The Importance of a Credit Score

Credit scores are more than just a way for your creditors to record your outstanding obligations and late payments, they can also decide if you will be approved for any new credit and what interest rate you will be offered.  We hear about extremely low interest rates on cars and homes, but seldom realize that those rates are only available to people with perfect credit.  Allowing your credit score to suffer can have more long term affects than you’d think.

It’s always important to know what your credit report looks like.  Getting a free report each year can help you keep track of what is reported.  You can make sure that the accounts listed are in fact yours, and whether or not your on-time payments are accurately recorded.  If you see something on your report that is incorrect, you can contact the reporting agency to dispute it.  Checking your report each year allows you to stay on top of things before they get out of hand.  For a free report, go to www.annualcreditreport.com.

It may be common knowledge, but the best way to lower your credit score is to not pay your bills on time.  Some companies will report your missed payment if it is 30 days late, and some will wait until 60 days or more.   Either way, late payments will begin to show on your report and affect your score.  Therefore, making a late payment to your credit card can result in more than just a late fee. 

Another reason your score may be lower than you’d like is that you are over extended or you are constantly applying for new credit.  Applying for every store card out there allows those companies to inquire into your credit.  It can ding your score if you have too many inquiries.  Maxing out the credit you have available to you can also lower your credit score, since the reporting agencies are in part measuring the chance that you will default on your obligations.  If you are maxed out, the chance of default is higher.

So what do you do if you just can’t afford to make payments on your credit cards?  Depending on your reason (lost job, medical emergency) you may want to speak to an attorney and evaluate your bankruptcy options.  You hear a lot about the downsides of having a bankruptcy on your credit report, but what most don’t know is that filing a bankruptcy can actually help you stop the late payment cycle, allowing you the chance to rebuild your credit. 

Making on-time payments to all of your credit cards will build a positive payment history and put you on track to a higher credit score.  If this isn’t possible for you due to circumstances that are beyond your control, call Greenwald & Hammond to set up a free consultation.

Submitted by:

Kerry Hammond, Esq.

No Relief From Student Loans - Will it ever change?

Lately I keep hearing that Student Loan Debt is a ticking time bomb much like the housing bubble was in recent years.  Sadly, all too often, I encounter debtors who remain powerless against their student loan lenders and collection agencies. 

Few people incur student loan debt with the expectation of being unable to pay.  Most college and graduate students incurring debt for education assume that they would be employable once they finish school.  Unfortunately in a bad economy, this is not always the case.  Even those that are employable, and employed, may not be earning enough to pay the unforgiving student loans that they incurred.  An $80,000 education does not amount to an $80,000 per year paycheck and usually does not even amount to a $40,000 per year paycheck, especially in today's economy.

I recently met with a graduate of a small fine arts college.  While in school, she was not provided with any education informing her of how much her payments would be when she graduated school.  Each year she incurred the loans so that she could obtain her degree in fine art, she was provided with assistance filling out the documents by her school's financial department.  After four years she had more than $100,000 in student loans. 

Her skills, which are specialized to the fine arts, allow her to be employed at roughly $30,000 per year.  Her monthly take home pay is roughly $2,000 and her student loan minimum payments are approximately $1,100 per month (not at a fixed APR).  She has used up all of her forbearance and cannot afford to live on only $900 per month.  She has no other debt.  She refuses to use credit cards and relies on family and friends to help her get by in tougher months.  She is not alone.  I have met with numerous hopeful young people, employed (sometimes working two or three jobs), yet unable to meet their student loan obligations.

Sadly when she came to me (a bankruptcy attorney) to seek relief, I had to tell her there was nothing I could do.  For some with additional debt, it might help to eliminate other debt, freeing up money to pay student loan debt, but for her, there was no other debt.  She is basically living in poverty as a slave to her student loan debt. 

Under the bankruptcy code, student loans, private and government backed, generally cannot be discharged.  In order to discharge a student loan a debtor in bankruptcy must file an adversary proceeding (a separate lawsuit in bankruptcy court) for a determination of dischargeability.  The debtor must prove that the loan is substantially burdensome.  For many the reality is that the loan is extremely burdensome, however, the standard to prove such a burden is so high that a debtor must essentially be permanently disabled with no possibility of using their education for financial gain.  Without the ability to meet this standard, most able-bodied debtors continue to struggle with no relief from student loans.

