Boston Bankruptcy Lawyer Blog

Credit scores are important to Massachusetts legal consumers. Why? They have an effect on your ability to get good interest rates on vehicle loans, personal loans and home mortgages. They can even have an effect on getting hired for a job. However, in a recent Visa credit card study, a large percentage of those surveyed believed that age, race, language and gender factored into someone's credit score. None of those attributes are a factor in determining credit score. Nor do address, assets, or employment history factor in to one's credit score. Another misunderstood factor is when creditors take a credit counseling class. This does not have an adverse effect on one's credit score. So while there may be a need to be afraid of Salem witches and goblins this Halloween, there is no need to be afraid of working on your credit score: all factors that go into your score can be changed.

In fact, 25% of those surveyed believed that their address, or the town where they lived, would have an impact on a credit score. Over 38% believe that age is a factor in the credit score. 21% thought that ones ability to speak English had an effect on credit scores. Almost 16% felt that race was a factor. A full 60% of those surveyed believed that employment history was a player in credit scoring. 53% believed that their assets and savings were a credit score factor. None of these factor into credit scores

While loan applications may ask for some of the information above, your credit score is not determined by any of the above. This is critical because Massachusetts consumers need to know that working on improving their credit score is possible. Improving your score could lead to getting that better rate on a mortgage or other loan.

Credit scores, as we have reported on before in our Boston bankruptcy blog and in our Massachusetts bankruptcy website information, are determined by the following factors: 35% on payment history, which includes payments on credit cards, loans, mortgages, car loans, and also bankruptcies, judgments, and other court related credit information; 30% on the amount you owe on credit accounts, including how far maxed out you are on your accounts such as credit card limits and home equity lines; 15% on the length of your credit history, which includes the time you have owned various credit cards and the activity on those cards; 10% on new credit, including the number of new accounts and new inquires as to your credit; and 10% on the types of credit used, that is auto loans verses mortgages verses credit card use.

The Visa survey found that 42% of Americans did not ever review their credit scores. So, perhaps it's time for some to go to www.annualcreditreport.com and request your score. Check for mistakes. Write to the credit reporting agencies to correct those mistakes. It could make a huge difference in the amount you pay in interest on your next vehicle loan or mortgage refinance.

Finally, keep in mind that the easiest ways to improve your Massachusetts credit score are 1. Pay your bills on time; 2. Pay down credit card debt, of course the cards with the highest interest rates first; 3. Don't max out your available credit as this has an adverse effect on the reporting agencies' algorithms, which like a debt to credit ratio of less than 35%. It may be hard work but it's not scary if you have the information you need to work on your credit score.

BOO!

Boston bankruptcy lawyers are often contacted to file Massachusetts bankruptcy to stop a foreclosure. Sometimes they need to file bankruptcy so that they can discharge their consumer debt, giving them the funds available to avoid foreclosure. Sometimes, our clients buy property at foreclosure sales. Today's blog entry on http://www.bostonbankruptcylawyerblog.com/ is concerning buying foreclosed property.

In a recent case handed down by the Massachusetts Supreme Judicial Court, Massachusetts foreclosure procedures were at issue. Actually, it was the validity of the title that the buyers of foreclosed property received that was the issue. As a result, the buyer did not have legal "standing" to file the lawsuit. Without standing, your case will be dismissed. Before we discuss the case, we will try to explain standing. If you are injured as a result of a Massachusetts car accident, you have "standing" to file a lawsuit against the person who caused the collision. If you observed the accident and feel that the driver was driving too fast, you do not have "standing" because you were not injured; you don't have a cause of action against anyone. You are simply a witness. If you buy a house and the title is at issue, you would normally have "standing" to file a lawsuit against the seller. After all, you paid money, you are living on the property, wherefore you should be allowed to file a lawsuit in the local courts to determine the quality of your title.

In this case, Francis J. Bevilacqua v. Pablo Rodriguez, Mr. Bevilacquo bought, or thought he bought property in Haverhill. The property had been foreclosed on by the bank, against Rodriguez, because of an unpaid mortgage. Rodriguez departed. Bevilacqua bought the property at a foreclosure sale. There was a problem with the title so Bevilacqua filed a claim in Massachusetts Land Court to validate, or clear, his title. The Land Court determined that Bevilacqua did not have legal standing to file the lawsuit, so it dismissed the case with prejudice. He appealed. The SJC took the case from the Appeals Court to decide the issue. The Court called the case "highly unusual" because the defendant, Rodriguez, never appeared. In other words, Bevilacqua filed a lawsuit, the defendant failed to answer for file any appearance opposing the lawsuit, yet he still lost. Twice! But because the bank never followed the proper procedures, it never had the ability to foreclose. Wherefore, Bevilacqua never had record title, so he could not even allege "standing" to file the lawsuit.

