Archive | Financial Planning

RSS feed for this section

What Insurance Companies Don’t Want You To Know

Receiving proper compensation from an insurance company due to injuries to you or a loved one is important for your family’s ongoing financial security.

You can recover lost wages, medical bills,  future reduced income as well as both temporary and permanent physical limitations.

Selecting the right attorney is crucial when dealing with highly specialized fields like bankruptcy and personal injury. Mr. Matt Van Giesen is my injury attorney of choice, and he is the guest author of this post on our site.

Matt Van Gieson, Attorney

As we all know, insurance companies want to make billions and billions of dollars. I mean, who doesn’t? What we don’t know is just how they do it. Yes; charge more in premiums and pay less in claims is the trick. But just how do they do that?

Tactic #1: Settle Fast and Cheap.

They push hard and fast—go to your home, take you to lunch, offer you $500 bucks—whatever. Just get a signature and then sit back and enjoy that you just saved them thousands, if not tens of thousands of dollars.

But if that doesn’t work, well then, welcome to 3D land!

Now I wish I could tell you that this is some sort of fun attraction like an IMAX 3D movie, but no! It’s a notorious way insurance companies wear out injured people and get them to settle their claim for sometimes pennies on the dollar.

Tactic #2: The 3Ds: Delay, Deny, Defend.

You’ve successfully resisted the “shock and awe”, “sign your life away” blitz of the insurance company. You’re feeling pretty good, but now the more devious of practices awaits—delay, delay, delay.

Life happens and the more the insurance company can delay, the tougher it is for you, the injured person, to resist settling for whatever the insurance company will offer. Work is missed, medical bills pile up, and collection notices arrive—all giving the insurance companies leverage to get you to sign on the dotted line.

But you persist, and make it past the delay phase. You’ve been valiant so far—only to find out that the next turn brings you into denial. Yep, they won’t pay your claim! They make up some ridiculous excuse of how you are at fault or were not hurt in the collision and then politely—or not so politely—deny your claim.

They’ve got you where they want you. You’re hurting and your only options are take the insurance companies low ball offer or bring a lawsuit. Yep, the billion dollar insurance company with its legions of lawyers is inviting, tempting you into its playground—the courtroom. “Come fight me, but beware I fight here every day. I know how to defend and defeat you.” This is where many cave and sign on the dotted line.

But that doesn’t have to be you. You don’t have to add to the insurance companies bottom line. When tragedy strikes, seek out a well-qualified injury lawyer and let your attorney take the fight to insurance company and get you what you deserve.

A professional athlete doesn’t go to bat and personally negotiate his own contract. The serious athlete hires a professional, as do musicians and artists, because they know that having a professional fighter on their side against a billion dollar industry is essential.

At the Law Offices of Harold D. Carr, P.S., we have been fighting insurance companies for over 25 years, and have handled more than 10,000 claims. We hold insurance companies responsible, and get injured people what they deserve.

If you are involved in a collision, call us at 800-700-8082 and let us even the playing field for you.

You or someone you know may want to turn over a new leaf, and get started towards a brighter financial future now. Call us at (253) 383-1001, or contact us through our web site in order to schedule a free, no obligation, personal consultation with me. During our meeting, I will listen to your situation, examine your options with you, and explain how and why bankruptcy may be the right choice for you. Don’t wait; stop procrastinating! Act now to regain your peace of mind right away.

Home Prices Increase, But More Slowly, in June, While Pending Home Sales Decline

Homeowners have been through a roller coaster that rivals any mere thrill ride over the past decade. The curves and slopes represented by single family home prices have at one time or another over the years led to temporary riches, longer term losses, and more familiarity with terms like “under water”, “upside down”, and other financial slang than most homeowners would prefer. As reported by the S&P/Case-Shiller gauge, U.S. home prices increased by 2.2% in June. That’s a healthy increase, but in May, home prices increased an average of 2.5% nationwide.

These results aren’t uniform when you look inside the numbers. According to an analysis of the most recent S&P/Case-Shiller index by, in six cities, prices rose faster in June than they did in May. In May 10 cities had posted faster monthly growth.

A longer term view shows more good news for home sellers when reviewed on an annual basis. Annual home-price growth hit 12.1% in June, down from 12.2% in May, when prices hit the fastest year-over-year pace since 2006.
Ruth Mantell, the author of the Cash-Shiller Index analysis, also reports on pending home sales on According to her article, “Led by drops in most of the U.S., sales contracts on homes fell 1.3% in July, a second month of declines, as mortgage rates continued to rise, according to data released Wednesday. Despite the recent drop, the pending-home sales gauge in July was up 6.7% from the year-earlier period, according to the National Association of Realtors. By region, pending home sales in July fell 6.5% in the Northeast, 4.9% in the West and 1% in the Midwest. Meanwhile, pending sales rose 2.6% in the South. A sale is listed as pending when the contract has been signed. Sales are typically finalized within one or two months of signing.”

Ideas for Action

If you are in the market to buy a home, rising interest rates may temper price increases in homes in your price range.

The articles and the surveys that the articles are based upon represent aggregate information that can be helpful in identifying trends, but probably has little direct correlation on individual markets like the one where you live. A realtor friend points out that the number of foreclosures and short sales in an area greatly affect the comparable market value of homes for sale in that area.

Spend time finding the most reputable realtor, and most reputable lender, that you can. Insist that they provide you with reviews and references if you can’t find reviews on the web. When you buy a home, you are making an enormous financial commitment that will have long term repercussions on your financial life. Ensuring that you are well represented and advised in your home buying and selling transactions, just as you ensured that you are well represented legally by engaging the Law Offices of James H. MaGee as your attorney, is worth the time and effort to identify reputable real estate and loan servicing agents in order to achieve the quality, satisfactory results that you should expect.

