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Wednesday, September 29th, 2010

FTC Supports Data Security Legislation

Even though federal law protects victims of information crimes, every year some people who file for bankruptcy cite identity theft or another information crime as one of the reasons for their financial distress. And, in an age of increasing online transactions, we’re more exposed than ever to data breaches that could lead to serious privacy risks.

That’s why it’s good news to hear that the FTC recently testified to Congress in favor of data security legislation.

Your Personal Data & Finances

You probably already know that your Social Security Number, your credit card numbers, your bank account numbers and similar information are valuable and should be guarded carefully. But, it seems, some businesses that collect and store our personal information don’t always take the same precautions we might ourselves.

The FTC testimony specifically suggests the passage of laws that require the following:

  • Businesses that make claims or promises about data security must know that these claims are accurate and up to date.
  • Businesses should take steps to guard against well-known technology threats to data security.
  • Businesses must know the recipients, if any, of sensitive consumer information.
  • Once they no longer need sensitive information, businesses must not continue to store it.
  • When disposing of sensitive information, businesses must do so properly and completely.

If it surprises you that these laws aren’t already in place, take note. This should serve as a wake-up call to remind you to keep careful track of your personal information at all times.

Protecting Your Information and Money

So how can you reduce the threat of identity theft and thus lower your chances of becoming a victim? Here are some pointers from the FTC:

  • Shred sensitive documents when you’re finished with them. This includes medical documents, financial papers, and anything else that has identifying information about you or your family.
  • Protect your Social Security Number. Keep your Social Security card in a safe spot (not your wallet) and don’t give this number out unless you’re obligated to by law. If you’re asked for your SSN, question why the company needs it, how it will be used and whether you can give an alternate form of identification.
  • Keep your personal information safe. Don’t communicate any sensitive info over the phone, through email or over the Internet unless you’re certain who’s on the other end.
  • Be suspicious of strange emails. If you get an email from an unknown source with a link or an attachment, avoid clicking on them – they could be viruses.
  • Keep your passwords obscure. Using important dates or family names can make it easy for identity thieves to access your accounts.
  • Keep your personal information secure. At home, take special precautions if you have roommates or non-family workers coming and going.

If you’re concerned that you may have been the victim of identity theft, speak with a lawyer today to learn about your rights.

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Posted in Finance 101: Secure Your Future, Identity Theft | No Comments »

Tuesday, September 28th, 2010

New Debt Relief Rule Means More Truth in Advertising

If you’re struggling with debt and looking for a way to improve your finances, there’s good news on the horizon: beginning Monday, September 27, new rules issued by the Federal Trade Commission prevent advertisers from deceiving potential customers about their ability to offer financial relief.

Here are some of the new protections the FTC’s latest consumer protection rule outlines.

More Honest Disclosures

While bankruptcy is a well-known debt relief option, many consumers try to avoid filing for bankruptcy by opting for debt settlement or credit counseling. While both options work well in many instances, in some cases, dishonest companies pitch too-good-to-be-true offers and consumers end up with more debt than they had before.

Now, advertisers will have to:

  • Announce proposed fees & refund policies No longer will companies be able to get away with advertising how low a price might be (“as little as…”). Now, advertisers will have to base their proposed fees on actual results they can realistically expect to get from a person’s creditors.
  • Estimate likely time frame: After consulting with a customer, debt-settlement companies must offer a good-faith estimate about the likely length of time the process will take, based on a debtor’s individual circumstances.
  • Estimate savings required to settle debts: As with the other new requirements, companies must make estimate how much money an individual customer must save before he has a realistic chance of settling debts based on that customer’s individual circumstances.
  • Disclose potential negative side effects: Rather than glossing over the downsides of debt settlement, companies are now required to review with customers the potential negative impact on their credit reports, the chance that creditors will bring lawsuits against them and any potential tax consequences.

More Honest Advertising

In addition to the above requirements, debt settlement firms are now required to advertise likely savings based on all their clients, not only the most successful ones. Theoretically, this should give potential customers a more realistic picture of how much debt settlement could actually help their finances.

