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Archive for July, 2010

Saturday, July 31st, 2010

Foreclosure Rescue Scams: What to Watch Out For

A recent press release from the VirginiaAttorney General announces a lawsuit against a “foreclosure rescue” company. The suit alleges that the company charged illegal fees and offered insufficient help to the consumers it was supposed to assist.

So what does that mean for you?

Loan Modification vs. Foreclosure Rescue

The nation is in the midst of a foreclosure crisis, which means that millions of Americans are either struggling to make their mortgage payments, in danger of losing their homes and/or in some phase of the foreclosure process.

As they look for ways to keep their houses, some home owners are turning anywhere for help.

However, not all foreclosure prevention measures are created equal. Here’s a look at three you might have heard of:

Mortgage loan modification: This involves a bank or lender sitting down with a borrower and figuring out modified payment terms so that the borrower can continue making mortgage payments and stay in his or her home. The Obama administration’s Home Affordable Modification Program aims to encourage banks around the country to modify mortgages for those struggling to make payments.
Chapter 13 bankruptcy: Another legitimate option for people struggling to make mortgage payments is Chapter 13 bankruptcy, which allows filers to reorganize their finances and repay debts over 3-5 years. While the bankruptcy court cannot modify the terms of a mortgage, bankruptcy’s automatic stay prevents all collection action – which includes foreclosure – while a case is pending. Thus Chapter 13 can give filers some breathing room while they resolve their debts.
Foreclosure rescue: This is often a scam. Generally, representatives from these less-than-reliable companies learn about foreclosure action by doing local research – foreclosures are a matter of public record. Then they may offer to “rescue” a homeowner from his or her troubles – for a significant fee.

The companies targeted by Virginia’s Attorney General reportedly charged consumers upfront fees as high as $1,200, and then did little or nothing to actually prevent the foreclosure of the home.

Such scams are depressing because they involve preying on people who are in desperate circumstances: Those in danger of losing their homes are often willing to take chances, including giving their money scammers disguised as angels.

Here are some of the signs that the Federal Trade Commission has identified as tip-offs, noting that a company might be fraudulent if it:

Charges fees up front, before any services have been provided
Guarantees that it can halt foreclosure, regardless of your situation
Suggests that you not contact your lender, housing counselor, credit counselor or lawyer
Suggests that you lease your home to buy it back over time
Accepts payment only through cashier’s check or wire transfer
Indicates that you should make mortgage payments to it rather than your lender
Encourages you to let one of its representatives fill out paperwork
Pushes you to sign paperwork you don’t fully understand or haven’t read in full

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Tags: home foreclosure
Posted in Home Foreclosure | No Comments »

Thursday, July 29th, 2010

Latest Unemployment News: More of the Same

The Department of Labor’s latest report on the unemployment situation in the U.S. shows little change from a week earlier, indicating that significant recovery in the jobs market has not yet taken hold. Here’s a look at some of the latest numbers (for the week ending July 17, published at the end of last week):

Seasonally adjusted initial unemployment claims increased 37,000 from the previous week, to 464,000, bringing the four-week floating average up 1,250 to 456,000.
The advance seasonally adjusted insured unemployment rate was 3.5 percent, down slightly from the previous week’s 3.7 percent.
The seasonally adjusted insured unemployment number was 4,487,000 for the week ending July 10, down from the previous week’s 4,710,000.

Week to week, the changes often aren’t very significant and don’t always reflect larger trends; however, last week’s numbers provide a somewhat hopeful picture when compared with figures gathered a year ago:

Initial unemployment claims under state programs (unadjusted) totaled 498,022 for the week ending July 17; in 2009, the same week saw 585,575 claims.
The number of people claiming insured unemployment benefits in state programs came to 4,581,351 in the most recent week, which marked a 186,572 person increase from the week prior, but was down from 6,256,960 during the same period in 2009.

