Published Saturday, March 6, 2010 @ 8:59 am

Just when the credit card industry thought it was safe in Washington, Uncle Sam has decided to keep them over his knee for a few last good swats of discipline in the form of tighter regulations on late fees.

For many who struggle with credit cards, the problem is not always uncontrollable spending—it’s the fees. Late fees, annual fees and over the limit fees can pile up faster than Feburary snow in Minnesota, pushing customers over the edge into an avalanche of additional credit problems.

However, earlier this week the Federal Reserve proposed new limits on how credit card companies apply penalty fees for things like missing a deadline or going over the limit.

The proposal suggests that these new restrictions go into effect in late summer 2010. Earlier provisions in the credit card bill began last May and were phased in over time. The introduction of this latest component of the bill may signal to the credit card companies that they are now an ongoing target in the sights of pro-consumer members of the House and Senate.

The Fed is concerned with the fact that a $5 surpassing of one’s credit limit triggers a charge of $40. The new law is recommending that the penalty be more closely aligned with the dollar amount in question. More clearly, if you spend $5 over the limit, that will be your penalty.

One thing to consider is what impact this will have on those who consistently teeter on the edge of their limit. By lessening the consequences, is there a risk more people will no longer fear the penalties? A penalty needs to send a message.

Other facets of the proposed action include a limit on late payment penalties to only the amount of the cardholder’s current minimum payment. Thus, the $39 late fee average that so many of us see from month to month would be a thing of the past.

One of the more important components addresses multiple fees for a single action. For example, if you are late and over your limit, you can only be assessed one fee. The beauty in this part is that it will include the fees that some banks are now charging for not using your card, called an inactivity fee.

Still, there are some aspects of the bill that may warrant additional debate. It does not prohibit the application of a $39 late fee for someone who has a $70 minimum payment. The new laws that just became active include six month interest rate increase reviews that require banks to review, six months after they increased your interest rate, if the reason for the increase is still valid. However, they can also consider current market conditions, which may lead to reasoning on why the rate should remain higher.

A lot of our readers struggle with credit card debt, which has carved out a deep niche in the financial struggles of us Americans. Thankfully, some of these laws may lessen the credit card companies’ role in our financial problems. The rest of it though, is up to us.

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Published Friday, February 26, 2010 @ 7:15 am

For most bankruptcy bound individuals, a discharge of all individual debts is considered the Holy Grail of any bankruptcy filing, yielding a permanent injunction that prevents creditors from collecting on debts. However, any good discussion of debt dischargeability also tackles the primary exceptions to look out for when considering any bankruptcy filing.

Exceptions to the power of a bankruptcy discharge, include:

Certain Tax Obligations
Withholding taxes are not dischargeable in bankruptcy, although you may be able to use a Chapter 13 case to pay these over time (notwithstanding any accrued penalties and interest).  Similarly, sales taxes are not dischargeable, but again, Chapter 13 can establish a payment plan for lessening the load and paying this out over the long haul.

The question of whether your income tax can be discharged ultimately depends on how old the tax debt is and when you filed the tax return.  In order to be dischargeable, your tax debt for the tax year in question must meet the following conditions: the due date for filing your tax return is at least three years ago; your tax return was filed at least two years ago; the tax assessment is at least 240 days old; your tax return was not fraudulent; and you are not guilty of tax evasion.

For example, in a 2009 bankruptcy filing:

• Taxes from 2006-2008 are not dischargeable;
• Taxes from 2004 and before are eligible for review; and
• Taxes from 2005 are potentially dischargeable if the return was filed by the debtor on or before April 15, 2006. If the return was filed under an extension, then the 2005 taxes are not eligible for the following review unless the debtor files after October 15, 2009.

Fraud and Certain Credit Usages Before Filing
Fraud is a valid creditor objection to a bankruptcy discharge. To find fraud, a creditor must prove: (1) a statement made under false pretenses; (2) a material fact; (3) designed to deceive the creditor; (4) that does in fact deceive the creditor; (5) the creditor reasonably relies on the statement; and (6) the creditor suffers actual damages resulting from the reliance.

The general rule here is this: if you’re considering bankruptcy it’s best to avoid maxing out (or in some cases simply using) consumer credit, credit cards, or loans. Bankruptcy law now demands that bankruptcy bound debtors like you do not take cash advances or purchase luxury items on credit 90-days prior to your filing bankruptcy. If you do purchase large or luxury items through these means, creditors may challenge you (and these discharging these debts) in Court if they believe that you have acted in bad faith in using credit excessively.

Domestic Obligations
Alimony, child support and spousal maintenance debts are not dischargeable in either Chapter 7 or Chapter 13 bankruptcy. Additionally, the first prong of bankruptcy, the automatic stay, does not act to stop most collection efforts for these claims. An exception to this exception comes in the second type of domestic asset splitting known as equitable distribution. While equitable distribution—a dividing of martial property as a result of dissolution of the marriage—is no longer dischargeable in a Chapter 7 bankruptcy, the same is not true in Chapter 13. Chapter 13 bankruptcy, in what is called as its “super discharge,” can aid a former spouse having trouble paying their bills to eliminate this type of burden. These issues are complex, and it is important that you speak with a bankruptcy expert if you have these types of issues.

Student Loans
In an effort to protect the education lending industry, and allow student loan money for almost anyone who wants it, Congress has made virtually every advance in connection with education non-dischargeable in bankruptcy. To that end, these loans are non-dischargeable “unless excepting such debt from discharge…would impose an undue hardship on the debtor.” While the definition of “undue hardship” is ultimately to the discretion of your bankruptcy judge, if precedent is any “judge,” this is a high hurdle to surmount. As a result, if you’re considering a bankruptcy filing simply to discharge a large student loan bill, don’t lose hope, it may just be best to wait: the tide appears to be turning in Congress to loosen this exemption as the costs of education skyrocket and more and more Americans face insurmountable educational tabs.

Because of the complexities of bankruptcy law, a qualified bankruptcy attorney is a necessary tool in your financial toolbox to help you conquer your creditors and face your fiscal  fears, yielding the right kinds of debt relief—at a low cost— for a viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Thursday, February 25, 2010 @ 6:05 am

In an era of extreme economic downturns and rising unemployment, having a car at your disposal has never been more necessary for work, job interviews and providing other basic fiscal needs…even as you consider a personal bankruptcy.

Yet, if you’re on the road to bankruptcy, these same economic issues and employment woes can mean you may have fallen behind on your most recent car payments, leaving your precious vehicle as a prime target for repossession by your car’s creditors. And while your bankruptcy filing’s “automatic stay” suspends a creditor’s ability to repossess most assets, you may be wondering what happens when your car is taken prior to your filing.

As with most things in bankruptcy, whether you can get your car back from your creditors largely depends on your ability to act quickly, diligently and with a purpose.

Once your vehicle has been repossessed, it is absolutely vital that you immediately seek the assistance of a qualified bankruptcy attorney, informing the attorney of the status of your car and that you need to file bankruptcy right away. While the repossession was likely caused by an inability to afford your car payment, this first, best step to get your car back through bankruptcy will require that you have enough funds to pay your attorney, the bankruptcy court filing costs, as well as the requisite credit counseling fees.

Another potential challenge, comes in the form of one word: paperwork. As time is of the essence to save your car, you must be able to provide instant information about your current financial situation so that you can file quickly and without any hidden loopholes. Typically, you will have ten days between the date of your car’s repossession to the time that the creditor actually sells the car. As a result, you and your lawyer will need to move fast.

Once you file for bankruptcy, it’s important to note that any further creditor action is stopped by the Bankruptcy Code’s automatic stay.  While the automatic stay also means that the creditor cannot sell the car once you file, it does not assure the return of your vehicle. But take heart: for a pre-petition repossession, most bankruptcy courts have procedures by which a debtor whose car was repossessed may be allowed to get the vehicle back once the bankruptcy case is filed, including the potential that the debtor will be required to pay back possession and storage fees accrued in the interim, provide proof of car insurance, and have money on-hand to pay the various court and repossession fees.  In all cases, though, the process is neither cheap, nor easy: something the bankruptcy bound individual may always want to avoid.

So, to avoid any headaches, hassles or hardships the best rule of thumb is, if you are going to file bankruptcy, do so before your car gets repossessed.  In short, knowing a qualified bankruptcy attorney can also help you not only conquer your creditors and face your financial fears, but also keep a much-needed car, yielding the right kinds of support, information and insights—at a low cost— to keep you moving (literally and figuratively) in your fiscally-viable future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button and let these experts take the wheel to so you can start down the road to your next best financial steps.

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Published Monday, January 25, 2010 @ 6:57 pm

Ugh. Debt. These days most Americans are sick of hearing the d-word. And who can blame us? Americans are in more debt now than ever before. Avoiding debt seems impossible…there are so many things you can’t even do without credit cards or loans that we now take debt as a matter of course. Despite our negative feelings about debt, Americans want to repay what we owe. In fact, this noble instinct is what keeps some people from filing for bankruptcy when they desperately need to do just that. Not only are people afraid of having a negative impact on their credit scores (which in fact may already be in the basement), they also feel that the right thing to do is pay back debt.

