Three Easy Ways To Pay Your Hawaii Bankruptcy Attorney

Feeling overwhelmed by debt? Struggling to keep up with your bills every month? If you’ve been thinking about hiring a lawyer for bankruptcy because you simply can’t continue to fall deeper into debt, you aren’t alone. You may be thinking, “If I can’t pay my bills, how will I ever pay for a Hawaii bankruptcy lawyer?” Fortunately, when you hire a bankruptcy attorney in Hawaii, there are three common ways to pay for his or her services that will get you out of debt without having to dig yourself into an even deeper financial hole.

A Payment Plan From Your Honolulu Bankruptcy Lawyer

While a lawyer for bankruptcy may not advertise that he accepts a long-term payment plan, you should always ask. Most of the time, a bankruptcy attorney in Hawaii will be happy to accept installment payments over several months’ time. He can prepare the paperwork, organize your debts and file everything with the court when he accepts your final payment. Keep in mind that in many cases you won’t be paying on most of your other bills during this time, so you won’t have to pay any more money out each month than you currently do. In some cases, you’ll actually be paying less. Working with an established bankruptcy attorney in Hawaii rather than a newer firm can put your mind at ease about where your money is going. It’s unlikely that an established Honolulu bankruptcy lawyer will pocket your money without doing the appropriate work for you.

A Family or Friend Loan

It’s difficult to borrow from a friend or family member, but it can be a great option if you are willing to talk to them about your financial situation and your need for help from a Honolulu bankruptcy lawyer. Explain that by filing bankruptcy now, you will be able to discharge your mounting debts and will have funds to repay them moving forward. Be straightforward about the amount you need for the loan and put it in writing so that you both feel secure with the transaction. Borrowing against a credit card or taking out a bank loan aren’t generally options when you’re hiring a lawyer for bankruptcy, since you aren’t supposed to be accumulating more debt while you’re proceeding with a bankruptcy.

Your Tax Refund

If you can wait until the appropriate time of year, you may be able to use the lump sum tax refund you get from the IRS to pay for a bankruptcy attorney in Hawaii. If you find yourself anticipating your tax refund every year because you need that money to pay past due bills, paying for a Honolulu bankruptcy lawyer may be a better option. Once you’ve paid your lawyer for bankruptcy, you can look forward to investing your next tax refund instead of using it to scrape by for another year.

Why You Need A Bankruptcy Attorney In Hawaii

Many people are hesitant to pay a Honolulu bankruptcy lawyer because they just aren’t sure if a lawyer for bankruptcy is worth the price when they’re already behind on their debts. But the right lawyer for bankruptcy is an excellent investment because it’s a one-time-only expense that will wipe out much larger debts and give you a fresh start. The laws of bankruptcy are constantly in flux, with changes and amendments every year that are confusing and difficult to understand. If you file incorrectly, you may end up even deeper in debt. Make sure you consult with a Honolulu bankruptcy lawyer who can advise you on which form of bankruptcy is best for you and who can file all the appropriate paperwork. A bankruptcy attorney in Hawaii can also explain how the process works, which kind of bankruptcy is appropriate for your situation and what personal items, property and cars you can keep even after you’ve filed. Consulting with a bankruptcy attorney in Hawaii should be your first step toward financial well-being.

Call Debt Free Hawaii today and get your Hawaii Bankruptcy case started today! (808) 528-4274

Bankruptcy In Hawaii Can Be Complicated, Finding An Experienced Hawaii Bankruptcy Lawyer Can Help

Bankruptcy Hawaii CoupleMore people than ever are struggling with debt in today’s economy. If your bills are piling up and you feel like you’re paddling furiously with no end in sight, it may be time to consider filing for bankruptcy in Hawaii. A Hawaii bankruptcy attorney can help you file the appropriate paperwork in order to get out from under your debts, but not every attorney has the experience and specialization needed to give you help with debt. In Hawaii, you need to do your homework in order to find the right bankruptcy lawyer for your situation.

Take The Time To Interview At Least Three Lawyers

Randomly choosing a Honolulu bankruptcy lawyer out of the phone book or off an Internet directory isn’t a good idea. Keep in mind that this person will be working closely with you and handling your financial situation; you need to have a rapport with your attorney and confidence with him or her. Ask for an interview with at least three attorneys and take the time to ask them some crucial questions. In most cases, a Honolulu bankruptcy lawyer will offer you a free, initial consultation so that you can discuss your case and how he will handle it.

Questions To Ask A Honolulu Bankruptcy Lawyer

Having a few questions prepared is great way to start the interview process so that you can easily compare the responses you get from each attorney. A few important questions to ask about bankruptcy in Hawaii include:

  • How long have you been a Honolulu bankruptcy lawyer?
  • How long have you been an attorney in general?
  • How many personal bankruptcies have you handled?
  • How often will we need to meet to discuss my situation?
  • How will you stay in touch with me? (Will he email you updates, call you, or have an assistant keep in contact with you?)
  • How often are you unavailable/out of the office?

During the initial consultation you should also ask them what kind of help with debt in Hawaii they offer. In general, personal bankruptcy in Hawaii falls into two categories – either Chapter 13 or Chapter 7. Be sure you know what kind your Honolulu bankruptcy lawyer recommends. In some cases, help with debt in Hawaii can also fall into the category of consolidation rather than bankruptcy. Ask every Honolulu bankruptcy lawyer you interview which plan is best for your situation.

Additional Considerations

Being comfortable with your Honolulu bankruptcy lawyer is crucial. The emotional toll of getting help with debt in Hawaii can be considerable. Your attorney will know every detail of your finances, including how you’ve spent every dime. If you have the wrong attorney handling your bankruptcy in Hawaii, you could end up feeling defensive or insulted. Being at ease with your attorney can make a painful process less upsetting. Your initial reaction is usually a good indication of how your relationship with an attorney will proceed, so pay attention to your intuition. If an attorney rushes through your consultation or is condescending, move on to Honolulu bankruptcy lawyer who will treat you with dignity and respect.

Filing for bankruptcy in Hawaii doesn’t have to be a miserable experience. Instead of spending years trying to get ahead of your debts, consider getting help with debt in Hawaii from an experienced, Honolulu bankruptcy lawyer. Debt Free Hawaii can give you help with debt in Hawaii that will soon have you feeling good about your decision as you move forward to a more stable financial future.

For help or advice on your Hawaii Bankruptcy needs, call Debt Free Hawaii today! (808) 528-4274 | Time could be critical in your case!

Hawaii Bankruptcy: How to file a Bankruptcy in Hawaii

how-to-file-for-hawaii-bankruptcyAs you may have read during your research of Hawaii bankruptcy, there are two types of consumer bankruptcy in Hawaii, Chapter 7 and Chapter 13, and three factors that are used to determine which type is appropriate for you: income, assets, and debts.

A Chapter 7 Hawaii bankruptcy is sometimes referred to as “straight” bankruptcy, because it cancels or discharges the majority of your debts. From the moment the bankruptcy is filed, all creditors must cease all collection attempts. Until your bankruptcy case ends, your financial problems are in the hands of the Hawaii bankruptcy court. It assumes control of the property you own (excluding your exempt property, which is yours to keep) and the debts you owe as of the date you file. The entire process lasts about three to four months, and generally only requires one trip to the courthouse for a meeting. A Hawaii bankruptcy lawyer can guide you through the process.

The other form of consumer bankruptcy is called a Chapter 13, and is commonly referred to as “restructure of debt,” because it lets you discharge most of the debts by paying all or a portion of them over a three to five-year period. As in a Chapter 7 bankruptcy, the act of filing immediately stops your creditors from taking further action against you. Usually you make payments directly to the court appointed trustee who, in turn, distributes money to your creditors.

In order for a person to correctly file a bankruptcy in Hawaii, the Hawaii bankruptcy court requires many official forms. These forms can be found at the US Bankruptcy Court website and are listed below.

1. Credit Counseling Course Certificate
2. Form B201A
3. B1 Petition
4. B1 Exhibit C
5. B1 Exhibit D
6. B7 Statement of Financial Affairs
7. B8 Statement of Intention (only if filing a chapter 7)
8. B21 Statement of SSN
9. Matrix
10. Verification of Creditor Matrix
11. B6 Summary of Schedules, Statistical Summary, Schedules A-J, Declaration
12. B22A Statement of Current Monthly Income and Means Test Calculation
13. Chapter 13 Plan (only if filing a chapter 13)

Forms 1-10 are fairly simple, therefore, just remember to read each question thoroughly before answering. Forms 11-13 can be very complex, and requires special attention.

