Watch out for predatory credit-counseling firms

You may have seen the attractive commercials for Credit Counseling Company's that offer immediate debt relief. Before one elects for this option, it is important to have a full understanding of what Credit Counseling can accomplish for your particular case.

Consumers need to be especially cautious when considering using the services of a credit-counseling firm because it has led to an alarming number of cases in which a consumer's debts skyrocket through no fault of the consumer.

According to the Better Business Bureau, as the number of Americans seeking assistance from credit-counseling firms has increased, so has the number of complaints against credit-counseling firms. In 2003, the Better Business Bureau recorded six times the number of complaints as it received in 1999, a mere four years earlier. Consumers need to be especially cautious when considering using the services of a credit-counseling firm.

Currently, the Federal Trade Commission, as well as Attorneys General from four states, are investigating and prosecuting some credit-counseling firms for engaging in deceptive business practices. Furthermore, the U.S. Senate is holding hearings on what one insider terms "predatory practices" in the credit-counseling industry. In certain cases, the firms are said to have misled their clients regarding their fees, as well as whether the fees would offset the individual's debts. In other cases, credit-counseling firms are charged with accepting consumers' payments but neglecting to pay their bills in a timely manner.

According to financial experts in the field, some credit-counseling firms will offer you a free financial review and will not begin to discuss a debt management plan with you before examining your situation with due care. Other credit-counseling firms may charge you a small upfront fee, as well as a monthly transaction fee, but you need to ensure that the firm's payment cycle coincides with the due dates for your original debts. If the credit-counseling firm does not pay your bills on time, you can be held liable for any accrued interest and late charges. Once these charges begin to mount, your chances of escaping from your debt will decline sharply.

The moral of this is that all consumers need to look beyond the appealing commercials that promise debt relief via immediate credit counseling. A consumer's failure to investigate a credit-counseling firm can result in increasing his debt ratio.

http://www.legalhelpers.com/legal_helpers/brc_credit_counseling.html

Consumer Alert Issued:

IRS and FTC Investigates Credit-Counseling Organizations

The Internal Revenue Service and Federal Trade Commission announced a joint advisory, warning consumers of some of the pitfalls of Credit Counseling. They plan to team up to investigate both deceptive practices of the industry and the often-misleading nonprofit status of some of these credit-counseling agencies.

"Consumers who are struggling financially need to be careful not to lose even more money to someone offering a quick and easy way to fix credit problems," said Timothy J. Muris, Chairman of the FTC. "We want all consumers seeking help to take some common sense precautions."

The IRS, FTC, and state agencies urged consumers to be wary when choosing a credit counseling organization. A large number of complaints from consumer advocate groups have alerted these groups of some of the deceptive practices and hidden costs associated with some credit counseling agencies. Consumer complaints have centered on high fees, hidden charges, and the lack of actual help these organizations have been able to offer.

The IRS is concerned that some credit counseling agencies are abusing their status as "tax exempt organizations" in order to avoid state and federal consumer protection laws. Many credit-counseling agencies have been able to operate using deceptive practices and hide under their "nonprofit" status. As nonprofits, the agencies are now exempt from dozens of state and federal regulations.

The IRS also warns consumers that a "nonprofit" status does not ensure the quality of an organization; it is merely a tax code classification. Consumer groups have also criticized the large salaries of many of the credit counseling agencies' executives. "Consumers need to know not to read too much into not-for profit status - that's no guarantee that someone is legit," said a director of the FTC's Midwest Operations.

The IRS has begun auditing some credit counseling services to see if they meet the criteria for their nonprofit status. To obtain tax exempt status, a credit counseling agency must limit its services to poor customers or must primarily provide education and counseling to the public. Many credit counseling agencies have been criticized for focusing on higher profitability and just acting as a middle man funneling money to the creditor and just taking a cut of the payments. The IRS said that simply enrolling people into payment plans is not enough. They also plan to more aggressively screen new applicants from credit counseling organizations.