When it is possible, paying back debt is the right thing to do, no doubt about it, but most people who declare bankruptcy don’t end up in a bad situation because they made negligent mistakes or don’t feel like paying; instead, dealing with the curve-balls life throws at us can prevent us from meeting obligations. By the time people opt to declare bankruptcy, they are not unwilling to pay back debt they simply can’t. The thing to remember is that creditors know that and take these factors into account. This is the reason creditors charge higher interest rates when they extend unsecured credit. If bankruptcy is the right decision, you shouldn’t allow misgivings about not paying certain kinds of debts hold you back.

What many people don’t even consider is that declaring bankruptcy can actually help you pay back debts. Consider this example: Say you are considerably behind on payments that are secured by your home or your car. In such a situation, filing for Chapter 13 bankruptcy can allow you to reach a compromise between what is feasible and what your creditors expect. In a Chapter 13 bankruptcy, a repayment plan could save your home from foreclosure by allowing you to catch up on back payments. Similarly, a Chapter 13 repayment plan can allow you to catch up on back payments for your car, helping you to avoid losing your vehicle to repossession. In both situations, the creditor is receiving payments for the credit they have extended, and you are working with a plan you can actually meet. This also applies to debts that you would not be able to discharge in a bankruptcy, such as child support payments and back taxes owed to the IRS. A Chapter 13 plan can help you make up for missed payments in the past while easing the pressure of being hassled and worried about never catching up. Eventually, with a good Chapter 13 plan, you are more likely to succeed in getting current on all your required payments.

A strategically timed bankruptcy can also help you in those situations where you may be able to pay off all your debts by selling assets, but you simply need more time. With aggressive creditors hassling you constantly, you may end up selling assets for less than they are worth, just to do so more quickly or to avoid penalties. This could land you with debts still to be paid and no assets to boot. A typical example is if your home is foreclosed on. Your home is not likely to sell for what it is actually worth if it goes through foreclosure. This means that you will no longer owe the mortgage company, but you will also lose the value in your home, if any, that exceeded the value of the mortgage. By declaring bankruptcy and forestalling foreclosure, you reap the actual benefit of your investment and potentially pay back everyone you owe.

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Published Monday, January 25, 2010 @ 6:33 pm

It’s tax season. Which means that for most people, it’s time to realize just how much we give to Uncle Sam every year. For some, the prospect of a refund provides a glimmer of hope that some new money is coming in soon to pay off debts.

Just a quick little note on your tax dollars before we get into the meat of this post: it is actually better to owe just a little bit of money after filing because that means that you have used more of our your own money throughout the year instead of giving it all to the government. Sure, a nice windfall come April is a nice thing. But keep in mind that it’s your money—you’re just getting it later. And, when it comes to investing, “money now” is always better than “money later.”

Because it’s tax season, we thought it important to discuss how taxes and personal bankruptcy can relate to one another. It is possible to use bankruptcy as a way to get rid of large, outstanding tax obligations but it’s not as easy as discharging a few grand in credit card debt.

Chapter 13 bankruptcy in most cases requires you to pay back what’s owed within your monthly payment plan and Chapter 7 rarely allows for the complete expulsion of your tax debts. (If you’re not sure of the differences between Chapters 13 and 7, simply do a search on our blog for each.)

There are, however, some precedents set for removing tax obligations as part of a bankruptcy. Although we encourage you to understand that it is a complicated process and the results are not always what you may be hoping for.

(Understand this post is only scratching the surface. Only in person can we provide a full breakdown of taxes and bankruptcy.)

One reason tax debt and bankruptcy tend to get tangled is that past due taxes can fall into all three categories of debt type: Dischargeable, Nondischargebale priority debts, and Nondischargeable priority debts.

Provided you filed your taxes on time, legally and provide no evidence of tax evasion other than legitimately being unable to pay, you can discharge tax debt in Chapter 7 and 13. Still, what’s owed must be more than three years late and assessed more than 240 days before you file. That means that you were officially declared late and in debt that many days before you filed. This ensures the IRS that you are not declaring just to get rid of a recent tax debt.

BUT (you knew there was one), that 240 day window starts only after the last extension expires, not when the original debt was assessed. Other impediments to that three year time-frame include a 90-day addition if a previous bankruptcy case of yours was still open while you were assessed the tax debt; the addition of any time the IRS was prevented from collecting as a result of a court ordered due process hearing plus an additional 90 days; and any time that a debt assistance professional formally asked the IRS to temporarily halt collection efforts.

Basically, any effort you make to delay the collection of tax debt, even if perfectly legal, counts against your ability to discharge tax debt in a bankruptcy.

The key to bankruptcy and taxes, like all things in life really, is to be completely honest and upfront. Any attempt to hide or even coyly plead ignorance will be considered an attempt to obscure or defraud the court and even worse, the IRS. Not being able to pay your taxes, especially after a mid-year job loss, is a common thing. Don’t make it worse.

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Published Monday, January 25, 2010 @ 8:41 am

Part of understanding bankruptcy is knowing who the professionals are that you will meet and deal with along the way. From your attorney to even your creditors, it helps provide a solid foundation of comfort to actually understand the role of those who are playing a role in your financial future.

One of those individuals is the case Trustee, the most prominent member of the bankruptcy process. And, the involvement you have with the case trustee depends on which chapter of bankruptcy you are filing.

As you may know, the 2 main “chapters” are 7 and 13. Well over 95% of all bankruptcy cases filed are filed under Chapter 7 or Chapter 13.

Let’s start by talking about the Chapter 7 trustee.

In every district in the country, there are 1 or more attorneys who have been appointed to act as a Chapter 7 Trustee. These Trustees are also sometimes called panel Trustees. When you file a Chapter 7 bankruptcy, one of these panel Trustees is assigned to your case.

The best way to think of this person is as an intermediary between you and the Court, an attorney whose job it is to make sure you have told the truth, the truth and nothing but the truth, to make sure that you have disclosed everything you are legally obligated to disclose, and to find and sell any ‘assets above exemptions’.

Fortunately, in our experience, in about 98% of Chapter 7 cases filed, there are no ‘assets above exemptions’ to sell. What does this mean for you? Just that if you file Chapter 7, there is very little chance you will lose any property you don’t want to lose.

As long as you have told the truth, disclosed everything, cooperate, and have no assets that cannot be protected by available ‘exemptions’, your contact with the Trustee should be a positive one.

However, the best approach is to assume that the Trustee assigned to your case is not your friend, so that you stay cautious and alert.

In most cases, you are first introduced to the trustee at your 341 meeting, also known as the “Meeting of Creditors”. Technically speaking, this meeting is held to provide your creditor an opportunity (in most cases, one last opportunity) to ask you questions. However, most of the time, none of the creditors show up, and then, it’s just you, your attorney and the Trustee. At this meeting the Trustee will ask you questions necessary to get to know you and your case better and necessary for the Trustee to carry out his or her duties. (There a number of posts here on the blog about this meeting. Take a look.)

Let’s say you are unlucky enough that your case falls in the approximately 2% of cases with more assets than can be protected. In this case, it is important that you understand that it is the Trustee’s duty to sell or dispose of those assets ‘above exemptions’, and to then distribute the proceeds to your creditors. Basically, anything not considered exempt property must be seized and sold by the trustee.

The type and amount of exemptions are, for the most part, set by the law of the State where you live. There are exceptions. Being set by State law, exemptions vary greatly. However, since in 98% of bankruptcy cases filed, there are no assets not covered by available exemptions, the exemptions statutes are, for the most part, fairly generous. However, make no assumptions in this regard. Always, always seek the help of an experienced, full time bankruptcy attorney. Such an attorney will be an expert in what exemptions are available in your State and how best to apply them. Such an attorney will also be able to tell you what is not protected.

The Chapter 7 Trustee is also responsible for tracking down any gifts you made just before filing, whether or not they were made in an attempt to hide assets or not. For example, if your nephew got a few thousand from you for his birthday the week before you filed bankruptcy, rest assured that your Trustee will be looking to get this money back. And, it’s not even safe to pay back relatives or friends prior to filing. These people are generally considered “insiders”, and, subject to certain exceptions, paying back insiders during the 12 months before filing bankruptcy is a “no no”, which will result in your Trustee being forced to try to get the money back.

Chapter 7 trustees are paid by a commission based on the amount of money they recover, so it stands to reason they’ll work hard to find and sell what property they can.

Now, let’s talk about Chapter 13.

The Chapter 13 Trustee, aka the Standing Trustee, is also first introduced to you at the 341 meeting. However, their role is more about ensuring your income is sufficient to pay your monthly Chapter 13 plan payment and that your proposed Chapter 13 plan is properly calculated. Assuming all goes well, it is then this Trustee’s job to collect from you your plan payment and to distribute it to your creditors.

Like the Panel Trustee, the Standing Trustee is paid a commission. However, unlike a Chapter 7 Trustee, the Chapter 13 Trustee gets his commission not from what he takes and sells, but rather out of the money you send in each month. Chapter 13 Trustees do not sell things. That’s just not his job.

The best way to think of your Chapter 13 Trustee is as the Chief Financial Officer in charge of your Chapter 13 plan. He runs the business of your Chapter 13 case. He figures out what is needed, and then accounts for and distributes the money you send in each month.

