Boston Bankruptcy Lawyer Blog

Many folks come to us to discharge their debts in Massachusetts bankruptcy and get a fresh start. Often we see payday loans on their credit report. Massachusetts has very strict laws regarding payday loans. There are no actual payday lenders in Massachusetts, so folks often use the internet. However, in Massachusetts, payday loans require full documentation, the due date of the loan must be in writing, there cannot be any pre-payment penalties, the whole transaction must be complete within 14 days, and there are strict rules on how unpaid loans can be collected against. Of significance, interest rates cannot exceed 23%. These consumer protections are why we don't see as many payday loans: they just are hard to get in Massachusetts. On the other hand, many of our clients have worked in other states, where the loans have become onerous.

In any event, payday loans are loans pledged against a worker's next paycheck. Seventeen states allow payday loans, which have, to date, been so under regulated that some interest rates exceed 400%. One report we read said interest rates were as high as 521%

We have written about consumer advocate and Harvard Law Professor Elizabeth Warren in the context of bankruptcy news and as the founder and initial leader of the Consumer Financial Protection Bureau, however, now that she has become a candidate for the United States Senate for Massachusetts, we will refocus our energies on the CFPB and it's new Chief, Richard Cordray. Cordray's first order of business after being an interim appointment (Senate confirmation was not an option) is conducting hearings on Payday loans. (Ironically, the Dodd-Frank Act of 2010 expressly forbids the CFPB from regulating non-banks until a director was appointed, and then the Senate refused to allow an appointment, adversely affecting consumers.)

Payday loan makers may provide a valuable service. If someone needs money immediately, is working, and will be able to secure that money by the end of the week or pay period, it would be invaluable to have access to a loan for that money instantly. However, folks that fit into this category are often taken advantage of. It is the protection of those workers that the CFPB is addressing in their public hearings and investigation.

The Consumer Federation of America undertook a study of payday loan providers and published their findings in August 2011. They claim that interest rates for a $500 loan was 652%, and in Kanas the range was from 378% to 780%. They found that some lenders circumvented state laws by using international forums to lend the money; some used Native American tribal bases for their lending. Among their many conclusions was that "payday loans are a debt trap."

If you search payday loans on the internet, you will find a lot of advertisements. The first one I found said I could get cash in one hour! All over the internet, of course. However, if you read the fine print, it indicated it was not available in Massachusetts. Another provider of payday loans used such cryptic language, even a Boston bankruptcy lawyer could not determine if they would provide a Massachusetts payday loan!

We applaud the efforts of the new CFPB to investigate these practices; we urge our clients to double check where they are getting loans from, what the interest rates really are, and what laws they are subjecting themselves to by taking out any loans.

As a Massachusetts bankruptcy attorney, I regularly tell clients that a Chapter 7 bankruptcy discharge gives you a "fresh start" and that all dischargeable debts are discharged by federal law. Those debts include, but are not limited to, credit card bills, personal unsecured loans, and remaining balances on motor vehicles and home mortgages that have been returned to the lender. They don't include student loans, some taxes, and numerous other protected debtors.

Recently, however, Capital One Financial Corp, tried to see if they could squeeze a few dollars out of folks who had legitimately filed for Chapter 7 bankruptcy and had their debts discharged. Capital One is the tenth largest bank in the US. For example, a woman from Hawthorne, New Jersey, filed for bankruptcy protection and secured a discharge. Nevertheless, Capital One filed a lawsuit against her for $4,266. Capital One dropped the state lawsuit once exposed, however, in a separate case filed in federal bankruptcy court by the debtor, resulted in litigation.

In the 2008 Massachusetts Capital One case, the US Trustee found 5,600 cases in which Capital One attempted to collect on discharged debts! The investigation began when Massachusetts couple filed bankruptcy, discharged a debt from Capital One, and fourteen (14) years later, Capital One tried to collect on $5,542.50 debt! The company entered into an agreement to turn over 2.2 million bankruptcy claims from 2005 to 2010 for an independent audit. The claim above, while not in Massachusetts, seems to have originated just after that period of time.

