there are a few things you should know. The 1st thing to consider is the statute of limitations in your state. In Massachusetts it’s 6 years, while Rhode Island is 10 years, and New Hampshire is 3. If the clock ticks past the statute of limitations, with absolutely no payments being made to the creditor, the debt is considered to be time-barred.  

This means that a debt collection agency may no longer sue you for the debt. This is not to say you no longer owe the debt, only that you may not be sued for it. The company may however, continue to try and collect from you, and many collection agencies become increasingly aggressive as the statute deadline approaches.

Should you be contacted by a collection agency regarding a debt that you believe is time-barred, you should ask directly is the get time-barred, or when was the last payment received on this debt. If they decline to answer or you believe the answer is not truthful, you should send a letter within 30 days asking that they verify the debt. They are not allowed to continue to collect until the debt is verified.

The most important thing to remember is that in most states, absolutely any payment starts the clock ticking again on the statute. In some states even the promise to pay is enough to revive the debt.

For further information about time-barred debt, you may contact a legal aid lawyer, your state Atty. Gen., the Federal Trade Commission, or PowerDownDebt, Inc.

Disclaimer: the above blog entry is the opinion of PowerDownDebt, Inc., and Frances Rahaim, Ph.D. , and should not be considered as legal or tax advice. Please seek the advice of a qualified attorney or tax professional. PowerDownDebt, Inc. is a debt management company located in western Massachusetts, and advocates for good credit etc.

For more information about credit-savvy debt management, visit PowerDownDebt.com.

Please send questions or comments to info@powerdowndebt.com 

Is Your Home The Money Pit?

The Money Pit or Mr. Blandings Builds his Dream House

by Frances Rahaim, Ph.D.
aka "The Money Doctor"

This is the time of year when we begin to get excited about improving our domiciles, or at least doing much needed repairs. Good weather beckons, and visions of a fresh look and outside projects sooth our winter blahs.  Home improvement stores offer paint sales and home renovation ideas to compete for our dollars.

Secretly we tell ourselves that spending money on our home ‘doesn't count.’  We rationalize that we are building equity and that home improvements are not frivolous expenses. Even if we take on debt to complete them we feel it was worth it. We reinforce our decisions with mantras like “A King's home is his castle”, and “we don't spend money on other things.”

Not surprisingly, it can become dangerous when we use plastic to pay for the renovations, but perhaps for less than obvious reasons.  When we use plastic rather than cash, we may not realize that we have overextended ourselves until the minimum payments becomes untenable.  Oftentimes we are trying so hard to meet the minimum payments on credit cards and protect our credit rating, that we are left without enough money to pay for other expenditures.  Without proper budgeting, this can sneak up on us, and in extreme cases cause delinquencies on even a mortgage or car payment.

When you’re thinking, “I can make the low monthly payments,” notice how long you’ll be making them. Then, get your crystal ball out, and if you see possible changes in the future, which may require higher monthly outlay, you may want to rethink your plan. Perhaps a less expensive renovation might do the job, or maybe you delay while you save enough to complete the improvements in cash.

Remember that improving the equity in your home will only affect you financially if you plan to sell your home and recover more than the cost of the improvements, or if you plan to borrow against the equity.

Two Real Money Pits

1.     Telling yourself, “I never spend money on myself – only on the house.” This is a very common sentiment and somehow seems to translate in our minds as “this debt or payment is guilt free. It doesn’t count because it’s for the home.”

2.     Using zero percent credit cards which default to a higher rate if not paid within the “teaser rate” period.  If something happens where you cannot pay in full by the deadline, you may be charged interest retroactively, perhaps even doubling your effective interest rate.  Remember, a 20% off sale is not a sale if you’re paying 29% on your credit card to purchase it.

Favorite Money Doctor, Money Pit Tip

Remember to shop in bargain stores, and up-cycle items. Or… connect with a friend, and shop/swap in your own homes to get a fresh décor without spending a penny! 