Your relationship with your Chapter 13 Trustee will be vastly different than the one you would have with a Chapter 7 Trustee. Chapter 7 Trustees live, for lack of a better way of saying it, for what they can “kill and eat”. Chapter 13 Trustee do not. Chapter 13 Trustees live off a percentage of what you send in each month. The Chapter 13 Trustee only succeeds in getting paid, if you succeed in making your payments. Therefore, as a general rule, Chapter 13 Trustees, at least those who recognize, so to speak, which “side their bread is buttered”, will go everything in their power to help you make a go of it in Chapter 13.

In most cases, as long as you make your required Chapter 13 plan payment, you can think of the Chapter 13 Trustee as more of a friend than adversary. He or she still has to do the job, but doing the job includes doing the best that can be done to make sure you do yours and that you get the full benefit of bankruptcy, all the way to the desired “discharge”.

If all of this is confusing and scary, we understand. Bankruptcy law is complicated and complex, to say the least. Need an expert? In North Carolina, there are many, good, experienced bankruptcy attorneys.

One is the Law Offices of John T. Orcutt, serving 30 counties in middle and eastern North Carolina. John Orcutt offers a Free initial consultation at 4 different locations: Raleigh, Durham, Fayetteville and Wilson. Call toll free to 1-800-899-1414 or visit his website for tons of info on bankruptcy: www.billsbillsb.com .

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Published Saturday, January 23, 2010 @ 7:15 am

You know your creditors: those nice folks who give you something you want — goods, services, or money — in exchange for your promise to pay them back at a later date.  In practical terms, a creditor can be a credit card company, a bank, a hospital, your local dentist, or any person or company to whom you owe a debt.

But, in these unfriendly economic times, [exactly] what happens when you can’t or won’t pay back that debt? What should you do when your creditors come calling? Can you keep creditors at bay or are you bankruptcy bound? Conquer your fears of dealing with your debt and remember the bankruptcy basics necessary to keep you from a creditor crunch.

Remember: Filing a Lawsuit Against a Debtor is not a Creditor’s First Choice
Keep in mind, creditors normally don’t want a lawsuit any more than you do. In fact, a creditor will not normally file a lawsuit against you until after many months and sometimes years of pursuing you for non-payment. Plus, creditors know that even if they file a lawsuit, it can be quickly neutralized by your bankruptcy filing—dispensing with your unsecured, and in some cases, even secured debt.

To Answer or Not to Answer
When you fail to respond to a creditor’s lawsuit, the creditor will gain a default judgment. This judgment will give the creditor the right to take certain collection actions against you, which could include seizing your bank accounts or garnishing your wages. In the alternative, if you respond to a creditor’s lawsuit—providing an “answer”—it can buy you precious time to secure more savings or take an excellent opportunity to file Chapter 7 or Chapter 13 bankruptcy.

The Consequences of Judgment Day
A judgment is a judicial order that, if it is not obeyed, will invoke legal consequences.  In extreme cases, a failure to pay a judgment filed on behalf of your creditors could result in a bench warrant issued by the court for your arrest. Keep in mind, only bankruptcy can help you avoid this type of judgment.

Settling What Constitutes A Settlement
Creditors file lawsuits because they simply want some kind of payment and, in the process, are often willing to settle for a lesser amount for repayment. Yet, while creditors want these types of settlements, it’s important to make sure your settlement offers are in writing.  Additionally, you should also be wary of so-called “debt settlement” firms who claim they can settle your debts for pennies on the dollar. Remember: you don’t need a firm to settle your debts…creditors filing lawsuits often offer settlement amounts; but the forgiven debt may be taxable. In the end, keep in mind that debts settled or discharged in bankruptcy are not taxable.

Worried About Wage Garnishment?
As mentioned, any creditor who wins a judgment against you can also garnish your wages or seize your bank accounts.  Only bankruptcy can stop your wages garnishment or a bank seizure order to raid your valuable accounts.  If a creditor seizes your wages or accounts after you file bankruptcy, you do have legal recourse and it’s even possible to get those assets back.

Knowing a qualified bankruptcy attorney can also help you conquer your creditors and face your financial fears, yielding the right kinds of support, information and insights—at a low cost— for a viable and secure future.  The bankruptcy experts at the Law Offices of John T. Orcutt offer a totally FREE debt consultation and now, more than ever, it’s time to take them up on their offer. Just call toll free to 1-800-899-1414, or during the off hours, you can make your own appointment right online at www.billsbills.com. Simply click on the yellow “FREE Consultation Now” button.

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Published Thursday, January 14, 2010 @ 11:34 am

It’s 2010, the year we take charge, so to speak, of our credit cards. In only a couple of months, credit card companies will have to fully abide by the provisions of the Credit Card Accountability, Responsibility and Disclosure Act (CARD). Some components of the act have already been in action.

Nevertheless, consumer advocates are expecting a slew of new credit card company tactics to increase, damage and elevate our debt, credit reports and heart rates. This is especially frustrating for those trying to re-establish a sound credit rating after bankruptcy. If more fees and restrictions come into play, it will take that much longer to use a credit card as a reputable credit source. (Remember though, this may not be a bad thing. Charge cards are a good way to use plastic and remain on top of your balance.)

We’ve discussed several times on the blog how credit issuers have started to counteract the measures by pushing interest rates just enough to not warrant any additional legislation yet get as much as possible from those Americans who already carry a significant monthly balance. For those with solid credit who manage a small balance over multiple cards, lenders have seized credit limits, decreasing what’s available and consequently creating marks on credit reports.

(It should be noted that action is underway to prevent those specific initiatives from harming a credit rating.)

Here are a few new methods by which credit card companies will be able to gouge their customers.

• Expect many cards to start charging annual fees. Currently, 80 percent of the available credit cards in the marketplace do not charge an annual fee. For those carrying solid credit ratings, annual charges are rare. Reports are coming in nationwide about some banks delivering notices about annual fees, which can in some cases climb to around $100. Other banks will only charge if you fall below a specific balance, which encourages card holders to not pay off a balance in order to avoid additional costs.
• Your one-time fixed rate card may suddenly shift to a variable rate, leaving you open to rapid jumps in balance. This is actually a byproduct of the law that prevents surprise interest rate hikes. Lenders bypassed it by simply creating credit cards with interest rates that will vary on their own. In other words, your card company isn’t deliberately increasing your rate, the market is doing it. Granted, that means your rate can sometimes go down, too. However, take a look at the markets. The Prime Rate is already as low as its been in a long, long time. It’s only going up from here.
• While the CARD act will prevent sudden rate hikes on existing cards, it does not address rate limits on new cards. Clearly, you don’t have to apply to a high rate card but the practice will make it much more difficult for people to obtain cards and also limit consumer choice.
• Scaring consumer advocates the most is the expected new fee strategy. It is believed that the credit card industry will start assigning fees for an array of membership services and card ownership privileges. You may also see vague charges on your statement, not unlike what’s found on most phone bills. For example, keep an eye out for inactivity or minimum balance fees.

Thankfully, consumers’ use of credit cards is at its lowest point in more than two decades. And it looks as if it may stay that way.

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Published Friday, January 8, 2010 @ 8:34 am

Bankruptcy should not be an embarrassing process. It’s bad enough the credit industry has surrounded it with negative stereotypes to make people believe it’s a life-altering decision.

However, for a number of people in Milwaukee, Wisconsin, filing Chapter 13 has become a series of perpetual embarrassments and ceaseless frustration as a result of a healthcare provider making public the medical conditions of patients who have filed for protection when their bills became too much to manage.

A 53-year-old college admissions employee filed Chapter 13 in an effort to clean up a difficult financial period of her life. Susan Dandridge understood that a good deal of private financial information will become public record. However, she did not count on an extensive list of her personal medical conditions being included in the claims filed by Aurora Health Care, a regional medical center to which she became indebted.

When she found out her privacy had been violated, she pursued legal action. In turn, a class action lawsuit was filed as it was revealed that Aurora had done the same thing with other patients’ billing records when submitting bankruptcy information.

This very compelling case not only brings to light once more the role medical bills play in the nation’s personal bankruptcy rate but also introduces the question about what medical information, considered private under HIPPAA laws, can be revealed during the bankruptcy process.

HIPPAA, or the Health Insurance Portability and Accountability Act of 1996, requires strict public protection of an individual’s health history by the entities that handle it, such as insurance companies and hospitals. Essentially, it is in place to protect citizens when medical information is transferred between health care providers or when people switch insurance companies. It is a private entity’s responsibility to protect your medical past.

Unfortunately, in Ms. Dandridge’s case, medical information became very public. Although those specific records have since been sealed, her suit contends they were available for months prior to her realizing they had been exposed. The suit also claims Aurora intentionally disclosed the records because of her inability to pay. Thus, her medical privacy was egregiously violated and, according to the lawsuit, the organization’s actions left her open to medical identity theft.

The lawsuit contends that Aurora could have filed summary information as a way to protect the consumers’ medical background while still adhering to state and federal medical privacy laws. However, the Wisconsin Hospital Association has jumped into the mix, stating that Dandridge’s attorney misinterpreted the law and that such information can be revealed in matters of billing and collections.

The realization that the information was made public came after a separate trustee in a Chapter 7 case noticed the amount of detail in Aurora’s claims and initiated legal action that eventually ended in a settlement. From there, the issue spiraled throughout the community and to those who had financial issues with the organization.

