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Friday, October 30th, 2009

Stalemate in Real Estate Sector has Increased Bankruptcy Filings

Guest Author: Peter Gomes

The real estate sector received a jolt when the sub-prime mortgage crisis eroded the US economy. The mortgage market was in doldrums and the upheaval so great that the government had to intervene with its series of mortgage bailout programs.

Consumers bankruptcy filings increased, and so did the number of foreclosures. Many Americans considering bankruptcy filing received more information on bankruptcy by connencting with a bankruptcy attorney.

The Obama Administration introduced a series of mortgage bailout programs to assist homeowners facing foreclosure. The program, known as the Making Home Affordable Plan, was expected to help as many as 7 million to 9 million homeowners. However, due to few limitations, the program has yet to help as many homeowners as anticipated.

There is a vicious cycle of debt that has led to the recession, which has affected consumer spending as well as investor sentiment.

In the easy-credit boom, people started using their credit cards even for making payments for grocery shopping and for utility bills. As employers went on a cost cutting and job cutting spree, it became difficult for consumers to make ends meet.

For consumers considering filing bankruptcy, it can be Chapter 7 bankruptcy or Chapter 13 bankruptcy. In Chapter 7 bankruptcy, a court-appointed trustee will liquidate your non-exempt assets so that the proceeds can help in paying off creditors. As per the new federal bankruptcy laws, certain changes have been introduced. The prominent ones are Means test and credit counseling.

If you are planning to file Chapter 7 bankruptcy, you have to find out if you qualify for the same by taking the Means test. Consumers also must take a credit counseling session prior to filing bankruptcy.

In case of Chapter 13 bankruptcy, you are given a repayment schedule according to which you are expected to make payments to your creditors.

In either bankruptcy chapter, there is one advantage of filing: an Automatic Stay or Order for Relief that prevents creditors from coming after you for their dues.

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Posted in Bankruptcy and the Economy | 7 Comments »

Saturday, October 17th, 2009

More Seniors Struggling with Debt

A recent Newsweek article highlights the problem of older Americans struggling with debt. It seems that those aged 55 and older have become the group most likely to file for bankruptcy.

Retirement and Debt

The reasons for senior citizens' financial struggles may not be immediately obvious, but they are telling. Consider these factors that can sap a nest egg:

  • Credit card debt. This comes as no surprise – many Americans are strapped with serious credit card debt. This is part of the reason why the Credit CARD Act of 2009 was passed.
  • Large mortgages & home equity loans. Those who refinanced their mortgages during the real estate boom – whether to redecorate, fund children’s education, or pay down other debts – may find themselves faced with massive mortgage payments. In some cases, seniors may owe more on a house than it’s worth.
  • Cash-strapped kids. Like it or not, you may be contributing to your parents’ financial woes. In many cases, parents try to help their children financially even when they can’t afford to do so. Or they may be too embarrassed to refuse a child’s request for aid.
  • An end to income. Once you stop working, the paychecks stop flowing in. This isn’t problematic if you’ve got enough money socked away for your golden years, but since the stock market’s crash, many nest eggs aren’t quite as hefty as they once were. And paying down debt without regular paychecks can be difficult.
  • Predatory lending products. Unfortunately, nobody is immune to financial disasters like payday loans. People on fixed incomes (like many senior citizens) can find such loans especially damaging, since sky-high interest rates make them difficult to repay.

Getting Help for Yourself or a Loved One

The good news is that helpful agencies are available to provide credit counseling or debt management to those in need.

The bad news is that many con artists are also out there, ready to take money from whomever they can.

Check out various credit counseling services in your area (The Association of Independent Consumer Credit Counseling Agencies has a searchable database of accredited firms) and visit the Better Business Bureau’s website to check out any operation you discover.

If you think an older person in your life may need debt assistance but not have access to online resources, consider offering your skills to that person.

Additional Resources

The Plastic Safety Net (PDF)

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Posted in Bankruptcy and Predatory Lending | 2 Comments »

Saturday, August 29th, 2009

Consumer Alert: Fake Bill Collectors and Rebate Checks

As you hopefully know, a well-informed consumer is a tricky target for a scammer.

Here’s a summary of are two new scams that have been reported in various parts of the country, and what you can do to protect yourself from them.

Phony Bill Collectors

Reports suggest that scammers are posing as debt collectors and threatening consumers over the phone while demanding payment.