For more information on managing finances visit http://www.powerdowndebt.com

Please send questions and comments to info@powerdowndebt.com

Dental Expenses Bite

Taking the Bite Out of Dental Expenses

by Frances Rahaim, Ph.D.

aka "The Money Doctor"

Dental insurance is most often deducted from your paycheck, but have you ever wondered what you get for that money?

Fear of a large expense is what causes people to feel the need to purchase dental insurance. However, the scheduled benefits that come with dental plans are often confusing, and have “warm and fuzzies” that make it appealing, such as free cleanings twice yearly.

So, if you’re not likely to use the insurance often, you may be paying for something you don’t need.

An increasingly popular option these days is the “dental discount plan.” This is not insurance, but offers large discounts on dental care, in some cases 50 to 80 percent, and is being accepted by an increasing number of dental offices.

But how do you know which alternative is better for you? It’s actually pretty simple. Go back and add up the total annual premiums for your dental insurance and compare it to what it actually saved you in years past. Remember that it only pays for a portion of fillings, crowns and other work in most cases, and not the whole cost.

Consider the level of dental work you or your family is likely to need, and how much the insurance will pay compared to the cost, and now you have the data you need regarding dental insurance.

Now compare that to a dental discount plan.

It may seem strange that a dentist would accept less for their services by taking part in a discount plan, but the system is really quite clever. Much like Hotwire or other discount travel plans are able to offer rooms or tickets for less, these dentists receive benefits for participating in the program, like reduced costs for dental supplies. Many plans also offer advertising for the dentist, and publish their information on web sites and pamphlets. But, most importantly, it helps the dentist gain new clients, which helps keep their schedules full.

Discount plans often cost less than $100 annually, and many have additional benefits, like vision and prescription discounts. You’ll want to do some checking before you decide to switch, and you may even ask your dentist if you could use both the insurance and the discount plan, although they may not allow it.

Check first to see if your dentist is on the plan you are considering, and if that isn’t the case, ask if they would consider the plan. If not, you may want to consider changing dentists if you feel the savings are worthwhile.

Once you decide to enroll in a plan, remember to discontinue your automatic payroll deductions should you choose to eliminate your dental insurance.

I have used and recommended dental discount plans for years, and have personally saved thousands of dollars. I recently went to the dentist and had work done that would have ordinarily cost $500, but with my discount plan, will cost just over $200. That means the plan paid for itself three times over in just one use.  You can search the web for a dental discount plan that suits you, ask your dentist, or check out the plan I personally use under the Links page at http://www.powerdowndebt.com. 

For more information about managing medical and dental debt more effectively, visit http://www.powerdowndebt.com

Please send questions or comments to info@powerdowndebt.com

Success and Debt in America

Successful People and the Debt Quagmire

by Frances Rahaim, Ph.D.
aka "The Money Doctor"

So there I was, watching “Children of a Lesser God” in which Marlee Matlin plays a high IQ graduate of a small New England school for the deaf who has stayed on rather than venture into a hearing society. I was given chills by the line, "Only stupid people think deaf people are stupid.”

I immediately recalled a sentiment I sometimes receive when I mention that I help people get out of debt. “How do people get themselves into all that debt?” The mistaken assumption here is twofold.

First, that it is credit card debt. We’ve been conditioned not to think of mortgages, student loans, business loans, auto, and other installment payments as debt but to simply accept them as a way of life. Oddly enough, Americans carry a higher burden in dollars of this type of debt than they do credit card debt by far.

Second, that bright, disciplined, credit-savvy individuals would not have amassed any debt.

In my experience, this could not be further from the truth.

It might surprise some to know that a typical PowerDownDebt client, if there is such a thing, is not only educated, but also may be quite disciplined in many areas of life, including their health regimens, child rearing and business.

In fact, therapists, teachers, students and small business people top our client list. Perhaps this is because successful people are busy with the details of their vocations or professions and the minutia of general finance takes a backseat to the busyness of raising families and performing our daily duties. Maybe it's due to unpredictable or sporadic incomes, which can cause budgeting issues. Shortcomings in education from our parents or our educational system may also be to blame.

