March 12th, 2010

Supreme Court: Bankruptcy Law Doesn’t Violate Lawyers’ Rights

A case decided by the Supreme Court this week settles a question of attorneys' free speech rights raised by a Minnesota law firm concerned about restriction in the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), according to the Washington Post.

Here are the pertinent details:

  • The law states that bankruptcy lawyers are prohibited from advising clients to take on more debt before filing for bankruptcy. In theory, the restriction is meant to prevent advice that would lead to actions that might constitute fraud under U.S. bankruptcy laws.
  • The question raised by the Minnesota law firm was one of free speech for lawyers. Apparently, the firm suggested that the aforementioned restriction amounted to an unconstitutional violation of the free speech rights of bankruptcy lawyers.
  • The court decided that the law was not, in fact, unconstitutional, and that lawyers can give their clients any advice that does not promote defrauding the bankruptcy court.
    • Filing incomplete or inaccurate information
    • Attempting to pay a "favorite" creditor in full before filing for bankruptcy
    • Failing to disclose assets or expected income
    • Attempting to “give away” assets before filing

    • The Broader Issue

    While the law firm’s concern with free speech may seem piddling here, in the context of bankruptcy cases, it has merit. In some cases, as the WSJ article points out, taking on certain kinds of debt immediately before a bankruptcy filing could benefit both the filer and his or her creditors.

    For example, refinancing a troublesome mortgage to better allow a debtor to make payments could benefit all parties. The Supreme Court Justices reportedly acknowledged the truth of this and agreed that taking on more debt can, at times, be the wisest decision for a potential bankruptcy filer.

    But, the court noted, the law can be read to mean that bankruptcy lawyers are restricted only from giving their clients advice that would lead to bankruptcy fraud.

    What Constitutes Bankruptcy Fraud?

    Bankruptcy fraud is a serious matter – in fact, it can lead a court to throw out your case (and thus eliminate your chances at receiving a debt discharge) and earn you fines and jail time. This is one reason why working with a bankruptcy lawyer can be helpful.

    Bankruptcy fraud includes:

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , , ,
Posted in Setting the Record Straight about Bankruptcy | 3 Comments »
March 11th, 2010

LifeLock Fined for Inappropriate Identity Theft Protection Claims

A company that made bold promises about its ability to protect against identity theft has settled with the Federal Trade Commission after the validity of its claims was questioned.

LifeLock is a company that protects customers' identities from theft, and alerts customers about identity theft security breaches, according to the company web site. LifeLock will even help consumers if their identity is stolen, by canceling and replacing stolen cards and verifying information changes.

According to federal regulators, however, LifeLock has made claims about its ability to protect customers from identity theft that it cannot uphold, leading to an agreement for the company to pay $12 million in settlements.

CNNMoney is reporting that the fine will settle charges that LifeLock made deceptive claims about its identity theft protection abilities. $11 million of the fine will go to the FTC, while another $1 million will go to a group of attorneys general from around the country. According to the FTC, this is one of the largest joint settlements between the FTC and the states.

According to the chairman of the FTC, Jon Liebowitz, LifeLock claimed that it could protect consumers against identity theft completely, including all types of identity theft.

The protection it actually provided, said the chairman, left enough holes that you could drive a truck through it.

LifeLock advertises its services in a brash manner, by displaying the social security number of the company's CEO, Todd Davis, on the side of a truck that drives around in public, as well as on national television commercials. This show of confidence is meant to publicize their $10 per month services that they claim will keep users safe from identity theft.

The case that the FTC made against LifeLock was that the company made "deceptive claims" about its protection services. Among these claims were that LifeLock could guarantee protection against identity theft, and that, according to CNNMoney, "it was the first company to prevent identity theft from occurring."

There are certain types of identity theft that LifeLock claimed it could protect against, and the FTC argued that these fraud alerts did not actually protect against one of the most common types of identity theft: the misuse of existing accounts.

There was also the charge that LifeLock claimed, falsely, to be able to prevent changes to customers' address listings that weren't authorized, and that it constantly monitored customer credit report activity.

The FTC also said that LifeLock made untrue statements about data security, claiming that sensitive data was only accessed on a "need-to-know" basis. According to the FTC, however, LifeLock collected social security numbers and credit card numbers on a routine basis.