Form 11-“B6 Summary of Schedules, Statistical Summary, Schedules A-J, Declaration,” is especially tricky regarding the correct application of exemptions. You will need to determine whether Hawaii or Federal exemptions will best protect your assets. There are approximately 25 categories regardless of whether you opt to use State or Federal exemptions.

Next, Form 12-“B22A Statement of Current Monthly Income and Means Test Calculation,” can also be difficult. Part of the issue is that people fail to calculate their wages appropriately, and do not know the local standards for rent, food, etc. Additionally, all types of income must be used in the Means Test, i.e. family contributions, rental income, gross wages (for full-time and part-time employment), alimony, child support, interest income, etc. You must include bonuses and/or overtime in your income, even if you do not consider it regular pay. Finally, make sure to read each section and be certain you understand what is being asked of you before filling in the blanks.

Finally, Form 13 – “Chapter 13 Plan” is unique if you attempting to file a Chapter 13 case. There are approximately four reasons why a debtor may want or need to file a Chapter 13 rather than a Chapter 7 bankruptcy; (1) to pay arrearages on a mortgage to prevent a foreclosure (2) your household income is above Hawaii’s median income, (3) you have disposable income (income that is higher than your reasonable expenses) to pay creditors, (4) you wish to value a collateral item at fair market value (strip a second mortgage or value a car at a specified amount less than what is currently owed). If one or more of these circumstances pertain to you, then a Chapter 13 bankruptcy might be your best option. Be careful, even with extensive research, even the most educated people usually do not succeed in properly preparing a Chapter 13 Plan that satisfies the court’s requirements. A Hawaii bankruptcy attorney can help you file all the necessary paperwork correctly.

20 sneaky credit card tricks

By Amy c. Fleitas * Bankrate.com

Credit card companies can be as slippery as a handful of greased Jell-O. They have all kinds of tricks to gouge your wallet and drive up your bill. While arguably unfair, all these tricks are legal, leaving you no alternative but to stay as informed as possible to protect yourself.
Read your statement, report any irregularities immediately and watch for these 20 sneaky credit card company tricks. Start saving on fees now.

1.The old bait and switch

So you’ve got this ingenious plan, You’re going to apply for a great credit card that gives you tons of frequent-flier miles, put all your shopping on it, and then head to the Bahamas in February. Stop — the miles you earn, if any, might get you no farther than Hope, Ark. When and if you get that card, study the terms carefully. If you don’t qualify for the great card, the credit card company can send you a completely different card with different terms. If it’s not what you want don’t activate the card. Call the company and cancel the account.

2. Musical address

Want to play hide-and-seek with your credit card company? No? Too bad, Tag, you’re it. Here’s your late fee.
Credit card companies sometimes change their payment P.O. Box. If you send your payment to the wrong one, it may meander around the postal system or your credit card’s headquarters for a while before finding its way to the payments department. That means you’re responsible for the late fee and your interest rate could be raised. It will be raised if you have one of those super-doper low rates guaranteed. To avoid falling for this trick use the envelope provided in your statement. If you use a different envelope or use online banking, check the mailing address on your statement each month or call the company to verify the address. Always pay early to avoid last-minute mix-ups.

3. Late fees in minutes

If you’re five minutes late it could cost you $33. You see, even though your due date may be the 15th of the month, upon further inspection of your statement, you might see it’s actually due by 1 p.m. So if Harvey the letter carrier took a few minutes of shut-eye at the cul-de-sac, it will cost you a late fee and a possible rate increase. Check your statement to see what time and date your payment is due and send it in early.

4. Over-the-limit fees

This fee is a no-brainer — don’t go over. But what you don’t know are the little tricks credit card companies use to push you over the limit. One Bankrate reader wrote us to describe how his brand new credit card pushed him over the limit.
He applied for a card with a high-credit limit and requested a balance transfer to pay off another card. He received his new credit card and was hit with an over-the-limit-fee the first time he used it. Apparently, the credit card company gave him a card with a much lower limit and transferred as much of his balance as the card could hold. So when he got his card, unbeknownst to him it was already maxed out.

5. Cash advance fees and rates

Don’t take cash out of your credit card. Read the fine print on your statement and you’ll see it’s a very bad idea. Your card might have a really low rate for purchases but if you take out a cash advance, get ready for a shock. The rate for cash advances is much higher. And there is no grace period –you start paying interest right away. Aside from paying a high rate on the cash you take out, you’re going to pay a fee, usually 2 percent to 4 percent of the amount advanced. And your payments will be applied to the lower-interest balance before they are applied to your cash advance.

6. Reverse the late payment, but up the rate

Credit card companies may forgive a late payment, but they could still punish you by raising your rate. Let’s say you fell for the ever-changing-mailing-address trick. You call and scream until they reverse the late-payment fee. But next month, when your bill arrives, you notice you’re now being charged a much higher interest rate because you were late on a payment. A Bankrate reader told us this happened to him.

7. Increasing the rate based on other accounts

Your credit card company may use your late auto loan payment to justify a rate increase. They frequently check your credit report and look for any late payments to justify raising your rate.

8. Fixed rates aren’t fixed

A fixed rate means the credit card company has to give you 15 days notice before raising your rate. You can call and ask them to lower it, but they don’t have to do it. Here’s how to ask for a lower rate.

9. Raising your rate for no reason

They don’t need a reason. They can just do it–it’s in the agreement. If they won’t give you a lower rate, get a new card and cancel the old one.

10. “Free gifts’ that cost a bundle

Did you really think they’d give you something for nothing? Throw away those offers that come in your credit card statement.

11. Selling credit card theft insurance

You don’t need theft insurance for your credit card. If it’s stolen, you are only liable for $50, at most.

12. Selling disability coverage

Credit card disability insurance will make debt worse, if it ever kicks in One Bankrate reader wrote in to say she developed cancer and her credit card company kept finding reasons not to activate her disability insurance even though she paid for it every month. But credit card disability insurance is a really bad idea anyway. Even though you don’t have to make payments, the debt piles up all along. And you can’t use the card during that time either.

13. Setting low minimum payments

It’ll take forever to payoff your balance if you only pay the minimum. Most credit card companies set the minimum payment at 2 percent of the debt. At that rate, you could be paying for life. To see how long it will take you to pay off your credit card, use our True cost of paying the minimum calculator.

14. Cards that cost more in fees than they give in credit

If you’ve got shaky credit, you could fall prey to a really bad credit card deal, like the card with $360 in fees that leaves you with a $19 credit limit.

15. Balance-transfer fees and disappearing low rates

If you’re not careful, you’ll get socked with unexpected fees and soaring rates when you transfer your balance. Before transferring a balance, ask if there is a fee. Also, ask how long the low rate lasts. Those low rates on credit card offers are usually only good for six months. If you are late on one payment, the low rate is immediately replaced with a much higher rate. Another note of caution: When you transfer a balance from one card to another, wait to see the balance appear on the new card before closing the old one.
Don’t be fooled.

16. Zero-percent offers — with a big catch

Those zero-percent offers sound like a good idea until you miss a payment or the introductory period ends. After that, you can end up with a sky-high rate.

17. Charges for charging abroad

In addition to the 1 percent currency exchange fee on Visa and MasterCard, some major banks are charging a 2 percent fee on credit card and debit card purchases made outside the United States. After a vacation’s worth of spending, those fees will add up.

18. Shrinking grace periods

The grace period is the time between when you make a charge or, your credit card and when that amount starts building interest. Many credit card companies are shrinking that time down to 20 days, meaning that by the time you get your bill, you may already be paying interest.

19. Pre-paid gift credit cards worth less than you pay

The fees on these cards can make them worth less than they cost. And they can expire rapidly making them, worthless. You’d be better off giving cash.

