STUDENT LOAN RELEIF FROM FILING BANKRUPTCY

In the past year, we have helped many people whose student loan payments are higher than they can afford, have lost their tax refunds to student loan seizures, and who have their wages involuntarily deducted by student loan companies.

Filing for a Chapter 13 bankruptcy will keep the student loan companies from going after your wages and taking your tax refund money.  And, in a Chapter 13 filing, you monthly payments to student loans can be reduced significantly.

Taking this step should be a last resort, because the student loans can continue to charge you the same interest as they were before bankruptcy filing, and filing for bankruptcy will not, under almost all circumstances, discharge your student loan debt.  What a bankruptcy filing will do is stop the student loans from forcing unreasonable payment terms on you.  You will be able to set more affordable payment terms.

While this option always should be used as a last resort only, more and more often, seeking bankruptcy protection from student loans is the only solution for many people.  If your income is low, and you have normal living expenses, you may not be in a position to make the monthly payment that your student loans are demanding from you.

The bad economy has forced people to accept jobs that pay less than they need to live, and at the end of the month there is no money left to make that student loan payment.  Fortunately, there is a way to reduce those monthly payments significantly so you can have a payment  you can afford.

Frequently Difficult to Correct Errors in Credit Reports

This is a great article to read from the New York Times about how difficult it can be to correct errors in your credit report.  It is a good practice to check your credit report frequently for errors, because it can take a very long time to correct errors which appear.

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August 2, 2013

An $18 Million Lesson in Handling Credit Report Errors

By TARA SIEGEL BERNARD

 

Even after sending more than 13 letters to Equifax over the course of two years, Julie Miller could not get the big credit bureau to remove a host of errors that it inserted into her credit report.

That indifference should surprise no one who has ever tried to deal with any of the three big credit reporting agencies, Equifax, TransUnion and Experian. “You feel trapped, like you are in a box,” said Ms. Miller, a 57-year-old nurse who works in a dermatologist’s office. “You have no control over this, and you can’t call them up and say, ‘You’re fired.’ ”

So she tried suing. That worked.

A jury in Federal District Court in Portland, Ore., last week awarded her a whopping $18.4 million in punitive damages, which, according to consumer lawyers, is the largest individual case on record.

If you think this has taught Equifax and the other credit reporting companies a lesson, you are a lot more optimistic than close observers of the industry. They say that despite the huge judgment, little is going to change for the millions of Americans who discover errors in their credit reports.

The credit bureaus are willing to tolerate these errors — and settle with consumers out of court — as a cost of doing business, according to credit experts and lawyers who work on these cases.

“Their business model is to keep doing the same thing over and over again,” said Justin Baxter, the lead lawyer on Ms. Miller’s case. “They can buy off a number of consumers with small dollar amounts and get rid of the vast majority of cases. To Equifax, that’s the cost of doing business.”

Ms. Miller made every effort to fix her report, exactly as consumers are advised to do. She initiated the company’s dispute process about seven times, and in most instances, Equifax would spit back a form letter saying it needed more proof of her identity. So she sent her pay stub and her phone bill. When that didn’t work, she sent her pay stub and her driver’s license. And when that failed, she sent her W-2 form and an insurance bill — at least three times.

But nothing ever changed: Ms. Miller, a model financial citizen who once had the credit score to prove it, had become mixed up with another, much less creditworthy Julie Miller. After she was denied a line of credit from KeyBank, she discovered 38 collection accounts on her credit report, none of which belonged to her, along with an inaccurate Social Security number and birth date. Her financial life was no longer her own.

Mixed files, as they are known in the credit industry, most frequently involve people who share common names with individuals who have similar Social Security numbers, birth dates or addresses. These errors are notorious for being among the most difficult to fix, credit experts said, and require human intervention to untangle the mess. But given the huge number of disputes, the process to address them is largely automated. And that is the excuse the industry advances to consumers who get stuck in its web.

The bureaus often outsource thousands of disputes daily to workers overseas. Those workers, often overwhelmed by the sheer volume of cases, are largely told to translate the problem into a two- or three-digit code that defines the gist of the problem (account not his/hers, for instance) and feed it into a computer.