In a blog article in our sister state of Maine, bankruptcy Attorney Richard Olson says this about the case: buyer beware. Be sure you have record title. Attorney Olson says do your homework before buying property at a foreclosure sale; hire an experienced title attorney to be sure you can get good title. Litigating a case in the Land Court and before the Supreme Judicial Court just may add costs that are unacceptable to get title. This is especially true when the banks have clearly mishandled the title documents and the foreclosure does not necessarily provide for clear title.

The good news is that the Social Security Administration has announced that next year, for the first time since 2009, there will be a cost of living adjustment in Social Security benefits in the amount of 3.6%. As a Massachusetts bankruptcy lawyer, I often get asked: can the Massachusetts Bankruptcy Trustee take my Social Security Check? Does Social Security get factored into the Means Test in Massachusetts?

First, let's review why there is a 3.6% increase coming. 55 million people will get the Cost of Living Adjustment (COLA) in their Social Security check starting January 2012. Approximately 8 million Supplemental Security Income (SSI) beneficiaries will get the same increase in benefits. Since 1972, this there have been COLA adjustments, based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from last year's third quarter to this year's third quarter. It is the US Bureau of Labor Statistics, in the Department of Labor, that determines the CPI-W. For the last two years, as many of our Massachusetts consumer clients know, there was no increase in CPI-W, and therefore, no increase in the cost of living adjustment in their monthly Social Security checks.

It is also important to note that in 2012 there will be an increase in the wages that can be taxed for Social Security: from a maximum of $106,800 to $110,100. This is based on the average wages increase. Everyone is taxed 15.3%, for Social Security and Medicare, up to the maximum. If you are employed, your employer pays half, or 7.65%, and, of course, that is factored into salaries. If you self-employed, you pay the full 15.3%. Except, of course with the government and taxes there is an exception, and in 2011 the exception is good: this was reduced by 2% for 2011!

The SSA estimates that the average monthly social security benefit starting January, 2012 will be as follows: $1,229 for all workers; $1,994, for a retired couple; $2,543 for a widowed mother of two; $1,184 for a senior who is widowed; $1,892 for a disabled worker or spouse with children; $1,111 for a disabled worker.

But, again, how would this affect someone asking for a fresh start in Massachusetts filing for bankruptcy? The easy answer is that no, Social Security income is not calculated as a part of the Means Test. The Means Test, a part of the 2005 changes in the US Bankruptcy Laws, requires that all people filing for Chapter 7 personal bankruptcy complete a "test", which is a form attached to the bankruptcy Petition. The test evaluates the income of filers, and if you are over the maximum incomes for your category, you may have to file under a different Bankruptcy Chapter such as Chapter 13. Thus, if you have a certain amount of part time income, plus Social Security income, you will be able to exclude the Social Security income from the test.

The Means Test really has two parts. First, if your income for the six months prior to filing is below the Massachusetts' median family income, for a "family" your size, you can simply "pass" the test. Thus, if you have income plus Social Security income, the Social Security income is excluded, which helps our many of our Massachusetts bankruptcy clients. The second part of the test only need be taken if your income exceeds the Massachusetts median family income. Many of our Boston bankruptcy clients pass this test simply by showing the details of their expenses, some actual expenses and some standardized Massachusetts expenses, therefore proving that they are in need of Chapter 7 bankruptcy protection in Massachusetts. The Trustee and the Court will look at those expenses to see if there are "special circumstances" such as medical or unemployment situations.

Not likely. However, in a ruling last month by the U.S. Circuit Court of Appeals for the Eighth Circuit, a decision came down that may affect how homestead law evolves. The ruling expanded the notion of what is exempt under the homestead law to include personal property. How will Massachusetts bankruptcy law be impacted? What are Boston bankruptcy lawyers advising about the Massachusetts Homestead Act? This is what we explore in our blog http://www.bostonbankruptcylawyerblog.com/ today.

Let's look at the North Dakota case first. The U.S. Bankruptcy Code allows each state to have its own homestead limit. In North Dakota, when a debtor files for bankruptcy protection, he or she may protect up to $100,000 of equity in their home, thereby "homesteading" that property. In the case handed down by the Appeals Court, the debtor, Lawrence Danduran, sold a home in New Rockford, North Dakota, in 2009, for $225,000. Included in the sale was personal property, physically in the home, including a pool table, a hot tub and audio visual equipment. Such items are often sold with a home. In New Rockford, which is in southwestern North Dakota, it is likely that this is just as common as in Massachusetts home sales - those moving, for whatever reason, don't need all of the personal property which fits nicely into the home. Mr. Danduran paid off his mortgage with the sale proceeds and put the rest of the money into a bank account. It is that sum, $87,500 that became the issue in this case.