Debt Settlement Vs. Bankruptcy

While there is no one-size-fits-all debt relief option, bankruptcy protection does have some obvious advantages over debt settlement and some other bankruptcy alternatives, which include:

  • Legal protection from creditors: Because bankruptcy functions as part of the federal government, those who file for bankruptcy are legally protected from creditor contact once they file their cases.
  • Federally and state regulated processes: While anyone can start a debt settlement firm, regardless of qualifications, bankruptcy attorneys and judges must meet very specific requirements, so you won’t have to question the background of the people you’re working with.
  • Federally regulated costs: The fees associated with filing for bankruptcy are set by federal laws, so you know you aren’t getting ripped off when you start a case (although fees that lawyers charge may vary). Debt settlement firms, on the other hand, can charge whatever they want – and some unscrupulous firms do, to the detriment of their clients.
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Posted in Finance 101: Secure Your Future, Your Credit Score | No Comments »

Wednesday, September 22nd, 2010

Poverty Rate Rose in U.S. Last Year

Recent reports from the Census Bureau show that the number of American families living at or below the poverty line increased in 2009 to a fifteen-year high of about 44 million, or one in seven Americans. So what does that mean for individual finances, including foreclosure , eviction, bankruptcy filings and more?

Here’s a look at what the rising poverty rate in the U.S. might look like.

Poverty and Bankruptcy

Many insiders have estimated that as many as 1.6 million Americans will file for bankruptcy by the end of 2010, up from even 2009’s 1.3 million. Even though that number represents an increase from prior years, some economists conjecture that more Americans would be in need of bankruptcy protection if not for:

  • Shared housing: More and more extended families, it seems, are opting to live in single residencies in order to save money on bills. For some people, living with loved ones may have been the result of losing a home to foreclosure or a landlord’s loss of property to foreclosure.
  • Extended unemployment benefits: Congress has extended traditional unemployment benefits more than once since the Great Recession began, and many individual states, too, are offering their out-of-work residents more support than usual.
  • Food banks and soup kitchens: Various charity-funded food organizations have apparently seen a significant increase in needy Americans. Reports suggest that more and more U.S. citizens are being forced to choose between paying the rent and buying food supplies.
  • Food stamp distribution: Sources note that the number of Americans receiving food stamps has risen to 41 million, from 39 million at the beginning of the year.

Unemployment and Bankruptcy

According to the New York Times, one likely culprit of the rising poverty rate is the unemployment rate, which has been stuck at just below 10 percent for months now and shows no signs of dipping.

Some analysts have reportedly noted that it generally takes some time for poverty rates to decrease once unemployment numbers begin to normalize, and the experts are still not saying when that’s likely to happen.

Here’s a look at who, according to sources, has been hit hardest by decreasing wealth levels:

  • 9.4 percent of white Americans are now in poverty;
  • 25.8 percent of black Americans live at or below the poverty line;
  • 25.3 percent of Hispanic Americans find themselves in poverty; and
  • 12.5 percent of Asians are in poverty.

All of the above groups except Asians have seen increases in poverty in the last two years. Additionally, sources note that young adults without college educations are especially hard hit across racial lines. Many predict that poverty will continue to rise for the duration of 2010.

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Tuesday, September 21st, 2010

Save Money on Your Car: Avoid these Scams

While owning a car is an indispensable part of many people’s lives (and often the main mode of transit to and from work), maintaining a car can put a real dent in the monthly budget. And, if you aren’t especially vehicle-savvy, you may run a further risk of being taken in by car-related scams.

A recent post from Bargaineering.com offers some insight on some of the worst and costliest car scams out there, which we all need to avoid, especially if we’re recovering from a bankruptcy filing. Here’s a summary.

Know What Your Car Needs…and Doesn’t Need

  • The engine shampoo: This service, which some unscrupulous mechanics have been known to offer, involves cleaning the outside of your engine. Admittedly, car engines get very dirty, what with all the work they do to keep your car moving. But, as those in the know realize, cleaning the engine doesn’t have a real impact on your car’s performance. What it does affect is your wallet – this scam can set you back a couple hundred dollars. A much better use for that money would be toward paying down debt.
  • The engine flush: This service does for the inside of the engine what the shampoo does for the outside. In some cases, this may be necessary (you’ll know you need a flush if you notice buildup under the oil cap). But, unless you’ve had your car for a while and have seen the oil cap buildup, opt out of the flushing service. If you have some money to spare, think about using it to start a savings (savings page) account.
  • Fuel injector cleaning: Again, unless your car has more than 100,000 miles on it, an offer to clean your fuel injectors is likely to be a waste of your money.
  • Gas saving gadgets: These have been blasted by Consumer Reports as money wasters. If you’re looking to spend less on gas, try driving within the speed limit, keeping the proper air pressure in your tires, braking gradually, losing extra weight in your vehicle and otherwise making sure your car is in good shape. If you’re really pinched for cash, try carpooling or switching to a bike a few times a week.