There is heightened concern as more and more consumers enter into credit counseling programs. The number of consumers involved in some sort of credit counseling sky rocketed to an estimated 9 million in 2002. This number is expected to grow as more and more consumers will be required to undergo some sort of credit counseling prior to filing bankruptcy under the proposed new bankruptcy laws.

http://www.legalhelpers.com/legal_helpers/brc_articles_consumer_alert.html

Student Loan Default

Debtors often ask the question whether student loan debt is dischargeable in bankruptcy. Student loans can be consolidated with your other bills in a Chapter 13 court-ordered repayment plan. During a Chapter 13, the student loan agency must accept payments under the terms of the Chapter 13, just like all of your other creditors. The student loan agency cannot pursue you for any unpaid portion of the student loan during the Chapter 13. After your Chapter 13 discharge, however, the student loan agency may pursue you for any portion of the student loan that was not satisfied by your Chapter 13 payment plan. So, the Chapter 13 will give you temporary relief, allowing you to pay a reduced percentage of your student loan and other outstanding obligations. When the Chapter 13 is discharged or dismissed, however, you will still have to work out a payment plan with the student loan agency.

Generally, student loans are not discharged in a Chapter 7 bankruptcy case. Presently, the only ground for discharge under the bankruptcy code is that the repayment of the loan "will impose an undue hardship on the debtor and the debtor's dependents." Unfortunately, it is extremely difficult and rare to meet the criteria for an "undue hardship" discharge.

There are, however, several options to help borrowers with defaulted student loans:

I. Loan Cancellation:

These types of federal remedies are available to the borrower even if the student loan is not in default. Keep in mind, however, that not all types of loans are eligible for cancellation. To find out what type of loan you have, contact the National Student Loan Data System at 1-800-4-FED-AID, or online at www.nslds.ed.gov.

The following are the main federal programs for student loan cancellation: Forms can be downloaded from (http://www.ed.gov/)..

A. Closed School: Applies to Direct Loans, Perkins Loans and FFELs. Students must have been enrolled in school at the time of closure. If the student withdrew, the withdrawal had to occur within 90 days of the closure. (http://www.ed.gov/.)

B. False Certification: Applies to FFELs and Direct Loans, but not Perkins Loans. To qualify, the student must show that he/she was not able to meet eligible state requirements for the job he/she was training for, or that the school altered or forged loan or check documents. This type of discharge applies only to loans received on or after January 1, 1986.

C. Total and Permanent Disability: This type of discharge applies to FFELs, Direct Loan and Perkins Loan. The borrower must be found totally and completely disabled to be eligible for this type of discharge, and must provide documentation from a physician that they are unable to work because of an illness or injury that is expected to continue indefinitely or result in death. This type of discharge is not available to the borrower if the condition existed at the time the loan was made. However, under new rules, pre-existing conditions may qualify if the borrower suffered substantial deterioration after the loan was granted.

D. Unpaid Refund Discharge: As part of the 1998 Higher Education Act, this discharge will allow students who borrowed after January 1, 1986, to discharge the amount of the loan to the extent of the amount of refund owed to the student which the school failed to reimburse. Included in this discharge are reimbursements of tax refunds seized by the IRS in repayment of the student loan debt to the extent of a refund the school owed the borrower but never paid.

II. Repayment Options:

Even if the borrower does not qualify for a federal discharge, there are still some strategies to explore in dealing with defaulted student loans.

A. Loan Consolidation: This program allows those who do not qualify for a federal discharge to consolidate their defaulted loans into a Federal Direct Consolidation Loan with an Income Contingent Repayment Plan (http://www.ed.gov/directloan).

B. Deferments and Forbearances: Borrowers may qualify for either a deferment or forbearance even if the loan is in default. The main types of deferments are: student deferments; unemployment deferments, and economic hardship deferments. However, keep in mind that deferments may not exceed a three year time period. Forbearances are available even when the loan is in default, but the interest continues to accrue during the forbearance period.