The trustee, appointed by the state bankruptcy court to oversee personal bankruptcies, objected to the $87,500, saying that $7,700 was "personal property" proceeds, from the sale of the pool table etc., and that issue to be decided was heard by the U.S. Bankruptcy Court for the District of North Dakota. That decision was appealed to the U.S. Bankruptcy Appellate Panel (BAP) for the 8th Circuit reversed the judge's decision. The BAP found that Mr. Danduran had shown "sufficient indicia" of combining his non-exempt property into his homestead property by putting all of the proceeds into the same bank account. The Court of Appeals, however, found that there were no specific findings of how the funds were mixed - was the payment to pay off the mortgage from the sale of the real property, the personal property, or a combination. Because the Court never addressed this issue, the monies were not clearly identified, and therefore, exempt.

How would this work in Massachusetts? There are two ways to use the Massachusetts homestead law. First, Massachusetts bankruptcy attorneys may advise to use the federal exemptions, United States Code, Section 522(d)(1). That law, which exempts $20,000, was the subject of our blog article regarding the simple approach to Massachusetts homestead law. If you have more than $20,000 of equity in your home, you may be advised to use the state law. The new Massachusetts homestead law, if utilized properly, exempts up to $500,000 in equity from creditors in bankruptcy. Can you include personal property in Massachusetts? Not yet. But what if you had a pool table and a hot tub in your home? If they were built in, they may very well be exempt. I might not advise Massachusetts bankruptcy clients to test the North Dakota law: it could be an expensive and unsuccessful proposition. However, the change in the law is often gradual, and the sale of a valid homesteaded home, along with some personal possessions that are combined with the sale, and the money is not segregated, could be where those waters are tested.

We have provided numerous updates about the Consumer Financial Protection Bureau since its establishment as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Act, usually referred to simply as Dodd-Frank, after the congressmen who were responsible for the law, has been a hot topic as of late. There have been many questions, perhaps generated by the Bank of America's decision to add $5 per month fees to all who use the ATM cash machines. From the perspective of a Massachusetts bankruptcy lawyer and a Massachusetts consumer lawyer, we see the Dodd-Frank Act as a positive step in bringing these consumer banking questions to light.

The Agency claims that its mission is to help "consumer financial markets" by "making rules more effective" and by working to "fairly enforce" the rules. The goal is to empower consumers with respect to their economic lives.

Over a year ago, President Obama named Elizabeth Warren as Assistant to the President and Special Advisor to the Secretary of the Treasury for the CFPB. We write about Professor Warren, who is a Massachusetts bankruptcy professor at Harvard Law School, in our blog, http://www.bostobankrutpcylawyerblog.com on occasion. Professor Warren was largely responsible for getting the new consumer agency on the books, and off the ground. Unfortunately, even before President Obama could nominate Professor Warren, she withdrew. Perhaps she withdrew because of the current climate in Washington. Presently, Ms. Warren is running for United States Senate, for the seat formerly occupied by Ted Kennedy and currently occupied by Scott Brown. We try to avoid politics, however, so our focus goes back to the CFPB.

Professor Warren noted that the statutory objectives of the Agency were to get consumers timely and easy to understand information about the financial decisions they would make, including mortgages, credit cards, and loans. The Agency was to be a watchdog over unfair and deceptive practices by financial institutions, large and small. Further, the Agency was to help REDUCE regulations.

For example, the Agency working toward reducing the mortgage disclosure documentation to one, easy to read "know before you owe" document. Considering that the mortgage crisis caused or largely contributed to the financial crisis, this could prove a helpful step for future homebuyers.

Another example is their work on the Credit Card Accountability Responsibility Act, the CARD law, of 2009. The CARD law provides consumers with all of the costs of obtaining and using credit cards, in a more up-front and consumer friendly fashion. Thus, everyone knows upfront about how the Bank of America $5 charges will affect them. You may not like the new fees, but you know about them...and you can make decisions before they go into effect.

As a Massachusetts bankruptcy lawyer, for over 25 years, I'm often asked about credit scores. The CFPB is required by law to study the fairness of credit reporting.

The current administrator of the CFPB is Raj Date, however, the president has nominated Richard Cordray, the current head of the Bureau's Enforcement Division, to be the first director. He is the former Attorney General of Ohio. While it is not clear of Mr. Date or Mr. Cordray will work to stop the $5 fee, the CFPB has been a flashpoint to focus the question. They certainly can review the effects of the fee on consumers. It's a large Agency, but not likely to take on every battle that hits the news.

The Bureau has the following divisions: Chief Operating Officer, which cover consumer response and operations; Consumer Education and Engagement, which covers financial education and consumer education, including education for elders, students, and US service members; Research, Markets and Regulations, which oversees research and regulations, including mortgages, installment loans, and credit markets; Supervision and Enforcement, which covers fair lending and equal opportunity, including overseeing large banks and non banks; and a legal, or General Counsel, office.