It does not matter whether or not anyone found or used for ill will the medical information revealed in the claims. The mere exposure of them is enough to constitute harm, according to Dandrige’s attorney. He also argues that now that the information is “out there” it is subject to additional exposure by third party companies who scan and archive court records.

It is the hope of Ms. Dandridge and the other class members that the practice of including conditions and reason for treatment in the collections and bankruptcy process be halted on a national level.

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Published Monday, January 4, 2010 @ 12:08 pm

In states like North Carolina—composed largely of rural areas dotted with farmland and abutting the ripe fishing grounds of the Atlantic—Chapter 12 bankruptcy can be exceptionally helpful to working farming and fishing families who might otherwise be bankruptcy bound.

In part one of the four-part series, entitled Chapter 12 Bankruptcy, we introduced the concept of Chapter 12, provided a brief overview of the special rights related to this protection, and shared who (or in some cases, “what”) qualifies as a family farm or family fisherman under the Bankruptcy Code. In this section, we’ll discuss how a Chapter 12 bankruptcy works, from initial petition filing to debt repayment planning.

If you qualify under the Bankruptcy Code’s broad definitions of a “family fisherman” or “family farmer,” a Chapter 12 case begins by filing a petition with the bankruptcy court where you live or the location of the “principal place of business” for your corporation or partnership. A qualifying husband and wife “family farmer” or “commercial family fisherman” may file. Unless the court orders otherwise, the petition includes a statement of your assets and liabilities; current income and expenditures; current business contracts and leases; and a general statement of your financial affairs.  In order to satisfy all of these petition requirements, you’ll need to gather a list of all creditors and the amounts and nature of their claims; the source, amount, and frequency of your income; a list of all of your property; and a detailed list of your monthly farming/fishing expenses, as well as living expenses, including food, shelter, utilities, transportation, feed, fertilizer, etc. In order to completely evaluate your household’s financial position, married individuals must gather this information for each spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing.

Upon filing for Chapter 12, you must pay a filing fee and a miscellaneous administrative fee with the clerk of court. With the court’s permission, and with specific deadlines, these fees may be paid in installments. Failure to pay these fees may result in dismissal of your case.

Filing the petition under Chapter 12 provides an automatic stay that stops most collection actions against you or your property. Under the automatic stay protection (a protection that exists under all forms of bankruptcy), any creditors—public or private—are not allowed to call you or send you collection letters. During the proceeding, they cannot continue any legal action against you, foreclose on your home, or repossess your car and other assets. And–even if a garnishment order has been issued–the automatic stay stops garnishment of your wages. Additionally, a Chapter 12 filing has the added benefit of protecting co-debtors (those liable with the debtor) from eager creditors seeking collection of consumer debts incurred by a personal, family, or household purpose.

When you file for Chapter 12 bankruptcy, an impartial trustee is appointed to evaluate the case and serve as an agent, for collecting your payments and making distributions to your creditors. Following your filing, the Chapter 12 trustee will hold a “meeting of creditors” at which you will discuss your financial affairs and the proposed terms of your repayment plan. From this meeting, parties typically resolve problems and repayment schedules. Afterwards, you, your trustee, and interested creditors attend a hearing confirming your personal Chapter 12 repayment plan.

Whether your bankruptcy is simple or complex, you’ll need an expert attorney to navigate the waters. Contact the experienced attorneys at The Law Offices of John T. Orcutt. Please note that while the Law Offices of John T. Orcutt does not file under Chapter 12, our office can evaluate your personal financial situation and refer your case to an experienced Chapter 12 practitioner if needed. Call us today: 1-800-899-1414.

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Published Monday, December 7, 2009 @ 7:41 pm

While mortgage companies continue to refuse lower payments to borrowers who can no longer afford their loans, millions are facing delinquency, foreclosure and the loss of their homes. But just because you’re facing tough odds doesn’t mean that you can’t plan ahead to minimize the possibility of foreclosure or mitigate the damage if you find yourself moving toward it. Homeowners just like you can take immediate action, armed with the tools necessary to make the best financial decisions for your future.

In this six-part series we’ll explore how you might stay in your home, the ins and outs of working with your mortgage lender, the pros and cons of a short sale, and various bankruptcy options and alternatives pending foreclosure.

Part I – How to Stay In Your Home

Don’t give up on your home without considering your options. Foreclosure can leave you homeless, hurt your credit rating and make it difficult, if not impossible, to buy another house anytime soon. Your best options if you’re having trouble making mortgage payments include:

Negotiating with your lender
When attempting to stay in your home by working with your lender, it’s important to act quickly. As soon as you realize you’re having trouble paying your home loan, and before you’ve missed any payments, contact your mortgage lender. Now, more than ever, lenders are willing to negotiate with their clients, if only to reduce the record numbers of foreclosures they’re dealing with during this lingering recession.

Filing for bankruptcy
What about if you’re already behind on your mortgage payments? Filing for bankruptcy may help you keep your home, or at least get you out from under looming mortgage debt. With a few exceptions, Chapter 13 or Chapter 7 bankruptcy proceedings force creditors to end their collection activities and delay impending foreclosure sales. Each of these bankruptcy options will be explored in part three and four of this series.

When you file for bankruptcy, the foreclosure process is legally stopped (called an “automatic stay”). Foreclosure proceedings cannot be reinstated until your bankruptcy case closes or the lender gets permission by the court to proceed, thereby “lifting the stay” on the foreclosure process. So, if your plan is to stay in your home payment-free, for as long as possible, bankruptcy can delay the foreclosure auction, and your ultimate move-out date, saving you time (and money) to figure out your next move.

Other options include:

Selling your home yourself
If you simply can’t afford the home you own, you still have power to take control of your financial destiny. If your home has appreciated in value since you bought it, you may be able to sell it yourself. Again, contact your lender, who may let you stop making payments, and stay in your home, until the house is sold. If the proceeds from the sale don’t cover your mortgage and related costs, you might be in a short sale situation. A short sale can be a good option in certain circumstances, but in most cases, it’s best to simply surrender your home in a bankruptcy. The short sale option will be discussed a length later in the series.

Giving your deed to the lender
What happens if no one buys your house? Don’t lose hope. Your lender may agree to a “deed in lieu of foreclosure,” taking on the deed and canceling your debt. Like a foreclosure, the bank can then sell your home. A deed in lieu, like a short sale, is unlikely to erase your personal liability. In this regard, bankruptcy is usually a better option.

For more detailed information on how to stay put in your home pending foreclosure or bankruptcy contact The Law Offices of John T. Orcutt.

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Published Monday, October 26, 2009 @ 10:38 pm

In discussing the issues surrounding the current economy, the term “mortgage meltdown” is now officially as tired a wordplay as assemblages like “From Wall Street to Main Street,” “Where’s my bailout?” and “It’s a crisis of confidence.” Beyond these catchphrases, you might still be wondering: What is really behind this recession?

In a nutshell, big banks created a huge demand for mortgage backed securities. Mortgage securities are basically your mortgage, packaged with a bunch of other people’s mortgages, which are then sold on the open market to investment banks who pay for the package based on the quality of loans included. Good borrowers with good loan applications made up the “Prime” packages, and different variations of the packages existed for other qualities of debt, such as “Alt-A” and “Sub-Prime”, the latter being defined by weak credit scores and little documentation. The packaging allowed investors to pick and choose, depending on how much risk they wanted to take on. This worked well as long as everyone in the game stayed honest.

It turns out, everyone involved was not being honest. As more and more consumers qualified for loans, the securities became watered down. It got to the point that literally anyone with a pulse was being qualified for a home loan. The prime packages were increasingly including “low-doc” and “no-doc” consumers, who had little prospect of being able to afford their mortgages over the long term. However, the investment banks kept buying and selling, re-packaging bad loans for investment banks who were hungry for more securities.

This giant tinder box eventually exploded when all parties realized that what they owned was worth far less than they thought. Adding to the devastation was the trillions of dollars in side bets on the market, termed “credit default swaps”. When the whole thing blew up, everyone needed to be paid. The only problem- the banks simply didn’t have enough money to go around. Lending froze as everyone clung tightly to the dollars that remained. Despite hundreds of billions in government money, banks still aren’t completely out of the woods.

Now that the dust has somewhat settled, many entities who purchased the bad debt are discovering that they can’t even prove ownership. In a New York bankruptcy court earlier this month, a mortgage servicer was unable to prove it serviced the loan or that the parent bank was the legal note holder. Upon formal request to prove their ownership of the note, the servicer, PHH Mortgage alerted the court that US Bank actually owned the loan. The only “proof” which PHH could provide was some vague paperwork by PHH officials, multiple signatures by the same executive (although with different titles each time), documents post-dated from the date of bankruptcy filing and eventually, an admittance of improper fees levied and even less proof they had a right to what was owed. The judge, unable to ascertain whether the debtor’s proposed Chapter 13 plan would be paying the right bank, completely disallowed the bank’s claim. You heard that right–the judge completely eliminated well over $450,000 in mortgage debt! Not only will this person continue to sleep in her house, she’ll be doing so knowing her mortgage payment isn’t due any time soon. Or ever.

