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How to Answer a Civil Summons for Credit Card Debt

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You do what you can, but sometimes debt gets out of control. If you get far enough behind on your credit card payments, eventually, the lender or a debt collector will file a suit against you to get what they’re owed. In this article, we’ll explore what a civil summons is and what to do when you’re faced with one.

What is a civil summons?

Generally speaking, a civil summons is when a governing body, individual, or organization files a lawsuit or judgment against another individual or organization.

The document indicates the reason for the suit or administrative action. It also listed pertinent information, such as time and date of the first hearing, details about the plaintiff and defendant, and the amount of time the defendant has to respond.

A civil summons with regard to credit card debt usually occurs when the account reaches “charge off” status. Charge off status usually happens between 120 and 180 days.

With that said, here are the steps you need to take.

Don’t ignore it

This is the worst thing you can do. The suit will continue, whether or not you respond. If you don’t respond, the court will issue a ruling in favor of the lender.

That means you will be forced to pay what’s owed. They may also tack on attorney fees, court fees, and interest to your balance.

Negotiate

Get in touch with the lender/collector that filed the suit, and see if they will accept a lower amount.

The filer may ask for a lump sum or a series of payments. The negotiated amount can range from 40% to 80% of the original balance.

Who filed the suit also makes a difference in negotiation. If the lender is after you, they will be less willing to negotiate a lower amount than a debt collector that bought the debt at a discount.

Research

If negotiation doesn’t work, it’s time to build your defense. Get a hold of the lender or collector again and gather information.

  • Check through your records to confirm if the debt owed belongs to you – does the amount and the original lender match up? Is it yours?
  • Get chain of custody records – does the filer have the legal right to do so?
  • How long have you owed the debt – the statute of limitations could forbid the suit based on how long you’ve owed it
  • Get proof from the filer – are their records accurate? Is the information listed correctly? If the filer has missing or incorrect information, this can work in your favor.
  • Get copies of everything – accurate and complete documentation is very important

Talk with a professional

Get a consultation. Often, these are free. At the very least, it’ll help get a better understanding of what you’re up against and what you should do.

If money is tight, there are organizations, like lawhelp.org, that will provide an attorney that volunteers their time.

If money isn’t as tight, vet and hire an attorney to help your cause.

Go to court

If negotiation and settling outside of court don’t work, then it’s time to go to court. Here’s what you have to do.

  • Formally answer the summons with the court. This has to be in writing and generally, you have to answer within 20 to 30 days of receiving the summons.
  • In your reply, you have three answer options: admit, deny, or lack of knowledge. Admit it’s your debt, deny it’s your debt (only if you’re 100% sure), or attest that you don’t have enough information to say otherwise.

Options after court

If the ruling goes your way, there’s not much else to do. However, there may be terms you need to settle on, depending on what the judgment was, so you may not be completely out of the woods yet.

If the ruling doesn’t go your way, you have a few options.

  1. Try negotiating with the lender/collector again.
  2. Pay the amount mandated by the court
  3. Argue the ruling by filing an appeal
  4. File for bankruptcy
    1. This is the last resort and should only be used if there’s no way to pay back what you owe.

Credit score

Your credit score will take a big hit throughout this process.

  • Prior to 30 days late, it won’t affect your credit score, but you will be charged late fees (most likely).
  • After 30 days, a late payment will show on your report. On-time payment is the number 1 factor when calculating your score, so expect a significant drop.
  • The impact late payment has on your credit gets worse as you pass 60 and 90 days.
  • As stated, a suit normally isn’t brought against you until 180 days late. At that point, the account is listed in “charge off” status and that will really hurt your score.

Obviously, you want to do everything possible to prevent being served a summons for your being behind on your credit card bills, but if you get there, these are the steps you need to take.

Related reading:

What Happens When You Fall Behind On a Mortgage?

What You Need To Know About Bankruptcy

Ways Debt Can Hurt You

What Affects Your Credit Score

How To Pay Off Credit Card Debt

How My Finances Have Changed with Covid

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Aside from the death and illness, it has caused, Covid-19 has done a number on the financial system and the economy.

I’m writing this on May 19th, and up to this point, over 30 million people have filed for unemployment benefits.