Car-Buying Scams

In addition to these maintenance scams, there have been reports of online scams targeting people interested in buying cars for a good price. One notorious scam claims to be selling repossessed cars for steep discounts. Know the warning signs:

  • A seller asks you to wire money.
  • A seller asks you to pay a significant portion of the price before you ever see the car.
  • The price seems too good to be true.

Cutting costs is essential to establishing financial health after a bankruptcy filing, but sometimes you need to pay more in order to get a reliable product.

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Wednesday, September 15th, 2010

What You Need to Know about Debt Collectors

WalletPop.com recently published an interview with a journalist who decided to spend some time working at a debt collection agency to research whether or not the company complied with federal guidelines for debt collectors (as outlined in the Fair Debt Collection Practices Act).

His findings (which are detailed in the book Fight Back against Unfair Debt Collection Practices), are summarized below.

What to Expect from Debt Collectors

While federal law specifically states that debt collectors must follow various guidelines that basically add up to treating debtors with respect, various reports have suggested that many collectors regularly break these guidelines—and most consumers don’t realize they have rights in the matter.

Here are some classic maneuvers to watch out for and speak up about if you encounter:

  • Trainees don’t count. It seems that some collection agencies excuse illegal behavior from employees by identifying them as “trainees,” meaning that they haven’t been fully instructed on how to behave according to the laws. To counteract this potential argument, make sure you document any threatening or rude calls from debt collectors: get their name, employee number, the date and the time of the call.
  • Tapes and lawyers come in handy. Apparently, debt collectors will play by the rules if you notify them that you are recording the conversation or that your lawyer is handling your debt collection calls. Be warned, though, that professional collectors have worked with a lot of debtors and you’ll actually need to have a lawyer retained if you claim you do.
  • Don’t give permission. In order to contact you outside the hours of 8:00 am and 9:00 pm, debt collectors need your express permission; however, it seems that some debt collectors will essentially lie about getting such permission by fudging their notes about a call. This reinforces the importance of taking notes about such phone calls yourself to use in cases of harassment.
  • Collectors probably know your credit history. One reportedly common tactic is for a collector to refer to other debts you may be current on when trying to collect a debt on which you’ve fallen behind. This means that you should be checking your credit report regularly to make sure you know at least as much as they do.
  • Get settlements in writing. If you and a collector agree to settle a debt for a partial, lump-sum payment, be sure to get the agreement in writing before making any payments. The agreement should have the original amount of the debt, the agreed settlement amount and the terms of the repayment. If you’re communicating with a collector over the phone, insist on an emailed PDF or a faxed copy of the agreement before making any payment.

Protect Your Rights from Debt Collectors

If you think your rights have been violated, you may want to contact a bankruptcy lawyer in your area to see what your options are for moving forward.

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Monday, September 13th, 2010

Study: We’re Using Our Credit Cards Less

A study conducted last year by the Javelin group reportedly found that, as a nation, we’re cutting back on our credit card usage. The study apparently found that, while 87 percent of consumers polled in 2007 said they’d used a credit card in the last month, only 56 percent answered yes in 2009.

And, according to sources, the researchers think that number will fall again in this year’s survey.

Potential Benefits of Lowered Credit Card Use

While the finding itself suggests that Americans are responding to the weak economy by shifting their primary payment techniques, the larger potential effects of our changing behavior are interesting as well.

  • More attractive cards: One potential side effect of decreased use of credit cards would be that credit card issuers could start trying to lure customers back with more enticing card offers, which could include rewards programs, low interest rates, versatility or a number of other options. This is by no means a guarantee, but it’s something to watch out for it you’re in the market for a new credit card.
  • Less personal debt: A move toward debit cards and prepaid cards could lead us to lower levels of personal debt. While this would have to be a broad and fairly long-term shift in order to significantly reduce debt, such a shift could even affect the number of personal bankruptcy filings.

Credit Cards and Bankruptcy: The Connections

It’s important to understand the connection between bankruptcy and credit cards in any examination of our nation’s credit habits, especially during a recession, when more Americans might be pushed to seek bankruptcy protection. Here’s a look at some key links:

  • Credit card debt in bankruptcy: Many bankruptcy filers have significant credit card debt when they file their bankruptcy petition. And, because credit card debt is not very high-ranking among debt types in the eyes of the court, a significant portion of those who enter bankruptcy with such a burden find some or all of their debt discharged.
  • Credit cards after bankruptcy: Because high credit card bills lead many bankruptcy filers to financial distress, some are skittish about applying for credit cards after they exit bankruptcy. But credit cards, when used well, can actually help strengthen your credit rating and thus help you “prove” to potential lenders that you’ve adopted healthy financial habits.

Is Your Credit Card Use Healthy or Risky?

