Boston Bankruptcy Lawyer Blog

Clients often ask their consumer attorney how to teach their college bound kids about credit and finance. At the intersection of when their income is low and needs are high, these enthusiastic young folks need clear instruction on how to manage their financial life. A wonderful approach to dealing with offspring and their finances is in Michael Stopler's book, Wealth: An Owner's Manual. The simple approach is to open a bank account which Suzie, or both of you, has access to, have her put her earnings in and you put a monthly, or quarterly, allowance in. The account can have a checking and debit card and Suzie is responsible for managing the account. Another approach is to give Suzie a credit card that you are responsible for.

Unfortunately, we see a lot of these credit card bills, one, two or 10 years later. Suzie had some problems and now the parents are in bankruptcy, partially because of these debts. If the credit card was in the parent's name, the parent is responsible. On the other hand, this does allow Suzie to build up some credit, and for the parents to monitor the expenses and to teach responsibility from time to time.

Our personal bankruptcy clients have many questions regarding their _blank">credit scores. We have written numerous times on this topic. Today we want to remind clients that while having a top credit score is nice, having an average credit score means paying more interest on loans. On the other hand, having a score below 650 begins to mean trouble. According to a FICO report released this week, 35% of all consumers have credit scores below 650 which makes them unworthy for prime loans for credit cards or other loans. 25.5% scored below 600.

The reasons for this mainly include a run up in credit card debt and, of course, defaults. There are many simple ways to attack this problem, mostly focusing on: reducing debt!

While we help clients with personal bankruptcies, we also help clients with budgeting, prioritizing, and often with negotiating one or more of their debts.

In February 2010, the second phase of the Credit Card Accountability Responsibility and Disclosure (CARD) Act significantly changed the terms consumers were held to by credit card companies. The CARD Act generally made credit card terms more friendly to consumers, since all credit card companies are now held to the same standards.

There is more good news for consumers, especially those consumers who are in the process of rebuilding credit after bankruptcy. The third phase of the CARD Act will come into action in August 2010 and incorporate the following updates:

1. If the borrower makes a payment 60 days late and suffers an increased interest rate, six months of on-time payments will cause the interest rate to return to the original rate.

2. Gift cards will not expire before five years and will not be subject to inactivity fees.

Although this is good news, consumers should still be cautious. Credit card companies may create new rules or change the existing terms of your credit card agreement to counteract these mandatory changes. Read any changes carefully, and don't forget to keep an eye on your overall credit by requesting your free annual credit report.

In February 2010, the second phase of the Credit Card Accountability Responsibility and Disclosure (CARD) Act significantly changed the terms consumers were held to by credit card companies. The CARD Act generally made credit card terms more friendly to consumers, since all credit card companies are now held to the same standards.

There is more good news for consumers, especially those consumers who are in the process of rebuilding credit after bankruptcy. The third phase of the CARD Act will come into action in August 2010 and incorporate the following updates:

1. If the borrower makes a payment 60 days late and suffers an increased interest rate, six months of on-time payments will cause the interest rate to return to the original rate.

2. Gift cards will not expire before five years and will not be subject to inactivity fees.

Although this is good news, consumers should still be cautious. Credit card companies may create new rules or change the existing terms of your credit card agreement to counteract these mandatory changes. Read any changes carefully, and don't forget to keep an eye on your overall credit by requesting your free annual credit report.

The Federal Trade Commission is coming down hard on the folks at freecreditreport.com because, well, because, it's not free! The three main credit bureaus will forward your credit score each month for a fee of $15, however, personal bankruptcy attorneys don't generally recommend these costs. After all, for the $180 you would pay them each year, you could work on reducing debt! The various credit bureaus will let you know of possible fraud activity, however, absent a notion of expected fraud, we question the cost. With respect to the score, the only time our clients really need their actual score is when they are applying for a loan and they need to be above a certain score to get approved. Perhaps then the associated costs are valid.

That said, as we have written before, getting a free copy of your credit report from each agency, each year, is advisable. For Equifax, click here. For TransUnion, click here. And, for Experian, click here. http://www.experian.com/ You can check all activity and write to the agencies if there are inaccuracies.

