Current Balance vs. Payoff Amount

Payoff amount and current balance are related but not equivalent terms.

Current balance means the amount you owe according to your statement. The next day, you will owe more. In other words, if you are trying to pay off a credit card and the statement says your balance is $514, you may not be able to bring your balance to zero and satisfy the debt by writing a check for $514. Instead, you would need to contact your lender to find out your payoff amount.

Payoff amount is how much you would have to pay to satisfy the debt. It is not the same amount as the current balance on your statement—at least not for long.

The difference between the current balance according to your statement and the payoff amount is crucial when you are ready to pay off your debt.

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How Not to Defend a Debt Collection Lawsuit

This article is a list of defenses that do not work. If you would rather find out what you should do, click over to “Served By a Debt Collector? What To Do Next.”

Most debt collection lawsuits are handled by overworked and unsympathetic debt collection attorneys. With that in mind, focus on your best defenses to the lawsuit. Here are some of the weaker defenses, which you should avoid.

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5 Great Questions to Ask a Debt Collector

Minnesota debt collection defense attorney John Rossman wrote this breathless warning for debt collectors for InsideARM:

An army of Debtors — fully equipped with scripts drafted by consumer attorneys and recording devices — are using their telephones as weapons to wage war on unsuspecting Debt Collectors across our nation.

Rossman warns debt collectors that consumers are trying to “entrap” collectors and “trick” them into violating the Fair Debt Collection Practices Act by asking the following questions:

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Avoid Debt Collection After a Divorce

In most divorces, the ex-spouses agree that one of them will assume some or all credit cards, which were probably joint cards. Unfortunately, a divorce decree does not bind the creditors, who can still collect the debt from either account holder.

Often, the spouse who agreed to assume the credit card debt has a hard time paying it off, which lands the exes back together in collection. Debt collectors can continue to collect from both of the names on the account, regardless of what the divorce decree says.

To prevent marital debts from haunting you after divorce, be proactive. Whoever agrees to assume the debts should get a consolidation loan in his or her name only. If possible, do this before finalizing the divorce decree. If that won’t work, get your name off any account your ex has agreed to pay. Tell the banks your ex has agreed to be liable, and demand that they remove your name from the account. Do this in writing, and before the card goes into default.

If all else fails, close the account. That way, at a minimum, you can be assured that your ex cannot continue using the card and making the debt worse.

Why the CARD Act is Good for Consumers

The market works well when everyone understands what they are buying and selling. But credit cards are complicated financial products. Few consumers can make an intelligent comparison of one card to another. That is a big part of why credit card companies have gotten away with charging ridiculous fees, double-cycle billing, and other transgressions over the years. Nobody knows what they are, and there may not be alternatives, anyway.

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Repairing a Bad Credit Score is Getting Easier

To repair your credit score in the past, you had to do a lot of guesswork. But because of the recent financial reform bill, lenders who refuse to loan you money will have to tell you why. They will also have to give you a copy of the credit score they used to decide to turn you down. This goes for employers, insurance providers, and anyone else who takes an “adverse action” against you based on your credit report.

Getting rejected sucks, but at least in the future you will know why, which means you can work to fix the problem.

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Confessions of Former Debt Collectors

CNN Money’s gallery, “Confessions of Former Debt Collectors,” offers a glimpse of the humans on the other end of collection calls. All talk about bullying debtors. Some regret it:

I realized that if someone owes one person money, they owe a lot more people money and they really aren’t deserving of such harsh treatment.

One particularly hard story comes from Bob Cook, who called a debtor to repossess his mobile home around Christmas time. Cook says he tried to be nice, but the debtor “winded up going home and shooting himself. I quit after that.”

Done properly or not, collecting debts takes a toll on collectors and debtors alike.

Fraud Alerts Will Not Hurt Your Credit Score

LifeLock has had its troubles, but its main tool—putting a fraud alert on your account every 90 days—does not hurt your credit score. It does, however, make it more difficult to get credit, because lenders have to jump through more hoops before approving a credit application.

So if you are not planning to try to obtain credit in the next 90 days, go ahead and use a fraud alert. Otherwise, know that placing a fraud alert on your credit files will make it more difficult to get credit.

Fraud Alerts Don’t Hurt Your Credit Score | NYT

Should Creditors Be Able to Send “Deadbeats” To Jail?

If this has you worried, read How to Avoid Ending Up in Jail for Debt!

Consumerist picked up on the article about debtors being thrown in jail, and a surprising (to me, anyway) number of commenters chimed in to support the debt collectors. For example, one commenter wrote

Not paying your debt = stealing. For stealing you go to jail. I am on the side of the little man, but there is no excuse to run up a debt and then simply choose not to pay it.

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Use for Free Credit Reports

If you want a free copy of your credit report, head over to, which was setup by the Federal Trade Commission.

Thanks to Congress passing the Credit Card Accountability Responsibility and Disclosure Act of 2009, the ads should be a more clear in the future. FreeCreditReport will now have large disclosure ads on their website that say something like “You have the right to a free credit report from . . . the only authorized source under federal law . . . .”

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