Debt

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Q. We bought a house in Tennessee, and we are deep into debt. We want to know if we can just ask the bank to take back the house? And would we owe the bank money? We have two car payments we are having trouble paying, we are up to date on all our bills, but have nothing left to live on.

We bought the house this past November and received the tax credit. How does that work? Does that have to be repaid too? We are planning to meet with someone from consumer credit counseling, but we are so stressed from our bills. We are both retired, and we already filed bankruptcy in 2005.

Anonymous
Lenoir City, Tenn.

Here's some news from the silver-lining department: A new poll shows that the recession has made Americans more aware of their spending habits and instilled in us a desire -- if not necessarily the funds -- to pay down our debts.

According to a poll of 3,201 Americans recently conducted by the National Foundation for Credit Counseling , slightly more than half of all respondents said the recession has inspired them to take steps to pay down their debt.

"Consumers have apparently become uncomfortable carrying debt, realizing how detrimental it can be to their overall financial well-being, and have gotten serious about doing what it takes to pay it off," Gail Cunningham, vice president of public relations for the NFCC, said in a statement that accompanied the poll.

Times may be tough, but some students are still managing to make payments on their student loans. The U.S. Department of Education just released an extensive list of colleges where students have the best -- and worst -- track record of repaying their loans -- and some interesting trends have emerged.

U.S. News and World Report sorted through the list, which ranked 8,412 colleges, job training programs, and graduate schools across the country. One finding: students at nursing schools and institutes of technology are among the most diligent about paying their student loans. Among the top 20 colleges on the list, are the California Institute of Technology (CalTech) and Medcenter One College of Nursing located in Bismark, North Dakota, both of which saw more than 90% of students repay their loans in 2009.

Sure, everyone's watching their spending -- but in some areas, women in particular are blowing it. "There is some dangerous impulse buying going on, and it's being driven by fear, and our obsession with buying bargains," says Kit Yarrow, professor of psychology and marketing at Golden Gate University. She says we overindulge at warehouse clubs, outlets ... and, most predominantly, here:

Sample Sales
"People are just buying stuff for the label even though what's on sale may just be slow-selling merchandise, irregulars, liquidation of a previous season, overstock, or items that buyers didn't want," says Kathryn Finney, author of "How To Be a Budget Fashionista: The Ultimate Guide to Looking Fabulous for Less." "You're better off paying full-price for something you'll wear all the time than half price for something you'll wear once, or not at all."

While most of the economic news out there isn't too encouraging, here's something positive to think about: The amount of debt Americans owe on their credit cards is dropping.

In fact, it's at its lowest level in eight years, according to TransUnion, one of the nation's largest credit bureaus. The average amount that people owe on their credit cards is currently $4,951, down from the $5,719 it was a year before. In addition, more borrowers made payments on time in the last quarter compared to the year before.

If you're one of those Americans who has a mountain of credit card debt that you'd like to make into a molehill, this is as good a time as any to rethink or re-tune your debt reduction strategy. Take a look at the following list of tips offered by a few credit experts. We bet you'll find a few tips that will help you pay down your debt faster, even if your funds are limited.

If a debt collector calls and threatens to sue or have you thrown in jail unless you immediately authorize a payment from a bank account, hang up because it's a scam, says Illinois Attorney General Lisa Madigan.

Madigan has issued a consumer alert warning people to be on the lookout for scammers posing as payday loan debt collectors. They call and threaten either a lawsuit or even arrest unless a payment is made. The state has seen a rise in consumer complaints of these bogus collection calls in recent weeks. In most cases, the callers already have some personal information about the consumer, including a place of employment and Social Security number. They also say they have the consumer's bank account number on file and ask to confirm the number.

Banks are experiencing Post-Traumatic Stress Disorder from the foreclosure crisis -- big time. They are painfully aware that loose lending kicked off the nasty economic domino effect that ended in millions of foreclosures, and billions of dollars in lost real estate wealth as a result.

We're all aware that, as a result of this mortgage PTSD, banks have raised the bar on what it takes to get a home loan. They know the riskiest borrowers are the ones whose income and assets were undocumented, and those who had no skin in the game because they hadn't put down a down payment. These are the folks who were the most likely to lose or walk away from their homes when the values plummeted.

Danielle Liss knew she was headed for a financial crisis. The Nevada-based lawyer had watched her credit card debt climb to $37,000, and she'd recently borrowed $45,000 from a relative. For the time being, she was keeping her head above water, but the date by which she needed to start paying off her six-figure student loans was less than a year away.

"I knew there was no way I could continue to manage my credit card payments and make my loan payments when the forbearance ended," Liss told WalletPop. She knew she had to act while there was still time. She considered bankruptcy, but since most of her debts would still be in place (student loans aren't discharged, and a court order wouldn't erase the family tie that bound her to paying back the $45,000), she had to find another way out.

In part one of this two-part series, Money College blogger Jennifer Larson explored how students can get student loans paid or deferred through their volunteer work. Here, she reports on loan forgiveness students earn through SponsorChange.org.

When Sheena Hancock received an e-mail from Pittsburgh Cares with the subject line "Volunteer to Pay Off Student Loan Debt," she was intrigued for reasons many college grads can relate to. At the time, she was looking for ways to pay off her debt, and also genuinely enjoys giving her time to affect change in society. She responded to the e-mail, filled out an application, and was asked to come in for an interview.

The rest fell into place.