Davis, the CEO of LifeLock, said of the settlement that he was pleased with it, and that it would help to establish the advertising standards for the identity theft protection industry. He went on to say that the activities in the FTC charges were from several years ago, and that LifeLock agreed to settle the case as a way to put the issues behind them.

We agreed to settle this matter, he said, in order to quickly put this behind us so we can get back to doing what we do best—helping to protect our members from identity theft.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Financial Literacy | 2 Comments »
March 7th, 2010

FTC: Identity Theft Top Complaint in 2009; Potential Data Breach

The Federal Trade Commission recently issued its annual report on consumer complaints filed in the last 12 months (summary available here, for the complete report, see below).

Identity theft was by far the largest complaint category, concerning 21 percent of all complaints filed. The top fifteen list looks like this:

  • Identity theft (21 percent)
  • Third party and creditor debt collection (nine percent)
  • Internet services (six percent)
  • Shop-at-home and catalog sales (six percent)
  • Foreign money offers and counterfeit check scams (five percent)
  • Internet auctions (four percent)
  • Credit cards (three percent)
  • Prizes, sweepstakes and lotteries (three percent)
  • Advance-fee loans and credit protection/repair (three percent)
  • Banks and Lenders (two percent)
  • Credit bureaus, information furnishers and report users (two percent)
  • Television and electronic media (two percent)
  • Health care (two percent)
  • Business opportunities, employment agencies and work-at-home plans (two percent)
  • Computer equipment and software (two percent)

    • The FTC reports that identity theft complaints also constituted the largest single group of consumer worries last year, but have dropped as an overall percentage of the whole. In addition to the release of 2009’s data, the FTC has posted an animated video detailing how and when to file a complaint (available here).

    A Potential Data Breach You Should Know About

    In another recent news release, the FTC noted that it has warned almost 100 companies that information they store on peer-to-peer websites (used for everything from playing video games to sharing text, audio and video files to conducting online phone calls) may be vulnerable to data breaches.

    Specifically, if peer-to-peer (P2P) software is improperly configured, any sensitive data may be accessible to anyone on the network. This presents a huge security risk, and could lead to identity theft or other costly and frustrating scams.

    What this could mean for you is that, if you have given your personal information to one of the companies in question, your information could be at risk.

    While no companies have necessarily broken the FTC’s regulations regarding storage of sensitive information, some may be at risk for significant future data breaches.

    Additional Resources

    FTC 2009 Full Report on Consumer Complaints.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Identity Theft | 8 Comments »
March 5th, 2010

‘Presidential Reunion’ Shows Need for Consumer Financial Protection

A viral video taking over the internet this week brings together some comedy heavyweights, plus director Ron Howard, to educate consumers about the need for a Consumer Financial Protection Agency.

"Presidential Reunion" brings together presidential impersonators from the past 35 years of "Saturday Night Live," including Will Ferrel as George W. Bush, Dana Carvey as George Bush, Sr., Chevy Chase as Gerald Ford and Fred Armisen as President Barack Obama. The video also features Jim Carrey as Ronald Reagan.

In the video (see it below), President Obama is struggling with opposition to the Consumer Financial Protection Act by congress and lobbyists. He is then visited by the six previous presidents (including the late Reagan and Ford). Bush, Jr., and Clinton (played by Darrel Hammond) explain how they eased restrictions on banks, helping to create the financial mess in which the nation finds itself. Later, Jimmy Carter (played by Dan Aykroyd) explains in clear terms the benefits of the proposed CFPA.

"Mr. President, you have to establish the Consumer Financial Protection Agency. People are tired of being ripped off by credit card companies and banks," he says.

The video was made in conjunction with the Main Street Brigade, an organization committed to bringing awareness to, and dispelling myths about the CFPA.

The act was first suggested to Congress by Harvard professor Elizabeth Warren, author of several studies about consumer credit and bankruptcy.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Credit and Bankruptcy | 4 Comments »
March 4th, 2010

Credit Cards 101: Visa

If you're a Visa cardholder, you probably received a packet of updated policies and terms of use for your card, related to the new credit card laws. However, even if you did read all the fine print, you still may be curious of the intricacies of how your Visa card works.