In the bankruptcy court audit, it was determined that Capital One had made that "mistake" 15,500 times! Capital One disputes the number but has not provided their own number of mistaken lawsuits notwithstanding the recent settlement in Massachusetts. The total amount of monies in those claims was $24.7 million.

In Mississippi, a bankruptcy judge is demanding discovery from Capital One on the issue of suing people who have already discharged their Capital One debt. The judge is demanding "some proof" that the lawsuits are not a "malevolent effort to go out and collect a debt that's been discharged."

There is a huge market in buying distressed debt. Capital One has their own employees do their collection work, thus not giving up on the fees associated with farming out debt collection. However, the aggressiveness of the debt collectors is often illegal.
When a creditor files a "proof of claim" form that debtors file there is a rule that false filings can result in a fine of up to $500,000 and five years imprisonment. It doesn't seem to be that Capital One has had many fines notwithstanding their behavior. It seems ironic that when individual debtors make a "false statement" the trustees are all over them, often threatening criminal action where the statement was merely a mistake and often of no consequence. Of even less consequence, but of some irony, is that the founder and chief executive officer of Capital One bank https://www.capitalone.com/ is named Richard Fairbank.

How does this affect Massachusetts bankruptcy debtors? If you have Capital One as a creditor, be extra careful of their filings. However, be sure to work with your Massachusetts bankruptcy lawyer to carefully list all debts. Following your Massachusetts bankruptcy, keep your attorney up to date on any and all letters and of course lawsuits by former creditors.

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!

Back in early January 2011, we wrote about increasing your credit score after personal bankruptcy in Massachusetts. Secured credit cards are credit cards that look and work like credit cards, however, are not based on the issuer's reliance on your credit, but based on "security" that is money, you have placed in an account with the issuer. It works like this: you deposit $500 into an account and you have "credit" up to $500 on your secured credit card. The beauty of it is that the issuer sends a monthly report to the credit rating agencies saying that you are up to date in your payments. It has proved to be an excellent way of enhancing your credit score after getting a fresh start following bankruptcy.

In a recent survey by New York Times columnist Tara Siegel Bernard, the following banks were determined to be helpful in issuing secured credit cards: HSBS, Capital One, Bank of American (one year following bankruptcy), Wells Fargo (with the one year provision and only to current customers). We don't have the resources of the Times to check on this, or to find other lenders, however, we have heard that credit unions are good places to check as well.

Filing a Chapter 7 personal bankruptcy (generally) allows you to either keep your home or walk away from a home that is "underwater" in mortgage debt. On the other hand, if you don't have a home, how soon after filing for bankruptcy protection will it take to be able to buy a home? Home ownership is 73% over the general population, 68% with those that filed bankruptcy over 15 years ago, and 50% for folks that have recently, according to a study by Ohio State Professor Jay Zagorsky regarding life after bankruptcy.

After you get a discharge in bankruptcy you can buy a house, but as a practical matter, you need to both save up for a down payment as well as be qualified for a mortgage. Saving following bankruptcy is often easier than you might think, as there is no credit card debt dragging you down. Getting a favorable mortgage rate can be difficult, especially within the first two years. However, after that your FICO score is no longer adversely affected by the bankruptcy. See our previous blog article for tips on how to improve your FICO score.

Continue reading "Home Ownership After Personal Bankruptcy in Massachusetts" »

With two million homes in foreclosure nationally, and another 2.2 million homes defined as at risk of foreclosure, a proposal being discussed in Washington this week seeks to help homeowners with new rules and regulations. Apparently Elizabeth Warren, the head of the newly established Federal Consumer Financial Bureau, is taking the lead on this program, which is backed by the Department of Justice, the Federal Trade Commission and Housing and Urban development. The perspective of a Massachusetts bankruptcy lawyer might be that this could help many families who want to save their home and could, with a modified mortgage. Supporters of the proposals say they would be fair and they would stabilize the housing market and countless neighborhoods.