These data, like many of the job loss information collected this year, show that recovery in the jobs market continues to be slow and inconsistent. While the national unemployment rate is down slightly from its 10+ percent high, it’s still well above where it needs to be and bankruptcy filing rates continue to remain high.

Unemployment Benefit Extension

Some more-or-less good news for unemployed Americans is that Congress and the White House have reportedly passed legislation that will extend unemployment benefits through November of this year.

The measure, which had difficulty getting through Congress because of Republican opposition, means that those whose benefits have expired or are about to will receive a few more weeks of government support.

While the nation’s unemployment rate clearly indicates that jobless citizens need help, many GOP legislators were apparently hesitant to pass the bill because of the affect it will have on the nation’s deficit.

So how will the extended benefits work? It seems that distribution of the funds will vary by state, so check out local resources to see what steps you need to take if you’re eligible for funding from the extended benefits.

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Tags: Unemployment
Posted in Unemployment | No Comments »

Wednesday, July 28th, 2010

Bankruptcy: BP’s Worst Case Scenario?

Six month ago, the idea of the oil giant BP going bankrupt was an unthinkable proposition. Now, although still difficult to imagine, isn’t so far-fetched.

Despite the improbability of a BP bankruptcy, there is a common question that people what been asking themselves: What does the worst case scenario for BP look like?

An article from the New York Times indulges into this hypothetical situation.

Already, the price of BP’s stock has plummeted over one third of its pre-spill price.
There is some speculation by legal minds that BP might consider filing bankruptcy and separate the cost of cleanup and potentially up to billions of dollars in legal claims into a separate corporate entity.

But according to Tony Hayward, BP’s ousted chief executive, BP will be capable of weathering the storm. Just last year BP turned a profit of an astounding $17 billion.

It is this extreme amount of cash flow that will allow BP to fully compensate those wrongfully injured by the company and pay for the cleanup costs, claims Howard.

Despite the incredible profits the company has made in the past, a $40 billion tab on the clean up and damage coverage isn’t of the realm of possibility in the area. If BP was forced to shell out this much money, then another Texaco situation might not be out of the question.

In 1987, the oil giant Texaco filed for Chapter 11 bankruptcy because it was unable to pay a $1 billion jury award to rival Pennzoil. What’s amazing is that the $1 billion award was actually less than 10 percent of the original judgment of $10.53 billion.

That was an interesting case where Texaco was found liable for jumping the planned merger between Pennzoil and Getty Oil, a move which allowed the jury to award triple damages for Pennzoil.

There is a cap on BP’s liability for so-called ‘economic devastation’, at only $75 million. The only problem with that cap is it becomes irrelevant if it is found that BP has violated safety regulations—and the latest presumption is that BP has in fact violated safety regulations.

It is possible for BP to fight and win any potential large judgment against them- a move which could save the company. When the now infamous Exxon Valdez spilled, the original judgment against Exxon was $5 billion. But after several appeals and fights which made it all the way to the Supreme Court, the final judgment was cut down to a more manageable $507.5 million.

A senior fellow at the Manhattan Institute, Robert Bryce, seems to sum up the main thought about BPs overall stability well when he says that, “BP is financially sound now. It is unlikely to go bust near term… instead, BP will spend the coming decades circling the drain, mired in endless litigation, its reputation irreparable damaged and its finances weakened.”

This is far from a great outcome, but it seems to be far more likely than bankruptcy.

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Tags: bp bankruptcy, gulf oil spill, oil spill
Posted in Bankruptcy News and Events | 1 Comment »

Monday, July 26th, 2010

Look Out for More (Legal) Credit Card Fees

With the Credit CARD Act set to take full effect on August 22, many credit card issuers are reportedly already altering their policies to come into compliance with the law. And, because that law seriously limits some of the fees issuers can charge (including overdraft fees), many banks are also introducing new fees.