If you’re worried about your credit card bills or if you’ve found yourself depending more and more on your credit card to make ends meet, you may be heading toward financial upset. And, in many cases, taking action sooner rather than later can make the process of financial reform much smoother.

To get an objective opinion about your overall debt levels, consider consulting with a bankruptcy attorney, who may be able to help you get on the path to healthy finances once and for all.

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Thursday, September 9th, 2010

Study: Americans are Spending Smarter… Sort Of

A study recently conducted by the National Foundation for Credit Counseling has found that, as a result of the Great Recession, Americans are more interested than before in paying down our debts. But, it seems, we still don’t quite have the financial habits that will get us to that goal.

Eliminating Debt by Watching Your Money

The study found some interesting nuggets of information about the way we tackle debts in this country:

  • More than half of poll respondents reportedly noted that the economic slowdown had inspired them to pay down their debts; but
  • Only 37 percent of those polled indicated that they had a good idea of how they spent their money each month; and
  • Only 20 percent said that they planned to begin budgeting their expenses in order to get on track financially.

The good news from the poll’s findings is that we seem to have had a collective wake-up call about the real cost of debt. But, clearly, we aren’t all on the same page about what kind of financial habits will get us to a debt-free lifestyle.

Steps for Getting out of Debt

Representatives from the NFCC and other financial gurus often offer similar advice for getting on target with financial goals. In fact, the steps to debt elimination are almost identical to those for rebuilding and maintaining healthy finances after filing for bankruptcy:

  • Track your spending: In order to seriously pay down debt, you have to know where your money goes each month. Luckily, this step is fairly easy to accomplish, once you decide to do it: for a month, write down everything you spend money on, including rent, utilities, food, clothes and entertainment. No purchase is too big or too small to count – and if you leave anything out, you won’t have a realistic idea of where your finances stand.
  • Create a budget: Armed with the information about how you currently spend your money, you can devise a plan for spending and saving your money more effectively – that might mean putting more money toward credit card bills and less toward new shoes, or switching to home-cooked meals most nights of the week. Be sure to give yourself some breathing room so you don’t feel deprived by your budget and give up.
  • Start saving money: Now that you’re actively, consciously managing your finances, it’s important to put some money aside each month so you’re ready for any unexpected event (such as illness, injury or job loss). Don’t be daunted if you can only save a little each at a time – anything at all is better than nothing, and your funds will build up over time.

Remember: good intentions are important, but they won’t get you out of debt and back on track financially unless you act on them.

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Wednesday, September 8th, 2010

FTC Deals with Payday Lending Scammers

The Federal Trade Commission has announced that it has reached a settlement deal with a payday loan company that was illegally garnishing the wages of some of its borrowers. Here are the basic facts of the case and some pointers to keep you from getting burned:

  • The company offered payday loans. The companies known as GeteCash and LoanPointe reportedly offered consumers payday loans, a type of short-term, high-interest loan considered by many financial analysts to be “predatory.”
  • Consumers agreed to online terms and conditions. In order to apply for a loan online, consumers apparently had to check an agreement of terms box. One of these terms, it seems, indicated that the company could garnish a borrower’s wages (that is, take money from their paycheck) if she failed to make loan payments.
  • The garnishment was illegal. According to the FTC’s charges, the payday lending company overreached its legal debt-collection abilities. While laws permit federal agencies to garnish the wages of someone who owes the government money, non-government groups aren’t afforded the same privilege.

The FTC apparently took action because the payday lenders not only indicated that they had the same collection rights as the government, but also claimed that their customers knew that they had agreed to the garnishment clause.

Because of the FTC’s actions, those behind the garnishment scam are barred from certain lending practices and responsible for a $38,133 judgment that has been suspended because of their current financial situation.

Don’t Get Burned by Payday Lenders

In recent years, legislators have taken action against the payday lending industry, which can lead struggling consumers into a perilous cycle of debt. Many financial insiders recommend avoiding payday lenders at all costs because of their high cost. Here are some options you might consider before turning to a payday lender if you’re in need of cash:

  • Friends and family: Asking to borrow money from a loved one may be hard, so consider this twist: offer to do chores or run errands in exchange for some money. Or, if you’re already swamped, volunteer to write up a formal payment agreement outlining the terms of repayment.
  • Your boss: If you have a decent relationship with your boss, consider asking for extra work and/or an advance on pay. This may not work more than once, but if you’re in a serious pinch, an advance on wages will likely hurt your finances less than a payday loan.
  • Your credit card: If you aren’t maxed out on your plastic, using it to pay is generally less expensive than taking out a payday loan. Credit cards generally have lower interest rates than payday lenders and offer you more options for paying them back.