While government-backed student loans provide some relief to debtors who are experiencing hardship, private loans offer no help and no sympathy to those who are struggling and they are quick to send loans that are in default to collections.  Unlike all other forms of debt (including taxes), there is no statute of limitation on the collection of student loan debt, so collectors may follow debtors to their graves.

There is now a bill in congress to amend the bankruptcy code to provide relief from private student loans under the bankruptcy code, treating it like all other unsecured debt.  H.R. 2028 was proposed in May 2011.  It is now at the committee level.  Many bills do not make it past the committee level, but in today's economy this is the type of relief that the middle class really needs.  There are so many young people who are suffering from bad credit and the inability to pay their living expenses because of the excessive amount of student loan debt they have that this would seem to be an obvious way to help many who are desperate.  Hopefully the federal government will get this one right.

Submitted by: 

Mindy Greenwald, Esq.
Bankruptcy Attorney
Greenwald & Hammond, PC

It’s Tax Time Again, Don’t Miss Those Important Deductions

If you haven’t filed your taxes yet, make sure you do a little research to determine if you may be overlooking any deductions.  More deductions means less taxable income, which means owing less to the government.  Below are a few frequently missed deductions to think about.  But in every situation, consulting with a qualified tax specialist is always your best bet.  This article is not meant, in any way, to be tax advice.  Spending a small amount on an accountant can go a long way to decreasing your tax liability, or better yet, increasing your refund.

One of the deductions a lot of people miss is healthcare.  If you pay your own insurance premiums (especially people who are self-employed) you can deduct your premiums and medical expenses that you paid throughout the year.  Different rules, and percentages of your adjusted gross income (AGI), apply for self-employed versus employed, so again, ask a tax specialist.

For those who were unemployed and searching for a job for a large part of 2011, you can deduct your job hunting expenses.   You may have hired a firm to write your resume, spent money traveling to interviews, etc.  If these expenses are 2% or more of your AGI, you’re clear to take the exemption.

Almost everyone I’ve ever known donates used clothing to the Goodwill or some other charitable organization.  Don’t forget to add these donations of goods to any other donations of cash that you may make throughout the year.

Lastly, there are a lot of people who have opted to go back to school to earn a first time degree, or an additional degree.  Depending on your income, you may be able to deduct tuition you paid last year for any college or professional school. 

When it comes to taxes, a little goes a long way.  If you take advantage of all the deductions available to you, it can quickly add up and save you money.  Whether it means you owe less or get a refund, it’s all money in your pocket, where it should be.

Submitted by:

Kerry Hammond, Esq.

Bankruptcy Attorney

New "Hope" for Distressed Homeowners

A major settlement was reached earlier this month between the Federal Government, state attorneys general and the five largest mortgage servicers.  The settlement will become a court order imposing sanctions for non-compliance and putting in place servicing standards that must be met.  The terms may offer significant relief to distressed homeowners as well as to homeowners with negative equity who are unable to refinance adjustable rate mortgages.

Some key terms of the settlement provide for:

1) relief for struggling homeowners: in the form of principal reduction or alternative assistance (examples are facilitating short sales, relocation assistance, forbearance during periods of unemployment) for homeowners who are in danger of default. The reduction in principal will result in lower monthly payments for homeowners who intend to stay in their homes and can make reasonable payments on the homes. 

2) refinancing of homes that are underwater: to be eligible the loan to value ratio must be at least 100% meaning the value of the home must be the same or less than the principal balance on the loan.  The loan payments must be current and the loan must have a current interest rate in excess of 5.25%.  The refinance terms must lower payments by at least $100.  Banks will be required to notify borrowers if they are eligible for this program.

3) mortgage servicing reform: that will include the requirement of notifying and evaluating borrowers of their loss mitigation options prior to foreclosure and prohibiting foreclosure actions while modification is being pursued.  Banks will be required to provide borrowers with a single point of contact at the bank while pursuing modification.  Restrictions on default fees, late fees, forced insurance, and other third party fees will be imposed as well.