Identity Theft Tips – a Few Basic Tips About What to Do

You might not know until months later that you have been the victim of identity theft. Sometimes you find out when a loan application is unexpectedly rejected. Here are a few tips to avoid identity theft:

  1. Place a “security freeze” on your credit history. A security freeze prevents your credit history from being shared with potential creditors. If your credit files are frozen, a thief will probably not be able to get credit in your name. A security freeze generally costs $10 to place, thus $30 to place on all three bureaus.
  2. Do not carry your social security card with you.
  3. Do not attach or write a personal identification number (PIN) or Social Security number on any card you carry with you or anything you are going to throw away, such as an invoice or receipt.
  4. Shred any document that contains your credit card or Social Security number before throwing it away.
  5. If your insurance company or other business uses your social security number as your membership number, consider asking the business to use a different number as your membership/ID number.
  6. Alert your credit card lender if you do not receive your statements. Someone may be stealing your mail.
  7. Do not give personal information or account numbers to anyone until you have confirmed and verified that you truly need to provide this information. Resist giving any of this information over the phone.
  8. Frequently check your credit report to look for warning signs. At , you can obtain one credit report each year for free.
  9. Add passwords to your credit card, bank and home accounts through your financial institution  Avoid using easily available information like your mother’s maiden name or your birth date as your password! In addition, don’t use the same password on all of your accounts. Finally, use a combination of letters, numbers, and symbols as permitted by your institution so that your password won’t be easily guessed by hackers who use dictionary-based attacks.
  10. Consider bankruptcy. If your “honest” credit was pretty messed up with unpaid medical bills, foreclosures, high credit balances and notations of “charged off” or “other than paid as agreed”, then consider bankruptcy to wipe out the “honest” credit problems for which you are responsible, and at the same time, wipe out the “phony” credit that the scammer incurred in your name by way of identity theft. It makes no sense to challenge identity theft related negative credit entries if your honestly-and-truly owed credit accounts are delinquent, unpaid and/or showing high balances. Just clean it all out with bankruptcy and then after the bankruptcy place a “security freeze” on your credit reports to prevent the scammer from effectively stealing your identity again.

Be careful out there! You work hard to provide for yourself and for those you love. Some lazy scammer out there wants to take the “easy road” by stealing your hard-won credit and financial identity!

Some comforting news about air travel

Traveling this summer? You may get better medical care than you think on an airplane.

Half of all flights have a doctor sitting somewhere in the airplane, reports Marilynn Marchione of the Associated Press in her article that is sourced from a Thursday, May 29, 2013 New England Journal of Medicine article. More comfortingly, when there is an on-board medical emergency, sick airline passengers almost always survive.

There are about 44,000 medical emergencies out of the 2.75 billion passenger trips per year. Here are some interesting statistics quoted by Ms. Marchione:

  • The odds of a medical emergency are 1 per 604 flights, or 16 per 1 million passengers.
  • Planes had to be diverted for emergency help in only 7 percent of cases.
  • Doctors were on board and volunteered to help in 48 percent of cases; nurses and other health workers were available in another 28 percent. Only one-third of cases had to be handled by flight attendants alone.
  • Most common problems: Dizziness/passing out 37%, trouble breathing 12%, nausea or vomiting 10%.
  • About one-fourth of passengers were evaluated at a hospital after landing and 9 percent were admitted, usually with stroke, respiratory, or cardiac symptoms.
  • Out of nearly 12,000 cases, a defibrillator was applied 137 times, including in 24 cases of cardiac arrest where the heart had stopped. Note: Sometimes defibrillators are used to analyze an irregular heart rhythm to help doctors figure out what to do, not necessarily to deliver a shock, so don’t panic if someone wants to put a defibrillator on you. You might not get the shock!
  • In one study, only 36 deaths occurred out of 12,000 in-flight medical emergency situations, with only 30 occurring during the flight.
  • Pregnancy-related problems were generally rare–61 cases, in this study–and two-thirds of them involved women less than 24 weeks along with possible miscarriages. Air travel is considered safe up to the 36th week or the last month of pregnancy.
  • In one study of 12,000 in-flight medical emergencies, only three cases involved women in labor beyond 24 weeks of pregnancy led to a plane being diverted.

If your summer vacation plans involve air travel this year, then I hope that these statistics bring your a bit more peace of mind.

Do You Know These Eight Used Car Buying Scams?

Spring and summer are top car buying months here in the USA. Buying a car is usually exciting, and it can even be fun!

Most of the time, all ends well, and both the seller and buyer are happy with the transaction. However, in 19 years of practicing law, I have heard quite a few very sad used car stories. Spending your family’s precious financial resources on a vehicle with mechanical or legal problems can be as financially devastating as an illness or job loss.

Car for Sale Sign on Winshield Under Wipers

As a prospective car buyer, you can protect your financial future and your family’s safety with these tips to help you become a better prepared used car buyer. Learn the facts and avoid falling for these eight top used car buying scams.

1) Odometer Fraud

Rolling back the odometer is becoming more difficult as more recent models use a digital display, but even computers are not infallible. The best way to tell if an odometer has been tampered with is to obtain a vehicle history report from a service like CARFAX®. CARFAX may list a few events in the history of the car indexed to the mileage at the date of the event.

Odometer fraud example: If a CARFAX report for a vehicle indicates that a fender bender event occurred in January 2012 when the vehicle had 61,000 miles, then the seller will have a difficult time explaining why the used car’s odometer indicates that the car had only travelled 40,000 miles as of June 2013.