20. Is anyone there?

If you want to talk to customer service, you better have a lot of time to kill. Credit card companies don’t want to save you money at their expense. So they will transfer you and put you on hold until you are blue in the face. The name of the game is Frustrate the Customer Until They Give Up and Go Away. This trick isn’t limited to the credit card industry, either. When I wanted to lower my bill, a certain cell phone company spent an hour and a half putting me on hold, transferring and “accidentally’ hanging upon me. Persistence pays off–but it’s exhausting.

41 credit advisors

By Monica Hatcher
KNIGHT RIDDER TRIBUNE NEWS

Six months after the federal government began requiring consumers to get credit counseling before filing for bankruptcy, IRS audits revealed that the $1 billion nonprofit credit counseling industry is riddled with companies profiteering on those who can least afford it.

In a sweeping program to weed out organizations flouting laws governing nonprofits, the IRS on Monday said it has stripped or was in the process of stripping the tax-exempt status of 41 companies that claimed to provide educational and counseling services to consumers, but instead were in the business selling prepackaged debt management plans.

The IRS did not release the names of the companies.

Nonetheless, IRS Commissioner Mark Everson harshly rebuked the audited firms, which represent 40 percent of the industry’s revenues, calling the growing sector “the poster child of bad conduct” that has “poisoned the entire sector of the charitable community.”
Millions of Americans look to the agencies for credit counseling, debt management assistance and other financial advice.

Under the Bankruptcy Reform Act of 2005, which went into effect Oct. 15, consumers are required to seek financial counseling before filing for Chapter 7 bankruptcy.

The National Association of Consumer Bankruptcy Attorneys, which opposes the credit-counseling requirement because of the additional financial burden it places on those already distressed, said the report was cause for concern.

“We have to send our clients to these credit counseling agencies, and the IRS is pointing out that many of them have questionable business practices,” said Bradford Botes, executive director of the association.

Service fees charged
Typically, credit counseling agencies charge consumers a service fee averaging between $35 and $50, although some can receive advice for free, depending on need. If consumers enroll in a debt management plan, they also pay the agency a small percentage of their total debt to make payments to their creditors at reduced interest rates or balances negotiated by the agencies. Some agencies also collect a percentage of the recovered debt from the credit card companies.

Not everyone is taking advantage of the law.
Nick Jacobs, a spokesman for the National Foundation for Credit Counseling, defended the many agencies he said were legitimately trying to help people fix their lives, but said the IRS was right in its assessment of the industry’s problems.

Preying on consumers
“There are people out there who are preying on consumers and taking advantage. They’re casting the entire industry in a very black light, so any efforts towards weeding out those bad actors is very welcome from our point of view,” Jacobs said.
Companies that have not been audited are not out of the woods. Everson said the IRS will be sending compliance inquiries to each of the other 740 known tax-exempt credit counseling firms. The agency is also issuing expanded guidelines detailing the legal standards of exemption.

Everson recommended consumers pick one of the 150 consumer counseling organizations approved by groups like the Better Business Bureau. But bad actors may exist among them, too, he cautioned.

When a Stranger Calls

The New York Times
July 9, 2006 – Editorial

As consumer debt in America balloons to previously unimaginable levels, currently $2.2 trillion and growing, the dark underside of abusive debt collection is growing along with it. Legislators and regulators should take further steps to curb the lies, harassment and intimidation coming from out-of-control collectors. At the same time, they should also look at irresponsible lending: giving additional credit cards and high-interest loans to those already deep in the red.
Sewell Chan reported in The Times last week that the number of complaints lodged against third-party debt collectors has soared, rising faster than those for any other industry. From 1999 to 2005 the number of complaints received by the Federal Trade Commission increased by a factor of six. Complaints to New York City officials have more than doubled just since 2003. With last years draconian new bankruptcy law pushing the last resort for the financially desperate farther out of reach, those numbers are only going to rise without stepped-up enforcement.

Third-party collectors are not the original lenders — the banks or credit-card companies that set the original terms with consumers. The collection agencies buy up debt for a fraction of its value and then try their hands at shaking loose payments. Most are law-abiding, and perform a legitimate service. Debts should be settled and someone has to track down deadbeats and absconders who make borrowing more expensive for the rest of us who pay our bills on time. But a growing number of financial bounty hunters can he extremely aggressive, not to mention indiscriminate.

According to the commission, some collectors call at all hours of the night, use obscene language, falsely threaten imprisonment or the seizure of property, and even humiliate their victims by contacting family members and employers. They sometimes seek a larger amount than the borrower actually owes — if indeed it was owed in the first place. Debt collectors have gone after people who have already paid their debts and even those who never had them to begin with. Sometimes that is a result of mistaken identity, but it is also increasingly due to identity theft.

Consumers should know that they are not powerless and that they do have rights. Collectors may not call late at night without permission. In most states family members or workplaces may be called only once, and then only to locate the borrower. It is up to the collection agency to furnish written proof that the debt is valid and it cannot bother a borrower in the meantime.
If harassment continues, consumers can call 1-877-FTC-HELP (1-877-382-4357) toll-free. Last year the commission won a judgment of $10.2 million against a company for use of illegal collection tactics. Once in a while the bullies are bullied back.

MBNA Turns Up the Heat

Credit Card Giant Raises Rates, Plays Hardball with Clients
By Martin H. Bosworth
ConsumerAffairs.Com
April 26, 2005 MBNA’s
(http://www.consumeraffairs.com/../../credit_cards/mbna_america.htm)

Surging profits may make it popular with investors but its propensity for self-surging interest rates isn’t going over so well with its cardholders.
Consumers writing to ConsumerAffairs.Com complain that their MBNA interest rates
(htttp://www.consumeraffairs.com/../../credit_cards/mbna_rate_hikes.html) have jumped from a reasonable 5.99% fixed rate to a 15.99% variable rate, from 18.99% to 26.99% and even from 7.99% to 26.99%. That unlucky customer, Kevin M. from Hamden, CT, was outraged.
“Its just plain robbery. I went from being able to comfortably pay my bills to an overnight crisis situation,’ he said.

MBNA claims to offer written advance notice any time an interest rate changes for any reason, yet consumers repeatedly claim they received no notice about their rate changes. It’s only upon opening their monthly statement that they learn of the increase.

In July 2004, Jason M. of Ridgecrest California opened his MBNA bill to find his rate had increased from 7.9% to 17.98%, ‘claiming that the increase was the result of information gained from my credit report and was unrelated to my payment history with their company.’
When Jason contacted MBNA’s customer service department, he was told that written notification had been sent out to consumers, advising them of the potential rate increase.
‘I was told that the notification was mailed with my July statement. As luck would have it, my July statement was still unopened in the kitchen as I recently moved and paid my bill online. When I opened the statement there was no notification in it,” he said.
Asked to comment, MBNA representatives did not return calls and e-mails.
Dale B. of Minneapolis, Minnesota received MBNA’s Gold Option account, a personal installment loan with a fixed rate of five years, and a fixed payment amount. Although MBNA’s Gold Option website states that ‘Your APR is not guaranteed for any period of time and may be changed by MBNA,” Dale was nonetheless surprised to find his loan rate had jumped from 18.99% to 27.98% after applying for an auto loan.
“MBNA now sees me as a risk and has drastically increased my APR and extended the term of the loan,” he stated. “I have never been late with a payment, and have not defaulted in any way with this or any other credit account that I have … MBNA claims I received a mailing telling me about the rate increase, and that it was due to me taking on additional credit. I do not recall such a mailing”

The MBNA representative offered Dale the chance to pay the loan off in full and close the account, which he was unable to do, leaving him saddled with a 72-month installment loan at a much higher rate.

Customer Service
MBNA is generally considered the leading credit card issuer. Most other companies follow its lead. But MBNA’s reputation for customer service appears to be in steep decline, judging by the complaints received by ConsumerAffairs.Com.

Dutch B., from Marana, Arizona, missed a payment on his MBNA card when he moved circa October 2004. He was shocked to find that his interest rate had jumped to 25 percent and that he owed MBNA another $112. He tried to dispute this charge but to no avail.
“In the meantime, they are phoning me all hours of the day and night, not showing up on the caller ID, then [when I call], I’m asked to wait for the next operator. The operators are very nasty, threatening, overbearing and extremely rude,” he said.
Other consumers have complained of continual calls at their workplace, MBNA representatives asking co-workers for customers’ cell phone numbers, and of offering deliberately false terms of rates and loans.