In addition to the above relief, terms were reached for monitoring and enforcement, payments to foreclosure victims, and penalties for violations of state law. 

We will probably have to wait and see whether this settlement will force all mortgage servicers to act "more reasonably."   But for many, it may provide some much needed relief.  For more information and links to your state attorney general click here for a website set up by the attorney generals committee who negotiated the settlement.

If your first or second mortgage is creating a financial hardship for you, chapter 13 bankruptcy may be able to help too.  If you are behind on payments or fear that you may be in danger of losing your home, contact Greenwald & Hammond for a free initial consultation.

Submitted by:

Mindy Greenwald, Esq.
Bankruptcy Attorney

Finding the Cheapest Gas Prices

In a bad economy, no one wants to pay more than they have to for goods and services.  I find it more painful when the goods and services are things that I need versus things I just want, because I can’t avoid the cost.  Anyone who drives a car has to buy gas, and with prices as high as they are, paying more than you need to can add up quickly.

I recently came across an article on Yahoo entitled 5 Tips to Find the Cheapest Gas Prices and wanted to share it with you.  Following the tips may take a bit of time and effort on your part, but if the savings add up considerably, I for one wouldn’t mind the work.

To sum up the article, here are the 5 ways to find the lowest prices:

1.       Mobile Apps & Websites – track the prices using websites such as gasbuddy.com or gaspricewatch.com.  You can search using your zip code.

2.       Don’t buy right off the highway – the convenient stations charge the most.  You can either drive a little ways to buy cheaper, or if you’re like me, always be on the lookout for prices when you’re out and about.  You can spot the cheaper prices and either fill up then, or know where to go back when you need to fill up.

3.       Timing – apparently just as there is a best time for buying airline tickets, there is also a best time to buy gas.  I even think they might be the same day; Wednesday according to some.  It does make sense that prices would be highest on weekends when we’re out driving around and having fun.  If you can avoid it, don’t fill up then, unless you absolutely have to.

4.       Partnerships - I find that I save money on gas using my King Sooper points that I earn when I shop for groceries.  I need to shop for food, so why not take advantage of the extra gas savings when I fill up at a Loaf & Jug?  I usually know in advance when I’ll need to fill up, so when I plan to be near a participating station, I make sure that I put a fill up on my list of errands.  I find that I often save 30 cents per gallon and have even managed to save 50 cents per gallon on occasion.

5.       Fill up yourself – I don’t know of any stations that even offer full service, so this one may not be a great help.  But if you are out there using a full service station, you may want to rethink the premium you’re paying for this service.

If you’re willing to put a little bit of work into it, you can save yourself quite a bit over time.  Why pay more than you have to?

Submitted by:
Kerry Hammond, Esq.

Bankruptcy Attorney at Greenwald & Hammond, P.C.

Minimum Payment Warning!

Credit card companies are now required to list how long it will take you to pay off your credit card if you just pay the minimum balance each month, along with the amount of money you will end up paying over that period of time.  But does anyone actually look at this part of their bill?

I have to admit, that I keep a balance (and pay lots of interest) on the credit card that I use for business purposes.  I’m sure this minimum payment warning box has always been on there, but I’ve never even noticed it.  Ok, it’s confirmed, I just looked back through a year’s worth of statements and that box was on every one of them.  Of course it’s thrown in there on the first page with other things I don’t really look at, like my “ultimate rewards summary” and “blueprint summary” (something Chase offers that I don’t’ even understand). 

If placement is only part of the reason we don’t see this box, what else is there?  Maybe denial?  It’s great that the credit card companies are now required to show us this warning, but how many of us would rather not see it, meaning we would rather not know?  It’s part of the whole head in the sand syndrome that happens to a lot of us when the economy is bad and we struggle to pay our bills.

Instead of ignoring this warning section, I suggest we all analyze it and come up with a game plan.  My bill shows how long it will take me to pay off my credit card if I make minimum payments.  It also shows me some random number that I can pay each month that will allow me to pay it off in 3 years.  But what if my payment is somewhere in between?  Here is a link to a calculator that allows you to input your balance, percentage rate, minimum payment percentage, and proposed payment. 

