You may have come across troubled debtors asking “Can you be sued for credit card debts?” The answer is yes, but only under certain conditions. Creditors tend to sue you if you are behind on payments for more than 60 days and if there is a court order against you. However, they usually try to avoid filing lawsuit and instead adopt ways that will make you pay up. Instead of suing you, creditors will find out if you have a co-signer who can pay the dues if you fail to do so.

If the creditor finds that you are employed, it means that you are having a steady flow of income. As such you are in a position to pay up. However, this may not be true for debtors that are older. Under such circumstances, creditors think that the debtor may not have a steady flow of income and his hopes of recovering the debt diminishes.

In fact, the reasons that caused creditors to extend a loan to you may be the same reasons why a creditor will come after you for his money. If you receive a notice from the creditor, first find out how genuine their demand is. You can do so by checking the “SOL” or Statute of Limitation. If you find that your account has passed the SOL, you can use it as a defense. If not, it is better to pay off the debt if the demands made by the creditor are valid. This is because if a judgment is passed against you, it stays in your credit report for a period of 7 years. And this will hurt your credit rating miserably. So, keeping your best interest in mind, it is better for you to negotiate with the creditor so that you can work out a way after talking to your creditor.

If you are facing financial hardship or you anticipate a financial crisis in near future, it is best to convey the reason of your non-payment well in advance. By doing so, you can work out an alternative payment plan with the creditor so that you don’t fall behind on payments and the creditor doesn’t file a lawsuit against you.

No Debt Plan is about getting and staying out of debt with a plan. Kevin, the author, is passionate about budgeting, saving for the future, and using goals to reach financial freedom. You can subscribe to his blog by RSS or email.

This interview is part of a new feature he’s developed called Subscriber Swap Saturday. The basic idea is to get the subscribers of one blog to subscribe to the other blog for at least a week, just to try it out. After a week if you don’t find that blogger’s content enticing, drop it. The hope is that over time you will find several writers that you weren’t familiar with who provide meaningful content to you. You can read more about Subscriber Swap Saturday at his get out of debt blog, as well as his interview with me.

And now, Kevin answers some questions I shot at him about his life, his finances, and his site:

You just hit the quarter-century mark this week. Any words of wisdom you’d care to share with us youngins?

Kevin: Ah, nothing like feeling old. 🙂 Just the same old same old — spend less than you earn, do something you love, and live on a budget. Contribute to your 401(K) and, if your 401(K) investment options have high expenses (or are not varied) open up a Roth IRA instead.

Were you good about your money and finances in college, or was that something that you developed after you graduated?

Kevin: I handled money great in college. I’m not so sure about when I learned it, I suppose it was over time. My first few years I lived on campus and didn’t go off campus a lot so there wasn’t a lot of ways for me to spend money anyways. But handling money in college is (or should be!) something on a small scale… I had a small part-time, on-campus job. There wasn’t a lot of money to spend in the first place. The major finance issues pop up once you suddenly have a real income coming in every month.

I’ve been following your blog (in its various forms) pretty much since I started my own blog! How have things changed for you since you started blogging?

Kevin: I was going to mention that as well! I first started out blogging on a domain associated with my name. But that didn’t rank very well for search engine terms associated with my content. That’s when I decided to switch to nodebtplan.net and use that domain to rank better in search engines.

I also made the switch from posting whenever I felt like it to deciding on a schedule (posting once daily) and sticking to it. When I first started I had a lot of topics to cover. When you write an article every day for a year and then some, you have to really start to dig in on some topics. That’s been pretty difficult.

Your blog focuses on something called the “No Debt Plan.” What is that, and how can 20-somethings make the No Debt Plan work for them?

Kevin: The No Debt Plan is essentially a summary of the advice I find myself giving to friends and co-workers time and time again. It’s similar to Dave Ramsey’s plan — you walk through the steps and it will show you how to setup a budget, how to stop living paycheck-to-paycheck, and how to pay off your debt effectively.

To make it work, just read it. I tried to write it so that it didn’t come across convoluted and too complex to understand. I think personal finance writers often make the mistake of getting too far into the nitty gritty of the numbers. Those are good, but for a series of posts like that I tried to back off the numbers a bit. (Although it did sneak in there every once and a while.) Let me also say that the plan isn’t complete… I’ve still got a few more posts up my sleeve.

How about some quick-fire, often-debated personal finance topics:

Credit cards for college student, yay or nay?
If they have an income and can manage it responsibly, yay. Otherwise, nay.

Emergency fund or aggressive debt payoff first?
It depends. If your debt is credit card debt then technically if you had an emergency you could rely on that to pay for living expenses. I prefer for folks to have an emergency fund that works for them (whether $500 or $2,000) and then focus on the highest-interest rate debt first.

Should parents foot the bill for college for their kids?
Not at the expense of retirement savings. I am fine with parents paying for education (my parents and scholarships paid for mine). I think kids really need to try and get as many grants and scholarships as possible — there is a lot of money out there to apply for.

Even though I know your answer to this, it’s the most-hotly-debated: Debt snowball by remaining balance or by interest rate?
Interest rate. Interest rate. Interest rate. The math is clear cut. I do buy the part psychology argument of Dave Ramsey’s plan. But when you run the math and you could save thousands in interest… hey… get your motivation from somewhere else.

And finally, what do you see in the future for Kevin and No Debt Plan? (Tell us all of your secret plans!)

