More Credit Fact or Fiction

(1) If a spouse is responsible for a debt due to a divorce decree, the other spouse is completely released of all liability - True or False.

False – If at the time of divorce both spouses are signed on the credit account, they are both liable for the debt after the divorce regardless of the divorce decree. The credit card companies only release liability when the debt is refinanced into the responsible spouse’s name.

(2) If you co-sign for another individual, your credit could be affected – True or False.

True – If you co-sign on a credit application, you are as responsible for the loan as the individual you co-signed for. If that individual misses a payment, that negative mark goes on your credit report. If that individual defaults on the debt, the co-signer is now responsible.

(3) If a creditor settles a debt, the consumer has no other further obligations - True or False.

False – If the creditor forgives debt, the creditor reports that to the IRS and the consumer has to pay taxes on the amount that has been forgiven.

(4) If a debt collector harasses a consumer, the consumer has no means of protecting their rights - True or False.

False – Consumers are protected under the Fair Debt Practices Act. If a consumer’s rights have been violated, a consumer can hire an attorney and file suit against the debt collector for the means of protecting their rights. The law also allows for attorneys that practice this special type of law to take cases for free. The attorney can force the debt collector to pay fees in the event the case wins.

(5) If your debt has been charged off and is with a debt collector, the consumer can always go back to the original creditor and negotiate the terms of the debt - True of False.

False – Once the debt has been charged off and is in the hands of the debt collector, the original creditor has no interest in talking to you about the debt. You talk with the creditor as long as they are holding the debt and collecting the debt through their in-house debt collection department.

(6) It is a good idea to try and negotiate a current debt - True or False

False – If you are on time with your payments and everything is current, you never want to call a creditor and ask for the balance to be reduced. It is like asking your credit card company to close your account and place you in collections. They will automatically deem you as a risk and probabilities are high that they will close your account and raise your interest rates to penalty rates. It happens all the time. You can attempt to get your interest rate lowered. However, it stops there.

(7) There is a way to legally remove bankruptcies before the credit reporting period has ended - True or False

False – Every negative item on your credit report has to serve its allotted reporting time on your credit report. For most, that is 7 ½ years past the first missed payment.

(8) A credit reporting agency has to inform me of the results of my dispute - True or False.

True – They do have to inform you by letter of their findings.

(9) After 7 ½ years and the debt has been removed from your credit report you no longer owe it - True or False.

False – You always owe the debt.

(10) Debt Collectors can always take legal action against you to collect a debt - True of False.

True and False – They can only successfully file suit against you during the statute of limitations period which is determined individually by each state. In Texas, it is 4 (some attorneys argue 4 ½) years past the first missed payment. They can still file suit after that period. However, it is up to the consumer to use the statute of limitation defense and get the lawsuit thrown out. If the consumer does not take action, the debt collector will probably successfully win that suit.

Copyright © 2008 Prudent Money and Bob Brooks. All rights reserved.