What You Might Notice

Make sure you’re reading your credit card statements closely in the coming months, as any new fees will be mentioned there. Here are some you might encounter:

Annual Fee: This isn’t a new one, but many issuers have abandoned annual fees in favor of inactivity fees, charging customers who don’t use their cards often enough. Because the CARD Act outlaws inactivity fees, sources note that you should expect the annual fee to work much the same way: if you make enough purchases, your issuer might waive the expense, but if you don’t spend a minimum amount of money (i.e. if your account is too inactive), expect to pay.
Foreign Transaction Fee: This is for when you make purchases in another country (regardless of currency) and is often charged in addition to a currency conversion fee. You can apparently expect this one to come to one to three percent of each purchase you make—to minimize the amount you pay, taking large amounts of cash out of ATMs and making cash-only transactions is often the best plan.
Cash Advance Fee: Again, this one is already company standard, but sources report that you can expect your cash advance fee to rise in the coming months. Remember: cash advance may be convenient, but it’s expensive, as card issuers charge both a flat transaction fee and a steep interest rate (usually higher than your overall interest rate).
Paper Statement Fee: Like receiving your monthly statement in the mail? It seems many banks have begun charging fees (ranging from $1 to $9 per month) to those who want paper statements. If you’ve got an email address and a printer (or digital storage space), you might want to opt out of this.
Setup Fee: This is reportedly already common practice on most secured credit cards, which essentially work like debit cards: the transactions you make are secured by money you pay to the credit card company ahead of time. While secured credit cards can be useful as credit rebuilding tools to those with weak credit (including those recovering from bankruptcy filings), they’re expensive and often come laden with fees, so that you might have to pay a couple hundred dollars just to activate your account.
Reward fees: Whether you want to redeem your rewards points or get them back after an issuer takes them as a penalty (maybe for a late payment), you’ll have to pay, usually between $20 and $50, according to the article mentioned earlier.

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Tags: credit CARD act, credit card fees, credit cards
Posted in Your Credit Score | No Comments »

Saturday, July 24th, 2010

How to Protect Your Social Security Number

In the computer age, one of the most frightening crimes is identity theft. Here’s a look at how you can protect your personal information to avoid the frustrations and financial setbacks associated with identity crimes.

What Is Identity Theft?

Identity theft occurs when someone uses another person’s identifying information to pose as that person. It can manifest itself in a variety of ways, including these:

Opening new credit: A thief who discovers your SSN can apply for loans and lines of credit as you. That person can then run up debts and leave you with the headache of contesting all the charges of your credit score and (possibly) paying some of the bills. In some cases, despite laws, consumers have listed identity theft as a reason they had to file for bankruptcy.
Using existing credit: A thief who discovers information for your bank account or credit card can use that information to drain your accounts or make massive purchases (remember: you don’t have to present a physical credit card to buy stuff online; only the card number is needed).
Getting medical treatment: The crime known as medical identity theft occurs when someone uses your information to get treated for an illness or injury. This can be especially dangerous to you because it could mean that incorrect patient history information ends up in your file. In emergency situations, that could cause you serious harm.

An article from Get Rich Slowly notes that the 2010 Identity Fraud Survey Report found that 11 million Americans were victimized by identity theft in 2009, for a total cost of $54 billion. The average person reportedly spent 21 hours resolving issues and had to pay $373 to do so.

How to Keep Your Information Safe

In general, it’s best to take some precautions to avoid the nightmare of identity theft:

Keep your Social Security card in a safe spot (NOT your wallet).
Avoid writing your SSN on checks; if any institutions currently use your SSN as your account number, ask them to change it.
Never disclose your SSN over email or over the phone, even if the request seems legitimate.
Make sure any web sites that require your SSN (such as online lenders) have secure servers.
Check your free credit report annualcreditreport.com every year to make sure nobody else is using your identity.
Shred documents with identifying information (like bank statements and medical bills) before disposing of them.
Know who does need your SSN: employers, banks and some government agencies.
Know that some businesses that request your SSN do not actually require you to give it to them. When you’re asked for yours, ask why they need it, how they’ll use it, whether the law compels you to provide it, how they plan to protect it and what might happen if you refuse to provide it.