The proposals include preventing foreclosure while a homeowner is actively trying to modify his or her loan. A frequent problem we hear all the time is that the homeowner is sending and faxing documents, sometimes for months, when the bank simply starts a foreclosure process. The second aspect of the new rules is that a trial modification program would be set up; if the homeowner makes three payments under that program, it would go into effect at the new rate. Third, any denials of a modification would go to an independent reviewing panel.

Continue reading "Massachusetts Foreclosure Procedure Could Change" »

Have you received a Summons to appear in court because of outstanding debt? Credit card companies often resort to suing consumers in Massachusetts District Courts for the unpaid balances. While it may be too expensive to retain a Boston attorney, and you may not qualify or be interested in a Massachusetts bankruptcy, there are ways to defend yourself. The Massachusetts Courts Self Help Center is a helpful start, but we have some advice to offer, too.

See our recent article called Massachusetts Consumers Can Represent Themselves Against Credit Card Companies in Massachusetts Courts. In this article, we explain which documents you'll need to file in a collection lawsuit, and we provide examples of forms for your reference.

A Massachusetts bankruptcy lawyer is asked to file a Chapter 7 bankruptcy for his client, but also to provide financial education. In a study undertaken by the financial industry's education arm, the Investor Education Foundation ,a survey in all 50 states revels some interesting facts about Massachusetts consumers verses the rest of the nation. For example, of the five financial literacy questions, Massachusetts's residents answered 3.1 of them correctly; the national average was 3 questions answered correctly.

In the survey, one critical question was: in a year, do you spend more than you earn, not including buying major items such as a car or a house. In Massachusetts, 21% of respondents said they did while the national average was 20%. It was the 18-34 year old age group that skewed this average. Another measurement they used was non-bank borrowing. This includes auto loans, payday loans and tax return advance loans. In Massachusetts, the percentage of folks with such loans is 16%; in the United States the average is significantly higher, at 24%. Rainy day funds protect folks when there is a personal financial crisis. Only 56% of Massachusetts residents have a rainy day fund while the national average is 60%. With respect to comparison-shopping, 62% of Massachusetts's residents' comparison shop, which is equal to the national average.

Continue reading "Massachusetts Consumers' Financial Knowledge" »

The Massachusetts SJC ruled Friday that banks cannot foreclose on Massachusetts homes without proper paperwork. The banks must show a proper chain of title before being able to complete a foreclosure and eviction in Massachusetts. Massachusetts bankruptcy and consumer lawyers need to properly advise clients in accordance with this ruling.

In the cases at bar the plaintiff banks, Wells Fargo and US Bankcorp, filed foreclosure actions stating that they owned mortgages taken out by Antonio Ibanez, for $103,500 and Mark and Tammy LaRace for $129,000, in 2005. The mortgages for both homes were two of those notorious adjustable rate subprime mortgages. At some point in time they were unable to pay for their mortgages and the foreclosure began in 2007 and the banks bought the homes. In March 2009, The Land Court, however, upon examining the actual documentation, found against the banks, saying that they did not own the mortgages when they filed the foreclosure. Further, the Court said that the banks failed to assign the Note when the finally did assign the Mortgages. The Massachusetts SJC agreed. In a concurring opinion by Justice Cordy, he found that the banks used "utter carelessness" in documenting title to homes.

Continue reading "Massachusetts Supreme Judicial Court Stops Foreclosing Banks" »

Bankruptcy lawyers in Massachusetts often get asked how to rebuild credit after bankruptcy. We have pointed to numerous ways in the past, and on our website there is a section on Life After Massachusetts Bankruptcy. One way to jump start enhancing your score is to find a helpful bank or credit union; one that will give you a credit card. CreditCardConnection.org seems to have attracted a lot of attention. Essentially, they find a local credit union for you. These are not commercial banks, but nonprofit membership organizations.