  • Fake agency affiliation: One con artist apparently claimed he was from the “Federal Investigation Authority,” an organization that does not exist.
  • Bogus claims about consequences: Sources indicate that consumers have also reported threats of jail time if they didn’t pay debts – often, debts they no longer owed. NOTE: You cannot be sent to jail for debts. Your home may be foreclosed on, you may have your car repossessed and your wages could be garnished, but debtor’s prison is a thing of the past.
  • Worrisome knowledge of personal information: Perhaps the most troubling characteristic of this scam is that, according to sources, scammers call with a frightening knowledge of the victim’s life: SSN, friends’ names, home address, etc.

These scams can be dangerous for a variety of reasons, the least of which is that scammers might call your work phone and force you to explain an embarrassing situation to your colleagues.

  • Protect Yourself. If you’re called by a suspicious collector:
  • Don’t give out any information. Even if he already knows your digits, refuse to verify any of it.
  • Don’t agree to anything. Demand to see written proof of your debts before proceeding with the conversation.
  • Contact the original company. If you truly still owe a debt, you can find out by calling whatever company the caller names.

Rebate Check Scam

After using a credit card to purchase a number of Snuggies, one consumer reportedly received a check for $8.25 in the mail.

It appeared to be a rebate check, and had the Snuggie logo on the envelope. It was not.

  • Read the fine print. The check in question apparently indicated that, by endorsing it, consumers agreed to a month-long trial membership to “Great Fun,” a discount travel company.
  • Proceed with caution. While that may not seem so bad, the rest might. After the trial month, consumers would be automatically enrolled for full-time membership – at a cost of $150 per year, to be charged to the credit card used for the Snuggie purchase.

If you’ve received one of these checks or been victimized by a similar scam, take action by filing a complaint with the Federal Trade Commission.

Protect Yourself: Never sign a check (especially one you weren’t expecting) without reading all fine print associated with it. If that means finding a magnifying glass, then so be it!

Additional Resources
Fair Debt Collection Practices Act (PDF)

Have you been a victim of a scam? Consider filing bankruptcy.

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Posted in Financial Literacy | 4 Comments »

Thursday, August 13th, 2009

Study: More Complaints About Debt Collectors - Protect Yourself from Creditors

A new survey by the Consumer Federation of America and two other consumer protection groups shows that consumer complaints about debt collection are growing at the same time that resources available to address these complaints are diminishing.

The Findings: Complaints Increase, Funds Shrink

The survey, which examined 34 state, city and county agencies from 19 states, found these troubling trends:

  • More complaints: 62 % of agencies reported more complaints in the past year than in previous years
  • Cash crunch: 47 % reported recent budget cuts and one agency was completely shut down due to lack of funding
  • Less hurting more: 50 % reported that small-dollar amount complaints were up last year, suggesting that the economy has made consumers more likely to report minor problems
  • Debt collection complaints soar: This was the fastest-growing category of consumer complaints
  • Mortgage woes continue: Foreclosure rescue scams and other mortgage-related problems stood out as the most egregious of consumer complaints
  • Money problems abound: The majority of agencies cited funding shortages as the biggest challenge they faced

Economy Primed for Scams?

The CFA’s analysis of the survey suggests that the increased consumer complaints are no surprise in the current economy – when everybody’s strapped for cash, people will be more aggressive to collect what they can from others.

Keeping Yourself Away from Scams and Debt Collectors

The CFA offers tips for decreasing your odds of being victimized by a debt collection or other scam.

  1. Know your seller. When buying from a new business, check its status with your local Better Business Bureau www.bbb.org.
  2. Check licenses. Before hiring an individual, find out about licensing requirements in your state and how to determine whether a person has met them.
  3. Pay safely. If you’re required to put money down for something you’ll receive in the future, use a credit card rather than cash or a debit card – that way, you can dispute charges if necessary.
  4. Don’t pay in full up front. Putting down a deposit is normal for services to be rendered in the future – paying in full is not.
  5. Watch out for scams. Any offer involving money transfers, check cashing, upfront money demands or other promises that seem too good to be true are likely fraudulent. Don’t get involved.
  6. Read your contracts. Make sure any verbal promises you get appear in writing as well, and make sure you understand what’s in anything you sign.
  7. Know where to go for help. Nonprofit, community-based credit counseling services are available across the country. Seek one out on the web or from a trusted source if you need help.
  8. Trust your instincts. If you suspect foul play, back up and get some trusted advice.

Additional Resources
Consumer Federation of America, National Association of Consumer Agency Administrators & North American Consumer Protection Investigators: 2008 Consumer Complaint Survey Report

Learn how filing bankruptcy can help you avoid foreclosure and debt collector harassment.