An interesting post from FiveCentNickel.com offers a look at Visa’s rules that merchants must follow if they accept Visa cards. Here’s a summary.

  • What to take: Vendors can choose whether to accept credit and business cards, debit cards and gift cards, or both.
  • No price limits: If a merchant accepts Visa cards, it is required to accept the cards for any transaction, regardless of its dollar amount. However, many merchants ignore this policy and set a minimum purchase amount to encourage spending. If you’re irritated by a specific vendor’s policy, consider speaking to a manager.
  • Near equality: Items bought with Visa cards cannot be subjected to any special charge, but vendors can offer customers discounts for paying with cash (you may notice this especially at gas stations).
  • Convenience fees: Online and over-the-phone transactions may be subject to extra charges, so long as they’re disclosed and not applied to any in-person transactions.
  • No cash tax: Sellers cannot collect taxes from Visa transactions in cash.
  • Tip not included: When you pay with a Visa card and intend to add a tip, vendors can only authorize your account for the amount of the service minus tip.
  • No cash returns: If you buy something with a Visa card, sellers cannot give you cash should you return it.
  • Time crunch: Merchants have to report Visa sales receipts within five days of purchase.
  • Privacy limits: Receipts for Visa transactions should only show the final four digits of your card number and should not show your card’s expiration date. Further, sellers have to keep all account number information private.
  • Policy disclosure: Vendors must explain (or make available) return and exchange policies before a customer makes a purchase.
  • Signature required: Unsigned cards are considered invalid. If a cashier encounters one, she is supposed to make the customer sign the card and compare the signature to one on an ID card. Writing “ask for ID card” in lieu of a signature is considered an invalid substitute.
  • ID optional: Merchants may ask for a photo ID, but cannot require buyers to have one in order to complete a transaction.

It’s always a good idea to make sure you know the rules of your debit or credit card, so if you don’t have a Visa, check out your cardholder’s website!

Additional Resources

Just the Facts about Credit Cards (PDF)

A Consumer’s Guide to Credit Cards (PDF)

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Financial Literacy | 2 Comments »
March 3rd, 2010

Handling Student Loans Outside of Bankruptcy

As a recent article from the Wall Street Journal highlights, student loan debt is a huge burden for many Americans. But, unlike credit card debts, student loans cannot typically be discharged in a bankruptcy filing.

And now, as layoffs and salary reductions become more and more common around the country, many once-comfortable graduates are finding themselves unable to meet the terms of their loans. Here are some ways you can handle your student debt.

Know Your Numbers

If you need to rework the terms of your student loans, consider contacting your lender. But before you do so, take these preparatory steps:

  • Outline your budget: Crunch the numbers and figure out what you can realistically afford to pay each month.
  • Read the fine print: Make sure you understand the terms of your loans as they now stand so that you’ll be ready to ask for specific modifications when you speak with your lender.

Once you’ve determined what kinds of payments you can make, familiarize yourself with your options for repayment. Depending on your circumstances, these may include the following:

  • Modify your repayment plan: Some lenders offer graduated repayment schedules, meaning you pay more per month as you go along (which can be useful if you expect to make more money in the future). If your loans are through the Federal Government, visit the Federal Direct Loan web site to see your choices.
  • Consider a deferment: Many lenders offer you a chance to defer payments for a variety of reasons (such as going back to school, working in certain fields, being unemployed, etc.). Check with your lender to see how to apply, but keep in mind that interest will likely still accrue during the deferral period.
  • Apply for forbearance: You may also be able to make reduced payments or suspend payments altogether for reasons of financial hardship but, as with deferments, interest will likely still build up.
  • Look at consolidation: Consolidation offers often prove helpful because they allow you to make a single payment each month and can even help lower interest rates. But be sure you understand the complete terms—some come with prepayment penalties.

If you’re just beginning school and considering loan options, remember that they may not seem like a big burden at this stage, but can add up quickly and should be considered carefully.

Additional Resources

Federal Student Loans: Learn the Basics and Manage Your Debt (PDF)

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Setting the Record Straight about Bankruptcy | 6 Comments »
March 2nd, 2010

Sen. Jim Bunning Holds Up Unemployment Benefits Extension

Unemployment benefits for 400,000 Americans are set to run out in the next week, and a bill that could extend them is being held up by a lone Senator.