2) VIN Cloning From Similar Make and Model Cars

Stolen vehicles are sometimes sold with vehicle identification numbers (VIN numbers) that have been swiped from similar legally registered cars. One possible way to avoid this scam is to verify that all of the VIN numbers on the vehicle match, including those on the dashboard, the driver’s side door sticker, the car’s frame and the paperwork for the title. If the numbers don’t all match then don’t just walk away, run away!

3) “Title Washing” Salvaged Vehicles

Cars deemed salvage drop dramatically in value. A salvage title is usually issued on a damaged vehicle when the cost of repair exceeds 75% of its pre-damage value, but this exact number can vary state to state. Scammers “wash” the title of a car by altering the title documents and/or moving the car to different states to get a clean title. Check for working that indicates a salvage title, such as “totaled”, “reconditioned”, “salvaged”, “junked”, rebuilt” or “warranty returned.” Also examine the title document to see if it has been physically altered. A CARFAX vehicle history report could also be useful. If a car was originally sold or titled in some other state, it might pay dividends to investigate the history of the title in that state to see if it was “salvaged” vehicle in that state or had any significant damage out of state, but then the car was subsequently moved to the current state with the issuance of a clean non-salvage title.

4) “Curbstoning” Problem Vehicles

The laws of most states don’t allow private citizens to sell multiple vehicles, other than those titled to them. Frequently, troubled vehicles are farmed out to private individuals by unscrupulous vehicles dealers for sale because the dealer does not want to have a further tarnished reputation when the troubled vehicle is brought back by a dissatisfied customer. Beware of anybody who is trying to sell multiple vehicles or perhaps someone who seems to get by “buying and selling cars” for a living instead of working a regular job.

5) Dangerous Airbag Fraud

A deployed airbag can be difficult and costly to replace. Airbag covers can be replaced on the dashboard so that, from inside the vehicle, there is no indication that the airbag compartment is empty. A CARFAX Vehicle History Report may tell you if the car has been in an accident. If there is an accident history, it may be wise to verify that the airbag system is in good working order.

6) Too Much Sales Pressure

Yes, I know it is beautiful and you want or need it, but resist the temptation to move too quickly. A $100 investment for check over by a mechanic you trust together with an inexpensive CARFAX report might save you thousands of dollars down the road. A high-pressure seller is suspicious. The seller may be trying to move things along fast in order to hide something.

7) Who has the Title?

This is a big deal. You want to see the title before buying the car.

  1. If buying from a private party and there is money owed on the car, you want to go with the seller to the bank and pay the car off directly and have the bank release the title to you on the spot. Don’t just hand over a large sum of money to the seller and trust that all will be fine. And for me, this same rule applies even when doing business with a dealership or used car lot, as I explain below.
  2. If buying a used car from a vehicle dealer, you still want to see the title before you hand over the money. This is because a cash-strapped dealer could be “floating” the car on the lot by accepting the vehicle as a trade in without paying off the underlying obligation that the previous owner owed to the bank, hoping that a buyer will come along before the next payment comes due and is reported to the prior owner as late and unpaid. If you pay the dealer directly but then the dealer goes out of business or for some reason can’t or won’t pay your purchase money over to the prior owner’s bank then you could end up getting nothing for something. The prior owner’s bank can come repossess the car for non-payment because they have a superior lien or security interest in the vehicle, and you may be out your money and your car.

If you find a dealership or car lot that is “floating” the car, then beware and consider walking away. If you still want to do business with that dealer, I suggest that you take your money to the prior owner’s bank and pay that bank directly to release the title to you.

8) Consigned Vehicles on Car Lots

Beware. Some dealerships that won’t “float” the title as explained in #7 above will take a vehicle on consignment. Consignment isn’t necessarily a bad thing, but pay attention to #7 above when paying over money for the car. If there is no money owed on the vehicle to a bank, consider having the consignor come to the car lot with the title and sign it over to you on the spot when the consignor is paid. If there is money owing on the car on the lot, then I recommend that you require that the dealer and the consignor all meet together at the bank where the money is owed and do a three-way transaction where you cash out the bank and the title is signed and delivered to you on the spot. If one of the parties won’t cooperate, strongly consider walking away.

CARFAX does have its Critics

A clean CARFAX vehicle history report is not a guarantee that the car has no prior accidents or problems, but it may be the best assurance that you can get! You’re better off coming prepared with something from a reputable company like CARFAX than with nothing.

It can be exciting to replace your car, but don’t let your enthusiasm overwhelm your judgment! If after reading about all of the dangers and pitfalls that can befall used car shoppers you are still determined to proceed, then go forth with your eyes open, a trusted mechanic at the ready, and don’t forget your CARFAX report. You are now better prepared to enter the wild world of the used car market.

This article and I owe a sincere thank you for the great tips and advice that can be found in the March 21, 2013 post at along with content on the CARFAX site for tips #1-6!

What you don’t know about “Charge off Dates” can hurt you

You may be able to remove some negative items off of your credit report by disputing old debts that are no longer due, and watch your credit score rise as a result!

Reporting invalid “out of statute” debt as currently collectible obligations is an old bill collector’s scam. If you fall into this trap, you could be tricked into paying money you don’t owe.

Did you know that consumer debt that has been in default for more than six years is not collectible using any sort of lawsuit or legal process, and therefore should not be reported on your credit report? However, there is an important exception to that rule in the case where debt is owed as a result of a lawsuit judgment that was issued at some time within that six-year period. I’ll explain how this exception applies later in this article.