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Tags: annual credit report, Identity Theft, social security number
Posted in Identity Theft | 1 Comment »

Thursday, July 22nd, 2010

Unemployment Benefit Extension Passed, Payments Could Take Several Weeks

Congress passed a six-month extension of emergency unemployment benefits, restoring a lifeline to nearly 3 million out of work Americans whose benefits have run out since June 2.

However, a processing delay could see many Americans waiting "several weeks" for their unemployment checks to arrive, according to the Washington Post.

The bill was passed by a vote of 272 to 152 in the House on Thursday, after being approved by the Senate on Wednesday following weeks of contentious debate. President Obama is expected to sign the extension immediately.

The expected delay in payments may be difficult for those whose benefits ran out as much as seven weeks ago.

With the official unemployment rate at 9.5%, and even more working significantly reduced hours, many Americans are turning to bankruptcy to help them eliminate high-interest credit cards and personal loans--often necessary to help maintain household finances. Nearly 800,000 bankruptcy cases were filed in the first half of 2010, and even more are expected in the second half.

If you are out of work and struggling with debt, consider your options by talking to a bankruptcy attorney. Click here to connect with an attorney in your area for a free, no-obligation case evaluation.

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Thursday, July 22nd, 2010

The Worrisome Truth about Debt Collectors

There’s been some clamor in the news recently about some of the abuses in the debt collection industry. A recent article from CNN Money profiles ten people who used to work as debt collectors, and some of the behavior they attribute to their coworkers and companies is appalling:

Many former debt collectors were reportedly encouraged to belittle or demean the debtors they called, and often ended up yelling and swearing as part of their collection tactics.
Even when no repossession action was legally allowed, some collectors reportedly threatened to repossess a debtor’s possessions in lieu of payment.
Some collectors allegedly threatened physical violence to debtors and even contacted family members and friends about their debts.

Significantly, one woman profiled said that she believed the debt collectors got away with the above and other illegal collection techniques because many consumers simply don’t know their rights.

In fact, federal law strictly limits the methods debt collectors can use to get their job done. The following techniques are illegal (see a complete outline here):

Phone contact outside the 8 am – 9 pm window
Phone calls intended to harass, annoy or abuse (including repeated phone calls)
Threat of legal action or arrest when none is legally permissible
Deceit or misrepresentation in order to collect a debt (e.g. a debt collector claiming to be a law enforcer or lawyer)
Communication with third parties about a consumer’s debt
Contact at work after being asked to avoid such contact

Debts You Don’t Even Owe

As if such blatant misbehavior on the part of creditors as that reported by CNN weren’t enough, The New York Times recently reported that some automated court systems have been allowing collectors to collect on debts that consumers do not legally owe (such as debts discharged in bankruptcy)

The problem is complex, but it largely boils down to the fact that most consumers (about 10 percent of those contacted) apparently do nothing in response to court summonses about debts owed. And, according to sources, only about one percent of consumers contact a lawyer about their lawsuits.

In other words, this system reportedly allows collectors to sue consumers for debts and go to court without input from those consumers. This is worrisome, especially considering that as many as 94 percent of cases are allegedly dropped when proof of the debt is requested.

So what can you do to protect yourself from illegal creditor contact and legal action? Consider contacting a bankruptcy lawyer in your area if you think you’ve been wronged by the collection industry. It could save you from paying money you don’t owe.

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Tags: collection calls, creditor harassment, debt collection
Posted in Finance 101: Secure Your Future | No Comments »

Tuesday, July 20th, 2010

Credit Card Delinquencies Down in First Quarter

As many people who have filed for bankruptcy know, one of the main causes of filing bankruptcy is unmanageable credit card debt. Often, a bankruptcy filing comes after months of missed payments.