This calculator will help you plan out a payment you can afford and allow you to tweak the numbers until you come up with an amount you are comfortable with, that will allow you to plan a payoff date for your credit card.  Now keep in mind, this only works if you’ve stopped using your cards and are just trying to pay them off.  If you continue to charge items, you will have to redo the calculation each month.  This may seem tedious, but I still think that it’s better to know than to be in the dark.

Of course, if you enter the payment that you can afford and it tells you that it will still take 34 years to pay off the card (and this is not your only card) you may want to re-evaluate your situation.  If you find that the debt you have will most likely take you your entire life to pay off, consider getting help.  Bankruptcy may not have been on your list of life goals, but sometimes life doesn’t go the way we planned.

You can contact Greenwald & Hammond and set up a free consultation to discuss your debts with a bankruptcy  attorney.  Maybe it’s time to re-evaluate your plan and get back on track.

Submitted by:
Kerry Hammond, Esq.

It’s the Thought That Counts

It’s Valentine’s Day and I know the above sentiment is used quite a bit, I really think that in many cases it’s true.  The economic crisis continues and people are still struggling to make ends meet, so perhaps it’s especially true right now. 

We all struggle to find that special someone a great gift for Valentine’s Day, one that says just what we’re feeling, yet won’t break the bank.  It seems like the cost of a dozen roses is always in the range of $50, so maybe now is the time to say “I love You” in a different, and inexpensive way.

Here are some great ideas for Valentine’s Day that won’t drain the bank account:

1. Knit a scarf.

2. Write a love letter.

3. The old tried and true coupon book (promising things like dinner, dish washing or a massage)

4. Light a fire in the fireplace, put a blanket down and have dinner in your living room - picnic style.

5. Rent a movie (Redbox is still under $2).

6. Make your own card instead of buying one. 

7. Turn off the TV and play a game instead.

Sometimes it’s just doing something different that makes for a special occasion.  Whatever you do for Valentine’s Day, I hope it’s a great one!

Submitted by:

Kerry Hammond, Esq.

Bankruptcy Attorney

Choosing Tap Over Bottled Could Save You More than You Think

I just read an article about college campuses banning bottled water.  While you may or may not agree with the ban, I found an interesting statistic in the article.  Drinking eight glasses of water a day from a water bottle can cost consumers roughly $1400 per year.  Drinking the same amount of tap water would run the consumer roughly $.49 per year.

Obviously most people do not drink exclusively one or the other, but a family of four who regularly uses bottled may be spending far more than they think on an expense that may be unnecessary, and according to some studies, unhealthy.  If your tap water is something that is less than desirable, try a water filter.  We use a water filter in our office and it works well.

It is such a small thing, that most people would not think of to save money but if finances are tight, small changes can really add up!  So even if you are not "green" cutting out bottled water might still be worth while.

Submitted by:

Mindy Greenwald, Esq.
Bankruptcy Attorney

Banks May Be Offering Short Sale Incentives

It seems that more and more banks are working with homeowners to approve short sales.  Some are even offering cash incentives to help with relocation costs.  Is it possible they have finally realized that it’s cheaper and quicker for them to approve a short sale than it is to hire an attorney and foreclose on the property?  This doesn’t mean that all banks will approve a short sale, or offer a cash incentive, but it shows a trend that may greatly benefit homeowners needing to get out from under a mortgage.

In the past, it has proven very difficult for homeowners to get a bank to agree to a short sale.  The concept behind a short sale is that the homeowner finds a buyer for the house, but that buyer is willing to pay less than the homeowner owes the bank, so the loan wouldn’t get paid in full.  The homeowner submits this offer to the bank and tries to get their approval to accept less than what is owed on the property.  It can take the banks so long to approve or deny these offers that many times the buyer moves on and the homeowner has to start all over again.  Even if the buyer sticks around, many banks simply deny the request and the homeowner is right back where they started.