Jeff Stroman, of Norridgewock, Maine, a former MBNA call center employee, describes an atmosphere of constant pressure to push cards and “encouraging representatives to ‘bend’ the rules in order to make a sale.
“You are competing against your peers, constantly trying to outsell them. If your stats fall below a certain measure — and they will when representatives don’t (bend the truth to make a sale) –you will be placed on probation and lose your incentive for a time no matter what your performance,” he said. “If you don’t improve your statistics, you will be let go.”
‘When the management ‘team’ at MBNA in Farmington was comfortable around you they joked about targeting the elderly and young adults,’ Stroman said in an interview.
Stroman noted the willingness of other employees to be less than truthful about interest rates in order to clear a sale and earn their incentive pay.

“It is amazing to me that I lasted there for nearly two years. I can only wonder how many hundreds of customers opened a credit card from MBNA believing the rate was 9.99%, because that’s what they were told, but in reality were stuck with 19.99% or higher.”

Universal Default
Even in a sluggish economy and amid reports of losses by other credit and financial companies, MBNA continues to turn a healthy profit. The company reported a gain of $432.5 million, or 33 cents per share, as its first quarter earnings this year. This was an increase from $369.9 million, or 28 cents per share, for the same period last year.

One analyst credited this to MBNA attracting “a higher class of consumer than the rest of the market,” and company spokespeople said that the average MBNA customer earned over $70,000 a year. MBNA has also backed away from offering zero-percent interest loans in order to attract consumers, whereas competitors such as Capital One and Citigroup have faced rising loan defaults.

Further improving profits, MBNA was also one of the first creditors to adopt the “universal default” policy, raising the interest rates on a consumer’s debt if they are late with any kind of payment on any bill, regardless of whether they pay their credit card balance on time every month.

In Jeff Stroman’s words, “MBNA is so big now, and in their minds they are such ‘fearless innovators,’ that they are willing to be the first to use such a dragnet as ‘universal default,’ while Citigroup and Capital One will wait and watch to make sure they get the green light in Washington.”

MBNA’s continued success has earned it unrivaled clout in the political arena. As has been widely reported, it was one of the biggest financial backers of President George W. Bush’s 2004 campaign, and a leading supporter of the recent tightening of bankruptcy laws.

ConsumerAffairs.Com’s special report (http://www.consurmeraffairs.corm/bankruptcy_act01.html) on the bankruptcy legislation details how high credit card debt and inability to pay back the rapidly ballooning interest and fees often leads consumers to bankruptcy. These are the circumstances facing many credit card users, even those who have never missed a payment or used their card irresponsibly, or– as in the case of Teresa W. from Madison, Tennessee –never used at all.
Teresa’s husband had suffered many hospitalizations, was forced to declare bankruptcy, and died, leaving her with a $12,000 debt on an MBNA card she didn’t know he had. Evidently not MBNA’s preferred class of customer, she was forced to deal with abusive collection agents constantly, and had her formerly low interest rate increased to 27.9% after missing two payments.
“I was a widow, no money, tired, at the point of wishing for my last breath, and now I am sending them the last of my husband’s insurance death benefit of $6,000,” she said in a complaint to ConsumerAffairs.Com

In fact it is very possible that Teresa had no obligation to pay MBNA. If the credit card was in her husband’s name, she had no personal obligation to pay even one dime to MBNA. The proceeds from her husband’s life insurance policy were presumably hers, not his estate’s.
MBNA would have a legitimate claim against her husband’s estate but not against any of Teresa’s personal assets. Teresa should consult an attorney, as she may be able to recover some or all of the funds in court.

Unfortunately, credit card companies and other creditors routinely demand payment from the families of deceased debtors, knowing full well that in many cases the families have no obligation whatsoever to pay any of the deceased’s debts.
“It’s very sad that many have died fighting for freedom in this country, only to find they can never truly be free because the corporations that supply you with food, electricity, water, they can ruin your air if they wish, poison your water, take every penny you have and reduce you to nothing,” Teresa said.

Comments from Bankruptcy Judge A. Jay Cristol (Bankr. S.D. Fla.) regarding the new bankruptcy laws

By Consumer Bankruptcy News

With Congress and the Supreme Court having approved what I would call criminal loan sharking, filings will start growing, and maybe not in a year, but in a couple of years, we might see filings as high or higher that they were before, notwithstanding the new bankruptcy law’s goal. Then take into consideration our present divorce rate, and the fact that there are 45 million people without health insurance. Those factors can’t be controlled within the bankruptcy system, but they have a huge impact on it.

In my 22 years on the bench, at least 98 percent of the debtors who have appeared before me are decent, honest hardworking people who suffered a tragedy. The claims that were made by the proponents of the new legislation that every bankrupt was a fraud and every lawyer representing them was crooked, is a bunch of nonsense and hype that was used to pass this bill.

Debtors’ Hell – Part I – The Boston Globe

No mercy for consumers
Firms’ tactics are one mark of system that penalizes those who owe
By The Boston Globe Spotlight Team – July 28, 2006

This stay was reported by Spotlight team members Michael Rezendes, Beth Healy, Francie Latour, Heather Allen, and editor Walter V. Robinson. It was written by Rezendes and Latour
It was just before 6 a.m. on a Saturday in the fall of 2002, when Marie-Colette Dimanche woke to a loud rapping at the door of her Mattapan duplex. With her night robe on and her two daughters still sleeping, she rushed down the stairs and peered out the window.
Outside, a tow truck blocked her driveway and her 1996 Chevy Blazer. A man and a woman with a court order told the single mother they had come to take her car for nonpayment of an old credit card debt. With interest and legal fees, the bill totaled more than $2,000, and it came from a company called Commonwealth Receivables. They gave her a choice: Pay the money now, in cash, or hand over the keys.

Dimanche had never heard of Commonwealth and believed the debt had been paid by a social services agency. “I just said, ‘You guys must be insane,” she recalled.
She had reason to be stunned: The debt was at least five years old. And shed never gotten notice of the lawsuit against her: When Commonwealth, a local debt collector, went after Dimanche, the address it supplied the court was one where she hadn’t lived for more than a decade. But Dimanche didn’t have the paperwork to prove the debt had been paid off, and she didn’t have $2,000. ‘What could I do?” she said. “I gave them the key.”

Dimanche is one of thousands of Massachusetts residents who have had their cars seized and lives upended by a pair of debt collection companies, Commonwealth Receivables Inc. of Watertown and Norfolk Financial Corp. of West Roxbury. Run by two brothers, one of whom was disbarred this year for his business practices, Norfolk and Commonwealth have become two of the state’s most litigious and aggressive collectors, a Globe Spotlight Team investigation of the debt industry has found.

In America’s debt-saturated culture, Chad E. and Daniel W. Goldstone are among the clear winners. They are perhaps the most active local players in a nationwide debt collection industry that has exploded in size and profits, inundating court systems in Massachusetts and across the country with collection lawsuits seeking tens of billions of dollars in debts that are often purchased for collection by the Goldstones and hundreds of other firms for just pennies on the dollar.

The success of such firms is a measure of how dramatically the world of consumer debt in America has changed. It isn’t just that consumers lean too heavily on credit cards to get by. It is that, almost unnoticed by policy-makers, many millions of Americans have slid, or been pushed, into a debtors hell where bank accounts are drained, wages are attached, property confiscated, and threats of jail are an everyday occurrence.

A fate once reserved for the worst deadbeats has become commonplace. The losers are the friends, neighbors, or relatives of just about everyone – people who generally owe the money collectors are after but don’t deserve what comes next. People such as Ana R. Rios, a 40-year-old Maynard woman whose car was hooked near midnight even though her debts had been erased through bankruptcy. Or Thomas S. Jessamey, a 45-year-old Saugus man who spent six months struggling to get his car back after it was seized for an old credit card bill.
An estimated one of every 11 consumers has at least one credit card that is more than 90 days past due, according to nationwide data provided to the Globe by the credit-reporting agency Experian. Many are already being pursued by debt collectors, or someday will be. And it is a vast army coming after them: In the last decade, the ranks of debt collectors have doubled to 162,000, making debt collection among the fastest-growing sectors of the financial services industry.