Not every case involving a confused lender will result in such a favorable outcome. A lot will depend on the supporting documentation behind the loan, but if you bought or refinanced a home during the boom years, the chances are higher that your note holder might not be able to prove that it owns the debt. In a bankruptcy setting, this is a huge problem for the lender, and a potential windfall for the consumer.

The recent New York case is being looked at as a serious wake-up call for lending institutions: the days of free passes and assembly-line foreclosures are over. If you’re a consumer with a bad loan and bad terms you can’t afford, at the very least a bankruptcy may be an option to catch you up on the missed mortgage payments. Call an experienced bankruptcy attorney today to discuss how bankruptcy can help you save your family home. In North Carolina, call the Law Offices of John T. Orcutt. 1-800-899-1414.

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Published Friday, October 9, 2009 @ 5:23 pm

Even though we are in the business of helping people through bankruptcy, legally and sometimes even emotionally, we understand that filing is not always the best option for you. However, our greatest fear is for those who should file but decide not to for the wrong reasons, whether it be because of the stigma of bankruptcy, an inability to face financial reality, or opting for a “less than legitimate” credit counselor.

To help in your decision, consider some of the consequences of not filing bankruptcy:

Losing your car
More than likely, you have a car loan. Should that payment be one of the debts that goes unpaid, your car can be repossessed by the lender and sold to pay the loan. But here’s the real pain in losing your car: it rarely covers the amount you owe. So, you could end up losing your car and getting sued for the difference. Bankruptcy stops the repo man, and in many instances, will allow you to repay the loan with much better terms.

Foreclosure
This can be the biggest pain of them all. While the bank can’t simply take your home like a car, they can foreclose on it. The process typically takes a few months. However, this does not mean you should wait until the foreclosure hearing to seek help. If you are behind on your mortgage, a Chapter 13 bankruptcy will allow you to catch up the missed payments over a repayment period of 3 to 5 years. Contact your bankruptcy attorney today, even if you’re only behind a couple of payments.

Student loan collection
In-state tuition for the University of North Carolina system schools is going up every year. Some of the private schools in our state are well over $50,000 per year just for the privilege of attending. Without question, college is getting expensive. And so is the cost of not filing bankruptcy if you have student loans. While many loans start out as federal in nature, a large majority of them are bought by third-party lenders who do not look kindly on your inability to pay them. However, these groups are more than happy to grant you a deferral or forbearance in order to drag out the payment periods to 25 years or more. If you don’t pay your loan, they can garnish your wages and even sue you. While bankruptcy can not get rid of student loans, it will get rid of your other unsecured debt, putting you in a better position to get back on track with your student loan repayment.

You could get sued
You might think that if you simply don’t pay your creditors, they will eventually go away. Not true. Debt buyers, the lowest of all life forms, will eventually purchase the debt for pennies on the dollar. These aggressive hounds will not stop until they have pressured you to cough up a reduced settlement amount. If you still refuse to pay, they can sue you and obtain a judgment lien on your property. Depending on the laws of your state, the debt buyer can then attempt to sell your home, car or other belongings in a sheriff’s auction. Bankruptcy will stop a lawsuit immediately, and stop the creditor from forcing a sale of your property.

If you are falling behind on your monthly payments, talk to an experienced bankruptcy attorney to discuss how bankruptcy can protect you and your family. In North Carolina, call the Law Offices of John T. Orcutt to set up your free initial consultation. 1-800-899-1414.

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Published Wednesday, October 7, 2009 @ 8:40 am

With the government’s new credit card legislation possibly reaching its stride two months early on December 1, a lot of frustrated credit card users may be breathing a collective sigh of relief. Given the tighter restrictions on credit card issuers, you might want to take the opportunity to be a little more choosy in selecting your new card, as industry players are going to push hard to win customers from competitors, using reward plans and low introductory rates as incentives. However, unknown to many credit card users is how reward plans are handled when payments are missed.

What far too few consumers understand is that not only do credit reports get the news when a payment is missed, so do the third party companies that handle the reward plans. Understandably, most people find themselves worried more about the late fees and interest rate bumps that occur when a balance goes unpaid. However, if you’re counting on the reward points to finance your next vacation, you may be in for a big surprise when they are told that as a result of missed payments, a big chunk of those rewards have been taken away.

A research effort at www.cardhub.com showed that each of the major credit card companies employ rules which revoke reward points when a payment is missed. That list includes American Express, Bank of America, Capital One, Chase, Citibank and Discover.

Discover seems to be a bit more brazen than their competitors. For example, miss your due date for two months and all of your points go away. All of them. (Don’t forget, Discover is “the card that pays you back.” Maybe.) American Express examines situations individually but will seemingly not hesitate to take away what you have earned. With all the other penalties for missing payments, like late fees, interest rate spikes, credit report dings and dinner time phone calls, this is just one more slap in the face to consumers.

Also, remember that the credit card companies can change the terms of a reward program at any time, without notice. Essentially, the lending industry allows points to be accumulated but not necessarily returned. Thus, a consumer may be using a card for a specific rewards program only to find that program is suddenly no longer available. Furthermore, reward programs are marketed as perks, gifts for simply doing business with a specific bank. Yet, that gift can be revoked without notice. Thanks for nothing.

Consumer advocates preach that those looking for a card with a rewards program should choose only those that offer cash back, because it can’t be devalued. Plus, you are more apt to take the cash reward earlier than if it was simply a pile of points accumulating in cyberspace over time for you to “eventually” use for a new mountain bike, kayak or trip to Yosemite.

Remember, if a card’s rewards plan is the main reason you choose to open the account, as it is for more card users today, make sure you understand all of the fine print before you make a decision.

From: The Law Offices of John T. Orcutt, with 4 convenient office locations in Raleigh, Durham, Fayetteville and Wilson. Call us today to set up your free initial consultation. 1-800-899-1414.

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Published Thursday, October 1, 2009 @ 10:15 am

Dealing with debt collectors is no picnic. Despite increased efforts by the government to protect Americans from some of the more questionable debt collection practices, hapless consumers continue to face the rude, callous pestering of debt collectors as they struggle to stay on top of their finances. While the mental distress caused by debt collectors may be no surprise, this case may well present an issue of first impression: Dianne McLeod, a widow residing in Florida, is suing her mortgage company, Green Tree Servicing, for her husband’s wrongful death. In the suit, McLeod alleges that the illegal practices of Green Tree’s collectors led to her husband’s untimely death of heart failure at the age of 57.

Stanley McLeod worked at Sears until he suffered a heart attack while at the job in 1997. During his recovery, Stanley was unable to hold down a full time job. The McLeods began to fall behind on monthly payments for their mortgaged home in Keystone Heights, close to Gainesville, Florida.

Soon, debt collectors representing the mortgage company began to call incessantly. According to Dianne McLeod, the debt collectors called as many as nine times a day, often leaving rude and harassing messages on the family answering machine. The McLeod’s attorney, William Howard of Tampa, Florida, says he is looking forward to playing the tapes for a jury. Howard considers the tapes pretty damning evidence of the debt collector’s operating procedure and is willing to bet that a jury will be sympathetic to Dianne McLeod’s suit.

Green Tree Servicing executives, meanwhile, have called McLeod’s claim “outrageous and meritless.” Speaking on behalf of the company, Brian Corey, Green Tree’s senior vice president and acting counsel, has denied the charges that wrongdoing on the part of his company was the cause of Stanley’s death. But according to his widow, Stanley’s health, already weakened from his first heart attack, visibly suffered as calls and collection efforts from Green Tree intensified starting in August 2005. Dianne says that after Stanley would receive a call from Green Tree Servicing, or listen to a message left on their machine, his face would redden and his breathing would grow labored. Dianne believes that Stanley’s health was progressively worn down by harassment from their mortgage company, culminating in her husband’s death of heart failure in December 4, 2005.

The McLeods already had a pending suit against Green Tree for unfair debt collection practices. The suit alleged that Green Tree broke Florida collection laws by calling too often, using harassing tactics, and contacting people outside the household in an attempt to collect on the debt. Following Stanley’s death at the end of 2005, Howard added the wrongful death claim. The attorney says debt collector harassment claims like the McLeod’s are not uncommon; he personally is handling about 500 claims from other people unduly harassed by debt collectors. He believes the McLeod’s case is the first wrongful death claim to have resulted from the illegal practices of debt collectors.

As you read this amazing story, did you find yourself sympathetic to the McLeods because of first-hand experience? Do you feel like debt collectors are hounding you to death? If you are tired of dealing with the threats and rough treatment from debt collectors, contact a bankruptcy and consumer rights attorney today. In addition to the protections of the Bankruptcy laws, you may have a claim for unfair debt collection practices. In North Carolina, call the Law Offices of John T. Orcutt. 1-800-899-1414, or visit www.billsbills.com to set up an appointment online. Your first appointment is free. Don’t wait another day.

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Published Tuesday, September 29, 2009 @ 9:44 am

It has been a number of months since new laws were passed to address the aggressive marketing tactics of credit card companies and their downright crooked methods of making money through penalty fees and interest rate hikes. To date, even with some facets of the law intact, few consumers are realizing a positive impact. This is because credit card companies have used the government intervention as an excuse to increase rates and invent new fees before the real teeth of the law come into effect in February of 2010.