Additionally, it has been nearly impossible to go the short sale route if you have more than one mortgage.  If you convince the first mortgage holder to take less than is owed, the second mortgage will get absolutely nothing.  Who would sign off on that?  An article in Bloomberg states that the banks who are starting to push for short sales may also be willing to pay a few thousand dollars to these second lienholders in order to get them to go along.  This is a huge benefit to anyone with multiple mortgages on their property.

Don’t be fooled, the banks aren’t  doing this out of the goodness of their hearts.  They are benefitting by avoiding the time and cost associated with a foreclosure (it takes an average of 348 days to foreclose on a property in the U.S. and another 175 days for the bank to resell the property if they buy it back).  However, the homeowner is spared the hassle associated with a foreclosure and the possible deficiency that the bank will try and collect after sale.  Even if you don’t add a cash incentive to the mix, I can only see it as a win/win.

Submitted by:

Kerry Hammond, Esq.

Bankruptcy attorney at Greenwald & Hammond, P.C.

Those Dreaded Debt Collector Calls

When a debt goes unpaid, whether it’s a credit card debt , utility bill, or medical bill, many companies sell the debt to a third party debt collector.  These debt collectors buy the debt you owe to Visa and they use their resources (call centers usually) to try and collect the debt.  They only get paid if they can get you to pay, which causes a lot of them to be very aggressive. 

There have been lawsuits, and even arrests, when these debt collectors go too far.  Last year I saw a news program where a man in Buffalo was arrested because his debt collection company was threatening debtors with a visit by the sheriff, saying that they would be arrested if they didn’t give their bank account number over the phone for a payment. 

Much of the time, these debt collectors have a valid interest in the debt you owe and the right to collect on that debt.  Beware, however, of whether or not you are still obligated to pay that debt.  Each state has a statute of limitations that limits the amount of time a creditor has to file a lawsuit against you.  If that statutory time has passed, they can no longer take you to court to collect on that debt.  If you make a payment on the debt, however, you can restart that statutory clock and bring that debt back into play.

The Federal Trade Commission (FTC) has started to better police these debt collectors and recently fined Asset Acceptance for failing to check if the statute of limitations had run or inform debtors of the fact that in many cases they had no right to sue for the debt if the debtors did not pay.  Most states, however, do not require debt collectors to check the statute of limitations before contacting consumers.  It’s really up to the consumer to know their rights.  Here is a link to the FTC Consumer Alert that discusses time-barred debts.

Knowing the law can be very difficult and confusing.  If you’re getting calls from debt collectors and don’t know your rights, speak to an attorney.  Many attorneys offer free consultations, so it won’t cost you a penny to find out what your rights are.  At Greenwald & Hammond, you can speak to an attorney about the debts you owe to find out what can be done to stop harassing creditor calls.

Submitted by:

Kerry Hammond, Esq.

When to Talk to a Bankruptcy Attorney

All too often I meet clients who have spent a fortune to try to get out of debt, only to hear me say that they should have come to me years ago, when their troubles started.  It is so unfortunate to meet with people that paid their entire savings to sell their home or used money from an IRA or 401K to payoff only a portion of their debt and find that they still needed to use their credit because every month all of their income was still going to pay the credit cards, and ultimately they have to file for bankruptcy.  

It may be hard to accept that bankruptcy is the best option because no one really ever wants to file bankruptcy.  Some situations in which you may want to contact a bankruptcy attorney include:

• You pay the minimum on your credit cards but then don't have enough money to live on so you're back to using your credit by the end of the month;
• You are considering dipping into your IRA to pay your mortgage or any other debt;
• You have missed car payments and are worried about repossession or you can no longer afford your car but owe more than it is worth;
• Your wages are being garnished or you are being sued by creditors; or
• You can no longer afford your home, or you are behind on your mortgage and hope to save your home from foreclosure;

If you are having trouble deciding which bills to pay and which can wait, or your financial situation keeps you up at night, talking to a bankruptcy lawyer can help you assess your situation and determine whether bankruptcy is a solution to your financial situation.  At Greenwald & Hammond we offer a free consultation in which we offer advice based on each client's unique circumstances.  Call for an appointment with an experience bankruptcy attorney.

Submitted by:

Mindy Greenwald