In Massachusetts, a Spotlight review of records in all 70 district courts, and interviews with court officials and collection attorneys, found that professional collectors filed an estimated 575,000 lawsuits between 2000 and 2005 – about one lawsuit for every 11 Bay State residents. The vast bulk of those were filed as small-claims actions in the district courts, where debt collectors always have lawyers and the debtors almost never do.
At nearly every stage, the Globe found, the debt collection system in the state is stacked against the average consumer:

  • Many small-claims courts have effectively become accomplices of collection firms, routinely giving them the upper hand in court cases while casually disregarding the rights and dignity of ordinary citizens.
  • Collectors almost always win the lawsuits they file, without being asked for evidence that the debts they are chasing are actually owed.
  • Like Dimanche, debtors frequently receive no notice of the lawsuits against them because debt collectors provide courts with outdated addresses for the people they are suing.
  • The disabled, the elderly, and the working poor are often talked into repaying their debts from their monthly government checks, which by law are protected from legal judgments.
  • And an obscure posse of law enforcement agents – constables and deputy sheriffs – operate freely as the blunt instrument of collection firms, with neither their steep fees nor their sometimes heavy-handed tactics regulated.

It is, in short, a system made safe – and very profitable – for Massachusetts collectors like such as Commonwealth and Norfolk, and for others like them across the country.
“The creditors are all repeat players. They know exactly how the game works said Elizabeth Warren, a Harvard Law School professor who studies consumer debt. “ Were watching a fight between two players, one a skilled repeat gladiator, and one who’s thrown into the ring for the first time and gets clubbed over the head before they even get a sense of what the rules are.
Commonwealth and Norfolk have built a reputation for operating at the hard edge of this increasingly aggressive and methodical trade.

It is a business with many reputable players; firms that collect money zealously but rarely cross the line of fairness. And then there are those that seem to live by another set of rules.
Commonwealth, owned by 41-year-old Chad Goldstone, and Norfolk, owned by his brother Daniel, who is 44, are among the most active users of the state’s small-claims courts, where lawsuits are limited to $2,000 or less. Together, the two firms have filed about 12,000 lawsuits in each of the last four years in all but two of the state’s 70 local courts, according to records examined by the Globe. That is more than 10 percent of the state’s small claims caseload.
And as for car seizures, a tactic many collectors consider harsh and unseemly, the Goldstones have made it an everyday practice.

“The way he handles cases offends us,” said Richard S. Daniels Jr., the owner of a large Boston collection law firm, speaking of Daniel Goldstone. “His practice is abusive.”
Seizing cars to collect old debts is lawful in Massachusetts. But time and again, those working on the Goldstones’ behalf have turned it into an excruciating ordeal for consumers, making dark-of-the-night collection visits, and holding cars hostage until debtors can scrounge up the cash to pay down a past-due amount.

Almost always, debtors who have their cars towed wind up paying far more than their original debt. Part of that is interest, of course. But it is also the result of hefty fees charged by the people who work on the Goldstones’ behalf, the kind of people Dimanche found knocking at her door just after dawn – locally appointed constables, deputy sheriffs, and tow lot operators.
And in cases where debtors are unable or unwilling to pay the debt, plus the high seizure, towing and storage fees, their cars are often auctioned for a fraction of their market value. Or they are junked, leaving the debtors without transportation and still liable for most, or all, of the debt.

The sight of a tow truck at the door is unsettling enough. But for some debtors chased by Norfolk and Commonwealth, it is literally the first they have heard that they are being sued. In several lawsuits examined by Globe reporters, Dimanche’s among them, the two companies provided incorrect addresses to the courts, with the result that judgments were issued without the knowledge of the debtors. But finding the right address is seldom a problem for the constables and sheriffs Norfolk and Commonwealth hire to seize debtors’ cars.
As Dimanche said in a hand-written plea to the court days after her car was taken: “I, Marie Dimanche, was never notified of any court hearing, and a judgment was passed without my presence to defend myself.”

But no court motion could fully describe what Dimanche had lost, The day she handed over her keys – her only means to get to work and her children to school – was the last day she would ever see her car.

Leaders in car seizures
How many others sued by the Goldstones have had their cars seized? The courts, which authorize the actions, don’t keep records that would allow such a tally.
But other official documents strongly suggest that the two firms have been seizing thousands of cars a year. For example, in affidavits filed in a lawsuit involving Norfolk Financial, Chad Goldstone and an employee of Daniel Goldstone estimated that, four years ago, a single constable company was hooking about 1,200 cars a year for the two brothers. In a two-year period, 2004-2005, deputy sheriffs in four counties – Plymouth, Norfolk, Bristol, and Worcester – seized 1,073 cars just for Norfolk Financial, a Globe review found.

That volume makes the two firms the dominant players in car seizures statewide.
Both brothers and their lawyer, John J. O’Connor of the Boston law firm of Peabody & Arnold, defend the propriety of their business practices. ‘We work hard to handle all mailers with courtesy and fairness, and in compliance with all legal requirements,” they said in a written statement.

Only Chad Goldstone spoke to the Globe at any length; Daniel Goldstone agreed to a sit-down interview, but then cancelled it, The Goldstones cited state privacy laws and federal statutes that protect debtors as justification for declining to answer most questions about their businesses, or to discuss lawsuits they have filed.

The Goldstone brothers run separate companies, but that wasn’t always the case. In 1992, Daniel Goldstone purchased a defunct collection law firm, renaming it Goldstone & Sudalter, and for several years Chad worked for Daniel, proving especially adept at managing computer systems that have made debt collection a highly efficient business. But in 1997 Chad Goldstone left the business to form Commonwealth Receivables. By then, Goldstone & Sudalter had been sued for bilking its largest client, Sears, Roebuck and Co. out of more than $800,000 – a case that would eventually lead to Daniel Goldstone’s disbarment. Daniel Goldstone established Norfolk Financial in 1999.

Even though they parted ways, the brothers remain alike in many respects as businessmen. Both buy delinquent credit card debt. Both employ similar collection tactics. Both work with small staffs from offices so poorly marked and out-of-the-way that they are difficult to find.
And though they are among the top filers of collection lawsuits in Massachusetts, neither company is registered as required by law with the state Division of Banks, which is charged with oversight of debt collection companies. Through their attorney, the Goldstones claim they are exempt because they purchase the debts they try to collect, and do not collect debts for other creditors, But David J. Cotney, chief operating officer for the Massachusetts Division of Banks, said every company in the state that collects defaulted debt, including Norfolk and Commonwealth, must be licensed. “I don’t know what basis they would use to exclude themselves,” he said.

The Goldstones, as debt buyers, are part of a growing trend that has transformed the collection industry. As the number of deeply indebted consumers has climbed, credit card companies and banks have become increasingly likely to sell off their uncollected accounts in bulk. Purchased by large debt-buying companies, the accounts are then repackaged and re-sold to smaller and smaller firms.

By the time local companies such as Commonwealth and Norfolk pick up this kind of “stale” debt, they are buying it on the cheap from firms that have tried and failed to collect. It is their opportunity to make a profit but it also presents a challenge. “How can [they] be successful where those who went before weren’t?” said Nicholas F. Ortiz, a consumer lawyer with a lawsuit pending against Norfolk Financial. “That’s where we come to seizing cars.”
Chad Goldstone said the debts he buys are typically one or two years old, although Commonwealth lawsuits examined by the Globe were often for credit card debt that was four or even five years old. Goldstone said he pays 6 or 7 cents on the dollar for the accounts he buys -$60 or so for a $1,000 debt – and generally collects 18-20 cents on the dollar.
Both brothers file nearly all their lawsuits in small claims because the filing fee is capped at $40 and judgments come with greater speed and ease. Chad Goldstone, with a staff of only six, estimated he sues as many as 7,800 people a year and almost always prevails – largely because more than 80 percent of the people he sues don’t show up in court. “People ignore the letters and the phone calls, and then we get a default judgment. That’s an ostrich mentality,” he said.

Or, he added, it’s a “game of chicken,” in which Commonwealth keeps up the pressure until the holdouts give in, scraping together a negotiated amount, to avoid having their cars taken, or to get a vehicle back.