In my previous post, which can be found here, I detailed how you can plan in the event of job loss.

Even if you haven’t lost your job, more than likely, your finances have changed. In this article, I want to pull back the curtain on how my finances have changed during this environment.

My Job

Thankfully, I’m still working. I work for my family’s business. Technically speaking, we have four family businesses and I work three out of the four in various capacities.

Two out of those three businesses are very resilient during recessions, so I’m not terribly worried about my income from those two sources.

The last, however, will be influenced by movements in the market. If I do my job well, it shouldn’t vary a ton, but if I don’t, my clients will feel the pain, as will I.

The reason being is I, typically, charge a percentage of the assets under management (AUM). If account values go down, so does the fee I receive. The two go hand in hand, as they should. If I do a poor job, I should make less. It just makes sense.

With that said, my income hasn’t moved too much from the financial advising gig. It dropped a little bit last month, but I imagine it’ll come back up by the end of May, as the market has recovered.

Opinion: The Economy

I don’t know if I’ve mentioned it yet here, but my opinion of the economy is darker than some. I think there will be a cascade of bankruptcies in the public and private sectors.

With regard to the public sector, the companies that are rated BBB are already at record highs. When revenues stop coming in or significantly reduce, it’s hard for companies to make interest payments to lenders (holders of debt).

Companies will start defaulting on their debts, and the ability to pay, as well as other factors, help determine the credit rating. This will cause a slew of BBB rated companies to get downgraded.

Funds

With regard to fixed income mutual funds and ETFs, the vast majority of them have rules they need to abide by. One of those rules could be only investing in investment-grade companies.

Investment grade is anything from AAA to BBB. My fear is that when companies get downgraded from BBB to BB, it’ll cause funds to dump those companies; exasperating the sell-off.

My Finances

With that said, here’s how I’ve adapted.

My finances really haven’t changed much. I’m spending more on groceries, especially right now as I am stocking up on certain goods. The added benefit of that is I’m spending less on food from restaurants, which saves me money and I’m eating healthier too.

So you’re spending more on groceries and less on take-out…what else? Well, given the nature of Covid and the uncertainty that surrounds it, my priorities have shifted a little.

More Cash

I’ve planned my clients’ portfolios with the above scenario in mind. The majority of clients aged 60 and up are positioned more conservatively than normal. With that in mind, all of the portfolios I manage will take a little hit, and my income will drop as a result.

I’ve suspended my retirement contributions, via payroll deduction, until I feel comfortable again. This may seem counterintuitive because of the stress I put on leaving things alone and dollar-cost-averaging as prices go lower.

Due to the fact that my income has some variability, not to mention my rental property and the uncertainty of my renters’ making rent payments (because of talks about forgiving rent payments for those affected by Covid), I have to keep more cash available than normal.

Retirement Contributions

As I mentioned, I stopped my automatic retirement contributions, but I am making voluntary contributions to my Roth IRA when I feel my cash available is adequate.

Other than that, nothing else has changed. Debt payments will continue as planned and saving for a down payment on a house will also continue.

Be advised: Any opinion expressed about the market/economy is strictly an opinion and should not be viewed as a certainty. Additionally, my preparations for said opinions are specific to me. Consult your financial professional about your particular situation.

Related Reading:

Why Asset Allocation Matters

What You Can Learn From Different Market Environments

Job Loss: What To Do

Dealing With Market Fluctuations

Job Loss: What to do

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Losing your job is like a big punch to the gut. At first, it’s hard to process, but then your head starts spinning. What will I do for work? How will I pay my bills and put food on the table? What will my family do?

Taking a deep breath is a good first step. After that, it’s time to put a plan into action. Many of you could be experiencing this right now, given what the world looks like today.

In this article, I’m going to lay out how to financially prepare before and in the midst of a job loss.

First thing

As I said, this will be a big shock to absorb. Give yourself some time to realize what has happened. More than likely, you’ll go through the 5 stages of grief.

Unemployment

One of the first things you should do is apply for unemployment. There might be some hoops that you have to jump through, but one imperative item you need to confirm with your old employer is that you were let go and without cause. Resigning or being fired for cause disqualifies you from collecting unemployment.

