While I write about personal debt tips all the time, I thought I would turn the pages, and write about business related issues instead.  Upon researching some business tip terms, a common one that pops up is, “debt factoring.”  I wanted to give you a detailed definition, as well as fees that you may want to be aware of.

The definition of debt factoring:

This is when you sell off your business invoices to a third party.  The third party will then charge you with processing, and the business will then be able to receive loans that are based on the payments on the invoices.  This is generally an estimate.

What businesses should use this?

This type of factoring is for businesses that need money rather quickly.  Businesses will find that through various resources, they won’t be able to get the loans / money that they need.  As long as you have a typical cash flow that you can prove, you should be able to use this type of service.

If you plan on using this service, you’re going to need to provide the lender with some invoices from the past.  Most of the companies out there on average are going to give you anywhere from 80% to as much as 95% of the value of the invoices.  This is all going to depend on who you sign up with.

What are the fees?

The fees for factoring your debt is going to vary on the lender.  Most lenders will take a small percentage.  This percentage can vary from 3% and on.   The average from researching is anywhere from 3 to 10%. The great the amount of money that you need, the greater the percentage can be.

If you, and your business decide to go down this route, you’re going to want to make sure that you read the terms and conditions, as there are many.  Most of the time, you will have to pay within 90 days.  While this may be an option to choose, be sure to read into before signing up to make sure that you want to go down this route.

A few days ago, I touched on the question what happens to debt before marriage, and while I touched a little bit on the divorce part, I thought I would go more into details.  Sadly, if you’re going into divorce, you’re probably wondering what’s going to happen and what you’re going to more than likely owe.

To set things straight, let’s take a look at what happens to debts in divorce:

Before you even get started, you’re going to want to consult with a debt / divorce attorney before you start reading things online.  Trust me, there are a l0t of misleading tidbits online, and you’re going to want to ensure that you’re getting your facts straight.

Step 1 – Get your credit report

The first thing that I would recommend is that you get ahold of your credit report. You and your spouse are going to want to analyze your debts, and see what is owed.  If you’re going to be civil, and you want to agree upon things, this may be the easiest way to do so.  Whether you want to sell a car, or trade some debt for another, this is really up to you.  You will want this credit report to see all of your debts that you owe today.

Step 2 – Watch your debt

Going through a divorce process doesn’t happen overnight.  What you’re going to want to do is make sure that you “freeze” your debts.  Don’t spend your credit cards, or get another loan.   Since you’re still legally married, you will find that these new debts will not only put a burden on you, but tack on even more debts to your total.

Step 3 – Agree on items

Start sorting through your debts, and try to agree on things.  If you can’t agree, this is where the courts are going to come in.  This is where you will want to be civil, and agree to what you should pay off, as well as what you should get rid of.  If you can’t get rid of some things, find out if you’re going to pay 50/50, etc.

Looking at the entire debt process

As you file for divorce, you’re going to have to work through the family court to finalize items such as who’s going to own the home, dog and more.  This is really for those that that can’t agree on things.  Even when you agree, they will finalize everything in terms of statements and more to make it official.

What happens if they don’t pay?

Let’s say that you agree upon 50/50 when it comes to your debt?  Well, you’re finding out that they are bailing out and you’re not seeing your money for the bills.  What can you do?  You’re going to want to either petition the court to enforce the agreement,  or pay the payment and tell the family court that you’re paying, but need reimbursement from your spouse.

The best thing to do in the end is to consult with an attorney, as well as be as civil as possible.  When you can agree upon debts, it’s going to make things a lot easier for you.

Credit: Flickr

If you’re in debt, or you’re in the process of bankruptcy, you may have heard the term of, “Cancellation of Debt”, but you’re probably wondering what it means.  To set things straight, let’s dig a little deeper and find out exactly what cancellation of debt is.

What exactly is cancellation of debt?

Cancellation of debt is granted to either individuals or even a business.  This debt is generally canceled when a person declares bankruptcy.  For example, if you declare bankruptcy, your credit card debt is going to be canceled.   Granted, there is debt that is unforgivable such as student loans and more.