Daniel Goldstone has filed nearly as many lawsuits as his brother – about 22,000 over the last four years. And he appears to have resorted to car seizures at least as often.
Daniel Goldstone did tell the Globe last year that he takes no pleasure in hooking cars: “I find it distasteful, seizing cars….It is an avenue of last resort,” he said.
That claim would come as a surprise to many of the debtors he has sued.

Driven to the brink
At 48, Joanne M. Johnson has been disabled with severe depression for five years. She gets by, barely, on a $739 disability payment. The one thing the Leominster resident owns of any monetary value is her midsize sedan, a 1996 Plymouth Breeze. It is her only means of transportation to medical appointments and to the thrift shops and food banks she visits when she can’t make ends meet.

In 2001, when Johnson became ill, she lost her job as a supervisor in the packing department of a local manufacturing firm, then defaulted on a credit card with a $500 limit. Norfolk stepped in, bought the debt, and in 2004 filed a lawsuit against her for $1,035- the debt plus three years’ interest.

That’s when the process went awry. When Norfolk sued, it supplied the Leominster District Court with an address where Johnson had never lived. The court put a hold on the suit when the notices came back undelivered. But for reasons court officials would not explain, the suit was then allowed to go forward after another notice was sent to Johnson – at the same wrong address. And when Johnson didn’t show up for her court date, Norfolk automatically won.
Then, with a judgment in hand, Norfolk phoned Johnson and told her to appear in court in early February 2005 to work out a payment schedule, according to Johnson. When she arrived, an attorney was there to answer questions. Johnson said she assumed he was a legal aid lawyer. In fact, he was a lawyer for Norfolk Financial who, Johnson said, never identified himself.
The lawyer asked her to fill out a financial statement and then, before she could figure out what was happening, she found herself before a judge.

“I told the judge that once my car was paid off, I could pay $10 a month,” she said. “All he said was, ‘OK.’ He stamped the paper and said, ‘You’re finished.’ Nobody looked at me and said, ‘We’re going to take your car.”

But that’s what happened. On April 1 2005, less than two months after her court hearing, Worcester County sheriffs deputies, who had no trouble finding Johnson’s correct address, appeared at her home at about 8 a.m. and took her car. To get it back, Johnson would have had to pay a sheriffs fee, towing, and storage charges and interest, in addition to the $1000 court judgment. The tally: $1,380.

With the help of a legal aid lawyer, Johnson filed for bankruptcy. But it was not until three months later, after a bankruptcy court judge threatened to jail the tow lot owner, that her car was returned – damaged, says Johnson.

The trauma of losing her car sent Johnson into a downward emotional spiral. Within a week, she became suicidal, and checked in at the emergency room at the Health Alliance hospital in Leominster. Then she was transferred by ambulance to a psychiatric ward, where she spent two nights under a suicide watch.

While the record is clear that court papers were not sent to Johnson’s correct address, Daniel Goldstone said that his company had met the legal requirements for serving notice. As for the seizure, he said: “Norfolk provided the court’s execution to the office of the county sheriff, who caused Ms. Johnson’s car to be seized.”

Left in humiliation
For Audrey E. Anderson, a 71-year-old retired Wellesley College teacher, dealing with Chad Goldstone’s company, Commonwealth Receivables, turned into an annual nightmare, with Commonwealth seizing her car three times – in 2001, 2002, and 2003.
But what the collection firm took from Anderson wasn’t just her 1995 Toyota Camry, she said, It was a retiree’s sense of independence. Because her car was seized, Anderson had to lean on her 85-year-old husband, Ezra, and friends, in ways she often found humiliating. “When you’re a strong person and you have your car taken, that’s like losing your right arm,” she said, ‘You can’t do anything.”

Unlike Joanne Johnson, Anderson did receive a notice from Framingham District Court to appear for her initial hearing, on a debt of $2,019. But she also received a letter from Commonwealth saying, “Our representatives are willing to work with you on this matter so that your appearance in court may not be necessary.” (Norfolk sends debtors letters with nearly identical language.)

Anderson said she called to negotiate, started making $50 monthly payments, and was again told she might not need to appear in court. But when she didn’t show, Commonwealth won its case against her by default. And when Anderson missed a payment several months later, Commonwealth, armed with its court judgment, sent constables and a tow truck for her car.
If Anderson couldn’t afford to pay off her remaining debt, she also couldn’t afford the $600 fee charged by the constable for taking her Camry, she said. To get the car off the tow lot, Anderson paid a $135 towing and storage fee, and entered into two monthly payment plans: One to Bay State Constable Service Inc. and another to Commonwealth, making an initial payment of $110 to each firm.

Anderson’s records show she made some of those monthly payments. But with a limited income based largely on Social Security benefits, Anderson said, she fell behind. And once again, Commonwealth had her car towed.

Anderson managed to retrieve her car a second time, scraping together a payment of $1,075 and entering into another agreement to make monthly payments to Commonwealth, But when she fell behind a third time, the company took her car for good – along with, she said, medication for her asthma, diabetes, and high blood pressure that she had left in the vehicle. “Can you re-seize this one?” the fax from Commonwealth to Bay State read. “You should have the original [documents]. Thanks!”

Even though Anderson shelled out a total of $2,741 in debt payments, constable fees, and other charges – more than the original debt – she would never see her car again. Three years later, she still doesn’t know what happened to it. When the Globe asked about its whereabouts, O’Connor, Commonwealth’s lawyer, would only say that the Camry had been lawfully seized.
Yvonne W. Rosmarin, an Arlington attorney who has sued both Goldstone brothers on behalf of other consumers, said she believes it is unfair and misleading for the Goldstones to suggest to debtors that they do not have to go to court, without telling them that they will automatically lose their cases if they do not appear.

“The debtors work out payment plans, then there are default judgments issued against them and their cars are hooked,” Rosmarin said. “It seems to me outrageous.” Rosmarin also said she believes the tactic is a violation of the federal Fair Debt Collection Practices Act.
O’Connor, the Goldstones’ lawyer, insisted that the letters are “in no way” deceptive and that they comply with federal law.

Lives disrupted
Losing a car is bad enough. But losing a car, a house, and a job was what faced Michaelyn S. Rackley and her husband, Raheem R. Weldon, in 2001, after Norfolk Financial filed a lawsuit against Rackley – and sent notice of the suit to the wrong address, She lives in Athol. Norfolk sued her at an address in Waltham.

Unlike Chad Goldstone, Daniel Goldstone often goes after debtors’ homes, as well as their cars. Real estate records examined by the Globe show that, over the last four years, Norfolk has put liens on more than 1,000 homes throughout the state, Once a lien is placed on a home, it cannot be sold or even refinanced unless the lien holder is paid.

Norfolk filed its lawsuit against Rackley on May 1,2001, for a $543 credit card debt, Court records show that the notice sent to Waltham was returned undelivered – which should have prompted the Waltham District Court to demand a correct address from the collector, or dismiss the lawsuit. Nonetheless, on Aug. 13, 2001, Norfolk won an automatic judgment against Rackley because Rackley did not appear for a hearing she knew nothing about.
Then last summer, Norfolk first came after Rackley’s car, and then her home.
The Worcester County deputy sheriffs and a tow truck hauled away her 1998 Subaru Forester in June. As a consequence, Rackley had to quit her job delivering newspapers for the Worcester Telegram & Gazette.

In July, Daniel Goldstone placed a lien on the couple’s Athol home. In October, Rackley had no choice but to pay off the debt – $1,038, with accumulated interest – when the couple went to refinance their home.

But Rackley never got her Subaru back. After it was seized, the storage charges mounted daily – all the way to $5,600 by October. In December, Direnzo Towing & Recovery of Millbury sold the vehicle to recoup its costs, according to the Worcester County Sheriffs office.
Rackley has since filed a federal lawsuit against Norfolk. And Norfolk has moved to have the suit dismissed, asserting that all of Rackley’s claims, “are merit less as a matter of law.”
Rackley said she’s found the experience frustrating. Norfolk, she said, is “very underhanded, It’s almost like they get a list of names and pick one out of a hat and say, ‘Okay, OK, were going after that one.’

And then there was the case of Marie Dimanche, the Mattapan mother who awoke to a 6 am, visit from constables working for Commonwealth Receivables.

Dimanche thought the debt Commonwealth was trying to collect had been paid by Travelers Aid Family Services, an agency for the homeless that had once helped Dimanche find a place to live. An official with the agency said it often provides financial assistance to clients, paying off old debts and restoring credit.