Set money aside for taxes. Unemployment does not withhold FICA taxes or state income tax (if applicable). If you normally receive a refund, you might get a reduced refund or none at all. Plan accordingly.

Severance

The next step has to do with severance. If you were let go or fired without cause, your company will, most likely, offer it to you. It isn’t required by law, but most companies do it. Take severance home and review it closely. Don’t sign right away. Once you’ve reviewed it, take it back and negotiate.

Job Search

Starting looking for a new job right away. It does not pay to wait. All jobs are first come first served, set get searching as soon as possible.

Be picky, but pick up a job of some sort that will provide you with some cash flow.

Is now the time for a career change? Have you been dissatisfied with your industry or line of work? Do you have the skills and/or qualifications to make such a change? These could be questions to consider.

Finances

With regard to any debts that you have outstanding, call your creditors and see if they will let you defer payments, or at least make reduced payments, for a while. Also, make the minimum on your debt payments. Having cash available for other necessary items is more important.

Relentlessly cut expenses and review your budget with fine-toothed comb. Again, cash flow is your friend in your new situation so the more liquidity you have the better.

Pad your emergency fund. Obviously, this is something that needs to be done before you lose your job, so it’s imperative that you listen. Common advice is to save 3-6 months’ worth of expenses. If you’re self-employed and are responsible for payroll and other business expenses, it’s prudent to have 6-12 months worth saved.

HELOC? That stands for Home Equity Line of Credit. Is that something you are able to do? Is that something that you want to do? A HELOC turns the equity you’ve accumulated on your home into a loan.

Insurance

Life and disability insurance are very important coverages to have, but a just loss and loss of income could derail those coverages. There is a rider that can be added (waiver of premium) at the time of application so your policy stays in force while you are unable to make payments. *Be advised: this has to be done when you sign up, not after the fact.*

Healthcare is another important item to take care of. First off, if you have any appointments you were waiting to schedule, do it now before your coverage changes. The next step is to find a suitable replacement for your current coverage. This could be taking your spouse’s insurance, finding new coverage on the marketplace, or signing up for COBRA.

Retirement

Avoid dipping into retirement savings – this should be your last resort. Retirement savings accrues most effectively when you leave it alone. That’s when compounding works the best. Not only that, withdrawing funds prematurely will subject you to income taxes and an early withdrawal penalty.

Do you have 401(k) loans? If the answer is yes, you’ll be required to pay that loan back in its entirety in the next 60 days, otherwise, it’ll be considered a withdrawal. Again, taxes and a penalty.

Make a decision on what to do with the old retirement plan – Do you roll it to your new employer, roll it to an IRA, or leave it with the current institution. If you have a lower account balance, your HR department could require you to transfer it or cash out. Each company is different.

Related reading:

Employer/Employee Negotiations

Why Financial Literacy is Important

Your Go-To Budget Guide

Living Paycheck to Paycheck? Tips to End this Way of Life

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Living paycheck to paycheck is not a preferred lifestyle yet millions of people continue to live this way. In part it’s due to a lack of income, but as a whole, most people live this lifestyle due to poor spending habits.

Cost of Living Paycheck to Paycheck

When you constantly scrabble to pay bills, it’s only a matter of time before the delicate balancing act fails. What occurs after is a domino effect of late payments, followed by missed payments. Initially, it’s payments due on credit cards that you pay late. However, as time progresses the list will include your mortgage and car payments too. Additionally, on top of poor credit, you now have added late fees on just about every payment due.

Paying Bills on Time

At this point, with a pile of unpaid bills mounting, you’ll need to find money to bring your bills current. There are mortgage loans available if your mortgage is not beyond 30 days late. However, if your credit score is bad, that may not be a viable option. You can sell items at a garage sale or online or take on a part-time job for the short-term while you bring the bills current.

Sticking to a Budget

Budgeting is very easy. The hard part is sticking to it. Create a household budget that includes your regular monthly bills and quarterly and annual bills too. Your budget should also include estimated allowances for food, gas and essentials. Sticking to a budget lets you track your debt and curtail your spending. You learn that the surplus of money in your account is there to cover periodic expenses and fund things such as a vacation and your retirement.