Many Americans have several “out of statute” debts –debts that should not be listed as currently due on their Experian, Transunion or Equifax credit report. These debts are too old to be carried on the credit report. In these cases, you should write to the collection bureau that lists the debt and dispute the entry so that the debt no longer appears on your credit report from that credit reporting bureau.

Q: How do bill collectors get away with this?

A: Once a debt has been in default (unpaid) for six years, the statute of limitations to collect the debt has expired. The creditor cannot file a suit to collect the debt once the debt is too old, as having been in default for six years. However, to trick you into thinking that the creditor has additional time to collect upon the debt, the creditor will (out of thin air) make up a phony date called the “charged off date”, and put that phony “charged off date” on your credit report as the date of default.

Q: Why is my credit score important?

A: The benefits of improving your credit score are undeniable; improved employment prospects, cheaper car insurance, and low-interest rates for future car loans and mortgages are among the perks of a better credit score. A FICO credit score of 700 or higher is ideal for the best of benefits –850 is considered “perfect” credit.

Q: My credit is pretty rocky. Will disputing “out of statute” debts really help?

A: If your credit is already really troubled with many enforceable unpaid debts, then disputing a few here and there might not be that helpful–a bankruptcy filing might be the right call. We can help you determine your best course of action, contact us at But if your credit is reasonably clean, you should make a habit of securing your free credit report each year, and checking it for errors. Even after a bankruptcy filing, you should get in the habit of making an annual review of your credit report. You can obtain your free credit report

Q: Why do creditors report “charge off dates” as occurring months or years after the date you defaulted on the debt?

A: It is a trick to fool you into believing that an aged and invalid debt is still valid and collectible. Actually, “Charge off date” is a term of no legal significance. So definitely make a written dispute of all credit report debts that have been unpaid and in default for six years or more, regardless of the “charge off date” reported in your credit report.

Please read the rest of this article on my website. My website also contains many more useful tools and voluminous information on bankruptcy and financial planning that I invite you to browse and learn from at no cost or obligation.

Biggest Loser Turns Biggest Winner. The Little Known History of the Credit Card.

Between 1979 and 1981, Citibank lost over $500 million on its credit card operations. By 1990, this had changed and credit cards were suddenly profit leaders at the bank. What happened?

Easy answer: Citibank (and many other banks) realized that they were pitching credit cards to the wrong market segment. Since nearly the inception of credit cards, banks had been offering credit cards almost exclusively to the financially well-off; but after years of lackluster profit performance with credit card operations, the banks finally realized that the truly big gains were to be made by offering credit cards to lower income and middle income market segments. They began to market to the elderly, the student and to most anyone of modest or lower income, specifically targeting low-wage clerks, young professionals, clerical support staff, struggling teachers and many laborers. The banks saw it as a matter of survival—theirs, not yours!

Banking was at a troubled crossroads in the late 1970s. Bank industry profits were flat or in decline as traditional business and mortgage lending suffered losses associated with the troubled economic times. Compounding the profitability problems, the usually more glamorous and profitable areas of banking business such as third world lending and commercial realty lending were also then of hit-or-miss profitability. The banking industry needed a new profit source. Credit cards issued to middle/lower income borrowers were then introduced to fill the profit void.

The best explanation of this shift in credit card marketing focus to the less well off might be found with Robert D. Manning’s year 2000 book, “Credit Card Nation”, published by Basic Books. ISBN 0-465-04366-6. The following quotes from the book appear in chapter 1, pages 9, 12-13 and 20: “During the 1980s, the credit card industry’s marketing campaigns successfully expanded into middle-class markets, including blue and white-collar workers who suffered unexpected employment disruptions due to corporate downsizing and recession-related layoffs. This profitable linkage with lower-income households early in the decade emboldened banks to target other nontraditional niche markets such as unemployed college students and retired senior citizens in the mid-1980s, then the working poor and the recently bankruptcy with secured credit cards in the late 1980s and early 1990s. The results were impressive. The profusion of credit cards generated rapidly escalating consumer finance charges, merchant discount fees, and, of course, profits. Between 1980 and 1990, the charges of the average U.S. household jumped sharply from $885 to $3,753 per year, or more than twice as fast as disposable income, while average cardholder debt soared from $395 to $2,350. Credit card issuers earned between three and five times the ordinary rate of return in banking in the period 1983-1988.”

“By the end of 1994, the typical American card holder had amassed nearly $4,000 in revolving debt on a total of three of four bank credit cards with an annual interest rate of about 17 percent.”

Credit card marketing budgets concurrently exploded, too. Marketing expenditures by Visa, MasterCard and American Express had climbed to $75 million by 1985. The big three then more than doubled marketing expenditures by 1994, with a 1993-1994 2-year total combined expenditure of $385 million, (plus another $40 million spent by Discover) over the two-year period 1993-1994. Then combined credit card industry marketing budgets doubled again within a mere four-year period, climbing to $870 million total expenditure for 1998.

So, in a mere 14 years ending in 1994, the average household credit card revolving indebtedness had increased by about 1,000 percent (a 10 fold increase!) from $395 to nearly $4,000, and credit card industry marketing budgets had increased by something approaching 400% (a 4 fold increase).

So, does credit card marketing contribute to bankruptcies and indebtedness? Quite possibly.

1998 saw 1,441,891 bankruptcy filings. 1980 filings stood at about 300,000.

So putting it all together, average household revolving debt increased by 10 fold (about 1000 percent) 1980 through 1998 to a high of $4,000 as 1980s and early 1990s marketing expenditure of credit card products (much of which was to lower and middle income households) concurrently increased by a nearly similar 1000 percent (10 fold) 1985 to 1998 to $870 million. Following suit, bankruptcy filings in roughly the same period 1980—1998 increased nearly 5 fold (a little less than 500 percent) from 300,000 to about 1.4 million.