When Commonwealth rejected her explanation, Dimanche’s effort to keep her car off the auction block became a race against time. Scrambling to understand the legal actions that had been taken against her, she filed a motion in November 2002 in Boston Municipal Court, asking to have the court’s judgment against her lifted.

Dimanche, in her motion, said she never received notice of Commonwealth’s lawsuit because of the outdated address the firm provided to the court. She emphasized the urgency of her case: her car was to be auctioned on Nov. 22.

The court responded by scheduling a hearing for Dec. 5- more than a week after the scheduled auction. And on Nov. 22, her car was sold for $2,197 -about a third of the vehicle’s market value, according to the National Auto Dealer’s Association Used Car Guide.
Days later, on Dec. 5, a judge lifted the judgment against Dimanche. But by then it was too late. Dimanche resigned herself to bumming rides and using the MBTA to get to work and take her daughters to school. It was two years before she could afford to buy another car.
But a reliable means of transportation wasn’t the only thing Dimanche and her children lost: Without her car, Dimanche was unable to make use of a City of Boston scholarship for computer training courses in Quincy – training that Dimanche said would have qualified her for a better-paying job at Sears, her employer.

‘They don’t understand that they’re altering people’s lives,” Dimanche said of Commonwealth. “It’s not like you can just catch a ride and go on like normal.”

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Top 16 Myths About Bankruptcy
Richard West
(You know all those bad things
….you’ve always heard about bankruptcy.

Most of it is NOT TRUE….and I’ll prove it
….right here…right now.

Here are the Top 15 Myths your creditors want you to believe
…and the reason why every one of them is NOT TRUE.

Myth 1: Under the NEW bankruptcy law, there is no more bankruptcy.
Myth 2: Everyone will know you have filed for bankruptcy.
Myth 3: You will lose everything you have.
Myth 4: You will never be able to own anything again.
Myth 5: You will never get credit again.
Myth 6: Filing bankruptcy will hurt your credit for 10 years.
Myth 7: If you’re married…both you and your spouse have to file for bankruptcy.
Myth 8: It’s really hard to file for bankruptcy.
Myth 9: Only deadbeats file for bankruptcy.
Myth 10: Filing bankruptcy means you’re a bad person.
Myth 11: Filing for bankruptcy will hurt your credit.
Myth 12: Even if you file for bankruptcy, creditors will still harass you and your family.
Myth 13: If you file for bankruptcy, it may cause more family troubles and may even lead to divorce.
Myth 14: You can’t get rid of back taxes through bankruptcy.
Myth 15: You can only file once for bankruptcy protection.
Myth 16: You can pick and choose which debts and property to list in your bankruptcy.

Myth 1: Under the NEW bankruptcy law, there’s no more
bankruptcy (or it’s too late to file).
Not True. In fact…nothing could be further from the truth. Sure you heard it in the press, but it’s just not true. The news media overcooked the whole story. The truth is that you can do almost everything under the NEW law that you could do under the OLD law. In some ways, the new law actually increased the benefits of filing bankruptcy. Want to find out more.

Myth 2: Everyone will know you have filed for bankruptcy.
Unless you’re a prominent person or a major corporation and the filing is picked up by the media, the chances are very good that the only people who will know about a filing are your creditors and the people who you tell. While it’s true that your bankruptcy is a matter of public record, the number of filings is so massive, that unless someone is specifically trying to track down information on you, there is almost no likelihood that anyone will even know you filed. However…telling someone that someone else filed bankruptcy is good gossip…just like telling a someone you heard so-and-so is getting a divorce. So…if you don’t want everyone you know to know you filed bankruptcy….you need to keep the information to yourself. As for newspapers…my experience is that most papers don’t include information about who filed bankruptcy…. and even if they did…think about it….who would be interested enough to read that stuff.

Myth 3: You will lose everything you have.
Nothing could be further from the truth. The fact is….most people who file bankruptcy don’t lose anything.
First….while laws vary from State to State, every State has exemptions that protect certain kinds of property. Using Ohio as an example…..there are exemptions to protect such things as your house, your car, your truck, household goods and furnishings, IRAs, retirement plans, the cash value in life insurance, wages, and personal injury claims. There is even a “wildcard” exemption of $400 per person that can be applied wherever you want it. In those situations where you have more property than can be protected by available exemptions…there is Chapter 13. In Chapter 13…you can even keep this property by paying a higher Chapter 13 plan payment.
Second…..as mentioned above (Myth 2)….filing bankruptcy does not generally wipe out liens. Therefore…if you want to keep a car, truck, home or business equipment that serves as collateral for a loan….you need to keep paying on the debt. If you make these payments and have exemptions to cover any value above what is owed….you can rest assured you will be able to keep these items.

Myth 4: You will never be able to own anything again.
A surprising number of people believe this….but this is completely false. In the future…you can buy, own and possess whatever you can afford.

Myth 5: You will never get credit again.
Quite the contrary. Filing bankruptcy gets rid of debt….and getting rid of debt puts you in a position to handle more credit….and this makes you look more attractive to would-be lenders. In my experience…..fortunately or unfortunately….it won’t be long before you’re getting credit card offers again. I say “unfortunately” because I don’t want you to get right back in debt again. At first…the would-be lenders will want more money down and will want to charge you higher interest rates. However….over time….if you are careful, and keep your job, and start saving money, and pay your bills, and do things that will put good marks on your credit report….the quality of your credit will get better and better. Generally…in my experience…if a client has not re-established good credit in 2 years…sufficient to buy a car or even a house….it’s not because they filed bankruptcy. It generally means that something else has happened after the bankruptcy to hurt their credit.

Myth 6: Filing bankruptcy will hurt your credit for 10 years.
Not true. This myth comes from getting 2 completely different concepts confused with each other. The fact that bankruptcy is reported on your credit report for 10 years gets mixed up with the effect that reporting will have on your credit. Just because something is reported on your credit report does NOT necessarily mean it will have a negative effect on your credit standing.
First…let’s get one thing out in the open. By the time you need to make an appointment to see a bankruptcy attorney…..your credit is already messed up or maxed out…or both. This being the case….you have no credit for bankruptcy to hurt.
Furthermore…as I mentioned above…in my experience…if you have not re-established good credit in 2 years after you file bankruptcy…..most likely….it has nothing to do with the fact that you….once upon a time….filed bankruptcy…and it certainly has absolutely nothing to do with the fact that your credit history still shows an old bankruptcy.

Myth 7: If you’re married…both you and your spouse have to file
for bankruptcy.
Not true. In many cases…where both husband and wife have a lot of debt….it makes sense and saves money for them to both file….but it is never a requirement under the law. We have many cases where only one spouse has filed. The good news is that generally….if it makes sense for both spouses to file together….they can both file for the price of one filing.

Myth 8: It’s really hard to file for bankruptcy.
No….it’s not….at least not in the hands of an experienced bankruptcy attorney. In the hands of an experienced bankruptcy attorney…filing bankruptcy is easy. The decision to file may be hard…but once the decision is made…the filing part is easy.

Myth 9: Only deadbeats file for bankruptcy.
Not true. Most of the people who file bankruptcy are good, honest, hard-working people…just like you and me….who file as a last resort….after months or years struggling to pay the bills that left over from some life-changing experience, such as a divorce, the loss of a job, a failed business venture, a serious illness, or some family emergency…or because they honestly and mistakenly fell into debt at a young age before they knew better…before they knew anything about budgeting or how to manage money.

Myth 10: Filing bankruptcy means you’re a bad person.
Not true. There’s a reason over 1,000,000 Americans file bankruptcy each year…and it’s not because they’re bad people. Lots of good, honest, hard-working people fall on hard times. Let’s face it….life is often brutal….and sometimes…the money’s just not there. The bankruptcy laws were created with this in mind…to make sure you have a way….if need be….to get free from the burden of debt…so that you…and your family….can have a second chance at a “fresh start”.

Myth 11: Filing for bankruptcy will hurt your credit.
That’s not true. Think about it. By the time you come to a bankruptcy attorney….your credit is already either messed up or maxed out. And if it’s already messed up or maxed out….how can a bankruptcy hurt it?
The big surprise for my clients is when I tell them that filing bankruptcy can actually help them re-build their credit. Bankruptcy gets rid of debt….and getting rid of debt puts you in a better position to handle new credit….if only someone will give it to you. Therefore….bankruptcy is the first step in the process of re-building your credit.

