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FAQ - Other Credit Questions

Question - Is bankruptcy the answer to my problems?

Answer - I don't know the answer to that question, because it is based on the facts and circumstances of your individual situation. We don't judge people based upon their decision to file or not to file bankruptcy. We suggest talking to a bankruptcy attorney regarding your individual situation. However, you need to understand the ramifications of choosing bankruptcy in regards to your credit score and credit reports. When you file for bankruptcy, every credit account that you decide to include in the bankruptcy will become an "included in bankruptcy" account on your credit report. Also a bankruptcy listing will appear seperately on your credit reports which will stay on your credit reports for 10 years. It can be difficult to remove all traces of a bankruptcy from your credit reports.

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Question - Are there any way to fix tax liens from the I.R.S.?

Answer - Tax liens can stay on your credit report for seven years unless your state only allows a five year reporting statute. If you have a tax lien, first consult a professional tax representation firm who will help advise you on the best way to deal with the tax lien. It is possible that these firms will be able to negotiate a reduced amount with the taxing authority. It is imperative to either negotiate a settlement or pay off the entire tax lien.

Tax liens are public records that have passed through many beauracratic hands. I mean we are talking about the government here so the chance for an error is very high. The chances of your lien containing errors or unverifiable items is also very high. If there are errors or the tax lien cannot be verified and it must be removed.

Tax liens create two seperate issues that must be dealt with. First, you have the actual tax debt, which needs to either be paid in full or negotiated and paid. Second, you have one or more negative credit listings, which appear, on your credit report. Your best bet is to address the tax debt first and then possibly address the negative credit lisitings through our credit restoration program.

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Question - What are Consumer Credit Counseling Services (CCCS)?

Answer - Consumer Credit Counseling Services (CCCS) are debt management services that through discussions with you and negotiations with your creditors will create a debt management plan (DMP). If you and your creditors agree to the DMP you will pay the CCCS one low monthly fee in return for lowering your monthly payments. The CCCS will pay all of your debtors on your behalf and keep a portion of your monthly fee as payment for their efforts. You continue to make monthly payments until all of your debts are paid off. The term of the agreement is generally 4-7 years.

I'm not trying to be cynical, because there are many reputable CCCS firms in the market, but you need to think about the ramifications of this option seriously before you execute a DMP. Once you agree to the DMP all of your creditors will report either "DMP" or "credit counseling" on their individual credit listings. This listing is the second worst listing you can get on your credit report other than bankruptcy. However, it is possible that the DMP could stay on your record for up to 14 years! It will stay on your credit record for the 4-7 years of the payment plan and 7 additional years from the final payment made. So by doing the "right" thing and paying all of your debts off you get punished for possibly longer than you would if you had just filed for bankruptcy. That is why credit counseling services make no sense to me. You should be applauded and in my mind rewarded for paying your creditors not punished for longer than if you had filed for bankruptcy. In addition to these negatives you will also pay more over the term of 4-7 years than the debts you originally owed when you started working with the CCCS.

Everyone has to make their own decision on what is best for their situation, but those are my thoughts on Consumer Credit Counseling.

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Question - What are the pros and cons of using a CCCS?

Answer - Pros include: you only make one payment per month; debt collectors stop calling you; interest rates and monthly payments are reduced; your bills are paid for you, and you have paid your obligations; some people say it is better than bankruptcy

Cons include: you are still obligated to pay back the full debt balance owed; it will take 4-7 years of payments; you are restricted from using credit during the term of your DMP; it can stay on your credit report for up to 14 years; you will damage your credit; and the set up fees and commissions charged can be high

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Question - What about debt elimination services?

Answer - These so called services are fraudulent and using them could land you in jail. When facing large amounts of debt many people get scared and these fraudsters prey on this fear. These debt elimination services claim that they can eliminate all of your debt with no repercussions if you pay them a large fee sometimes in excess of $2,500. They claim that under federal law debt you have incurred using credit cards is not legal debt. They send you a piece of paper that you are supposed to take to your local bank and your credit card companies which will legally absolve you of any obligation to pay the debts owed. This is an expensive lie that could land you in jail so please don't fall for it. If you have lost your job or your debts are just unmanageable and you have other options.

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Question - Is it possible to alter my Social Security Number or use an Employee Identification Number (EIN) to get a fresh credit file?

Answer - It is possible to do this and many people have done it. However, just because you can do it doesn't make it a good decision. By altering your social security number or using an EIN number to create a fresh credit fil you are committing fraud. If it was me I would suggest steering clear of companies that broker in this kind of business. I'm not here to pass judgement on anyone who chooses to do this, but I can tell you the risks of pursuing this option far out way benefits. The costs charged by these companies can be exorbinant along with the risk of imprisonment makes this a dangerous proposition.

Also, just think for a second about someone who is in there thirty's or forty's that has absolutely nothing on their credit report, it defies all logic. When potential creditors see zero credit history not only are they suspicious, but if you don't have any credit history how can a creditor determine if you are credit worthy. Having an average to poor credit history is better on many occasions than having no credit history at all.

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