Thankfully, it sounds like lawmakers behind the effort have caught wind of the ongoing tactics and are now pushing to enact the laws sooner than expected, as early as December of this year.

Representative Barney Frank, chairman of the House Financial Services Committee and by no means a novice at how to get under the skin of big business, is leading the measure to get the law into action sooner. He is joined by fellow Democrat Carolyn Maloney of New York. The act also prevents credit card companies from raising interest rates unless a customer is more than 60 days late and requires the original rate to be restored after six months of on-time payments.

Aspects of the legislation considered for the proposed December 1 deadline include the requirement that credit card companies apply payments to the cardholder’s highest balance accounts first. The legislation would also put an end to the practice of “universal default” interest rate hikes. This practice allows individual lenders to increase interest rates if their customer defaults on an account with a completely different lender. When this happens, multiple credit accounts set to the default rate simultaneously, greatly increasing the chance for additional defaults and added fees.

Industry card issuers have been primarily pushing fees to address tactics consumers use to avoid higher payments, such as when a customer transfers balances from a high interest card to one that may be offering a much lower introductory rate. Discover Financial Services, which issues the Discover Card, announced an increase in balance transfer fees from three percent to five percent of the balance. On a $5,000 balance, the cost would go from $150.00 to $250.00.

In recent months, American Express, Chase, and Bank of America have all raised interest rates across the board, and have changed many account holders’ interest rates from fixed to variable. A representative from www.lowcards.com stated that their company has tracked more than 50 interest rate, fee and terms changes by eight card companies since January, which is when the bill was starting to take shape in Washington.

Rep. Frank and others in Congress are not pleased with the credit industry’s reaction to the Act, and are looking to put a stop to abusive lending practices as soon as possible. However, even with the changed effective date, consumer advocates fear that credit card issuers will simply raise the interest rates before December 1st, leaving many consumers to deal with unmanageable interest rates at a time when account balances are often at the highest– right after Christmas.

If you’re sick of the interest rate hikes, sick of the penalty fees, and want an opportunity to start fresh, call a bankruptcy attorney today. In North Carolina, call 1-800-899-1414 to set up a free initial debt consultation. Or visit www.billsbills.com, where you can fill out our confidential debt questionnaire and set up an appointment at one of our 4 convenient office locations.

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Published Sunday, September 6, 2009 @ 1:18 pm

Now that every bit of information about you is digitized, it is easier than ever to use your own data against you.  Scammers know that flashing a little bit of knowledge can disarm an otherwise savvy consumer, so don’t be fooled into falling for the latest scam just because someone knows your address, details from your purchasing history, or even your social security number.

One new scam to be on the lookout for involves fake rebate checks. Basically, scammers send you a check in the mail for a rebate on an item you may have purchased. It’s possible they may actually know that you purchased the item, but it’s also possible that scammers will stick with popular or “hot” items, the kind of stuff you see advertised on TV and magazines, and snag consumers by counting on coincidence; either that you bought the item or that you were planning to buy it. One such program looks like an official check from the manufacturer, complete with a trademark logo, but it’s actually a ploy to obtain your signature…and therefore your consent to sign up for junk you don’t want at prices you don’t care to spend. If you get a rebate check in the mail, be very careful to read all of the teeny tiny print―annoying, but not more so than having to fight a company to recoup money you’ve been tricked into spending.

And here’s another scam, this one involving fake bill collectors―as if the real thing weren’t bad enough! This particular set of bad guys will call you and pretend to be collecting on a bill, making threats and demanding payments for debts you never owed or don’t owe on any more. Reports about this scam are especially unsettling because the scammers seem to have a lot of information at their disposal on the people they are calling.

So how can you tell if the bill collector is the real thing or another scammer on the take? Scammers will often report that they’re employed for agencies that don’t exist, so if you’re unsure about why someone is calling, request information about the company and the caller, explain that you want to look into the situation and hang up. Afterward, do a little research; if you’re satisfied it’s a real company you can always call the number back. Another warning sign are the kinds of threats scammers make; for example, threatening to send people to jail if they don’t make payments. You can’t be sent to jail over debt, so this particular threat is a dead giveaway. Finally, remember not to be fooled just because the person appears to have information about you; don’t confirm that any of the information is correct, since that may be the objective of the call in the first place. Remember that you have the right to demand written proof of your debt, and you should do so at the first sign of trouble.

You don’t have to take abuse from fake bill collectors, but the real thing are no joke either. Unlike the scammers, legit agencies won’t stop calling you until you do something to end your debt problems for good. If you can barely keep your debts straight, making it easy for scammers to take advantage of your vulnerable state, bankruptcy could be the answer for you.

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Published Friday, August 28, 2009 @ 8:36 am

What if you have money on deposit with a bank, and you owe the bank money for something totally unrelated―what can they do about it? Let’s say a bank had given you a loan at one branch and you’d fallen a bit behind on your payments. Then let’s also say you had money on deposit in a savings account, at another branch, but with the same bank? Can the bank just go into your account and take out what you owe them?

This scenario seems to prompt dueling intuitions; on the one hand, banks seem to be able to do whatever they want, and since they generally draft the contracts they sign with their clients, they definitely command the lion’s share of bargaining power.  On the other hand, something about this power seems wrong, intrusive. Shouldn’t the law protect us by giving us ultimate agency over our funds? Not paying a debt may be wrong, but it should still remain your choice to make, right?

Wrong or not, the bank would be acting legally in going into your accounts to take what you owe them because they have what is called a right of setoff. The bank has the right to “setoff” the debt owed to them with the funds held on deposit. The source for this right can usually be located in two places: first, in the contract you signed when you opened the deposit account; and second, under principles of common law. Essentially, the bank assumes the role of secured creditor when you make the deposit, even if the loan they originally extended to you was unsecured!

Thus, if you have money in any number of accounts, the bank can go rooting in there for a debt they claim you owe them. This includes checking accounts, savings accounts, money market accounts, and certificated of deposit (CDs). Generally speaking, the bank will do this for a debt owed them that is delinquent, where they have made a demand for payment from the debtor. However, the bank is not even required to give you advance notice that they are planning to setoff by deducting from your accounts. This can cause major trouble for you if you have outstanding checks, as the bank can take every penny in your account and then charge you overdraft fees when those outstanding checks finally clear.

Other complications can follow: Imagine that you’ve been waiting for your employer to direct deposit your paycheck, as with every pay period so you can pay your rent or make a payment on your car. If your bank decides to setoff, that money you were expecting will be gone before you even see it.

What if you unwittingly owe money to a bank who also happens to hold some of your money in deposit? Many people don’t realize that the stores that extend them credit for purchases are actually a middleman; the real lender is a bank. In this case, the bank is allowed to seize your funds, even though you were unaware of the peril.

As you can see, setoff gives banks a powerful tool to use against you…as if they needed another one! So what can you do to fight back when your money is at risk?

Unfortunately, even declaring bankruptcy won’t eliminate the bank’s power in this situation. The bank’s right of setoff supersedes the bankruptcy. That’s why it’s very important to change banks prior to filing bankruptcy, if you owe your bank money. Any money owed will then be discharged as a general unsecured debt through your bankruptcy. Speak with an experienced bankruptcy attorney to find out more. In North Carolina, contact the Law Offices of John T. Orcutt at 1-800-899-1414 to set up a free initial debt consultation. Or fill out our online debt questionnaire at www.billsbills.com.

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Published Monday, August 24, 2009 @ 11:52 am

Think that only credit card companies and gym memberships get passed off to collection agents? Think again.

In recent years, and now more than ever given the economy, local governments are selling overdue property tax accounts to private companies to gain immediate access to the money needed to supply public services. The downside is that these firms, called tax lien investors, can charge very high penalties and double the normal interest rates.

Housing and consumer advocates across the country are beginning to get wind of the tactics and have started calling for regulation. Although, municipalities have a strong argument for the raising of money this way because, like property taxes, it gets used to build roads, schools and supply public services. Not only that, tax lien investing has become big business, with many Wall Street brand names directly involved.

The demise of the real estate market in the last two years has left hundreds of thousands of unfinished houses on quiet cul-de-sacs in half-built neighborhoods across the country. It has also left in its wake millions of struggling homeowners. Should an overdue tax bill become property of a tax lien investor, suddenly the mortgage bill is not the only envelope instilling fear in the checkbook of its recipients.

Normally, governments do charge interest and late fees. Although, they do so at very reasonable rates. Why? Because they have no interest in seeing their communities becoming foreclosed ghost towns. Under the thumb of a private tax lien company, people are very likely to end up in foreclosure much faster. And, based on recent stats, a much more likely candidate for bankruptcy.

Tax lien investors have minimal concern for the preservation of towns and villages in which they have no role. Their stance is focused on collecting debts they purchased, not the building of schools or a playground. The underlying intention of their efforts, in essence, does not serve the community.

Private investors can move to foreclosure quickly, often taking priority over the mortgage holder because they “own the taxes,” (taxes are required to be paid first in the event of a foreclosure) and also stack on 18 percent interest rates on what is owed. People subject to tax lien investment companies across the country are reporting immense increases in fines and interest that often end up pushing them over the edge.