Presently, it costs Massachusetts consumers about $15 to secure their credit score; credit reports, on the other hand, are free. However, yesterday the United States Senate passed an amendment to the big financial regulatory bill that would give consumers a free copy of their score whenever they were denied credit, denied the best interest rate or denied employment because of their credit score. Experience from our own experience in bankruptcy is that those folks that pay attention to their credit score are more likely to work towards bettering their credit. The amendment was sponsored by Colorado Senator Mark Udall.

The amendment, which is part of the large and complex financial regulatory reform bill that is sweeping through Congress, is a step in the right direction for openness for consumers. Since auto and home loans, as well as credit card interest rates, rely so heavily on credit scores, the more information consumers have the better. In enables them to learn how the system works and to make educated decisions about their financial well being.

The Federal Reserve Board released recently released requirements that should help businesspersons, even following personal bankruptcy in Massachusetts. In essence, the "Interagency Statement" requires banks to "understand the long-term viability of the borrower's business, and focus on the strength of a borrower's business plan, including its plan for the use and repayment of borrowed funds." The regulations require that the lenders focus on local, not national, trends. Massachusetts debtors who have received a credit history and financial strength, including credit score, are components of assessing willingness and ability to repay, and should be considered in conjunction with other judgmental factors, such as the strength of management. The loan structure should be appropriate for meeting the funding needs of the borrower given the type of credit and expected timing of the business' cash flow. Further, an institution should analyze the secondary sources of repayment, such as the strength of any guarantor or collateral support, and the ability of the borrower to provide additional capital. Institutions should not place excessive reliance on cyclical factors, such as appreciating or depreciating collateral values.

While we can assist our personal bankruptcy clients in discharging much of their consumer debt, there are some debts that are not dischargeable. Among those are student loans guaranteed by the federal government. There are numerous programs that can help.

Graduating students should be aware of the following: first, graduate school results in a deferral and usually qualifies you for a more selective job. Second, work in a public service qualifies for deferral. Ten years of public service results in full loan forgiveness, with certain restrictions. Third, working in an underserved area can qualify you for forgiveness. Fourth, working in a national service organization such as AmeriCorp and Vista qualifies you for up to $5,350 in "awards." The Peace Corps also allows for a 70% cancellation of the federal Perkins loans.

Finally, graduating students with a high debt to income ratio can ask to have their debt payments reduced. Payments under this program will cease after 25 years; there is a proposal by the current Administration to reduce this to 20 years!

We warn our Chapter 7 no asset personal bankruptcy clients in Boston that the free credit reports advertised are in fact, not free. Experian paid over one million dollars in fines for their misleading advertising and now charges $1. More importantly, if you sign up and fail to disengage your membership during the "trial" period, you can be charged up to $14.95 per month!

On April 2, 2010, new rules went into effect require credit agencies to state on their websites that the only "free" credit report is from Annualcreditreport.com. Experian, in protest, now charges $1 and does not have to place the required information on their website.

We advise folks to call Annualcreditreport.com to request 1-888-322-8228 a free mailed version of their Experian credit report. The U.S. Trustees Office in Boston tends to request that particular report when questions arise about credit reports.

The number of homeowners defaulting on new federally subsidized mortgages is up at an alarming rate. This is according to the US Department of Treasury and the Housing and Urban Development Department. For home loans in Massachusetts there were 5,635 "permanent modifications" with lower payments guaranteed for five years; those lower payments average $500 per month. 4024 of these reduced mortgages were in the Boston Metropolitan area. What was significant is the number of defaults, or "cancellations" as the Feds call them. Those numbers are up, unfortunately.

Notwithstanding all of the federal assistance, there are seven million homeowners behind on their mortgage payments. Boston homeowners should know that this relief will not prevent them from filing personal bankruptcy.

Our clients often ask us about he United States Fair Debt Collection Practices Act 15 United States Code, Sections 1692-1692p. Our Massachusetts bankruptcy practice involves assisting clients who are victims of unfair debt collection. This blog article is an attempt to overview the situation for our clients.