Sen. Jim Bunning, a Republican from Kentucky and former Major League Baseball pitcher, has objected to extending jobless benefits, which are attached to a larger spending bill that was past unanimously by the House last week.

The New York Times reports that 4,300 of Bunning's own constituents will exhaust their unemployment benefits in the next week, and that number will surely continue to rise over the coming weeks and months.

In New York, about 54,300 jobless workers are set to see their benefits run out next week, the most of any state, according to the Labor Department. Florida and Georgia follow, with approximately 49,600 and 41,000 workers losing benefits after March 13, respectively.

Bunning, who is not seeking reelection this year, has received praise from fellow Senate Republicans for taking his controversial stance.

The $10 billion bill up before the Senate would use stimulus money to extend unemployment insurance for jobless workers, and resume work for 2,000 Department of Transportation workers on highway construction projects.

About The Bankruptcy Blog

The Bankruptcy blog provides news and information on the economy, financial trends and bankruptcy information.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Financial Literacy | 3 Comments »
February 27th, 2010

Shortcomings of Credit CARD Act

This week saw the much-anticipated date (February 22) on which the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act) took full effect. And, while it theoretically introduces many new consumer protections, it leaves plenty room for “creativity” from card issuers.

Center for Responsibility Lending Responds

The Center for Responsible Lending released a humorous (though cynical) animated video that highlights some of the areas not addressed by the new act—and illustrates ways in which credit card issuers have adapted their policies to maintain profit levels. These include:

  • Interest rate hikes: To compensate for lost revenue, some card issuers have already raised users’ interest rates. Even users in good standing may be “forcibly eligible” for this, as the video claims.
  • Over-limit fees: If you accidentally exceed your credit limit, your cardholder likely charges a fee. And, with new restrictions in place on other charges they can assess, you might see this fee jump.
  • Inactivity fees: On the other hand, if you use your card too infrequently, you might see a fee for that, as well, because that means you’re less profitable for the company.
  • Increased minimum payments: Another technique some card issuers are using is to up the minimum amount you can pay each month. This could be profitable for those who won’t be able to afford the increased payments and can be charged an under-payment fee.

The Regulation-Creativity Relationship

As the video illustrates with a graph, more consumer protection may seem like a good thing, but in practice, it often means that card issuers just get more “creative” with fees they charge reasons they charge them.

If you’re thinking now is a good time to get out of credit cards altogether, you’re not alone, but, before you cancel your cards, consider this:

  • Your credit score: Part of your credit score is based on age of accounts (older ones are better); another part is based on diversity of credit (so eliminating one type entirely would hurt you).
  • Your reentry: If, at some future time, you decide you want a credit card again, you’ll likely have to contend with uber-high interest rates (above 70 percent) because you won’t have any recent credit card history.

The video exaggerates a little (by mentioning, for example, a “legibility fee” for left-handed users), but by doing so draws attention to the more serious matter of how significantly your credit card could change.

Be sure to read all correspondence from your card issuer, even mailings that seem like junk: some of them might contain important details about the new rates and fees you may have to pay. These statements will also come in handy if mounting fees and interest force you into bankruptcy.

Additional Resources

Credit CARD Act

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Credit and Bankruptcy | 5 Comments »
February 25th, 2010

More Mortgage Relief in Proposed Changes to Obama Plan

FOX Business recently reported that it obtained a document leaked from the federal Treasury Department that outlines proposed changes to the Making Home Affordable program - also known as the Home Affordable Modification Program, or HAMP. The plan is part of the Obama Administration’s attempt to provide some home foreclosure help.

Some experts suggest the rules are unlikely to pass because they would mean more work, and potentially less income, for many mortgage lenders and loan servicers. This issue, according to some, highlights the core problems with that industry.

The Proposed Mortgage Rule Changes

Here’s a look at what alterations have allegedly been suggested and what they reveal about the way HAMP and the mortgage lending system in general is currently working, and how it could better work to help people avoid bankruptcy and stay in their homes:

1. Introduction of a 30-day “borrower response period.” This period would begin after a borrower was denied a mortgage modification; during the 30 days, mortgage lenders would be prohibited from foreclosing on properties. The aim is to provide a window in which borrowers can determine whether their denial resulted from mistakes in their application.