The head of the National Tax Lien Association, Howard Liggett, was rather bold in a recent statement, saying that his industry’s investing practices, ” … beats the heck out of any certificate of deposit.”

In other words, tax lien investing makes a lot of companies a lot of money.

Overdue taxes are indeed a form of debt. And they need to be dealt with, just like your car payment and student loans. However, you enter into the agreement with your local government under the auspices of being treated as part of the community. Thus, it’s easy to understand how the practices of tax lien investment firms could make an already financially challenged family feel even more abandoned by their community. And as a result, less likely to pay what’s owed.

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Published Wednesday, August 19, 2009 @ 9:19 pm

Back in May, President Obama pushed for new legislation to prohibit some of the business tactics of credit card companies. Namely, the Credit Card Accountability, Responsibility and Disclosure Act of 2009 will require lenders to notify card holders of rate and fee increases 45 days before they take affect. Until August 20, they only need 15 days of notification.

The small timelines credit card companies use to alert consumers of rate hikes is considered a primary driver of high personal debt because they are timed with a person’s spending habits. In other words, if a new television or other large expense was put on a card, a consumer would have about two weeks to pay it before the rate jumped, substantially increasing the overall cost of the item.

The 45-day window will allow consumers to be more proactive in alleviating their balance, whether through balance transfers to cards with lower interest rates or by simply putting more money toward the balance. Washington economists believe that a more lenient credit card industry will contribute to lower personal debt and hopefully, fewer bankruptcies.

The best part of the new legislation? A cardholder can refuse the rate increase or late fee and agree to close the account and pay off the remaining balance within five years. This component of the bill was a big win for consumer advocates, as it provides consumers with a solid opportunity to assess their spending and make changes before allowing it to spiral out of control.

It also creates competition within the industry because consumers will have additional time to shop for a new credit card. This will eventually force the industry to be more consumer-centric.

When the law hits tomorrow, credit card users who have suffered from late fees will also feel some relief. The act states that statements must be mailed 21 days before a due date to allow the lender to charge a late fee. And, that fee can only be applied after an additional 14-day notice period.

More provisions will take effect at different times over the next year. For example, the law states that any credit card applicant under 21 must have an adult co-signer. It also disallows any retroactive rate increases, which had previously been a tremendous money maker for card lenders. This allowed them to apply higher fees to expenses incurred by the cardholder months prior to the notice of an increase being sent out, resulting in exponentially larger balances.

Unfortunately, credit card companies are still actively implementing new strategies to increase revenue streams before the full brunt of the act takes effect in 2010. Annual fees, balance-transfer fees and assorted other monetary upticks are being assessed to cardholders nationwide. People are seeing interest rates double without notice.

If you are consistently carrying a balance on your credit cards and can’t seem to get a handle on your debt, speak with a bankruptcy attorney today to discuss your options under bankruptcy law. A properly planned bankruptcy can eliminate your credit card debt and give you the fresh start you deserve.

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Published Monday, August 10, 2009 @ 5:51 pm

Liens can certainly throw a wrench in bankruptcy plans, especially for the unsuspecting. Unlike unsecured debts, which are simply discharged through a normal Chapter 7 bankruptcy, liens won’t be so efficiently eliminated with your filing. So what options do you have to at least address liens you can’t eliminate entirely?

One solution is to file for Chapter 13 bankruptcy rather than Chapter 7 and take advantage of some of the special privileges unique to that chapter. When you file for Chapter 13, you propose a repayment plan. Chapter 13 allows you to stretch out payments to creditors for the life of the plan, usually three to five years, and when it comes to a secured debt―that is, one where the lender holds lien on property that is acting as collateral to secure the interest― someone filing for Chapter 13 may be able to pay for only the value of the collateral rather than the total amount owed. This will occur if certain conditions are met, and it is definitely a huge advantage, because the value of personal belongings will almost certainly depreciate significantly below what is owed on the item. Thus, if you meet conditions, you get to keep your item and pay a lot less for it.

Take the example of a car. You will be entitled to pay for the value of the vehicle rather than what you owe on the loan if : 1) the loan you used to buy the car wasn’t a purchase-money security interest (i.e., what you put up for collateral wasn’t the car itself); or 2) if you bought the car for something other than personal use (say, for a business use); or 3) even if you did get the car for personal use and used a purchase-money security interest to pay for it, if the purchase occurred more than 910 prior to your filing for bankruptcy.

For an item other than a car, such as a household appliance you bought with  department store charge account, you will only be required to pay the fair market value of the item if the purchase was made more than 1 year ago. In North Carolina, if the seller or third party finance company issued a credit card in conjunction with the purchase, and that credit card has more than a 15% interest rate, the seller has no security interest whatsoever. This means the debt will be discharged as a general unsecured debt.

Thus it’s important to keep in mind that bankruptcy offers many ways to approach financial difficulties, even for those situations when it seems like the lender is holding all the cards.  Call an experienced bankruptcy attorney today to discuss your unique financial situation. In North Carolina, contact the Law Offices of John T. Orcutt today for your free initial debt consultation. 1-800-899-1414.

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Published Wednesday, August 5, 2009 @ 7:14 am

One aspect of bankruptcy you don’t hear much about is what happens after you file. One of the steps that tends to be a little disconcerting for those who have just filed Chapter 7 or Chapter 13 is the “Meeting of Creditors.” It just sounds so intimidating, doesn’t it?

Truthfully, it isn’t.

Meetings of creditors take place a few weeks after your attorney has filed your case and you have provided him or her with your most recent income information and list of debts. The meeting is essentially an opportunity for every one with an interest to hear your case and accept or challenge its terms.

The meeting of the creditors rarely even justifies its namesake because it is highly unusual that a creditor actually attends. What does happen usually takes only a few minutes and sometimes less. At the meeting, you will be sworn in by the trustee and have your identity verified. You will then be asked, under oath, whether the petition you have filed is a true and correct statement of your financial affairs.

The questions you might face are pretty easy to handle and should not cause you to be nervous. For example, “Why are you filing bankruptcy?” is pretty common. Your reason for filing will probably need to be flushed out in some detail but obviously, that’s not anything you need to study for because anyone who has gone through the financial stress and frustration prior to bankruptcy knows full well the reasons why. You will also probably hear some questions about employment and real estate, too. But again, nothing overly complicated.

There are rare occasions when a creditor might appear at a Meeting of Creditors. This often happens when there is a domestic support obligation involved, or some other obligation between you and another individual party. If a creditor does appear, they will be given a limited time to ask questions. If it appears that the creditor will need more time to ask questions, the Trustee may ask the creditor to make a formal request for a separate hearing to continue the inquiry. Don’t let this scare you. These extra hearings are extremely rare, and, as long as you have been honest throughout the process, you shouldn’t have any problems answering the questions.

You may also see a creditor if you ran your own business. This is because there is typically a great deal more money involved with a business than an individual. And, business creditors are more bankruptcy-savvy and thus feel comfortable being involved with every step of the process. Again, your honesty with schedules and asset listings will determine how easy a time you have at the meeting.

This post should give you a decent overview of the Meeting of Creditors but be sure to discuss it with one of our attorneys as you begin the bankruptcy process. Again, the more you know about the process, the more comfortable you will be throughout your journey into & out of bankruptcy.

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Published Tuesday, August 4, 2009 @ 6:20 am

Sometimes life throws you the unexpected. If you’re living paycheck to paycheck, all it takes is one unanticipated expense to put you on the path to a truly disastrous financial scenario. It’s often the unforeseen emergency expense which starts the ball rolling. Soon you’re 2 or 3 months behind on the car payment, and repossession of your car or foreclosure becomes a very real possibility. That’s why it’s so important to talk to a bankruptcy attorney the moment things start to get out of control.

But even if your debt problems have sneaked up on you and now you’re facing an imminent repossession, a quick bankruptcy filing can put the brakes on the repo man. If your situation is critical, you can file what’s called a bare-bones or skeletal filing with a court to prevent imminent action against you; for example, if your vehicle is being repossessed or you are facing foreclosure, the court will allow you to file an emergency bankruptcy petition.

In a bare-bones filing, the court allows you to file your bankruptcy petition with only a minimum of the required set of documents. After this minimal filing, you will be given a set amount of time to gather the remaining documents. The amount of time can differ, but generally you will have up to 15 days to complete your petition. Once your petition is filed, you enjoy the benefit of the automatic stay, which stops creditors’ collection efforts in their tracks. This allows you to keep the car, stay in your home, and put the creditors back in their place.

The emergency petition should be filed only if absolutely necessary. If you can avoid doing so, it’s probably a good idea to give yourself and your attorney time to carefully file your case. This approach allows you to develop the best bankruptcy plan to help you out of your financial trap and into a fresh start. If you’re facing foreclosure, for example, you will have ample time to contact an attorney before the foreclosure sale. In these cases, don’t wait until the last minute! Car repossessions, on the other hand, can develop much more quickly and often necessitate quick action to prevent irreversible consequences.

If an emergency situation has caused you to get behind on your car or home, talk to an attorney early. An experienced bankruptcy attorney knows how the repossession process works and can best advise you on how to best protect your interests. Don’t wait another second, call today.

Durham bankruptcy. Raleigh bankruptcy. Fayetteville bankruptcy. Wilson bankruptcy.