Just because you file bankruptcy, it doesn’t mean that you’re going to be able to cancel all of your debts.  Each, and every loan on your account is going to have it’s own policy.  The best word of advice for you is to consult with a bankruptcy attorney, because he/she will be able to guide you in the right, legal direction.

Besides bankruptcy, there are instances when you can cancel debt without declaring bankruptcy.  Many credit card companies out there today allow you to purchase insurance that you can apply to your account.  If you incur a terrible accident, disability, or something else, the credit card companies can wipe your debt clean.  The terms and conditions are rather extensive with this, so be sure to read into this to learn more about it.

As for other loans such as student loans, mortgages and more, you will find that via extreme circumstances,cancellation of debt can happen, but 99% of the time, it probably won’t happen.  I’m not saying that you can’t have it done, it will be via extreme circumstances.

In the end, cancellation of debt basically means that you’re going to wipe your debt clean.  Whether you have an insurance policy, or maybe you declare bankruptcy, each and every account is going to be different.  Consult with either an attorney, or read the terms and conditions with your account to learn more.

So, you want to get married, but you’re worried about your finances?  One of the biggest problems when it comes to a marriage proposal is money.  If you have any type of debt, it’s always best that you tell your significant other to avoid any type of stress issues in the future.

What happens to your debt before marriage?

First off, what you’re going to find is that your debt won’t go anywhere.  It’s still going to be there, and you’re still going to have to pay it.  There isn’t a magic wedding pass that you’re going to get, when you’re fighting debt.

Now, onto debt, what you will find that the only way that you will be responsible for your spouse’s debt is that if you put them onto the debt with you.  While many spouses won’t do this, you will find that if you add your name to the account itself, then you will be held responsible together.

Now let’s say that god forbid you  have a divorce in the future.  When you get a divorce, you find out that there is debt still sitting there prior to your marriage.  As long as you can prove that you didn’t create it, and it happened before you got married, you generally won’t be held responsible.

Once you’re married, all debts that you accrue while married will hold both of your responsible.  If you go on to purchase a home, a car, boat or whatever it may be, once you’re married, you’re looked at as a “one.”

In the end, as long as all of the debt was accrued before the marriage, you won’t be held responsible.  In case creditors call, and mistaken your identity, all you will have to do is prove that you don’t owe that debt.  Most of the time, you can show marriage certificates, etc to show that you weren’t married at the time.

When you want to agree upon debt, it’s essential that you send the debt company a form.  The reason that you want to do this is to show that you have agreed to an amount.  You don’t want to send them off money, thinking that you paid off your debts in full, and find out that things got mixed up and they never agreed in the first place.

What you’re going to find is that if you didn’t know already, you can agree to debt pay offs that don’t necessarily equal the total.  For example, let’s say that you owe $10,000 on a bill.  You may be able to call up, and settle on $5,500.  Now, if they agree, this is when you will want to write the following letter.

How to write a debt agreement letter

YOUR NAME
YOUR ADDRESS

Debt College Agency Name
Address

RE:  Your account number, or something to reference your debt.

To whom it may concern / Dear Mr/Ms. (Name):

In regards to our phone call on [DATE], I had brought to your attention that the balance on my account was currently [$TOTAL].  While I can’t afford to pay everything today, we had agreed that I could pay [$TOTAL] to cancel out the debt / balance.

Since I would like physical evidence, I would appreciate that you confirm this letter by signing a copy, and sending it back to me at my home address listed above.  Once you accept my terms, and I receive this letter signed back from your company, I will proceed to send the check to your company within 21 days.

I hope this agreement still stands, and I appreciate you working with myself and my family.  Thank you for understanding this situation.

Sincerely,

Signature
Your name printed

———————————–

I, ___________________ agree that if [$TOTAL]  is paid, the balance on account # [ACCT NUMBER] will be considered null, and the balance will be set to $0.

Signature: ________________________
Date: _________________________

Tips that you will want to use:

• Make sure that you send certified mail, so that you know that they have received it.
• Let them know ahead of time that you’re sending them a letter.
• If you don’t get a response within 30 days, be sure to follow up.
• Make a copy for yourself when you send it out.
• Once you receive a signed copy, send out your money and live up to your word.  Save this copy for future evidence, if anything does happen.