Recent data from the American Bankers Association (ABA) shows that, as a nation, we’re improving our on-time payment rate for our credit cards. In fact, we’ve improved in a variety of areas:

Bank card delinquencies reportedly fell to 3.88 percent of all accounts, down from 4.39 percent in the fourth quarter of 2009. The current rate is also apparently below the 15-year average of 3.93 percent and stands as the lowest rate recorded since 2002.
Auto loan delinquencies fell in both the direct category (from 1.94 percent to 1.79 percent) and the indirect category (from 3.15 percent to 3.04 percent).
Home equity loan delinquencies dropped from 4.32 percent to 4.12 percent, marking the first dip in two years, according to the ABA.
Personal loan delinquencies decreased slightly, from 3.63 to 3.61 percent.
Property improvement loan delinquencies inched downward, from 1.63 percent to 1.40 percent.
Home equity lines of credit delinquencies dropped from 2.04 percent to 1.81 percent.

The ABA considers loans delinquent when payments are thirty days or more overdue, so the decrease in delinquency rates suggests that more Americans are making a concerted effort to make payments on time, on a variety of loan types.

But not all of the ABA’s findings were rosy: the group also noted that several categories saw increased delinquency in the first quarter of 2010:

Marine loan delinquencies

Mobile home loan delinquencies: Up to 3.65 percent from 3.41 percent
RV loan delinquencies: Up to 1.58 percent from 1.44 percent
Non-card revolving loan delinquencies: Up to 1.63 percent from 1.46 percent

While some analysts point to the overall decrease in consumer delinquencies as evidence to support the theory that the economy is on the upswing, others looking at the financial landscape aren’t so sure.

Numbers from the Federal Reserve released earlier this month indicate that, overall, consumer credit decreased in May 2010, which can be read as a positive sign (because people are borrowing less and so are accumulating less debt) or as a negative sign. After all, one of the main reasons we’re taking out fewer loans and opening fewer credit cards as a nation is that lenders have tightened their standards and are less willing to offer us money.

The Fed’s numbers are especially telling when broken into their categories: while consumer debt overall decreased at an annual rate of 4.5 percent in May, revolving credit (which encompasses the vast majority of credit cards) decreased at a rate of 10.5 percent, and non-revolving credit decreased only at a rate of 1.5 percent.

The jury may be out on whether these numbers are good for the larger economy, but if you’re part of the trend of paying loans on time, keep up the good work.

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Tags: credit card debt, delinquency rate, economic trends
Posted in Your Credit Score | No Comments »

Saturday, July 17th, 2010

Foreclosures Likely to Top One Million This Year

A recent report from NPR notes that mortgage foreclosures are likely to reach the one million mark in 2010. To put this figure in context, consider these statistics, pulled from the real estate tracking site RealtyTrac.com:

In a typical year, the United States sees about 100,000 homes enter foreclosure—a mere tenth of the number expected this year.
In 2009, considered a big year for foreclosures, 900,000 homes were foreclosed on by banks.
In the first five months of 2010 alone, 528,000 homes have entered foreclosure—already more than five times the yearly average.
A whopping 1.7 million U.S. homeowners got some kind of foreclosure-related notice between January and June of this year (some of those houses have already gone into foreclosure). This translates to one in 78 homes in the country.

Understanding the Foreclosure Process

So what causes a bank to foreclose on a home? It can take as long as 15 months for a bank to repossess a home once a borrower is 30 days overdue on payments, according to sources. Here’s an idea of what might happen:

Missed payments

: If a mortgage payment is thirty days or more late, the homeowner is said to be delinquent on payments. At this point, the lending bank may send a notice of foreclosure. This is kind of the first warning of foreclosure a homeowner can get. At this point, it’s a good idea to contact your lender if you’re having financial difficulties. You may also want to consider consulting with a bankruptcy lawyer about whether Chapter 13 bankruptcy is a viable option to stop your home’s foreclosure.