Pittsburgh Cares is a volunteer clearing house for nonprofits in Pittsburgh and an affiliate of the HandsOn Network, a national organization. It partners with SponsorChange.org, which assists in outreach and administrative efforts for the fall program.

SponsorChange.org is currently located in Pittsburgh, but plans to expand to other major cities in the U.S. The program was created to address the national student loan crisis and to also assist nonprofit organizations with their goals. Volunteers get to employ specialized skills they otherwise might not get to use in their day jobs.

As for whether the experience changed Hancock, let's just say she's now director of internal and external communications of SponsorChange.org.

In part one of this two-part series, Money College blogger Jennifer Larson explores how students can get student loans paid or deferred through their volunteer work.

If you feel stuck in the never-ending cog of student loan debt, you are certainly not alone. A lot of people are in the same situation, and among there are many ways to break free including -- surprise -- volunteer work.

If your main priority in life is giving back to society and helping others, you may have heard plenty of times that this will keep you from making big bucks. That may be true in some cases, but many volunteer organizations and teaching programs recognize your hard work and want to reward you for it.

Several organizations and employers offer aid for paying student loan debt and loan forgiveness programs. Similar to volunteer organizations, a few teaching programs award college grads with student loan payments or enroll them in forgiveness programs. These programs also allow grads to positively affect their community while they start to pay off student loans.

California Attorney General Edmund Brown is suing TV's Tax Lady Roni Deutch for $34 million, claiming she duped thousands of consumers who sought her tax advice.

"Tax Lady Roni Deutch is engaged in a heartless scheme that swindled people with tax problems," Brown said in a statement. "She promises to significantly reduce their IRS tax debts, but instead preys on their vulnerability, taking large up-front payments but providing little or no help in lowering their tax bills."

Deutch is a licensed attorney who runs a tax resolution law firm in California. Her claims to fame are her frequent appearances on late-night cable TV, NBC's Today Show, CNN and CNBC.

To say that Billy Glynn expresses controversial, self-styled views for solving America's economic woes is putting it mildly. A self-described "think tank of one," the venture capitalist and entrepreneur is used to raising money by the millions in fields from music technology to molecular science; InformationWeek once ranked him as one of 15 top global innovators.

Now, he's out to raise some ire with his new book, "The United States of Bankruptcy: 20 Great Ways to Save the American Way of Life" (Franklin Green). In it, Glynn maintains that America has gone bankrupt -- socially, spiritually and financially -- and that our nation's politicians have become "nothing more than [objects of] consumer branding led by commercials designed for us to buy a political product." Ouch.

So where does economic recovery begin? As Glynn told WalletPop, Americans need to start acting not merely as citizens, but shareholders with everything at stake: "If we allow our government to do more of the same, we will lose more international confidence in our economy than we have already." he says. "We will be cut off from those nations buying our debt and keeping the U.S. from bankruptcy right now. As bleak as all this sounds, I believe solutions can be brought to the political process."

But those solutions, as Glynn outlines them, would involve some wholesale changes many in power would find hard to swallow. Likewise, Flynn has some harsh words of rebuke for Americans who have spent themselves into all sorts debt.

With $830 billion in student loans outstanding in America, mounting student loan debt is increasingly wreaking havoc on the lives of U.S. college graduates and dropouts alike.

As unemployment remains stubbornly high, delinquencies and default rates are rising as indebted borrowers struggle to repay hefty student loans that often reach six-figures.

Unfortunately, college debt isn't just taking a financial toll on millions of borrowers. It's also inflicting staggering costs on the health, careers, emotional well-being and personal relationships of those burdened with big college loans.

At StudentLoanJustice.org, where people share their stories about living with college debt, one person talks about suffering a mild heart attack, while another laments having panic attacks – both due to the stress of student loans. Others admit having sleepless nights, migraines and even thoughts of suicide.

In fact, in a poll currently running on ForgiveStudentLoanDebt.com, 8% of those surveyed said they would be willing to commit suicide "as an aggressive form of protest" in order to be heard by Congress about their student loan plight.

So if you think the worst that can happen with hefty student loans or unpaid college debt is money problems and bad credit, think again.

It can actually get worse. Much worse.

Death and debt: Both can be uncomfortable subjects to discuss, but what happens to your financial obligations after you pass away is one uncomfortable conversation worth having with your loved ones. Survivors of the deceased can often fall prey to some common traps when it comes to "inheriting" debt, and it's imperative they know their rights before it's too late.

Carole Brody Fleet (pictured at right) almost fell victim to a common heavy-handed tactic used by lenders against grieving families. Fleet, who later wrote a self-help book about her experience as a widow, tells WalletPop she was contacted roughly one month after her husband passed away in 2000 by a law office representing the couple's long-time credit union.

"I was never contacted personally by the credit union, many employees of which were at his funeral," Brody says. Instead, she received a letter informing her of an old account - predating her marriage - on which her husband still owed money. The credit union was threatening to take her to collections. Brody, who had a background as a paralegal, saw this empty threat for what it was and didn't pay a dime. "I was shocked and outraged," Brody says.

TV ads promising extra money each month through an auto loan modification may be tempting, but be wary of scams, warns the Delaware chapter of the Better Business Bureau.

"Auto loan modification companies are following in the footsteps of unscrupulous mortgage modification companies which have long targeted struggling families who are just trying to stay above water," Delaware chapter president Christine Sauers said. "Some companies may make it look like they are tossing out a life preserver, but they end up pulling many borrowers deeper underwater."