Myth 12: Even if you file for bankruptcy, creditors will still
harass you and your family.
This is NOT true. In fact, nothing could be further from the truth. The minute you file bankruptcy, the Bankruptcy Court issues an order telling all of your creditors to leave you alone. No more phone calls. No more collection letters. No more lawsuits. No repossessions. No foreclosures. Nothing. This order has a name. It is called the “automatic stay”; and it is issued pursuant to 11 United States Code, Section 362. The automatic stay prohibits you from any and all collections actions. After you file bankruptcy, the creditor is not even allowed to talk to you. In addition, the creditor must stop any collection attempts already started. The automatic stay is very powerful, and puts the full weight of the United States Courts to work for you, to make sure your creditors leave you alone. If a creditor violates the automatic stay, you have the right to bring the creditor before the Court for Contempt of Court, and to be compensated accordingly. Believe me, Bankruptcy Court Judges do not take kindly to creditors who ignore the automatic stay, and these Judges have been known to punish creditors severely. Very simply, once you file for bankruptcy, creditors must leave you alone or suffer the consequences.

Myth 13: If you file for bankruptcy, it may cause more family
troubles and may even lead to divorce.
This is NOT true. Usually, it works just the opposite. Filing bankruptcy is not the problem. The problem is not being able to pay your bills. All good, honest, hard-working people feel a strong need to pay their bills, and not being able to do so, causes them to feel tremendous stress. Unless you do something to relieve this stress, the stress can quickly build to the breaking point….the marriage breaking point. Bankruptcy is designed to get you out from under the burden of debt, to protect your property and to lower your stress level. If your experience is like that of other couples, you will find that filing bankruptcy… and lowering the stress level…. can be a crucial first step in bringing the love and caring back into your relationship….which…..in turn…..gives your marriage a fighting chance.
In fact – true story – I had a couple who already filed for divorce come to me to get the debts out of the picture to make their divorce process easier. They were sent to me by a divorce lawyer I knew. When I showed them how I could solve the debt problem, they looked at each other and said “that’s the only reason were divorcing, and here is the answer to the problem.” After I showed them the good that a bankruptcy would bring them, they fired the divorce lawyer (who has never sent me another client since), reconciled, and filed a chapter 13. Today they are still happily married and on their way to being debt free.

Myth 14: You can’t get rid of back taxes through bankruptcy.
We get rid of old “income” taxes for our clients all the time. By “old”…I mean income taxes more than 3 years old. Under the law…there are 3 or 4 qualifications that have to be met….but once these are met….these taxes are gone. Please note: Filing bankruptcy does NOT get rid of withholding or sales taxes…no matter how old they are.

Myth 15: You can only file once for bankruptcy protection.
The truth is….you can only file for a Chapter 7 bankruptcy once every 8 years….but after 4 or 6 years…if need be…you can file a chapter 13 if you need to. However, my experience is that people generally only need one bankruptcy in a lifetime.

Myth 16: You can pick and choose which debts and property
to list in your bankruptcy.
I’m sorry…but you can’t. Doing so would be against the law. Under the law…when you file bankruptcy…you have to list all your property and all your debts. Most people want to leave out a debt because it is their intent to keep paying on it.
But, the good news is that you can achieve the same goal, even though you have to list the debt. If you want to keep paying on a debt…after bankruptcy….you can. After bankruptcy….you can go back and pay anybody you want. In fact…after you file bankruptcy….there are some debts you have to keep paying on. For instance….if you have a car, truck or house loan….even though you list the debt in your bankruptcy….if you want to keep the car, truck or house….you have to keep paying on the debt. More importantly….you need to know this. As long as you stay current on the loan…and keep the property properly insured….you are protected under the law …. and you get to keep the property….because…under the law…the creditor is stuck with you and can’t do anything about it.

As we bloat with debt, enablers egg us on

By LOREN STEFFY
Copyright 2004 Houston Chronicle

I’m worried my paper shredder isn’t big enough.
No, I don’t have any important records to dispose of; and I never worked for Arthur Andersen. My problem is I have a mailbox.

Every day, at least two offers for low-interest credit cards arrive. Banks beg me to go into debt. They entice me to take debt I already have with another bank and give it to them. They ask me to hock the little piece of my house that I actually own. They even suggest I borrow against my tax refund.

For many people, either because of need or desire, the offers work. An average U.S. family now has six credit cards with a combined limit of $21,000, according to a study last year by Demos, a nonpartisan public policy research group in New York.
For credit card companies, the debt itself isn’t where they make the big money. They start cashing in when we fall behind. Between 1996 and 2001, late fees collected by credit card issuers rose more than fourfold, to $7.3 billion annually from $1.7 billion, according to Cardweb.com, an online research service that tracks the credit card industry. During the same period, the average late fee more than doubled, to $29.84 from $13.28.
At the same time, the minimum monthly payment customers can make without incurring a penalty fell to 2 percent of the card balance in 2001 from 5 percent in 1993, Demos found. That means you can spread your payments out longer and get socked with more interest. A $5,000 balance on a card charging 15 percent interest would take more than 30 years to clear by paying the minimum.

Credit card companies aren’t the only ones looking for lucrative ways to lure us into hock. During the recession, home electronics manufacturers, carmakers and mortgage companies stepped up efforts to snare us by offering more favorable terms. Sony sells televisions with no payments for a year, General Motors offers seven-year car loans, and Washington Mutual now has 40-year mortgages.

The result? Debt is stacking up in ways it never has before. Consumers lured by the promise of no money down on new cars a few years ago now find they owe more than their cars are worth. Some are buying new cars, borrowing more than the price of the new vehicle and using the excess to cover what they still owe on the old car. Lenders call this “negative equity.’ I call it a deep, dark hole.

The only thing more dangerous than consumers willing to borrow more than the value of their collateral is banks willing to lend to them.
Here in Texas, we’ve seen that little number before. Banks across Texas made loans like that to developers in the mid-80s, right before the real estate market tanked, dragging down 500 of the state’s financial institutions.

Consumer spending is a powerful thing. It has risen for 13 straight years, accounting for about 70 percent of our total economy. Household spending has been the main driver of the recovery. Easy credit has its benefits. Many people now have access to capital they might otherwise have been denied. But it comes at a price. Household debt reached a record $8.9 trillion last year. In 2003 alone, more than 1.5 million people filed personal bankruptcy, more than five times the number of filings in 198C according to the American Bankruptcy Institute. Consumer debt experts expect that number to continue rising.

By 2010, one in seven families with children will tile for bankruptcy, says Amelia Warren Tyagi, co author of The Two-Income Trap, which examines the burden of debt on middle-class Americans.
“More children will live through their parents’ bankruptcies than their parents’ divorce,’ she says.
So are we becoming a nation of undisciplined spendthrifts? Not exactly. In the past 30 years, the nature of debt has changed. Tyagi found that people aren’t spending more on luxury items; they’re spending more on essentials. Houses in neighborhoods with good schools cost more. So does a college education.
Between 1972 and 2000, monthly
mortgage expenses rose by 69 percent, while expenses for other household items such as food, clothing and furnishings fell or stayed the same, Tyagi’s study found. The cost of a college education more than doubled during the same period.

The need to borrow for housing and education is stretching families thinner than ever- Then, if a crisis hits— a breadwinner loses a job or a family member is stricken with a long illness—there’s no cushion, no rainy-day savings to cover the unexpected costs.
In fact, most of us have no savings at all. In 1981, U.S. households saved more than 10 percent of their income.

By 2000, that number had dropped to less than zero and continues to fall, according to SMR Research Corp. That means many of us are operating in the red, borrowing because we can’t pay what we already owe and sinking ever deeper into a quagmire of debt.
Lending to people with bad credit has become big business. Banks send credit card offers to everyone: the desperate, the impoverished, even the bankrupt. My son’s friend got his first credit car offer when he was 6 years old. With fees and interest generating so much income, banks arc willing to take a chance on just about anyone. That’s why our mailboxes are so full of junk.

It’s not just me. All of America needs a bigger paper shredder.