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Posted in Financial Literacy | 1 Comment »

Thursday, August 6th, 2009

Are You Responsible for the Debt of a Deceased Relative?

When a dear family member dies, the last thing you want to think about is money – unfortunately, financial problems arise sometimes.

Besides funeral and burial costs, you may be forced to deal with the unpleasant question of financial obligations your loved one left unpaid.

Here’s what you need to know.

Protection from the Fair Trade Commission

The law that protects you from a family member’s debts is called the Fair Debt Collection Practices Act and is enforced by the FTC, a government consumer protection agency. Basically, the law outlines the following terms.

  • Who’s responsible for debts after death? In most cases, payment of any debts comes from the deceased’s estate. If money from the estate is insufficient to cover debts, they usually remain unpaid.
  • Is there a legal obligation to pay remaining debts? Most relatives are not legally required to pay debts. You may be obligated to cover debts left by a spouse; however, responsibility is often limited by state law. A bankruptcy lawyer in your state may help you learn more about state law and debt.
  • What should I do if debt collectors try to make me pay? First of all, don’t give out any of your personal information (SSN, bank account numbers, etc.). Some con artists stalk the obituaries and pose as debt collectors as a way to steal identities and money. Instead, direct the collector to the deceased’s representative (an executor of a will or an administrator).
  • Can I ignore debt collectors who contact me about debts? Technically, you can. But if you’re representing the deceased or otherwise responsible for his debts, you may want to negotiate with the collector to see if you can work out an arrangement.
  • How can I stop a creditor from contacting me? Write a letter to the collector asking her to stop attempting to collect the debt. Copy the letter and send it by certified mail so you’ll get a receipt when it arrives. After the creditor has received your letter, she can only contact you for two reasons: to announce a specific action (like a lawsuit) or to announce the end of collection attempts.
  • Can creditors tell others about a relative’s debt? Unless the creditor needs contact information for the representative of the deceased, he is generally prohibited from telling anyone besides a spouse, parent or guardian.

Learn more about filing bankruptcy and stoping creditor harassment.

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Posted in Financial Literacy, Post-Bankruptcy Debtor Education, Setting the Record Straight about Bankruptcy | No Comments »

Friday, July 31st, 2009

What To Do When Adult Kids Ask for Money

Many of us are struggling to keep afloat in this economy and nobody wants to see loved ones flounder under overwhelming debt.

So what should you do if your grown children come to you asking for help with their debt?

Below are some steps to take before you fork the money over.

Consider These Points:

Step 1: Stand back and consider everything.

Before you decide whether or not to help your child out of a financial squeeze, consider all relevant factors.

  • Is this just one more in a series of demands for money? If so, odds are neither you nor your child will benefit from a financial bailout – you may want to let your kid learn the hard way.
  • Is this a true emergency like unexpected job loss, illness or divorce? If so, offering some help may be in everyone’s best interest. Millions of Americans end up filing bankruptcy because of such unexpected expenses. If you can offer a hand, your child may be able to avoid bankruptcy.
  • Do you have a personal stake in your child’s finances? That is, did you cosign any of his or her loans? If so, your credit could be damaged if your child fails to make payments.

Step 2: Initiate or participate in useful research.

Whether or not you decide to help your child financially, make sure you both know what options are available, such as:

  • Student loan deferral and forbearance: The government recently introduced two new programs to help recent graduates deal with student loans (info available here http://ibrinfo.org/). You can help your child determine whether he qualifies for such programs.
  • Credit counseling: Your child may be able to handle his or her debt after consulting with an accredited counseling firm. Find information about services and firms in your area here: http://www.nfcc.org/.

Step 3: Weigh the options.

Once you know what you’re facing debt-wise and what options are available to you and your child, consider what you can reasonably do to help.

  • Non-financial assistance: Maybe your finances don’t permit you to offer your child money. But could you invite him to live with you rent-free? Could you carpool to work or otherwise help him cut expenses? Creative thinking is essential when money is tight all around.
  • Money gifts versus loans: If you decide that offering your child money will best serve you both, make sure you decide at the outset whether you’re giving her this money (you can give up to $12,000 tax-free per year) or lending it. If you opt to lend, make sure you put everything in writing or use a peer-to-peer lending site that specializes in formalizing loans between family members.

Step 4: Know when it’s too late.

If your child is being pursued by bill collectors, his financial problems are probably too deeply set to benefit from a handout. Help your child learn about filing bankruptcy if necessary, and encourage him to learn from this experience.