The banks found a way to turn the biggest loser in their stable of operations into the biggest winner of profits. The banking industry turned a broken-down, sway backed and under appreciated old nag of a pony into a Kentucky Derby jackpot winning thoroughbred—in part by feeding it what grew into an $870 million annual diet of marketing. Profits jumped and a whole new industry was created: the modern credit card. This led to an amazing turn around for the banks, mostly at the courtesy and expense of middle and lower-income America.

If you are struggling under a mountain of debt and do not see much hope of completely escaping from the debt within the next 24 months, then you should strongly consider consulting with us regarding a bankruptcy filing. Your initial one-half hour consultation is completely free!

Rebuild your credit score after bankruptcy

The Wall Street Journal’s “Smart Money” feature states it clearly: bankruptcy can help improve your credit score over the long term, even if your score hasn’t declined very much.

Just being cautious with your credit after bankruptcy is of number one importance, according to “Smart Money”. There are many consumers who may see quick gains in credit score recovery from a bankruptcy, and other consumers for whom a bankruptcy filing can arrest an otherwise inevitable long term credit score slide.

Consumers who fail to significantly reduce the amounts owed on high balance credit accounts my eventually see a decline in their credit score. Carrying high balances on credit over time can eventually be as harmful to your credit score as late mortgage payments, repossessions, or delinquent accounts placed with bill collection companies.

Some consumers may already have made payments late, missed payments altogether, or have had accounts turned over to debt collectors. These consumers are probably already out of the “good credit” 700+ credit score range. A credit score of 850 is considered “perfect”.

John Ulzheimer, president of Educational Services, a consumer credit education group, is quoted in an article entitled “Declaring Bankruptcy Can Improve Your Credit Score” in ”Smart Money” by Aleksandra Todorova. Mr. Ulzheimer asserts that after filing for bankruptcy, consumers who fall into either the high balance or struggling to make payments categories may see their credit scores increase, depending upon the point where they have fallen on the credit decline trajectory. Why? To start with, credit reports are largely wiped clean with a bankruptcy filing.

According to Ulzheimer, many consumers see a fairly quick improvement in credit scores after bankruptcy. Here’s why: When calculating scores, the formulas developed by Fair Isaac (the company that calculates the most widely used credit score, known as the FICO score) are set up to grade someone’s credit standing as compared with that of consumers in a similar financial position. To do that, Fair Isaac divides consumers into 10 groups, using what it calls “score cards”. It then ranks the consumers in each group based on the others in the group. One of these score cards is bankruptcy filers.

With a bankruptcy filing, the FICO score is then determined based on how one does after bankruptcy compared with other bankruptcy filers, explains Fair Isaac spokesperson Craig Watts. The reason? Fair Isaac has found this to predict credit risk better. ”It’s a much fairer comparison,” says Mr. Watts. ”You’re not compared with people with rosy, perfect reports.” Thus with good after bankruptcy credit management, a good score in the 700s isn’t impossible, and when the bankruptcy drops off of your credit record in 7-10 years, you might even then hit that perfect 850.

The “V” Shaped Curve Leads to Inevitable Credit Recovery

In her article on entitled, “How Much Will Bankruptcy Hurt Your Credit Score”, LaToya Irby, Credit / Debt Management Guide, takes us through the decline and recovery of a consumer credit score in various scenarios. The “worst case” scenario for a bankruptcy filing might be a temporary credit score drop of a mere 150 points for someone with an already mediocre credit score of 680-690, and even less than 150 points if a credit score is already in the troubled 500-650 range. If one’s credit score is already coasting down to 680-690, then bigger problems are probably already on the way. The good news is that a bankruptcy filing can 1) end the days of that forever lingering sub-700 mediocre to poor credit score or 2) halt and then reverse a downward-moving credit score trend. The reason is that with a long term credit score of 680-690, you will not receive many low-rate credit offers anyway, so a bankruptcy filing could easily be a step in the right direction to better credit offers in the near future. So consider taking the bankruptcy hit now to strip away the credit disaster, and then begin to rebuild a better financial future.

Ms. Irby does relate that if a consumer’s credit score is really high—a score of 780, for example—a bankruptcy filing could lower the score by 240 points to a poor score of 540. However, starting from that low point, a credit score can recover with amazing speed to the point of qualifying for a home mortgage in as few as two years after bankruptcy. Better yet, the consumer might even be able to comfortably afford the mortgage without the crushing debt burden eliminated after bankruptcy.

Is Chapter 13 better than Chapter 7?

Generally, bankruptcy in Chapter 13 where the debtor makes full or partial repayment of debts according to a reorganization plan is not better for rebuilding credit. A Chapter 7 “straight bankruptcy” filing offers the best financial recovery strategy for most consumers. In Chapter 7, all or nearly all debts are wiped out in a quick and short proceeding without any repayment required. Many people misunderstand Chapter 7, and mistakenly believe that they will lose their house in a Chapter 7 and that their car or 401k savings plan will be taken away. This is not correct. Rarely, if ever, is any property or item taken away in Chapter 7, and consumers can keep a house and car in Chapter 7 if they wish, so long as any mortgage or car loan payments are kept up. Ms. Irby of Guides researched the question of whether 7 or 13 was better for quick credit recovery, and decided that Chapter 7 is better for a quick credit score recovery, relying upon information released by FICO.