Bank notifications: If a borrower continues to miss payments or stops making payments altogether, the bank will likely send notice that foreclosure proceedings have begun. While procedures and laws differ from state to state, homeowners can generally expect various types of notification in the mail and/or via telephone.
Eviction: Once the bank has processed various paperwork, it can evict the residents of the house and reclaim the property as its own. Because of the unprecedented number of foreclosure cases currently active in the U.S., banks may (but won’t necessarily) take longer than usual to actually evict tenants.
Foreclosure auction or sale: The bank now owns the home and may choose to sell it at a foreclosure auction or via short sale. Often, as sources note, any proceeds the bank makes from such a sale might be used to cover legal costs for the foreclosure process or the unpaid portion of the mortgage.

Clearly, the news of massive foreclosure action isn’t good for individuals and families who are losing their homes, but it’s also a bad sign for the larger economy. As more and more properties glut the real estate market, prices fall and the chances of a swift recovery in that area diminish.

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Tags: foreclosure, mortgage, statistics
Posted in Home Foreclosure | No Comments »

Friday, July 16th, 2010

Credit Scores in the U.S. at Record Lows

A recent report from the Associated Press notes that Americans’ credit scores have dropped to all-time lows, with 25.5 percent of the country scoring below 600. Here’s a closer look at that figure and what it might mean for future borrowing.

Credit Scores & Borrowing

When you apply for a loan, most lenders review your FICO credit score, which can range from 300 to 850 and is based on the information in your credit report. Higher scores qualify borrowers for larger loans and loans with more attractive terms (like lower interest rates); lower scores indicate that a borrower might be a greater risk to a lender, and so qualify borrowers for smaller loans and ones with higher interest rates.

The recently released data on credit scores reportedly show the following figures:

Scores of 599 and below: The number of people in the “low” range of credit scores has apparently jumped since the Great Recession hit—while a typical year finds that about 15 percent of those with active credit (about 25.5 million people) fall into this category, currently 25.5 percent (about 43.4 million people) reportedly score in this range.
Scores in the middle range (650 – 699): Sources indicate that this group traditionally comprises about 15 percent of active credit users, but has fallen to 11.9 percent in recent years. The shift suggests that those most likely to take out home and car loans might now be deterred from doing so because of lowered credit scores and thus more costly loans.
Scores in the high range (800 and above): The good news, it seems, is that the number of people with very high credit scores have increased: while the typical average hovers close to 13 percent, recent research found the group to comprise 17.9 percent of credit users.

So what does this mean for individual consumers and the larger economy?

A Slow Recovery?

Sources note that much of the economic growth in the boom years before the Great Recession was fueled by borrowing—also known as debt. While Americans were spending plenty of money, much of it was money they didn’t actually have (in the form of credit cards, mortgages, car loans, etc.).

The sky-high foreclosure rate and steadily climbing number of personal bankruptcy filings suggests that we’ve learned a lesson or two about debt as a nation, which may mean two things: first, that lenders will be a bit more discerning when issuing loans; and second, that borrowers will be a little more cautious when applying for them.

This could translate to a slow recovery, as we pare back our spending in favor of building up safety nets.

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Tags: bankruptcy, borrowing, credit score, recession
Posted in Your Credit Score | No Comments »

The Bankruptcy Blog

Archive for July, 2010

Foreclosure Rescue Scams: What to Watch Out For

Loan Modification vs. Foreclosure Rescue

Latest Unemployment News: More of the Same

Unemployment Benefit Extension

Bankruptcy: BP’s Worst Case Scenario?

Look Out for More (Legal) Credit Card Fees

What You Might Notice

Unemployment Benefit Extension Passed, Payments Could Take Several Weeks

The Worrisome Truth about Debt Collectors

Debts You Don’t Even Owe

Credit Card Delinquencies Down in First Quarter

Foreclosures Likely to Top One Million This Year

Understanding the Foreclosure Process

Credit Scores in the U.S. at Record Lows

Credit Scores & Borrowing

A Slow Recovery?

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