Thursday’s need-to-know money news

Today’s top story: 5 divorce mistakes that can cost you. Also in the news: How to achieve financial independence without retiring early, consolidated debt and how to do it right, and where to go when you have a travel insurance problem.

5 Divorce Mistakes That Can Cost You
Curb your social media.

How to Achieve Financial Independence Without Retiring Early
A worthwhile goal.

What Is Consolidated Debt and How to Do It Right in 2019
Don’t start charging again.

Where To Go When You Have A Travel Insurance Problem
Being your own best advocate.

Q&A: Options for high debt, low income

Dear Liz: I’m 87 and drowning in debt, owing more than $21,000 with an income of $23,000 from Social Security and two small pensions. I don’t like the idea of debt consolidation but is that better than bankruptcy? My only asset is a 2003 car.

Answer: Debt consolidation merely replaces one type of debt (say, credit cards) with another, typically a personal loan. You are unlikely to qualify for such a loan and even if you did, your situation wouldn’t improve much if at all because your debt is so large relative to your income.

You may be confusing debt consolidation with debt settlement, which is where you or someone you hire tries to settle debts for less than what you owe. Debt settlement can take years and may not result in much savings, since the forgiven debt is considered taxable income and hiring a debt settlement company can cost thousands of dollars. In addition, people in the debt settlement process risk being sued by their creditors. Bankruptcy is typically a better option for most people because it costs less, is completed more quickly and ends the threat of lawsuits.

You may not need to file for bankruptcy, however, if you’re “judgment proof,” which means that even if you stop paying your creditors and they successfully sue you, the creditors wouldn’t be able to collect on those judgments. That’s typically the case when someone’s income comes from protected sources, such as Social Security and certain pensions, and they don’t have any assets a creditor can seize.

Please discuss your situation with a bankruptcy attorney who can review your options. You can get a referral from the National Assn. of Consumer Bankruptcy Attorneys at www.nacba.org.

How debt consolidation can go wrong

Daniel Montville knew a debt consolidation loan wouldn’t solve his financial problems, but the hospice nurse hoped it would give him some breathing room. He had already filed for bankruptcy once, in 2005, and was determined not to do it again.

Montville took out the loan in 2015, but within a year he had fallen behind on its payments and on the payday loans he got to help his daughter, a single mother with four children. The payday lenders all but cleaned out his checking account each time a paycheck landed, leaving little money for necessities. Then his daughter lost her job, and the $5,000 tax refund she had promised to him as repayment went instead to supporting her kids.

“That’s when I wised up and realized this was a no-win situation,” says Montville, 49, of Parma, Ohio. Montville is now repaying his creditors under a five-year Chapter 13 bankruptcy repayment plan.

In my latest for the Associated Press, learn why debt consolidation isn’t always the best idea.

Monday’s need-to-know money news

Today’s top story: 4 keys to successful debt consolidation. Also in the news: Credit card startups want to get in your wallet, financial must-do’s for newlyweds, and the best ways to get a big credit card bonus without going into debt.

4 Keys to Successful Debt Consolidation
Put those cards away.

Credit Card Startups Race for Space in Your Wallet
One card to rule them all.

Ask Brianna: What Are My Financial Must-Do’s as a Newlywed?
Starting off on the right financial foot.

The best ways to get a fat credit card bonus without going into debt
Timing is everything.

Millennial parents more likely to save for kids’ college

Zemanta Related Posts ThumbnailMillennial parents are far more likely than their predecessors to save for their children’s educations and far more of them want to pay the whole tab for college, according to a survey.

Whether they will be able to do so is questionable, though, given the relatively small amounts most have saved so far.

Seventy-four percent of parents aged 30 to 34 polled for the 2015 Fidelity Investments College Savings Indicator have put aside money for college, compared to 58 percent of parents the same age who were polled in 2007.

Nearly half (48 percent) of the group born between 1981 and 1985 plan to pay for all college costs, compared with just 16 percent of parents the same age in 2007, according to the survey conducted for Fidelity by Boston Research Technologies.

In my latest for Reuters, a look at why Millennials want to cover all college expenses for their children.

In my latest for DailyWorth, everything you need to know about debt consolidation.

Thursday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: Could your bad credit score leave you homeless? Also in the news: How your wedding could boost your credit score, the pros and cons of debt consolidation, and how living small could save you big money.

Could a Bad Credit Score Make You Homeless?
Landlords are taking a closer look at potential renters credit scores.

How Smart Wedding Spending can Lift Your Credit
Not going overboard could boost your credit score.

Debt Consolidation: When It Helps, When It Doesn’t
The advantages and disadvantages of consolidating your debt.

Live Small, Save Big: What You Can Learn from Minimalists
How living with less could save you more.

Checkout 51 Saves You Grocery Money Without Clipping Coupons
A new app lets you upload your grocery receipts for instant rebates.

Beware of loans to family

Dear Liz: I went with my brother to his credit union to refinance his house and found out his wife has about eight medical bills that went to collections and he owes a phone company more than $2,000. Their debt totals about $6,300. I could lend them the money or they could do a debt consolidation or talk to a credit counselor. What’s your opinion on these options?

Answer: None of these options is likely to work the way you hope.

Your brother should be wary of any “debt consolidation” offers he gets, as many will be scams and others will charge outrageous interest. The collections accounts have trashed the couple’s credit, which means mainstream lenders will probably avoid them until their situation improves.

The debt management plans offered by legitimate credit counseling agencies, meanwhile, are designed to help people pay off credit card bills, not past-due medical or phone bills. A credit counselor may give the couple some helpful budgeting advice to enable them to pay their debts, but it typically wouldn’t arrange payment plans.

Lending your brother the money would enable the couple to pay off the overdue bills. That won’t help their credit scores, however, unless your brother is able to persuade the collectors to remove the accounts from their credit reports. That’s often difficult to do, said debt collection expert Gerri Detweiler of Credit.com.

Your brother could start by asking the medical providers to take back any accounts that have been assigned to collectors and making payment arrangements directly with those providers. Medical collections are often on consignment and can be called back if the provider wishes.

The phone account, by contrast, was probably sold to a collection agency and can’t be reassigned to the original company. Even if your brother can’t get the account deleted from credit reports, he’ll probably need to pay or settle it if he hopes to refinance his mortgage because lenders usually don’t like to see open collection accounts.

Before you lend him the money, you should understand that loans to people with debt problems often don’t get repaid. If you can’t afford to lose this money, don’t lend it.

Friday’s need-to-know money news

Zemanta Related Posts ThumbnailToday’s top story: Consolidating you debt when you have bad credit. Also in the news: Maximizing child tax credits, what to do in your 20’s to protect your financial future, and the importance of verifying personal finance advice.

Can You Consolidate Your Debt With Bad Credit?
You might need a backup plan.

Are You Missing Out On These 11 Kid-Centric Tax Breaks?
Wringing every penny out of your kid at tax time.

5 Things You Must Do in Your 20s to Protect Your Financial Future
Goals, goals, goals.

Trust But Verify Personal Finance Advice (Huffington Post)
Only you can protect your money.

Study Finds Many of Us Still Lack Basic Personal Finance Skills
And that’s a big problem.