First, what debts are covered under debt collection law? The law covers personal, family and household debts. This includes loans for personal motor vehicles, medical bills, credit card debt, insurance and personal loans. Note, the act does not cover business loans or business debt. Second, who is a debt collector? The statute is very clear that any person who uses the phone or the mail to attempt to collect a debt is a "debt collector." The FDCPA makes it very clear what the debt collectors may, and may not, do.

One important aspect of the law is to know your rights with respect to those pesky debt collectors. Absent consent from the consumer, a debt collector may not contact you at "inconvenient" times; after 8 p.m. and before 9 a.m. local time; if you have an attorney and the debt collector has knowledge of the attorney's name and phone number; at work, if the debt collector knows that your employer "prohibits" such communication. Furthermore, consumers have the right to simply write a letter to the debt collector asking that they cease all communications; the debt collector is then only allowed to communicate in a very limited fashion (to notify that they will indeed stop and to inform that they will attempt a specific remedy, such as filing a lawsuit.). See our model letter below.

Continue reading "Unfair Debt Collection Law's Application for Massachusetts Consumers" »

The Federal Housing Administration announced a new series of steps aimed to assist troubled homeowners. Our "exempt" home equity up to $125,000, and the new program deals with homeowners who are underwater in equity; they owe more than the house is valued in today's real estate market. Thus, now may be an excellent time to take advantage of this new federal program, regardless of filing for bankruptcy protection for your other consumer debts.

If you owe more than 115% of the value of your first mortgage, and your current mortgage payment is more than 31% of your family gross income, you may qualify. The program also deals with second mortgages, people who are unemployed and houses with negative equity. There are approximately 7,000,000 households that are behind on their mortgages. There are an additional 11,000,000 households where the mortgage owed is higher than the value of the house. The focus of the program is to help homeowners rewrite their mortgages with their lenders. The program also assists folks who are foreclosed upon to move, providing $3,000 in "relocation assistance."

And, the ultimate question our clients ask: how will this impact my credit history? Like usual, it is not completely clear. If your mortgage holder writes off some of the principal, it is not clear if this will adversely affect you. Folks taking advantage of the current loan assistance program have not had their credit scores reduced. This because the US Treasury and the Consumer Data Industry Association (the credit reporting agencies) have made a "deal" in which these transitions are not included in credit scores.

Clients and potential clients in Massachusetts sometimes ask us if filing for a Chapter 7 Personal Bankruptcy will have any adverse effect on their employment status. The answer is fairly clear: no.

In 1978, Congress passed a law which prevented various types of discrimination against folks who filed for bankruptcy protection. With respect to denying employment, that law states that an employer cannot "deny employment to, terminate the employment of, or discriminate with respect to employment against" anyone simply because he or she has filed for personal bankruptcy.

Continue reading "Can Massachusetts Employers Fire You for Filing for Bankruptcy?" »

Clients regularly ask us about their credit score. We are always on the lookout for information that will help our clients understand and upgrade their score. Recently, we have learned of new websites that may be useful to determine your credit scores. The following are a few we have found:

Credit Karma, owned by TransUnion, provides a credit score which is NOT your actual FICO score, but claims to be an indication of your FICO score. For no cost, the website provides helpful information for increasing your score. A nice feature is that you can check your scores as often as you wish. The fun part of this site is that you can simulate future events to determine how they would effect your credit score.

Continue reading "Credit Report Check Ups for Massachusetts Bankruptcy Clients" »

A client of ours had her wallet stolen recently on Newbury Street in Boston, Massachusetts. After commiserating with her and then looking around the web, we have come up with a few suggestions should the same happen to you.

1. Use only initials on your printed checks so a thief will not know how you sign your name. Do not have your phone number on your check. Never put your social security number on your checks.

2. Do not sign the back of your credit cards. Write "photographic identification required" in the signature spot.

3. When paying a credit card bill, only write the last four numbers of the credit card on the check.

4. Make a copy of each and every document in your wallet (front and back) and keep it in a safe place. You can also make a PDF file of these documents and have them available in a web based storage account. Be careful with passwords for that account, however. You can do the same with your passport.

Continue reading "Stolen Wallet Tips" »