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By LIZ PULLIAM WESTON
Old Debts Can Continue To Haunt
Dear Liz: A debt I owe is appearing as two debts to two different companies on my credit report. One is the original company and the other is a collection agency. Can credit bureaus do that, and what happens if I don't pay either of them?Answer: State laws differ, but generally creditors have a set period of time in which to sue you over a debt. In
A creditor, including a collection agency, can try to get you to pay after this statute of limitations expires. Some will even sue, hoping you won't show up in court to point out that the statute of limitations has ended. Once the creditor gets a judgment, it may be able to get some of your income through wage garnishment.
Even if the creditor doesn't pursue legal action, the unpaid bill will continue having an effect on your credit scores until it's dropped from your credit reports. Such negative marks are typically removed seven years and 180 days after the account first went delinquent.
As for your question about one debt being listed twice, the answer is yes, the bureaus can list debts that way and commonly do. The first entry is reported by the original creditor, who charged off the debt, and the second entry is reported by the collection agency that purchased or was assigned the debt.
Dear Liz: My wife and I are approaching retirement. Our home has about $225,000 in equity, but the kitchen/family room needs about $65,000 in remodeling. Remodeling will probably add $125,000 in value but will obviously add to our debt. We've spent way too much time talking about this and would like your suggestions on the best approach.
Answer: In the best real estate markets, there are relatively few remodeling projects that add more to the value of the home than they cost. Typically, you get back 70 or 80 cents on the dollar when you sell, at best. In a declining market, even those payoffs can't be guaranteed.
So unless your kitchen/family room is actually a gaping hole exposed to the elements, remodeling isn't "needed" and the project certainly won't add nearly twice its cost in value to your home.
If you plan to stay in your home a long time, feel comfortable tapping your equity for this upgrade and can manage the payments on the loan, then the project can make sense. If you're planning to sell soon, you'd probably be smarter to confine yourself to less-expensive cosmetic upgrades (new paint, say, or perhaps new appliances) and let the next owner handle the remodeling.
Dear Liz: What you've been writing about fee-only financial planners is of great interest. I simply do not know how to find one who is reputable. I would not just pick someone from a list. It would have to be through a recommendation from someone who is well regarded. Do you have a suggestion?
Answer: I don't provide recommendations or referrals, but you can get some from two organizations that represent fee-only financial planners: the National Association of Personal Financial Advisors (www.napfa.org) and the Garrett Planning Network (www.garrettplanningnetwork.com). NAPFA, which represents planners who deal mostly with wealthy individuals, has strong education, experience and ethics requirements for the planners they refer. You can read more about those on its website. The Garrett network focuses on providing by-the-hour service to middle-income folks, and its website includes a list of questions you should ask before hiring an advisor.
You shouldn't rely on any single individual's recommendation, in any case. Investors are responsible for doing their own due diligence, and that includes checking the backgrounds of financial planners. Ask for the planner's Form
You also want to make sure the planner has other clients like you, with similar incomes and in similar situations. If you're the advisor's only retired client and everyone else is in their 30s, for example, the planner may be more versed on investing for retirement than investing in retirement.
A bit of research can help you find a planner that fits your circumstances, comfort level and pocketbook, but no one else can or should do that research for you.
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© 2008, No More Red Inc. Liz Pulliam Weston is author of the new book “Easy Money: How to Simplify Your Finances and Get What You Want Out of Life.” She regrets that she cannot respond personally to inquiries, but questions for possible inclusion in her column may be sent to 3940 Laurel Canyon Blvd., #238, Studio City, CA 91604, or use the “Contact Liz” form at her website, www.lizweston.com.