III. Offset of Federal Benefits:

Finally, borrowers whose student loans are in default often inquire as to whether their Social Security Benefits can be taken by the government in repayment of defaulted student loans. Under the 1996 law, the federal government can take benefits from Social Security Retirement and Disability Benefits, Certain Railroad Retirement Benefits, and Black Lung Part B Benefits. However, keep in mind that there are limits on the funds that the government can take, and that the borrower can fight back. You must receive notice of a hearing before any of your benefits are taken.
If you owe on a defaulted student loan, your hearing will be with the Department of Education. At the hearing, you can either challenge the offset, or set up a repayment plan prior to having your benefits seized.

http://www.legalhelpers.com/legal_helpers/brc_student_loan_default.html

Secured & Unsecured Debt

What is the Difference Between Secured Debt and Unsecured Debt?

The most straightforward way to understand the difference between unsecured and secured loan is to work out if your creditor can take away any item or property in the case that you are not able to repay the overdue amount in time.

The basic difference between secured and unsecured debts is that in unsecured debts there is no tangible property or any other kind of product that is attached to that debt, whereas for a secured debt there are tangible items that are attached to the debt. Common examples of unsecured debts are arrangements such as credit cards, medical bills and store cards where you do not have to put up any material as security for the debt. On the other hand, things such as mortgages and car payments usually have tangible items attached to it, i.e.: your house or car.

The difference between the two types of debts is applicable when someone is filing for bankruptcy also. In Chapter 7 Bankruptcy you can make the choice of either keeping the product or property and pay of your debt in some other way. But if you decide that you cannot pay at all then you also have the option of giving the product or property back and paying off your debt in that way. On the other hand, inChapter 13 Bankruptcy you are allowed to keep the merchandise or property but you will be allowed to pay off your debt according to the Chapter 13 plan. That is to say the bankruptcy court will most probably allow the creditor to charge you only about 10% interest, whereas you most probably were paying a much higher interest than that. However, if the value of the item is less that the value of the debt, then the outstanding about that is not covered by the item will be paid as an unsecured debt without interest.

http://www.bankruptcyhome.com/secured-and-unsecured-debt.htm

ending harassment

What is Creditor Harassment?

Creditor harassment may not be a common phenomenon, but it isn’t a rare one either. While harassment may sound too drastic a measure, you will be surprised by what many debtors go through. If you don’t know what we mean, consider yourself lucky!

What Amounts to Harassment?

Under the law, threatening violence, using obscene language and calling persistently with the intent to irritate/annoy amounts to harassment. Also, calling home at odd hours or at work place if there has been a notification to not do so or even calling up relatives or friends without your permission can all amount to harassment.

How Can I Avoid or Bring An End to This Harassment?

It would not be a bad idea to try and start a dialogue with the creditor before anything else, unless you have a strong sense that the person may not be affable. Explain why you are in default, and try to reason with them and ask for payment extensions or alternative arrangements if they can suggest anything, or put forth any ideas you may have.

As much as one would hope reason and logic can win the battle, the fact is that more often that not, it will not work this way. Debt collectors will probably live up to the stereotype of being unreasonable (sometimes even unfair and harsh) people. The next option you, as a debtor, have is to file for bankruptcy. Here is an option that will ensure that all debt collection activities (including phone calls), ethical or otherwise, come to an immediate end. As soon as you file for bankruptcy all creditors and bill creditors must immediately stop their collection efforts. Once you’ve filed for bankruptcy, both the Bankruptcy Court and the attorney will notify all creditors of your bankruptcy through the mail. In the meanwhile, since this could take a week or so to reach them, you can also notify them in case you get a call, or a creditor comes ringing your doorbell.

What if Nothing Works?

First and foremost, there is no question of nothing working out. You must be aware a law called the Fair Debt Collection Practices Act has been put in place to keep a check on issues related to harassment by creditors. Also, in case creditors continue to contact you after you have filed for bankruptcy and informed them of the same, there are penalties and fines in place for them. In fact, once notified that you are represented by an attorney all calls must be directed through the attorney.