Reduce Your Spending

It’s almost unbelievable how small daily purchases can add up and sap your expendable cash. For example, you purchase a hot latte on the way to work and when lunch rolls around you head to the deli. Just those two items combined add up to over $10.00 a day. Multiply that by 20 working days, and you have a whopping $200.00 gone. Identifying where you waste money through your budget will allow you to change your habits and spend money wisely.

Reducing Debt

Debt can mount up quickly. Unfortunately, with interest compounded daily, reducing your debt will take some time. There are a few ways to approach it. You can use the method of paying credit cards beginning with the one that has the highest interest rate or the lowest balance. Some people want to see results fast. For them, the second option works best. The best way, going forward, to reduce debt is not to add any more.

Emergency Account

Along with poor spending habits, many people get into trouble because they don’t have money in reserve. When you live paycheck to paycheck without a safety net, any minor problem will become a major one. Everyone needs an emergency savings account that’s there only for emergencies. Some examples include the need for a new home furnace or an exhaust system for your car. By having this account, you’ll prevent the need for borrowing money from your checking established specifically to pay bills.

Rely on Cash

Cash brings to light the cost of items that otherwise go without notice. Give yourself a weekly allowance and once you spend it, it’s gone. This will teach you valuable lessons on how to make money last and ways to reduce wasteful spending.

There are many ways to reduce debt and enjoy a comfortable lifestyle. If you’re tired of living paycheck to paycheck, you can create a budget and reel in spending and put an end to the vicious cycle.

Audit Your Digital and Financial Life

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There’s no better time to audit your financial and digital life than tax time.

Having these two things orderly and up to date not only helps you stay organized but also gives you an opportunity to review your progress.

Review your budget

First things first. Review your budget.

Have any line items changed? Have there been additions? Maybe you paid off a debt and that line item can be dropped off?

If that’s the case, you can adjust your debt repayment plan. Whatever money was going to that paid off debt, funnel it a different one. You can do that by using one of two strategies.

One, the debt avalanche, where your dollars go to the debt with the next highest interest rate. Two, the debt snowball, where you focus that money on the debt with the next lowest balance.

Related: Your Go-To Budget Guide, How to Pay Off Credit Card Debt

Increase savings rate

If it’s been a while since you adjusted your savings rate, now is the time to see if you can tolerate an increase. Bump up your salary reduction plan an additional 1%. If you’re saving $50 per month for emergencies or your kid’s college fund, can you do another $10?

Review investment portfolio allocation

Is your current portfolio allocation still suitable? Whether or not you rebalance can hinge on two things. One, did your risk tolerance or time horizon change enough to warrant an adjustment? Or two, did your investments perform so that you’re no longer where you started?

Asset allocation tends to get out of whack when stocks perform well. 2018 is a good example, where the S&P 500 index finished up over 20%. More than likely, some rebalancing took place at the beginning of 2019.

Related: Why Asset Allocation Matters

Tighten up your expenses

Sell items you no longer have use for. You get rid of some clutter and can make a little money in the process.

Review your subscription list and get rid of things you don’t need. With so many subscription-based offerings, it’s easy to keep saying yes until you’re shelling out too much money each month. Audit these subscriptions and get rid of the ones you don’t need.

Call your internet provider. It’s more costly to acquire a customer than it is to retain a new one so they should work with you a little.

Do the same thing with your credit card company. They want to collect on the debt you owe them, so if that means lowering your APR by a percentage point or two, they’re more willing to help you out.

Related Reading: Quick and Easy Ways To Save Money

Digital

As our devices become more and more embedded in our way of life, we accumulate various types of accounts. Email, social media, and the like; this leads to endless different amounts of information that can be used against you. Time to purge (not like the movie).

  • Destroy or recycle old devices – This will clear up space that can be better used by something else. Make sure you wipe the device before recycling it.
  • Change passwords – Complex passwords are vital in our data-driven society. Long passwords with numbers and special characters must be used to protect your data.
  • Remove old accounts. Social media, email, and apps that you no longer use can be deleted and removed. Make sure that you delete the data from those accounts before you remove them, however. Just in case the owners of the site/app/program use the data from those apps for their personal gain.
  • Make sure your devices are up to date – This is elementary data protection. Up to date devices have patches for bugs and possible holes in their system. Your operating system is your first line of defense.