Kevin: Ah if I could only see into the future. I plan to continue blogging and would love to get to the point that I could blog full time. I have a few new blog ideas (as in new, separate blogs), but I just don’t have the extra time to develop them. I’ll finish my MBA in August and I am considering getting my Certified Financial Planner certification.

All that and keeping the dog worn out. 🙂

It was a really exciting opportunity for me to exchange these interviews with Kevin. As I said in this interview, the two of us have been tracking each other’s sites pretty much the whole time so far! I consider Kevin one of my “old friends” of blogging, and I would definitely appreciate it if you gave his site a chance. Subscribe to his site by RSS or email. And don’t forget to check out my answers to his interview questions!

Last week I wrote about how my student loans will be too big of a burden to bear, at least at first. So, all whining aside, what am I going to do about that?

Well, obviously Objective 1 is to get a job and to make money. Those loans are going to come due, and quick! One of them doesn’t even have a grace period – the first bill will be due one month after I’m no longer taking classes, so probably in late March or early April. The next loan has a six month grace period, so I can expect bills for that starting in late August/early September. And the final cherry on my loan pie will start come due starting around the new year.

Joy.

But, as I said, work may not be enough. I make enough from my little "side hustles" that I can cover Loan #1 when it starts billing. And I’m really hoping I’ll have a job that can cover Loan #2 by August. But with rent and gas and other bills, it’s Loan #3 that will start to give me a hardship.

Is it ok to… start relying on my credit cards at that point?

Whoa, whoa, whoa, calm down and stop screaming! I know, that sounds bad. I was in credit card debt once before, and the prospect of getting back into it doesn’t really excite me. But it might be necessary, if I don’t make much (a huge possibility) and my Getting Established fund and Emergency Fund run out.

Suze’s Rules

Suze Orman actually gave me the idea for using my credit cards, in The Money Book for the Young, Fabulous, & Broke. She has some rules, though, concerning this action:

• A credit card can be used to help you make ends meet, but you’ve got to cut everything down to bare bones, first. It’s not for "blowout vacations, a closetful of expensive clothes, and going out four times a week."
• Keep monthly charges at or below 1% of your annual gross income. For example, if you make $30,000, charge no more than $300 per month.
• She doesn’t say it, but she says it elsewhere in the book: keep paying the minimums, don’t fall behind!
• Reexamine your situation every six months or so – decide if you can continue to charge for another six months, or if it’s time to rethink your career path.

My Rules

I have a few restrictions I have to impose as well, if I get to this point. I’m still not sure it will happen, but it’s helpful for me to make rules now.

• Keep the debt at a reasonable ratio compared to total credit lines. Between my two cards, I current have $7,500 in credit. When the balance between them equals $2,250, it will start to adversely affect my credit. $3750, or half of my available credit, is the upper limit.
• Use the lower-rate card. This seems like a no-brainer, but I might be tempted to put things on my Amazon card, which gives me points toward Amazon.com gift certificates. That’s a big no-no: the higher APR on that card (12.24% vs. 9.24% on my Bank of America card) cancels out the rewards I would earn. Unless my rates drastically change, the Amazon card is only for purchases that I pay off every month.
• Pay twice the minimum payment. If I can’t afford to do that, it’s a big signal that I’ve charged too much.

The idea of this whole thing is simply to bridge the gap before my income rises – to make ends meet while I do internships or entry-level jobs. I’m hoping it never gets to this… but I feel better going into it with a set of guidelines, first.

I’m taking a personal financial management class – half because I want to see what new concepts I can pick up and half because it’s my last term of school and I have some major senioritis (symptoms may include late papers, easy classes, oversleeping, and some job search anxiety). For one of my class projects, I had to pick a house and walk through the steps of financing and buying the property. That was fun and interesting (if you’re a nerd like me), but part of searching was figuring out how to pay for it.

The calculators for "how much house can you afford" ask about your other debt payments. With my credit card paid off, I’m only looking at student loans. But, I hit a bit of a snafu when I looked up what they will cost me in monthly payments.

Federal student loans offer a variety of repayment plans, but the standard plan is the best because it results in the least interest paid, and it’s only a 10-year term, which means you won’t still be paying off your loans when your kids apply for loans of their own. The downside is that the standard repayment plan comes with the largest monthly payment.

Between all of my loans, my monthly payment on the standard plan comes out to $470. Not really an amount I’ll be able to pay during my first year out of school.

I wanted to put myself on the standard repayment plan right off the bat, and tackle this debt head-on. I wanted to consolidate my loans into one low rate while rates are dropping. But it looks like just to be able to make the minimums, I’ll have to stay on the graduated repayment plan (where the bills start small and get bigger every year) – with payments of $319 (at first).

Trust me, I’m really disappointed by this. I don’t know why I didn’t run the numbers until now, other than the fact that it’s easier to run them now that I’m done taking out new loans. It’s startling to be this close to repayment and suddenly realize that I will have trouble paying the bills.

My employment is uncertain. I’m going to do the best I can with job applications and internship applications over the next few weeks… but I’ve come to realize that I’ll have to do a lot more than that. I can’t afford anything outside of Ramen to eat and car maintenance, since I’ll be needing that to get to a job. I’ll have to start Compacting again.

I’d thought I was out of the woods, but I’m really, really not. Somewhere deep inside my brain, my current Self is kicking my 17-year-old Self in the pants for getting us into this mess!