Those in the know suggest that this proposed change is necessary because a number of borrowers are being denied modifications because of mistakes in their application – not because they don’t actually qualify.

2. Prohibition of foreclosures for borrowers who have not been proven ineligible for modifications. In other words, banks would be required to offer borrowers an alternative to foreclosure (namely, modification) and would not be permitted to foreclose on a home if a borrower proved eligible for that modification.

According to sources, this type of language already exists in some form in HAMP – in fact, that’s part of the whole purpose of the program. The inclusion of this as a proposed modification suggests that mortgage lenders are not taking adequate steps to avoid foreclosing on properties.

3. Suspension of all foreclosure action once a borrower has been approved for a 90-day trial modification. HAMP requires a trial period. In this 90-day window, approved borrowers make payments under a modified mortgage plan. If they adhere to the terms, they should qualify for a permanent modification.

The fact that a new rule expressly prohibiting foreclosure action during the trial period has been proposed suggests that lenders are disregarding modification agreements and proceeding to foreclose regardless of a borrower’s status.

4. Written verification (from a trustee or lawyer) that a borrower does not qualify for HAMP before foreclosure can proceed. In other words, this rule would require banks to have proof that they can go ahead and foreclose.

This suggests that mortgage lenders have not been following this rule on their own, and have perhaps been foreclosing on properties even when a borrower qualified for a modification.

Bottom Line For Anyone Needing Mortgage Relief

If you are at risk of losing your home to foreclosure, you may want to contact a bankruptcy attorney. These proposed rules suggest the cards may be stacked against you.

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Mortgage Foreclosure | 4 Comments »
February 23rd, 2010

Your Car in Bankruptcy

For many people considering filing for bankruptcy, it’s important to know whether they’ll be able to get on with their lives afterward—and for many, that will be determined by whether or not they have a car.

And, with car issues in the news pretty often these days, they’re certainly on our minds. Here’s a little crash course on what you can expect to happen to your car if you file for bankruptcy.

Chapter 7 & Chapter 13 Bankruptcy

Whether you file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code, you can expect an automatic stay to take effect. This stay prevents debt collection, wage garnishment, lawsuits related to your finances, foreclosure and repossession.

The automatic stay remains effective until the court discharges your case.

Cars in Chapter 7 Bankruptcy

Chapter 7 bankruptcy offers filers a complete discharge of many unsecured debts. Your car loan, though, is a secured debt (it’s attached to property—your car). If you file a Chapter 7 case, you’ll have three options for your car loan:

  • Redeem: This option involves one lump sum payment to your creditor for the car’s current fair market value. If you can afford to do this, it may make life easier in the future, since you’ll have eliminated car payments. But because most people file for bankruptcy at a time when cash is not handy, it may not be a viable option for many filers.
  • Reaffirm: This option allows you to essentially continue making payments on your lease or loan as you did before you filed for bankruptcy. In reaffirming your debt, you agree a second time to continue making payments according to a schedule agreed upon by both you and your creditor.
  • Surrender: If neither continuing payments nor redeeming the car will work for you financially (for example, if you owe more on the car than it’s currently worth), you can also choose to surrender your vehicle to your creditor and have the remainder of your debt discharged.

Cars in Chapter 13 Bankruptcy

If you file under Chapter 13 bankruptcy, your car’s future will depend on when you bought it.

  • Newer cars: If you bought your car within 910 days of your bankruptcy filing, you’re required to pay the full value of the car loan, though your interest rate may be reduced.
  • Older cars: If you purchased your car more than 910 days before filing for bankruptcy, you’re only required to repay the car’s current fair market value.

Additional Resources

Understanding Vehicle Financing (PDF)

Understanding Vehicle Repossession (PDF)

Share and Enjoy:
  • Digg
  • Sphinn
  • del.icio.us
  • Facebook
  • Mixx
  • Google

Copyright © 2010 TotalBankruptcy, Inc. (as licensee). All rights reserved.

Tags: , ,
Posted in Legal Info | 1 Comment »
« Older Entries