Rarely do I meet someone who tells me he or she received sound financial or debt counseling regarding repaying student loans, starting a practice or running a business during the educational phase leading up to these events.

I often ask clients, successful in their careers, how they have amassed debt and why they think we see so many professionals.

Over the years I have heard many reasons why debt piled up, but most point a finger toward easy credit, the necessity for student loans and the expense of raising a family or running a business.

In answer to my second question as to why so many professionals seek help, one eloquent answer stands out in my mind.

A 27-year-old Harvard graduate named Erin sat before me with a master’s degree in psychology, more than $80,000 in student loans and a $30,000 job as a social worker, and quickly said, “I think it's our ability to ask for help and accept it.”

She went on to explain that teachers and counselors spend their days helping people. Furthermore, while they may be experts in their particular fields, they understand the value of hiring a professional.

So the next time you hear someone judging someone else because they’re in debt, remind them that in America, success often requires taking on debt. It's how you manage it afterward that counts.



For more information about managing debt - even future debt - without harming your credit, visit http://www.powerdowndebt.com


Please email questions or comments to: info@powerdowndebt.com or call 413-774-5555.

Don't Let Creditors Leave You Homeless

Protecting Your Home from Creditors both Present and Future

by Frances Rahaim, Ph.D.
aka "The Money Doctor"

Any homeowner in danger of becoming delinquent on credit cards or other loans, knows the added stress and worry of losing their home in the process.  While I am not an attorney, I do feel there are some highlights which may be of benefit, and warrant further research, and so I will attempt to point them out here in layman’s terms.

Although the Homestead Act, which underwent many changes in 2011 may be well-known by attorneys, it seems the general public is often unaware of the protection this act may offer from creditors when filing a bankruptcy, or in a judgment or lien status.

The revised Homestead Act provides for automatic protection of $125,000 of equity in your home. For greater protection, the homeowner must file a “Declaration of Homestead” with the Registry of Deeds in the area the home is located, and may benefit from the full $500,000 of equity homestead protection. This applies to principal residences only. Homeowners age 62 and older, or who are disabled may be eligible for additional protection of up to $1 million.

It may be important to note that the declaration will not protect against liens imposed by the Massachusetts Department of Transitional Assistance (formerly known as Public Welfare) as a result of Medicaid benefits. Therefore this act may not protect the equity in your home in the event you enter a nursing home for which Medicaid is paying. However, it may be possible for a surviving spouse to remain in the home until death, at which time Medicaid may seek reimbursement from the estate for the benefits paid.

One area that the Homestead Act may be particularly helpful is in a bankruptcy, where it may allow the homeowner to retain a much greater portion of the proceeds from a liquidation sale than they would be allowed under federal bankruptcy law exemptions. This could decrease or even in eliminate the possibility that the homeowner would be required to sell their home due to a Chapter 7 filing.  In a Chapter 13 bankruptcy, it may even reduce the percentage of unsecured debt that the homeowner would be required to repay.

Perhaps the most important revision in the act, is that the Declaration now protects   against pre-existing debt without the need to file for bankruptcy.

But bankruptcy or delinquencies are not the only reason to file under the Homestead act.  There are other instances where filing a declaration of Homestead on your principal residence may be prudent. For instance, protection against future law suits or other liabilities. In short, this act is designed protect some or all of the equity in your home against present and future financial risk.

The Declaration form is simple to complete, and should be recorded the Registry of Deeds in the County where the property is located. The cost to file is a mere $35.00.

As always, when considering this type of decision, it is advisable to seek legal counsel.  A good resource to begin your research is Secretary of the Commonwealth William Francis Galvin’s website at www.sec.state.ma.ua/cis.

For more information about dealing with creditors and managing debt properly, visit http://www.powerdowndebt.com

For questions or comments, please email info@powerdowndebt.com

or call 413-774-5555.