Pay the bill, or report your child to police

Dollars & Sense

January 12, 2003|By Liz Pulliam Weston | Liz Pulliam Weston,SPECIAL TO THE SUN

I am in a very tight situation with a department store over a stolen credit card. We reported the theft to the store, then later discovered that it was my daughter and son-in-law who had racked up $6,500 in unauthorized charges. I have since received two letters from the store's fraud department telling me that I am responsible for these purchases. I did not authorize the use of my card and neither did my wife, but the store will not accept my explanation on this. I don't have the money to pay the bill or the interest they are charging my account. I would appreciate any advice you could give me on this matter and what to do to get the store off my back without my having to pay this money to them.

You reported the theft to the store. Did you also report it to the police, and tell them who you suspected of stealing the card?

Unless you're willing to have your daughter potentially prosecuted for this crime, you probably won't get very far with your creditor, said attorney Deanne Loonin, credit expert for Nolo Press, the self-help legal publisher.

If you can't bring yourself to report your child, then you'll have to pay the bill or suffer the consequences.

The store can continue to hound you for the money or turn the account over to a collection agency. Your credit report will suffer as well.

You might think this harsh, but consider the matter from the store's point of view.

They have only your word that the spending spree wasn't authorized - and you haven't been willing to take the next logical step, which is to report the purported theft to the police.

If anyone could blame a relative for a big credit-card bill without having to follow through with a police report and possible prosecution, then more people probably would use such a loophole to get out of paying their debts.

I would like to attend graduate school this year. I have $30,000 in student loans for my undergraduate degree. My debt-to-income ratio is about 23 percent. My FICO credit score is 760. I will be applying for private loans to help pay for graduate school. Will I have any trouble borrowing the extra $25,000 I need for my first year of school?

With your good credit score, you should have no trouble getting the loan you want. But getting the money is the easy part. Paying it back is what will be tough.

Private loans for school typically are based on your creditworthiness. Your debt-to-income ratio is usually irrelevant because you probably won't be earning much while you're in school.

Once you're out, it's extremely difficult to get out of paying back your loans, so your lenders can be pretty confident they'll be repaid regardless of how much pain it causes you.

After just one year of graduate school, your debt (including accrued interest) will exceed $55,000.

Unless you're qualifying for a job that will pay considerably more than that annually, you might want to rethink your plan.

As you've read here before, your student loan payments shouldn't exceed 10 percent of your expected income once you graduate.

If you figure that you'll repay $12 each month for every $1,000 you borrow, that means you'll need to line up a job paying at least $79,200 - more if you need to borrow to attend graduate school for more than one year.

You don't have to give up your dream of graduate school, but you might need to work for a while to pay off your existing debt before you take on more.

You also could look for scholarships or fellowship programs. In addition, many students continue to work part-time in graduate school to help reduce the amount they need to borrow.

Liz Pulliam Weston is a contributor to The Los Angeles Times, a Tribune Publishing newspaper.

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