In 2010, the Fair Isaac Company, the provider of the popular FICO credit scoring model in which a score of 850 is considered a “perfect” credit score, published information about how bankruptcy can affect a credit score by proving some mock scenarios with different credit profiles. The FICO mock examples did not differentiate between the effect of Chapter 7 and Chapter 13 bankruptcies, so the proprietary and secret FICO formulas do not seem to prefer or favor a debtor who makes full or partial repayment through a Chapter 13 bankruptcy plan. This argument seems to suggest that most consumers might as well file for Chapter 7 when it comes to FICO credit scores, because a Chapter 7 filing is over so much more quickly than a three to five year Chapter 13 full or partial debt repayment plan. LaToya Irby authored an interesting article entitled “What Your Credit Score Is Made Of” that describes the components that make up consumer credit scores in more detail.

Credit Restoration 101

Restoring credit after bankruptcy is not nearly so hard as people might think, and there is an easy rule of thumb to begin the speedy recovery of a FICO credit score. That is, simply maintain a good credit record with any accounts which survive the bankruptcy, including child support payments, utilities, mortgages, and car loans that are kept after bankruptcy. Guide’s Ms. LaToya Irby sums it up: ”You might be surprised to see how soon after bankruptcy you begin receiving credit card offers again. If you file for bankruptcy, know that your credit isn’t lost forever.”

Aleksandra Todorova of the Wall Street Journal “Smart Money”‘s agrees: “[H]ere’s some surprising news: In many cases, the damage done (by bankruptcy) to one’s credit score isn’t nearly as bad as expected. Over the long run, obtaining a score high enough to make you eligible for very competitive rates isn’t out of the question.”

Advanced Credit Recovery

Consumers can turbocharge their after bankruptcy FICO credit score recovery with a little further reading and follow-up action. There are a number of online guides and some great books available to help you learn how to speed up your FICO credit score recovery after bankruptcy. Consumer debt expert Gerri Detweiler,, is the author of “The Ultimate Credit Handbook: How to Cut Your Debt and Have a Lifetime of Great Credit, Third Edition,” for example. For starters, the first four credit recovery steps recommended in the aforementioned WSJ’s “Smart Money” column are really easy steps to get a credit score back into the desirable 700s – maybe even within two years. Here’s a summary:

(1) Damage Control. Make sure that all the accounts listed in your bankruptcy are listed in your credit report as $0 balances and/or “discharged in bankruptcy” because if the creditor keeps erroneously reporting it as having a collectible balance, it will slow down or stop your credit recovery progress. You may get your credit report at to check for erroneous reporting, and then learn how to dispute erroneous information on your credit report.

(2) Get a New Credit Card. If you can’t get a credit card with a small credit limit, then search for a lender who will issue you a “secured” card. A secured card is one that is backed by a modest cash deposit. Look for a lender who promises to let you “graduate” to a regular unsecured credit card following 18 months or so of on-time payments.

(3) Piggyback. If you have a very trusted friend or relative with good credit repayment habits, ask that person to allow you to become an “authorized user” on one of their credit cards. This may eventually “bootstrap” your friend’s good payment history into your credit report history.

(4) Bigger Loans. I have seen some people get a car loan while they are still in the 4 month Chapter 7 process. For others, a car loan within a few months after bankruptcy is often a possibility. Of course, only finance a car loan if in fact you really need a car. Should the need arise, start shopping for a lender and auto dealer who will work with you. It is important to be choosey about the terms of any car loan. If you are shopping when the auto dealership is under a crunch to make a sales quota, you might find that the auto dealership needs you more than you need them. Do not accept a ridiculous loan interest rate! If the car lot finance manager cannot get you a reasonable after bankruptcy interest rate of 8-14%, then move on immediately. Find a more flexible lender. I have heard tales of some people even getting a 5.0% interest rate car loan—or less—after bankruptcy on a car loan. Be tough, be polite and be fair during your negotiations, and you may be surprised at the favorable outcome.

Gerri Detweiler says that sometimes consumers have to face the music and file bankruptcy. Rebuilding a credit score into the FICO 700s range after bankruptcy isn’t necessarily that difficult, especially by starting with the four good credit restoration fundamentals reviewed above.

Ideas for Action

Saving a credit score in the short term shouldn’t be seen as a good reason to avoid or postpone filing for bankruptcy, particularly if you have either high debt balances or are struggling to make payments on time. If you find after a sober examination of your finances that you are unable to completely clear consumer debts to zero within a couple of years, bankruptcy may be the prudent choice. Even if your credit score isn’t below 700 currently, it is quite likely that it will end up there anyway if your financial resources are stretched too thinly. ”You have to be realistic about your ability to get back on your feet financially by repaying your debts within a reasonable time without an extreme or ridiculously small household budget which is not long-term practical” says Ms. Detweiler.

Articles quoted or referenced in this article:

How Much Will Bankruptcy Hurt Your Credit Score

Credit expert Gerri Detweiler The Ultimate Credit Handbook: How to Cut Your Debt and Have a Lifetime of Great Credit, Third Edition (9780452283923): Gerri Detweiler: Books


How to Dispute Consumer Credit Reporting Errors and Fix Your Credit Report – Money Management

Declaring Bankruptcy Can Improve Your Credit Score –

After your bankruptcy filing, get discovered (and rich!) with

David Pogue, personal-tech columnist for The New York Times, states that 2013 is the year of the “smart watch” in his “State of the Art” column entitled “Dick Tracy, Your Watch Is Ready, Almost”, published February 27th.

The apparent market leader in “smart watches” will be the Pebble Watch. The next products to challenge for the lead will have names like the Cookoo, I’m Watch, Meta Watch, Casio G-Shock GB-6900 and Martian.

Come on! What does a discussion of new “smart watches” have to do with a bankruptcy blog? It has lots to do with bankruptcy!