Remember, that the creditor may be unreasonable, but the law is not and our attorneys will provide you with able guidance to tackle such issues. Disclose any such instances that you may have experienced, and let the attorney deal with it through the appropriate legal methods.

http://www.bankruptcyhome.com/endharassment.htm

fair credit reporting

What is a Credit Report?

A Credit report holds crucial information about you, such as information about your identity, your professional and personal addresses, and other pertinent information. A credit report is used by a creditor to decide whether or not to extend a credit to you. Information such as your bill-paying habits and your credit history come into play when taking such a decision. Your credit report is created by credit reporting agencies or bureaus which send it to businesses for evaluation.

Why a Law?

The Fair Credit Reporting Act is a federal law that regulates credit reporting companies. The purpose of the act is to ensure “accuracy and fairness of credit reporting.” A lot of things, including the banking system, a debtor’s credit worthiness and capacity, consumer privacy, and creditor decisions on general consumer reputations are dependent on this Act.

How Does This Law Benefit?

These consumer reporting agencies disperse information if or when required by court order, requested by the individual consumer. The information can also be requested by a creditor or some other entity who may want to learn about the credit worthiness of a particular debtor; either with the intent of lending a debt, employment or setting up some type of a business relationship.

The debtor has the right to ask for a copy of their credit report at any point of time. This can be done by mail or phone.

What is Fair Credit Reporting Act?

“The purpose of this [act] is to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance with the requirements of this [act].”

The primary purpose of the Fair Credit Reporting Act is to ensure fairness and accuracy of credit reporting, and that the procedures followed are reasonable.

Under the Fair Credit Reporting Act:

• If denied credit, insurance or employment on the basis of your credit report, you may ask the creditor for name and address of the reporting agency, and contact then within 60 days of receiving denial notice to get a free copy of your credit report.
• A credit reporting agency cannot give out information to employers, and certain other information of a specific nature, such as reports that contain medical information, without your consent.
• You can dispute completeness and accuracy of information in your file.
• Derogatory information that is outdated cannot be reported.
• You can seek damages from a reporting agency in a case where they violate the Fair Credit Reporting Act.
• You can request for your name to be removed from the list of reporting agencies. (But keep in mind that once you are off the list, you have to be off it for two years.)

How Do I Contact A Credit Reporting Agency?

There are primarily three national credit bureaus that supply credit reports; Experian, Equifax and Trans Union. You can look up "credit" or "credit rating and reporting" in the yellow pages and make calls, your information may be with more than one agency, calling up more than one is advisable. You will to pay a reasonable fee to get your report.

http://www.bankruptcyhome.com/whatisfaircreditact.htm

What Congress and the Supreme Court Say About Bankruptcy

So what do those who make up and protect the laws of bankruptcy say about the process? As a general development, the government has been trying to make the bankruptcy laws harder, so that people cannot easily get away from the debts they collect. The government would like individuals who are in financial trouble to try to work out new financial plans to work out their debts rather than file for bankruptcy.

At the start, the government had introduced bankruptcy laws as a way for industrious individuals who unfortunately were faced with out of control debts to be able to start afresh with their financial planning and management. However, over the past year it has become evident that there are many people who choose to use the bankruptcy laws in order to avoid their financial obligations. Keeping this adversity in mind, the government has decided to tighten the reins on the bankruptcy laws.

The changes made to the Bankruptcy Abuse Prevention and Consumer Protection Act will ensure that people will not be able to abuse the benefits of filing for bankruptcy. On the other hand, however, those who are in actuality faced with financial difficulties and need bankruptcy laws to protect them will find them it harder to file for bankruptcy.

Bankruptcy laws allow those who have filed for bankruptcy either exemption from or discharging of certain kinds of debts. For those who are involved in out of control debts, they would need a fresh start which is what the government intends to support. But at the same time, it is important that those who are out to take advantage of bankruptcy laws are sifted out in the process.

http://www.bankruptcyhome.com/congresssay.htm