What is a Garnishment?

When your wages are garnished, a percentage of what you make is automatically routed towards paying off a debt. You wages can be garnished if you fail to repay a debt, taxes, court settlement, child support or any other debt that a judgment has been granted against you by a court of law. Only a few states restrict wage garnishment, they are Texas, South Carolina, North Carolina and Pennsylvania. This would be for state and federal debts only. Usually the limit of the garnishment is 25% of what a persons paycheck would be. It is not legal to hide assets to avoid the garnishment. You may be prosecuted for fraud if you try.

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What is a Charge Off?

A charge off is a debt that a company has written off as noncollectable. Once they have written the debt off they can take off the loss on their tax returns. That is not where it ends for the person who took out the loan however. For the borrower they will have a charge off or a collection account on their credit report. This is not a good thing for your credit score. One charge off can drop your credit score over 100 points. The only want to take care of it is to pay it off. You will need to speak with the company that is handling the collection of the old debt. That's right, the old company may have written it off, but that doesn't mean that you are out of the woods on paying it back. A collection agency may buy the old debt for pennies on the dollar and try to collect on it. They have a legal claim to collect from you and will not remove the bad mark on your credit until you pay up.

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What is a collection agency?

Collection agencies are companies that collect on past due bills. They collecting is either done by the original company that made the loan with you or they have an outside company do the collecting. Typically a third party collection company will often work on commission. They will receive a percentage of the amount of debt that they collect. Usually a debt collector is paid a small salary with a large commission incentive. This is why they may be very aggressive with you. They want to get paid. Typically you are going to get phone calls and letters which most likely will not be of a friendly tone. Their job is to scare you. The more they can scare you, the more money they can collect from you.

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What does BK mean?

BK is short for bankruptcy. It is a widely used acronym in the United States culture for the term bankruptcy. Not much more to say about this one.

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What is Debt Negotiation?

Debt Negotiation is a process of paying off your collection accounts by using a third party. You can either hire a debt negotiation company or an attorney to handle paying off your debts. It is considered to be an effective alternative to bankruptcy. Debt negotiation can save you 40-60 cents on the dollar while paying off your collection accounts. Once the debts are paid off your credit will begin to improve. The unpaid collection accounts will now report as paid collections. A paid collection will report as a positive mark with the credit bureaus.

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What is a debt management company?

A debt management company is a third party company that assists consumers in their repayment of debt. Many companies that do this kind of service is called credit counseling or consumer credit counseling. Consumer credit counseling is referred to as CCCS as well. They will also help you work out a budget so you can save more and allocate more money to getting out of debt. Often times they will lower interest rates and get over the limit and late fees to stop accumulating. It used to be that signing up with a debt management company was like doing a chapter 13. Those days are over, you can actually buy a home while you are still in the program.

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What is a secured debt?

Secured debt must have collateral behind it. Homes and cars are secured debt. If you quit paying on them, someone will come to your door and take the stuff back. The best test if a debt is secured or unsecured is if you stop paying on it. If you stop paying your bills and your get to keep your stuff, it would be unsecured debt.

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