First, every single one of the “smart watch” products have something on common, says Mr. Pogue. The concept behind each prototype was first floated on, a website where people with an idea seek donors who would contribute to their prototype.

Second, if you have an idea for something like the smart watch and you file for bankruptcy, what happens to your idea? Can your idea be taken away from you as intellectual property to be sold with the proceeds distributed to your creditors? If you have an idea, when should you post it on for funding requests?

The answer is “yes”, you can lose rights to your great ideas in bankruptcy. Your idea can be taken away by the bankruptcy court trustee and sold to the highest bidder. So if you are on to something big like the “smart watch” at the same time you are struggling with debts, you might want to file for bankruptcy before you do any significant marketing or development work on your invention, and you should certainly file for bankruptcy before you ever post your idea or invention on

Could an idea of yours find funding on and even lead to post-bankruptcy riches if you are “discovered” by the right people? Very possibly yes, as does not limit participation to technology and physical inventions, but welcomes performance artists, musicians, authors, and fashion designers. wasn’t established just to help inventors to make money by finding a financial backer to buy your idea. may enable you to develop something of benefit to humankind that you otherwise would not have the resources to pursue. It is a platform for sharing ideas and for connecting ideas with crowd sourced funding.

Don’t discount your ideas. Even seemingly weird ideas might find funding on Venture capitalists and Fortune 500 companies now regularly scan to find promising ideas and concepts that they might fund and develop. This is how the “smart watch” idea was discovered, says Mr. Pogue.

Check back soon for part two of this blog post that will include actual success stories from and more great ideas!

Hollywood secrets: 7 big stars and their almost unknown bankruptcies and bonus: 8 best uses for the first $1,000 of your tax refund

Even after a long day of sympathizing with clients as they share financial troubles, I still have ample appetite to consume the latest news story of a celebrity’s financial train wreck.   I cannot pass up a headline announcing the latest financial woes of the famous and telegenic.  Even after a 20 client day, I will still pause to read about a celebrity debt default.   I sometimes ask myself:  How could all of that talent, fame and fortune leave one insolvent? How ever did it happen?

 The layout of this blog post is unique:  following every (ho-hum, yawn) financial inspiration tip of what one might do with the first $1,000 of any tax refund is a little tiny tidbit of irresistible celebrity financial muckraking.

 You will get seven celebrity financial crashes and eight financial advice tips about how you might spend the first $1,000 of your tax refund – all mixed in one package.  I think that is a square deal.


The average tax refund is $2,913.00 – some of this is understandably might used for “catch-up” on household obligations or to repair aging vehicles.  But if you can spare $1,000.00 of the refund, consider using the $1,000.00 for the benefit of your financial future – so I present eight tips about how to best use $1,000.00 of your 2012 tax refund.

 But on to the crashing celebrities:  We almost all know about Mike Tyson’s 2003 filing for bankruptcy protection and Anna Nicole Smith’s two filings.   But did you know about Walt Disney’s bankruptcy filing?  After bankrupting at age 21, he went on to found a company that grossed $38 billion in revenue last year.

Some of our most loved and respected celebrity entertainers have faced financial woes and were able to reconstruct their lives and finances with the assistance of the US Bankruptcy Courts.

If you are besieged with bills and collectors (or know someone who is) – then reach out to us for a consult and let us open the door to a bright post-bankruptcy future.  Just consider Walt Disney…. he did just fine after bankruptcy.

1.   Tip:  Use $1,000 of your tax refund to open a Roth IRA for yourself, a child or a grandchild (or even a nephew or niece!).  If you, your child or grandchild had taxable income for the year (even if no tax was due or paid) you can usually contribute up to $5,000.00 into a Roth IRA for yourself or that child or grandchild.  But lets take it easy, as $1,000 would be more than a generous.  The Tax Code provides the rest of the generosity as this contribution will grow tax-free year after year, and it can be withdrawn tax-free after age 59.5 years.  What greater gift than to begin the creation of a nest egg for yourself, a loved child or a grandchild – so toss in $1,000.00 and watch it grow!  Even if you or your loved one has financial troubles in the future, the money in the Roth IRA is virtually unreachable by creditors.  Now on to the celebrity financial woes……

2. Celebrity bankruptcy:  Actor Sherman Hemsley “a/k/a George Jefferson” filed for bankruptcy protection in June 1999.  He was unable to repay a $1 million dollar loan and had IRS issues to boot.  After some time he did withdraw his bankruptcy petition after negotiating repayment arrangements with his creditors.

3. Tip: Use $1,000 of your tax refund to replenish your emergency fund – set up a separate savings account for this purpose at a bank where you don’t normally do business.  If you want to REALLY  go for it, set up a paycheck allotment or auto-deposit of $100 monthly into the same emergency fund.  In just two years, this fund will grow to nearly $5,000.00.

 4. Celebrity bankruptcy: Actress Kim Basinger filed in 1993 after a town she purchased in 1989 (at the encouragement of relatives) turned into a financial nightmare.  She had hoped to turn the whole town into a theme park of some sort, partnering with investment company Ameritech.  Also compounding her financial challenges was an $8.1 million dollar judgment against her for withdrawing from the film “Boxing Helena”.  Eventually Kim bounced back well, winning an Academy Award for her film role in “L.A. Confidential” and eventually settling the $8.1m lawsuit for about half of what she owed.