Keeping your life organized and performing a regular review/audit is imperative, whether we’re talking about your digital or financial life.

Related Reading:

Top Technology Trends That Will Dominate The Banking Industry

Three Ways To Cut Business Expenses

Financial Stability and Marriage

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Marriage and finances. A match made in hell. Why do these so often go together like oil and water? Why is money such a contentious topic in most households?

It’s because people go through life differently. Depending on how you were raised, what you learned, and what you personally experienced, your money philosophy will be different from that of your spouse.

Before we talk about that, however, I’d like to touch on financial stability and why the growing trend is being financially stable before committing to someone.

Financial Stability

It makes sense from a psychological perspective. Having financial stability makes you appear more mature and that you have your priorities straight. People who see that, probably see someone that’s ready for a commitment.

Additionally, getting married, and marriage in general, can be an expensive endeavor.

Obviously, it depends on the wedding you want, but the average price tag on a wedding nowadays is around $25,000 (source). Add onto that a honeymoon that could take you to another state, if not another country, and you’re spending a lot of money within the first month of being married.

What, historically, follows is a house and kids. Both, though worth every penny and minute, are expensive.

Because everyone has a different experience, and there are so many of them out there, I can’t go into detail about every one of them. Instead, I’ll speak generally about what they are trying to do.

Debt

People are trying to get out of or get a firm grasp on their debt. Whether it’s student loans, credit card debt, or medical bills, nobody wants to go into a committed relationship, let alone marriage, with a significant amount of debt.

Not only does debt hinder you from putting it towards future wants and needs, but when you get married, your debt becomes your spouse’s debt as well. You don’t want to burden them with that.

People want to be financially stable going into a marriage so they can afford the wants that often come with marriage, and they don’t want to be sacked with debt that brings down the family balance sheet.

Credit

Another piece of the financial puzzle that people try improving is their credit score. Your credit score plays a factor in almost every important life event. Where you live, where you work, and what you drive, your score could play a role.

Your financial philosophy is how you view money and how you use it.

Philosophy

Are you a saver or a spender? Do you view credit cards as a tool or a money sucker? When you do spend, do you prefer to buy stuff or experiences? Would you rather invest with the chance to earn more or put those dollars in a savings account for safekeeping?

As I mentioned before, your upbringing, what you’ve learned, and your personal experiences shaped the answers to these questions.

When you commit to a relationship, you’re going to have different answers. The key with any part of marriage, and money is no exception, are compromise and communication. You have to find some middle ground so each individual is getting their needs met, to an extent.

What you have to do is sit down with your significant other, dive deep into each other’s life experiences with regard to money, and what’s important to you, both now and in the future.

Once you have a good understanding of where you’re both coming from and what you want, you can work together to develop a plan, and once you have that plan, you can start executing

Related Reading:

5 Steps Before Tying the Knot

The Psychology of Money

How My Relationship with Money Changed

What Affects Your Credit Score?

Debt Consolidation Loans for Bad Credit: What Are Your Options?

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American household debt reached a whopping $13.21 trillion in 2018. Add the number of students who enrolled in classes and people currently signing up for credit cards, and you have a massive debt issue.

Many people are knee-deep in debt- even savvy savers and high earners.

If you’re wondering about debt consolidation loans for bad credit, you need to know what options you have and which loans can be a good fit for you.

Below are some crucial tips on navigating debt relief in its various forms.

Consolidation Loans for Bad Credit

Debt consolidation for bad credit can turn out to be a great success if you are well informed.

When you consolidate your debt, you stand to reduce overall payments and can pay off your debts faster without borrowing money in the direct sense.

How does consolidating student loans with bad credit work? You take several loans accumulating interest and/or debt and turn them into one loan.

Keep in mind that your credit score will usually affect your repayment plan. Still, consolidation is considered less risky, meaning you are more likely to pay off all your loans sooner with a consolidation plan than you would by paying them individually.