Steer Your Child Toward Good Financial Health

Make sure your child knows how important a healthy credit background is for American adults.

Knowing how essential strong credit is to succeed in finance may prompt your child to work harder at eliminating debt. Point him or her to www.annualcreditreport.com for free credit reports and pages on financial literacy to boost general knowledge.

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Posted in Financial Literacy | No Comments »

Wednesday, July 22nd, 2009

Ben Stein and Not-So-Free Credit Scores

The blogosphere has been all over Ben Stein, a financial guru, spokesperson and New York Times columnist, over his involvement with what appears to be a slightly shady "credit-score" site, FreeScore.com.

In advertisements, Stein shills for the group which claim to offer you a free credit score. As several blogs point out:

  1. Your credit score doesn't tell the full story. While your credit score is important, you'll need more information if you want to take action to improve. In order to see what's bringing your credit score down, you'll need to see your credit report, which includes any claims against you.
  2. FreeScore.com isn't actually free. After giving you a "score" for free, they begin charging you monthly fees.

While some people may want to check their credit score monthly, in most cases you don't need this kind of scrutiny. In fact, simply requesting your credit score or credit report can affect your credit score.

You are entitled to a free annual credit report from the government. And the government makes one available at exactly one - and only one! - Web site: Annualcreditreport.com.

Don't be fooled by similar or imitator sites.

If you're in debt and trying to get out, you may become a target of predatory merchants. These groups are looking to make a quick buck off your troubles.

Avoid this by informing yourself, reading the fine print and sticking to reputable, trustworthy sites and sources.

Trying to repair your credit but can't keep up with the bills? Consider filing bankruptcy.

Filing bankruptcy doesn't have to ruin your credit for life. Learn more: Credit After Bankruptcy.

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Posted in Bankruptcy and Predatory Lending | 3 Comments »

Wednesday, July 8th, 2009

City of Chicago to Hire Debt Collection Agencies

Well, the city of Chicago really knows how to kick somebody when they're down.

The City of Chicago is looking into hiring some debt collection agencies - some of them with checkered pasts - to collect outstanding debts owed to the city. This includes unpaid utility bills and parking tickets.

Just a few months ago, the city quadrupled parking meter rates in the middle of massive economic turmoil. Now, they'll be turning to collection agencies to ratchet up the pressure on financially strapped families.

From the Chicago Tribune's story:

"A lot of the private companies that are in line for collecting government debt have long histories of hiring people who are abusive toward debtors," said Joe Ridout, spokesman for Consumer Action in San Francisco. "They impugn the reputation of the government agencies that they are supposed to be helping out."

Ridout said some collection agencies call people at work to try to embarrass them into paying. In other cases, he alleged, bill collectors have told debtors with Hispanic surnames that they could arrange for them to be deported unless they pay up.

And who will be paying for the "work" these agencies are doing? City taxpayers. This could be a huge deal for collection agencies, who are licking their lips:

The Chicago contract could be a "giant deal," said Sean Keegan, national marketing director of United Recovery Systems in Houston. He estimated a private company would need about 200 collectors and could keep 18 percent to 30 percent of what it rakes in for the city.

If you're dealing with collection agencies, you should keep your rights in mind. Each state has their own laws regulating how collection agencies operate. Generally speaking, collection agencies:

  • Are allowed to call only between 8 a.m. - 9 p.m. If you're receiving calls late at night the collection company could be in violation of the law.
  • Cannot use profane language.
  • Cannot threaten physical harm to your or anyone else or threaten to damage your property.

If you feel your rights have been violated, speak with an attorney right away.

And if you want the harassment to stop, remember that when you file bankruptcy the Automatic Stay court order usually puts a legally-binding halt to all collection actions.

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Posted in Bankruptcy News and Events | No Comments »

Friday, June 26th, 2009

Michael Jackson Lived Like a King, Died Nose-Deep in Debt

Michael Jackson’s death has shocked the world.

If we were too young to remember him belting out top hits as a round-faced child, we probably have vivid memories of him monster-dancing on MTV or dangling his kid over a Berlin balcony.

And as the globe starts to process his death, we take a look at the entertainer’s troubled fiscal life.

Michael Jackson’s Wild Spending Habits

Jackson left this world with his checkbooks in disarray.

There was hope that his upcoming, sold-out 50 show London tour would sweep him out of the red, but that hope shattered yesterday when he died in an LA hospital after a cardiac arrest that was rumored to stem from a Demerol injection.