When I entered our office zip code, it found two "featured" and numerous other credit unions with offices within 5 miles of Six Beacon Street, Boston. With some types of accounts at the credit unions, you give them a deposit of money and they give you a credit card, not a debit card, and allow you to use the credit card up to the limit of the dollars you have deposited. Each month they report to the credit agencies, Experian, Transunion and Equifax, that you are up to date on your payments. This is the opposite of debit cards, where the process is the same; however, the banks do not report your positive credit history to the credit agencies.

Continue reading "Massachusetts Consumers Rebuild FICO Credit Score" »

Bankruptcy consumers are hopeful in the new credit statistics. According to the Federal Reserve, US consumers total credit card debt is shrinking. Revolving credit, also known as credit card debt, was reduced each of the first three quarters, and through October, in 2010. However, this is likely because banks are tightening approval of credit card debt for individuals and small businesses, according to a Federal Reserve study.

Nevertheless, average household credit card debt is $15,700. The credit reporting agencies are reporting that average debt is down for the fifth quarter in a row. Further, they report that fewer credit cards are being issued. It is not clear if this is because of enhanced requirements to get credit cards, or because fewer folks are requesting new credit cards.

Continue reading "Credit Cards Being Paid Off" »

No, but do they? Massachusetts bankruptcy clients ask us this question all time. In a case filed by the federal credit report will come into sharper focus. Some states have banned using credit reports in hiring. Others have allowed their use on only a limited basis. Nevertheless, surveys show that half of all employers use credit histories sometimes.

The argument against using credit reports for employment are clear: they are often inaccurate, they are not necessarily good indicators of job performance, they fail to tell the whole story of why a payment was late and, with respect to bankruptcy in Massachusetts, they fail to tell the story at all. Furthermore, managers who make higher salaries do not necessarily understand why lower paid employees might have had a credit problem and that that problem would be unrelated to work ability.

Continue reading "Can Massachusetts Employers Discriminate Using Credit Report?" »

Until the new Consumer Financial Protection Bureau kicks in, the Federal Reserve remains in charge of credit and debit card regulations. In new regulations proposed by the Fed, the swipe fees on debit card transactions have been reduced by 84%. Massachusetts bankruptcy lawyers and consumer lawyers see this as a victory for consumers because merchants will be able to lower fees to customers who use debit cards.

Basically, the Fed reduced the fees from 44 cents down to 7 to 12 cents in swipe fees. The credit and debit card issuers were, of necessity, outraged at the action by the Fed. Their stock prices were down on December 16 by 10% (Mastercard) to 13% (Visa). This will enable to retailers to lower their charges to consumers, goes the theory. The banks, however, say that they will simply charge higher fees elsewhere, which will adversely affect consumers.

Will Consumer Financial Protection Bureau Guru Elizabeth Warren chime in? When?

Many of our Massachusetts bankruptcy clients ask us, how do we do it right this time? How can we budget so that we don't end up this way again? We have searched numerous books and blogs and there is ample information out there for creating budgets following bankruptcy. Perhaps the most important thing is to be totally devoted to making it work. Change your money management habits in order to avoid bankruptcy.

The experts all seem to agree on several points:

Continue reading "Creating a Budget After Bankruptcy in Massachusetts" »

Boston bankruptcy lawyer Neil Burns reveals that credit issuers reported a decline in the number of credit card holders who are delinquent, indicating strength in the upcoming black Friday and the holiday season. The Wall Street Journal compiled official filings from banks which show a decline in loan delinquency rates, especially credit card rates, to the lowest in 2010.

While delinquencies are loans that are behind, and may eventually be charged off, actual charges offs are loans that the lenders and banks have determined are not collectable. The rate of charge offs, as reported to the Security and Exchange Commission, was also reduced in recent filings.

Continue reading "Massachusetts Holiday Season Expected to be Better in 2010 Due to Credit" »