But that process won’t untangle a mixed credit report. The reason files become mixed to begin with can be traced back to the computer formula the bureaus use to match credit data to a specific person’s credit report. It allows credit data, say a late payment on a credit card, to be inserted into a person’s file even if the identifying information isn’t an exact match. In other words, the system might add a late payment to the credit report of someone like Julie Miller even if the Social Security number is off by two digits or a birth date is off by two years, but enough of the other identifying information matches. That’s roughly what happened to Ms. Miller.

Partial matches aren’t always wrong, of course. Solid estimates on the number of mixed files are hard to find, though a 2004 study from the Federal Trade Commission said that partial matches occurred in about 1 to 2 percent of credit files, citing data from the bureaus. That might not sound like much, but when you consider that there are 200 million individuals with credit files at each of the big three bureaus, that translates to two million to four million consumers.

Other estimates put the number of actual mixed files at less than 0.2 percent to nearly 5 percent. The F.T.C.’s report said that mixed files were not always harmful to consumers because most credit account information was positive.

To that I say: Consumers with mixed files are supposed to take comfort in the fact that their credit report doppelgängers, on the whole, are likely to pay their bills?

There is a reason the bureaus operate this way. They would rather err on the side of including too much information in your credit report than leave information out, according to consumer lawyers and advocates. They also need to account for typos and small errors that can cause the credit agencies to leave out information — both good and bad credit behavior. Financial services firms are paying the bureaus to receive the most complete financial profile possible, even that means sacrificing a bit of accuracy. (The F.T.C.’s report said that lenders might actually prefer to see all potentially derogatory information about a potential borrower, even if it can’t all be matched with certainty.)

“The bureaus would rather accept the possibility of some mixed-file risk rather than the possibility that a debtor who owes a debt gets away with it,” said Leonard Bennett, a consumer lawyer in Newport News, Va., who said he has about 20 active mixed-file cases in any given month.

The dispute process is supposed to catch the people who fall through the cracks. But as people like Ms. Miller can attest, it doesn’t always work. The Fair Credit Reporting Act, the law that governs the big bureaus, requires the agencies to provide a reasonable investigation. Ms. Miller’s lawyer said their litigation revealed that there was no investigation at all. (It’s worth noting that Ms. Miller had problematic credit reports at the other two bureaus, but those agencies resolved the matter.)

“They testified that they get something like 10,000 disputes a day, so they don’t have the time to look at each one,” Mr. Baxter said. “Whether it is because the person has too many disputes to process or they choose not to, that is where the system falls apart.”

What else could she have possibly done? I asked the credit bureaus. Equifax declined to comment, and would only say that it was “very disappointed in the jury verdict” and was exploring its options, including an appeal. The other two agencies didn’t offer much guidance either, though TransUnion pointed out that the credit reporting industry resolved 70 percent of consumer disputes within 14 days.

Ms. Miller, however, had to endure repeated phone calls from debt collectors, who threatened to sue. She couldn’t co-sign a credit line for her son who was in his freshman year of college, and she said she put off refinancing her mortgage. It also meant that she couldn’t co-sign a car loan for her disabled brother. And plans to build a workshop on their property, which required a loan, would have to wait.

The jury’s giant award to Ms. Miller is generous and goes a long way toward compensating her for those lost opportunities. But lawyers say the initial awards are often reduced after being reviewed by the trial judge. An out-of-court settlement for the typical mixed-file case might be $50,000 to $250,000, depending on the case, while settlements for other errors may be far less.

Will Ms. Miller’s award have any lasting effect on the industry? Mr. Bennett, the consumer lawyer, is one of the optimists. “This case will change the calculus,” he said. “If they have to pay $2.5 million every time one of these folks gets to court, they might have to reconsider their procedures.”

It’s more likely, though, that the Consumer Financial Protection Bureau, which began overseeing the large credit bureaus last September, will have more impact. It has broad authority to perform on-site examinations, check records and examine how disputes are handled. Consumer advocates have long suggested that the credit agencies tighten up the way they match up data with consumers reports and strengthen the dispute process.

“Big punitive penalties may help force the bureaus to upgrade their 20th-century algorithms and incompetent dispute reinvestigation processes,” said Ed Mierzwinski, consumer program director at the United States Public Interest Research Group. “But C.F.P.B.’s authority to supervise the big credit bureaus is one of the most significant powers Congress gave it.”