If you’ve already turned to payday lenders to keep up with financial obligations, you may want to consider the financial relief that filing for bankruptcy could offer you.

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Posted in Predatory Lending | 1 Comment »

Sunday, September 5th, 2010

Bolster Your Finances: Prepare for Illness or Injury

While the exact numbers fluctuate from year to year, it’s common in the United States for bankruptcy filers to indicate that an unexpected injury or illness was a contributing factor to their decision to turn to bankruptcy protection to get a fresh start on their finances. So how can you prepare for such an event?

Think about Sickness When You’re Healthy

The first step to prevent an illness from becoming a financial disaster is to take a little time to think about what an illness would mean for you—right now, while you’re still healthy (hopefully).

  • Work time: If you have limited sick leave and/or vacation days, an extended leave of absence (or even one lasting longer than a few days) could mean taking time off without pay and/or risking job loss. To prevent such a calamity, figure out whether you could logistically work from home. If so, figure out specifically how it would work and set aside time to propose the plan to your boss. The proactive stance will not only let you know where you stand but show your commitment to your workplace.
  • Provisions: On a very basic level, serious sickness or injury may mean that you can’t get out of your home for a few days. If you live alone, that could mean you’d have to survive on the stuff in your shelves—so make sure you’re stocked with nutritious non-perishables so you don’t have to revert to expensive, non-nourishing delivery meals during your illness.
  • Caretakers: While some sicknesses pass quickly enough and let you get back to your life, others require outside help even after you feel relatively normal again (think broken arms or legs). If you don’t know any of your neighbors and aren’t friendly with anyone at the office, you may want to make the effort to get to know a few people. A friendly neighbor might offer to run to the grocery store or pharmacy for you, and a close coworker can help you as you ease back in to office life.
  • Money: This is the tricky part. The cost of medical bills, especially for major illnesses, can be daunting. But that’s all the more reason to start a savings account specifically for emergencies, if you haven’t already. Some financial analysts recommend socking away six months’ expenses, but if that sounds overwhelming, just focus on putting away some money from every paycheck. Eventually, small amounts will add up and you’ll benefit from the peace of mind that comes with knowing an illness won’t throw you into a nasty debt spiral.

Remember: you won’t feel like dealing with the details of sickness when you have the flu, so take a few healthy hours of your life to plan. If and when that pesky sickness shows up, you’ll be grateful you did.

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Friday, September 3rd, 2010

Mortgage Foreclosures & Delinquencies

In light of some mixed news about housing and foreclosure for the second quarter of this year, the outlook isn’t too rosy for the short-term future of the nation’s real estate market, a recent New York Times article notes.

Here’s a look at some of the numbers released recently by the Mortgage Bankers Association and various government organizations and what they might mean for the housing market:

  • According to the MBA, the number of homes currently in some stage of foreclosure fell in the second quarter of 2010, marking the first such decline since 2006.
  • Sources note that foreclosures on subprime loans may have already peaked and are likely now dropping off; however, it seems that prime loans are now in danger of default, partly because of continued high unemployment.
  • Mortgages that are 90 days past due (considered to be in “serious default”) accounted for 9.11 percent of all loans in the second quarter, a drop from 9.54 percent in the first quarter of this year.
  • Sources note that existing home sales in July 2010 were 26 percent lower than they were in July 2009.
  • Sales of new homes, it seems, were down 32 percent in July 2010, compared to a year earlier, apparently making the month the slowest on record (with stats going back to 1963).
  • As many as seven million households were behind on mortgage payments in July, according to sources (down from the high of eight million, reached about eight months ago).
  • Numbers suggest that banks and lenders are starting to clear the foreclosure logjam: in July, 279,685 foreclosures were started, an increase from 225,700 in June.

Clearly, these numbers don’t exactly point at recovery in the housing market—and some analysts have reportedly predicted that as many as four million American families could lose their homes to foreclosure before the crisis eases.

And such a high rate of foreclosures could have a seriously detrimental effect on the overall economy:

  • Less money, less spending: Consumers who are struggling to make mortgage payments are likely to spend less in other areas, meaning that consumer-supported economic growth may be weak.
  • More foreclosures, more houses: As banks start foreclosing on homes, more vacant properties will flood an already saturated market.
  • More houses, lower prices: This inundation of homes will mean that supply is far higher than demand, and could lead to further drops in housing prices.
  • Lower prices, more underwater mortgages: As home values continue to decrease, more borrowers will likely find that they owe more on their homes than those properties are currently worth.

There is no clear end in sight for this cycle of foreclosure.

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