A consolidation company essentially buys your loans and offers you one monthly payment. Student loan consolidation with bad credit makes it easier to budget, saving you time and money in the long run.

Refinancing Loans with Bad Credit

Wondering how to refinance student loans with bad credit?

When you refinance your student loans, you will need to go through a private lender. Your private lender pays off your current loans and offers you a new loan. Your new loan has its own interest rate and payment schedule.

If you meet the eligibility requirements, you may find yourself paying off the new loan with ease. Of course, if you have bad credit, this could affect which lenders will offer a repayment plan.

You can always get a cosigner to receive a lower interest rate. Make sure you and your cosigner are on the same page about their amount of involvement and what they might expect from you during the repayment process. Communication goes a long way in this case.

Credit Counseling

Credit counseling can help you decide between different repayment options based on your financial goals.

For instance, if you are looking to pay off a balance on a credit card with high interest, you might be interested in starting a debt avalanche. Not to worry- this can be good for your credit. You pay more money initially, but you save a lot in interest.

If you have a number of accounts open and limited monthly funds, you might try the snowball method.

The snowball method focuses first on the account with the smallest balance, giving you a feeling of accomplishment. Since you are still eliminating debt, you gradually accumulate momentum until you’ve paid off your debts.

If you’re having trouble finding someone to help consolidate your debt, you can look to a credit union or nonprofit. Both tend to be more people-focused but may have limited funds depending on their customer base.

A credit union or nonprofit can connect you to another lender or provide inhouse services, depending on your needs and your credit.

Wrap Up

Don’t let debt pull you under. With a little patience and the right help, you can pay off your debts and help your credit score recover.

Contact us with any questions you might have about consolidation loans for bad credit. We address your needs with your financial well being at the forefront.

For more great Free Financial Advisor Articles, read these:

How Long Should You Keep Financial Records After A Death?

Advantages and Disadvantages of Saving Money In The Bank

What To Do When You’re Behind On Your Mortgage

Financial Planning Basics: The Financial Pyramid

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The first time I heard about the financial pyramid, I was instantly intrigued. I had never thought about it in this concept before, but I unintentionally had been practicing this in my own life.

In finances you have to build the base before you can reach the top or it will all fall apart, hence the allegory of a pyramid.

financial-pyramid

The Base

The base of your financial pyramid should be a solid financial plan. This includes your written budget, short-term and long term goals, and how you will make your income as well as an investment plan to be implemented in the future.

You should have a positive cash flow, meaning, no longer using debt to fund your lifestyle.

RELATED: The Importance of a Personal Investing Statement

Once you have implemented the base, you can move onto the first building block: protection.

Protection

You must protect yourself from the unimaginable, so I recommend everyone have a will and power of attorney, insurances such as life, health, auto, homeowner’s/renter’s, and disability, and a basic emergency fund of at least $1,000-$2,500.

I was thankful to have my mini-emergency fund when I had some car issues because I was able to pay cash to repair them instead of having to go into debt. The overall pyramid looks something like this:
the-financial-planning-pyramid

The second building block is low-risk wealth accumulation. This would include saving for a home, retirement, and children’s college education, in addition to reducing consumer debt.

Debt Reduction

Financial guru Dave Ramsey teaches that you should get completely rid of any debt before beginning savings, although, in my opinion, you should still invest in retirement while reducing debt only if your employer offers a match.

I, myself, am in the debt reduction stage but still contribute to my retirement account since my employer offers up to a 4% match into my 401(k).

Additionally in this step, you should create your emergency savings fund. Many people believe an emergency fund of 3-6 months’ worth of expenses is adequate.

Investing

The third building block is high-risk wealth accumulation.  This includes investing. Expanding on the second block, in this stage, you will max out your retirement accounts and then build a non-registered investment portfolio.

Once you have built your net worth to an amount sufficient to fund your lifestyle and retirement, you can move to the next stage of investing– speculation (also known as speculative investing.) In this stage, you invest money into investments such as start-up companies.

This is very risky, so you don’t want any debt by this stage. Also, you should only invest a small portion of your total investments into speculation. Also in this stage, you’ll want to begin tax planning, especially as your retirement investments increase.