5. Tip:  Get a Professional Review of Your Finances from a fee-only non-commissioned financial advisor – which usually costs less than $1,000.00.  How is this different from calling Edward Jones or Charles Schwab?  There is a big difference, as your local stockbroker is a salesperson, not a truly neutral financial advisor.  Contact the National Association of Personal Financial Advisors for a local referral.  A note of caution: if you have not yet filed your own bankruptcy to be rid of burdensome debt, I doubt that your friendly financial advisor will be able to instantly resolve financial woes.  But once free of hopeless debt, you may have a little extra in the household budget – and this could be wisely invested  in mutual funds, IRAs, GETT educational credits or other funds to suit your family’s long-term needs as recommended by your professional (non-commissioned) Personal Financial Advisor.

6. Celebrity bankruptcy: Crooner Wayne Newton  “a/k/a Mr. Las Vegas” filed for bankruptcy protection in 1992.  His woes then included $20 million in unpaid bills related to a libel lawsuit he had filed against ABC for claiming that organized crime was involved in some of his casino dealings.  By 1999, Mr. Newton was doing better, but again faced financial problems by 2005, including a $1.8 million IRS taxes and $60,000 in unpaid airplane storage bills.

 7.  Tip:  Improve your home’s curb appeal with a $1,000 tax refund trip to Home Depot.  Yes!  You get to go shopping!   $1,000 will buy a trip to Home Depot for some new landscaping shrubs, a stylish new front door with fancy door knocker, a gallon of paint and three pink yard flamingos.  There are two reasons for sprucing up your home: If you have to suddenly relocate and sell your home to chase a new job, you will be glad you took care of this “sprucing up” when you had the extra funds and time.  Plus, coming home to a pretty home after a long day of work or job hunting is truly gratifying.  Don’t own a home?  Then plan “B” for those not owning a home is a little weird – spend $500 on professional wardrobe items and save the other $500 for your emergency fund – because should you eventually want to purchase a home or change apartments,you are going to need that $500 you placed safely in your emergency fund!  Likewise, looking professional at work is never a poor investment.

8. Celebrity bankruptcy: Singer Vince Neil a/k/a Heavy metal band “Motley Crue” frontman.  Mr. Neil has actually filed for bankruptcy twice, the most recent time in 2010.  One of his creditors was his lawyer, to whom Mr. Neil owed $16,000.00, for getting him out of many a heavy metal jam.

 9. Tip: Hire a lawyer to write your will for $1,000.00 from your tax refund.  Yes, you can cheaply use an online form downloaded from the internet from legal zoom or worse and avoid the lawyer fee – but watch out!  There are many issues you might overlook, and legal situations are treated differently state to state, so your Florida oriented form might not work so hot in Washington.  Here are a few examples of subtle issues a lawyer might better address:  Nominations in your will of a guardian to care for minor children, care for pets upon your passing, “health care directives” which direct when the medical establishment should back-off providing medical care to you and finally, addressing confusion between the death division of “non-probate” assets such as life insurance policies, IRAs and 401k’s and “probate assets” such as homes and realty investments.  Special note: if you have not revised your will or changed financial asset beneficiary designations since completing a divorce, you had better get on it!

 10.  Celebrity bankruptcy:  Baseball player Jose Canseco walked away from his 7,300 square foot Encino, CA mansion in 2008.  While technically not a bankruptcy, abandoning your mansion seems pretty darn close to bankruptcy to me.  Jose retired from baseball in 2002 after a long and highly compensated career with the Oakland Athletics.  In 1988, he was the first player in major league history to steal 40 bases and hit 40 home runs in the same season.  Two costly divorces and a steroid scandal laid low Jose’s finances and his mansion was foreclosed.  He tried out for the L.A. Dodgers in 2004, but was passed over.

 11.  Tip:  Hire a personal fitness trainer and diet coach with $1,000.00 from your tax refund.  Try two sessions per week (one hour per session) at between $50 and $75 per hour to learn modern fitness technique.  This seven to ten week investment may be the best money you ever spend.  Fitness trainers and diet coaches are not just for movie stars any longer.   I know that trainers work: Before starting with my trainer, I had never heard of “short burst cardio” – “burpees” – “bosu balls” – “kettle bells” – “arnolds” or “skull crushers”.  With a richer vocabulary, a slimmer midsection and a much more positive mental attitude I strongly recommend a fitness coach.  I revolutionized my diet with the trainer’s help and went from 219 pounds down to 201, dropping six inches off of my waist from 38 to 32.  If not for the personal trainer, I would still been stuck in the same old unsuccessful exercise rut.  Try the trainers at the YMCA for economy – but if you want the best, then try “The Club at Gig Harbor”, where I meet my trainer.

 12. Celebrity bankruptcy: Mark Twain filed for bankruptcy in 1894 after a failed investment in an automatic typesetting device called the Paige Compositor.  The investment cost Mark Twain his fortune (and also cost much of the inherited fortune of his wife), but he bounced back after bankruptcy.  He went on to replace at least a portion of his fortune as a lecturer.  Ironically, the man who coined the phrase “the Gilded Age”, Mark Twain, went broke.

 13. Tip:  Spend $1,000.00 of your tax refund to beef up career skills.  Consider courses at community colleges or some on-line courses to strengthen the weaker portions of your resume and experience.  A stronger resume can ease a transition into a new position with your current employer, or provide you with a new classroom learned skill that will be a focal interview “talking point” if you are interested in reaching out to new potential employers.

 14. Tip:  If you have not yet paid off your debts in full, then invest $1,000.00 of your tax refund money in the bankruptcy services of James H. MaGee.  Each year that you toil along with debt means one less year to accumulate adequate retirement savings and one more year of hope-robbing and health-corroding stress.  A bankruptcy case can often mean quickly restored creditworthiness – call us for a consult, and I can explain how and why!  253-383-1001