Nearly every expert I spoke with conceded that Ms. Miller had few options. “She had two choices, and they both stunk,” said John Ulzheimer, a credit expert who has served as an expert witness on more than 140 credit-related lawsuits. “She could live with it, or she could hire an attorney.”

Kitty Bennett contributed reporting.

 

Don't Leave Money in a Bank Account if You Have a Credit Card or Otherwise Owe Money to the Same Bank

Many people do not realize that if they are behind in payments on credit cards, lines of credit, overdraft protection, loans, or other credit lines, and they have their money in an account with the same bank, the bank usually can withdraw funds from your bank account to pay for a credit card or other debt you owe to the same bank.

The best practice is, if you are delinquent on credit cards or other debts to one bank, keep your savings and other money in accounts with a different bank.  Otherwise, you may wake up one morning seeing your bank account emptied.  You might as well kiss that money goodbye.  This may mean you have to change your payroll direct deposit to a different bank.  This small inconvenience could save you many headaches.

Do Not Make the Mistake of Liquidating Your Retirement Accounts to Pay Off Your Debts

So many of my clients have come to me, having cashed in IRA's and 401(k) retirement accounts, to try to avoid bankruptcy.  What frequently happens is that the retirement accounts are gone, a good amount of debt remains, and a bankruptcy case still has to be filed.

These clients could have kept all of their retirment money, eliminated their debts, and had a secure future retirement.  Try to avoid the mistake that so many people make, and regret.

REDUCE YOUR CAR LOAN MONTHLY PAYMENT AND CAR LOAN BALANCE

Many clients come into my office with monthly car loan payments they cannot afford any longer.  Most people's first thought is to give up the car, especially when they owe more on the loan than the car's is worth.

We routinely file cases for clients to help them with their auto loans.  We can reduce the monthly payments significantly, lower the interest rate on the loan, and, if the car's value has dropped below the amount they owe on the loan, we can reduce the loan balance down to the current value of the car.

This procedure has helped many clients keep cars they otherwise would have turned in.  Especially when somebody's income has gone down, they need help to make their car loans more affordable. 

Owners of Multi Family Homes and Mobile Homes Can Reduce Their Mortgage Balances

In Rhode Island, the Bankruptcy Court permits onwers of multi family houses and mobile homes to reduce the amount they owe on their mortgages in a way that few other courts in the United States permit.

I recently have concluded a case for clients who own a multi family house, and through the court, reduced their mortgage balance from $195,000 to $81,500.  My office was able to reduce the number of years that these clients will pay off their mortgage in full from 23 years to 4 years.  We saved these clients 19 years of mortgage payments.

Anybody who owns a multi family house or mobile home should consider whether they would benefit from such a mortgage reduction as well.  My clients have a great feeling that in a few short years they will own their home outright and never need to make a mortgage payment ever again.

Five Time Grammy Award Singer files for Bankruptcy

Many people think that they are the only ones who need help to resolve a financial matter.  In fact, people from every walk of life experiences ups and downs, as this article shows.  Click the link to find out the very famous person who recently sought help from a bankruptcy attorney.

http://www.cnn.com/2013/03/26/showbiz/dionne-warwick-bankruptcy/index.html?iref=allsearch

15 Lies About Bankruptcy

A fellow bankruptcy practictioner in Maryland, Brett Weiss, Esq. has written an extremely informative article entitled "Top 15 Lies About Bankruptcy." 

He clearly repudiates many of the false information about filing for bankruptcy.  I highly recommend that any person considering filing for bankruptcy read this link, which provides useful and valuable information to making an informed decision.

http://www.bankruptcylawnetwork.com/top-15-lies-about-bankruptcy/

The Truth About Debt Consolidation and Debt Management Companies

Many of my clients have trid to avoid filing for bankruptcy by turning to debt consolidation or debt management companies.  Unfortuately, most of these companies promise much more than they every deliver.  Only about 1 out of every 10 people actually pay off their debts in the time they were promised.  The majority of people enrolled in these plans spend so much money and do not realize the results they expected.

Take a few moments to view this link to learn more about the false promises made by these debt management companies.

http://www.nacba.org/Portals/0/Documents/NACBA%20Docs/NACBA%20debt%20settlement%20trap%20consumer%20alert.pdf

http://www.nacba.org/News/ConsumerAlertDebtSettlement.aspx