The King of Pop died with as much as $500 million in debt, according to sources recently cited in the Wall Street Journal.

When you look at some of his wild purchases, it’s not hard to understand how his debt got so out of control.

Some of the items he bought included:

  • a Ferris wheel and the rest of the infamous Neverland playground
  • a bronze sculpture of an Indian
  • an arcade collection
  • a personal ice cream cart
  • a life-sized Lego model of Darth Vader
  • a 1989 Rolls Royce limo with 24-karat gold trim
  • a statue of E.T.
  • a zoo (remember Bubbles Jackson?)

And that’s just a fraction of his possessions.

When Jackson was on trial in 2005 for child molestation charges, a forensic accountant testified that Jackson was spending $20-$30 million every year. (Jackson was later acquitted of all criminal charges.)

But Jackson’s money problems go well beyond shopping sprees.

Michael Jackson's Legal Problems Contribute to Debt

Years before the criminal trial, Jackson settled a civil lawsuit for $22 million with a boy’s family who alleged Jackson sexually assaulted the child.

Jackson and his reps denied any wrongdoing and said he was settling to “move on”.

As recently as last year, Jackson was sued by the son of the King of Bahrain who said he owed him $7 million.

Jackson argued that he thought the sheik had given him gifts, but the sheik said he had actually invested in a songwriting business with the pop legend.

Jackson ended up settling with him for an undisclosed amount.

Lawsuits, settlements and frantic shopping sprees add up quickly.

So, the question left to answer is what happens to all of his debt now he’d dead?

Debt After Death—Is Jackson’s Family Responsible?

Typically, family members are not responsible for the debts of a deceased love one; however, there are exceptions.

Read on for information on how Jackson’s debts could fall to people close to him.

Repossession and Foreclosure After Death

Contrary to popular belief, in many cases, loans are not automatically dismissed just because the debtor dies.

Secured debt (debt tied to a property, such as a home or car loan) can still be repossessed by the bank to cover the balance of an unpaid loan.

That means a dead person can lose their home or car even after they’ve been laid to rest.

If another person’s name is on the loan, they would likely be responsible for the debt.

So, for example, if Lisa Marie Presley (Jackson’s former wife) signed on a mansion with him, she could likely be responsible for that debt.

Credit Card Debt After Death

If any person held joint credit cards or lines of credit with Jackson, it’s probable they would be responsible for paying the remaining debt.

Keep in mind, if a person is an “authorized user” on a credit card, (which is different than a co-applicant or joint account holder), then they typically don’t have to pay.

But there’s a twist—under certain circumstances, an authorized user may still be liable for those debts because the balances on those accounts may become the responsibility of the estate.

Did Jackson Have Co-Signers?

If someone was a co-signer on a loan Michael Jackson took out, he or she may very well be responsible for that debt.

Co-signers often get the short stick.

In fact, co-signers are usually even responsible for debt if the original debtor files bankruptcy (except in most cases of Chapter 13 bankruptcy).

Michael’s Debt Didn’t Define Him

As fans wander through the stages of mourning, a strong feeling emerges—Michael Jackson can’t not easily be defined, nor should he be.

He, like us, is a multifaceted, complex human being.

Being on the brink of filing bankruptcy doesn’t define you.

Yes, he was a debtor and a shopaholic, but he also was the King of Pop, a father, a son, a brother, an artist, a philanthropist and a friend to many.

Our hearts go out to his family.

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Posted in Bankruptcy News and Events | 5 Comments »

Wednesday, June 10th, 2009

Debt Problems? You’re Not Alone. More People Filing Bankruptcy

Perhaps the most difficult aspect of trying to get control of your debt can be the stress and fear.

Many people - even people who come into debt through no fault of their own, through unexpected illness, injury, job loss or even tricky credit cards - feel shame at their debt.

They may try to hide their debt from friends and family, while at the same time trying to make a little income go a long way.

To anyone struggling with debt, know this: You are not alone.

Forbes has a report out that shows in the first three months of 2009 more than 330,000 people filed for bankruptcy. At this rate, more than 1 million people will file by the end of the year.

Filing Bankruptcy Becoming More Common

This doesn't count everyone facing economic hardship, but it does show that there are other people out there going through the same struggles and decisions as you are.

So know that filing bankruptcy doesn't make you a bad person. It doesn't mean you've failed. It only means that you, like so many others, are willing to take action against your debt.

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Posted in Setting the Record Straight about Bankruptcy | No Comments »

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