Estate and Charity

The final building block is wealth distribution. You’ll gift and spend the money you have earned. As well as plan your estate for future generations or charity upon your death. Since your net worth increased quite a bit since you first started the financial planning pyramid, you should update your will and/or trust.

Finally, once you’ve got these basics nailed down, it’s time to hire some help. One approach a lot of millennials use is robo-advisors. A robo-advisor is a machine that uses various theories about portfolio allocation to make investing decisions. If you’re interested in a critical review of this, consider checking out Roboadvisorpros.com, they have a good article on the topic.

If you aren’t into trusting your cash to a computer, consider signing up with Personal Captial.  They’ve pretty much become an industry leader among the newer financial planning firms.

If you’re’ going to use them, please use this link or click on the banner below.  It will help keep the lights on here at The Free Financial Advisor.

personal-capital-pyramid
For help getting your financial pyramid in order, check out these great articles.

10 Best Financial Planning Blogs
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What Happens When You Fall Behind On Your Mortgage?

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what-to-do-when-youre-behind-on-your-mortgage
What does the bank do if you’re barely hanging onto your mortgage? What if you’re still a little behind, or a lot behind, on your mortgage?

First, it depends on your definition of behind.  It may not be the same as the bank’s definition (not shocking). Let’s examine:

1 – 15 Days Late

Most companies allow a 15-day grace period before tacking on any additional fees.  I know that being self-employed, my mortgage company calls me on the second of the month if I didn’t pay on the first, but there’s nothing to worry about if you’re “behind” less than 15 days.  No big deal.  That’s why they call it a “grace” period.

15 – 30 Days Late

If you’re in that 15 to 30-day time frame, prepare for a ton of telephone calls from your mortgage service provider (probably between two and four a day).  You’ll also begin receiving letters reminding you that if you forgot to pay your bill, now would be the perfect time to make that payment.

Back when my income was very unsteady, a sneaky trick my mortgage company would pull was to send out another bill insinuating that I was two months behind and that if I disagreed with them I should call ASAP.  Sneaky snake oil salesmen they were.

During this fifteen to thirty day period, if you can’t pay, don’t worry about the phone calls.  You’ll have to pay a small late fee of some kind, but there still won’t be any damage to your credit report.

30 – 59 Days Late

It’s important to note here:  If you’re running up against that 30-day late period, it’s best to drop everything and pay your mortgage.  Even if you’re habitually late 29 days; it’s better than being 30 days late from a credit reporting standpoint.

Now the letters and phone calls increase dramatically until you’re 60 days late.  Your credit report will note your current late status. Your credit score will fall.

60 – 90 Days Late

Here the phone calls and letters will cease.  Does the mortgage company give up?  Ah…that would be nice, but alas, no.  They change tactics.

Once you’re over 60 days late, they’re going to send someone out to your house, just to make sure it and you are still there.  You can see these people coming a mile away.

They circle your block two or three times, usually, they don’t look like they belong in your neighborhood, then they run up to your front door, peer in a window or two and leave a note on your door saying “Sorry we missed you.  Please call us at once.”

It’s at this point you should start preparing for your next steps.  If you’re 60 or 90 days past due, it’s probably a lingering problem, but all hope isn’t lost.

The best thing you can do when you’re behind is to communicate with your lender.  Home lenders have instituted a number of programs to help you work through your late status.

The second biggest thing to remember is that the people you talk to don’t know you and you don’t know them.  They don’t care about your problems.  It makes no difference to them whether you stay in your house.  They’re a thousand miles away in a cubicle.  Stay calm while talking to your lender.

When you’re behind more than 30 days, you need to start talking – but don’t wait until it’s too late.  Call your mortgage company, explain your personal circumstances, and begin laying the groundwork to solve the problem.

Can you pay the late payment over a couple of months?  How about rolling that payment to the back of the mortgage?  Can they waive a fee or two?  Sometimes they will, sometimes not, but you’ll never know if you don’t ask.

Next week I’ll talk about the different options you have when you’re really behind on your mortgage and what they all mean.  Stay tuned!

For more on paying off your Mortgage and ways to help you do it check out these articles.