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Published Friday, July 31, 2009 @ 9:38 am

Bankruptcy is a terrific way to take care of many kinds of debts. But you may have heard that not all debts will be discharged in a bankruptcy. As a result, and depending on the kind of debt you have, you may be worried that declaring bankruptcy would not really help you. What you may not know is how bankruptcy can help you with your debts, even the ones you can’t discharge outright.

Support obligations fall in this category of debt.  They include things like alimony and child support payments. Because these are priority debts, you will not be able to discharge them outright with a Chapter 7 bankruptcy, and, in addition, the automatic stay will not prevent collection efforts on past due support obligation payments.

Nevertheless, a Chapter 7 bankruptcy will help you get caught up and stay caught up on your support payments. First of all, when your unsecured debt is discharged, all the money you were spending on things like credit card payments will be freed for use toward your support obligations.

The protected status of support payments can be a good thing in the event that your case is a Chapter 7 asset case. In this rare kind of case, some of your assets will be liquidated to pay creditors. You probably would rather see the proceeds of your liquidated assets go to something like child support, rather than sending it all to unsecured creditors. In that case, your attorney should file a proof of claim on behalf of the support recipient, and this will ensure that most of the proceeds from the liquidated assets will be put to use toward your support payments.

A Chapter 13 bankruptcy will be even more helpful to you when it comes to past due support payments. Say you are really behind on your alimony payments. Your ex is pestering you all the time about the past due amount and you need some relief.  A Chapter 13 filing will allow you to work these payments into your repayment plan and allow you to catch up over the course of a 3 to 5 year repayment plan. Note that you must be careful to keep up with your ongoing post-petition payments; failing to make the new payments as they become due can put your case in jeopardy. However, with the help the repayment plan, you buy yourself time to manage old debts and therefore keep up with the new ones.

If you’ve been struggling to catch up on your child support payments and alimony, bankruptcy can help you get back on track. Even debts that won’t disappear in a bankruptcy can at least become manageable after a successful bankruptcy. You are probably aware already that unpaid support obligations can have very serious consequences; you could face hefty fines, problems with professional licenses, or even jail time, in addition to some very aggressive collection efforts. Besides all that, many people really want to make good on their support obligations, but their financial circumstances simply don’t allow for it. Because of this, it’s important not to wait until it’s too late to be pro-active about solving your debt problems. Talk to a bankruptcy attorney today before the situation gets out of control.

From the Law Offices of John T. Orcutt. Helping families with real debt solutions since 1995. Call today to set up a free initial debt consultation at one of our convenient office locations in Raleigh, Durham, Fayetteville or Wilson.

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Published Tuesday, July 28, 2009 @ 6:21 am

Before the deservedly unpopular 2005 reforms to the Bankruptcy Code, it was rare that an innocent mistake could cause your discharge to be denied or revoked. It used to be that trustees and the courts reserved this harsh measure for those situations where it was clear that a person filing for bankruptcy had engaged in serious, persistent and intentional misbehavior. Now, in the aftermath of the reforms, it is even more important than ever to hire a competent bankruptcy attorney to help you navigate a bankruptcy filing, not just because the reforms made declaring bankruptcy much more complicated, but also because a mistake could cause your discharge to be revoked or denied. And what’s the point of declaring bankruptcy if you don’t get your debts discharged? That bankruptcy isn’t going to help you at all, probably, and it will almost certainly hurt you.

There are several situations you must be on the lookout for to avoid having your discharge denied or revoked. First of all, under the reforms, a prerequisite for receiving the discharge is the completion of a financial management course. This course is one hosted locally in your area and approved by your bankruptcy case trustee. You will only be exempted from completing this course if a good one isn’t available nearby. Although the educational value of these courses is questionable, all debtors must fulfill the requirement or forfeit their discharge.

The bankruptcy trustee can demand a great deal of information from you over the course of your bankruptcy. One of the more onerous demands is the production of your last four years of tax returns. If the Trustee demands the returns and you fail to produce them, your discharge could get dismissed outright. If you’re bothered by this requirement, well, who can blame you? It seems like your tax returns are private financial information that should remain so, even during bankruptcy. There is a little bit of latitude for protecting your privacy: you can opt to send transcripts of the returns (also known as summaries) instead of the full filings; these contain less personal information. Avail yourself of this option by requesting summaries from the IRS.

And we’re not done yet! If you’re filing for bankruptcy under Chapter 13 and you owe child support or alimony, it’s time to get caught up. In order for your debts to be discharged at the end of the process, you must be completely up to date on your support payments. The good news is that if you are behind, the arrears can be caught up in your Chapter 13 plan. Your ongoing payments must continue to be paid over the course of your bankruptcy. It would be a real shame to get to the end of the process, having made all of the required plan payments, only to have a problem because you missed a few support payments along the way. Protect your discharge by paying these on time.

Finally, it should hardly need to be stated that you must tell the truth and avoid fraudulent activity during your filing. Remember that even if your intention isn’t to commit fraud, an innocent mistake could be interpreted as such if the effect is to obscure some part of the process or misrepresent your position in any way.

With all of these potential quagmires, it’s imperative that you consult with an experienced bankruptcy attorney. In North Carolina, contact the Law Offices of John T. Orcutt- helping families since 1985. 1-800-899-1414.

Durham bankruptcy attorney. Raleigh bankruptcy attorney. Wilson bankruptcy attorney. Fayetteville bankruptcy attorney.

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Published Saturday, July 25, 2009 @ 5:35 pm

It shouldn’t take more than a few visits to our blog for you to find a slew of posts about how to prepare for your bankruptcy and manage all the relationships along the way, like those with your attorney and bankruptcy trustee.

Like any relationship, the ones that are forged during a bankruptcy should be built on trust. That is, you need to be upfront with everyone and every entity involved, even your creditors, to ensure that in the end you wind up where you need to be. A large part of building that trust has to do with how you handle the disclosure of your assets. The following point almost deserves to be in all caps, but no one likes to be yelled at, so: never try to hide or transfer assets with the intention of shielding them from creditors.

Okay, now that the lecture is over, it should be noted that sometimes people transfer assets with good intentions. A constructively fraudulent transfer is not an deliberate attempt to hide an asset but is looked down upon by creditors because quite often, the gift or item in question is transferred at a value less than its actual worth. For a simple example, imagine you sold a $25,000 SUV for $15,000 out of simple desperation to raise cash for the bankruptcy. Sure, you now have cash, which is still an asset, but the creditor would have preferred the $25,000 SUV. And you can rest assured, they’ll make a case out of it.

Consider these additional examples of constructively fraudulent transfers:

• Ty Webb gives Lacy Underall $10,000 to help her move from dreary old Manhattan to a high-end suburban country club. His creditors will end up pretty unhappy with Ty’s attempt to secure his girlfriend a spot at the club pool because that money could have been used to pay his debt. Worse yet, he received no real asset in return. As a result, the bankruptcy trustee handling Ty’s case will most likely try to sue Ms. Underall for the money. Since Ty’s asset transfer wasn’t an attempt to hide anything, his bankruptcy will probably go through as planned. But now his girlfriend is involved, and that doesn’t bode well for Ty’s post-bankruptcy dinner plans.
• Al Gore, on the cusp of bankruptcy and in a last-ditch effort to remain relevant, decides to switch political parties and attend an expensive fundraising dinner for the Green Party candidate in the 2012 election. He pays $50,000 to attend. Once he officially files for bankruptcy, the court immediately rules that the party candidate’s election committee needs to relinquish Mr. Gore’s donation to the trustee because it was ruled that the dinner was not equal to $50,000 cash that could be used to pay creditors.

As you can see by the example above, even donations are subject to becoming constructively fraudulent transfers in the eyes of the court. Large donations to churches, schools and other non-profits can all be retrieved by the trustee if they result in the reduction of an asset’s value or are considered an attempt to quickly move money and thus, diminish the trustee’s ability to obtain proper restitution for your debts. There has been some action against this practice, however. In 1998, a contingent of religious organizations successfully lobbied for the Religious Liberty and Charitable Donation Protection Act, which was formulated to protect good-faith monetary gifts of up to 15 percent of a person’s gross income based on the year before filing bankruptcy.

If you’re considering filing for bankruptcy, it’s important to talk to a bankruptcy attorney early to avoid an innocent mistake like the ones described in this post. In North Carolina, call the Law Offices of John T. Orcutt for a free initial consultation. 1-800-899-1414.

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Published Wednesday, July 22, 2009 @ 8:08 am

Liens―a kind of property interest that secures payment on a loan, or the performance of some obligation―are a thorny little issue in bankruptcy cases. Unlike many kind of debts, liens generally (with only a few exceptions) will not be discharged automatically in a bankruptcy the way unsecured debt is. Liens come in many flavors―how about tax liens, mortgage liens, and mechanic’s liens, to name a few― but they generally fall into one of two categories: consensual liens and nonconsensual liens. Consensual liens are themselves split into two categories; one category of consensual liens is generally referred to as a “purchase-money interest,” while the other is known as a “nonpurchase-money security interest.”
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1) Consensual Liens
purchase-money security interests, nonpurchase-money security interest

2) Nonconsensual Liens
Judgment liens, statutory liens, tax liens.

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Ok, there you have it, your daily dose of jargon. Now what does it all mean?!