Dear Dave,

I have old credit card debt that goes back a few years. The account has been sold and re-sold to several collection companies. The limit was $300, but with late charges and fees I now owe $1,500. Am I liable for the extra $1,200?

-Monica

Dear Monica,

You agreed to their terms, which included the right to charge fees and penalties. Legally, they can do this. The honorable thing would be to send the company you contracted with a check for the full amount. However, that company no longer owns the debt, and they won’t get the money. They sold the debt. The present holder is just hoping to get something out of it. They buy debt in volume, dirt cheap, and whatever they can collect from any creditor is profit.

The current collection company would probably be thrilled to settle for a lot less than face value. Make them an offer. Start low. Meet them somewhere in the middle. You can probably settle this for around $500.

Do not give them any money until you have in your hand – on paper, in writing – a statement showing the amount for which they will settle, and do not give them electronic access to your bank account, either.

Once you have this in hand, send them a cashier’s check or money order, and keep a copy of that payment and the letter for the rest of your natural life.

If this comes up again, and it very well could, you’ll have proof of the agreed upon amount, and the fact that you’ve already paid!

- Dave

Dear Dave,

I got laid off the other day. The fact that I had 10 months of expenses in my emergency fund made this a little less painful, but just before that happened I made a knee-jerk decision to cash out a 401(k) to pay off $26,000 in credit card bills. The money is in transit right now. Is there any way to stop this?

-Mike

Dear Mike,

That was a really bad decision. I’m glad you’ve realized that, but now you’ve got to jump into damage control mode fast! First, see if you can cancel the transaction. If it’s too late for that, do a direct transfer as soon as the money arrives and roll it over into an IRA. This will prevent you from getting absolutely killed on taxes.

If you don’t take care of this, you’re going to get slapped with a 10 percent penalty, plus your tax rate. The government’s going to hit you for 40 cents on the dollar. You really don’t want to let this happen!

-Dave

Dear Dave,

Given the current direction of the government, I believe that inflation is going to increase dramatically. What are the best inflation-proof investments I can make?

-Russ

Dear Russ,

Real estate is a great way to go. Single-family homes, paid for with cash, area great hedge against inflation, because housing makes up so much of the inflation rate equation.

Plus, you got the materials and everything else – boards, shingles, nails, copper and labor – that go into the creation of housing. These are some of the kinds of things that “inflate” when inflation kicks in!

- Dave