Pay a Little Extra on Your Mortgage – What a Difference it Makes
6 Tips for Paying off Your Mortgage Quickly (Without Going Broke)
Don’t Be Afraid to Refinance: 6 Options to Meet Your Financial Needs

Photo: Hanging On: Jess2284

My Goals for 2020

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Now that we’ve turned the calendar to another year, another decade, it’s time to figure what goals we would like to set.

Specifically, in this post, I’m going to go over the goals that I’m setting for myself, why I’m setting that goal, and how I’m going to put a system in place to achieve that goal.

What are my goals for 2020?

  • Get out of debt – Bought a house in 2019 and bit off more than I could chew. The divorce also threw a wrench in my financial planning.
  • Save for retirement – I’ve put my savings on hold for the time being due to poor financial decisions that led to the debt, etc.
  • Incorporate a meditation practice – I’ve harped on it and studies show how much it helps. I need to do this.
  • Journal every day – When I remember to journal, those are generally good days. I need to do this consistently.
  • Read every day – Reading can only help me, so why wouldn’t I do it more? I’ll learn something new and it’s shown to provide some meditative benefits.
  • Spend more dedicated time with my son – I’ve found myself over the last month or so having my phone out more than normal. I mean, I’ve had quite a lot going on with work and mentally, but that’s no excuse. He deserves better.
  • Exercise regularly – it’s good for my body and my mind. It’s a must.

Typically, when you’re setting goals, you should be very specific. You’ll notice, that I wasn’t. I get more granular with my goals in the systems section.

My systems

Getting out of debt and saving for retirement we can lump into one system, as they both revolve around finances and me reigning in my spending.

Until April, this will be incredibly challenging, as I am currently paying my mortgage on my house and the rent for my apartment.

So until I get my house rented (I have tenants set to move in, in April), I’m kind of stuck. Once that happens, however, I’ll have the debt repayment pedal down to the floor.

Simultaneously, I’ll contribute $20 per month to my retirement account, just to get in the habit of doing it again. Start small, enforce the habit, then increase the dollar amount.

Meditation

Of my goals, incorporating meditation practice should be relatively easy. I know my preferred style – I’m not one to sit pretzel-legged on a cushion. I lay down on the floor, on my back, which some relaxing music playing.

The hard part is a) making the time for it and b) doing it consistently. To start, I’m going to set my alarm for 5 minutes earlier than normal.

5 minutes might not seem like a lot, but if I wake up 5 minutes earlier, that gives me 5 minutes to meditate. If I do that consistently for the next, say three weeks, those extra 5 minutes won’t seem that, and I can scale it to 10 minutes.

As I noted in last week’s article, when forming a habit, you have to start small and then scale up.

Reading

Reading every day. This is a must-do for me. It’s good for my mind, it’s good for my soul, it’s good for everything. I have a great many books on my list, but they will all fall into a specific genre – finance, philosophy, religion, or biographies.

The first one will help with work. The last three will help with life.

Every day, before bed, I’m going to read for 15 minutes. That’s my starting point. Once I get into the habit, the amount of time I read will increase.

Spending time with my son

Spend more dedicated time with my son. This is an easy one. Just stay off my gosh darn phone.

Keep it in my room or in the kitchen. Not in my pocket, where I can easily access it. Put the ringer on and leave it alone.

If it’s an emergency, someone will call and I will hear it.

This will also eliminate a distraction, so if he goes to bed for the night, I can immediately pick up a book without getting sucked into the social media black hole.

Exercise

Exercising every day. I read recently in a book about the Dalai Lama that exercising your mind is more important than exercising your body, so I’ve put that on the back burner.

I have a pull-up bar in the doorway to my bathroom and I do 5 pull-ups every time I go in, but that’s not enough dedicated, consistent time for exercise.

I think doing it in the morning makes the most sense. I’m too tired in the evenings to exercise. The question is, do I do this before or after meditation?

Probably after, as I need my mind at ease when I meditate.

So instead of waking up 5 minutes earlier, I’ll start by waking up 20 minutes earlier. Dedicated 15 of those minutes to exercise and the remaining 5 for meditation.

Related reading:

A Systematic Approach to Goals

Worthy Goals for You to Set and Crush

How Do You Set Financial Goals?