Tag Archives: subprime credit cards

Dating, Marriage and Credit Scores: A New Twist in the Road To A Happy Life

He was tall, religious, well employed in finance and had great teeth. Even better, he came from a nice family background, and was brought up similarly to her. She was attractive, peppy and fully employed as a flight attendant.

But Chicago’s Jessica LaShawn was dumped after a first date when somewhere between salad and dessert Jessica truthfully answered a question about her credit score. Jessica’s FICO score was subprime (below 660), as she had paid late on some bills and had some lingering unresolved debts. A couple of days later, Jessica received an apologetic text message from her potential prince charming – no second date – it wasn’t Jessica, it was Jessica’s credit score which caused him to decline a second date with her. Good bye prince charming. Good bye, white picket fence…

Credit Scores are newly becoming a relationship metric, as many people are deciding who to consider and who not to consider for marriage based in part upon credit scores. Dating site executives report that they are receiving more inquiries and interest about when and how to bring up the issue of credit scores when deciding whether to date or pursue a relationship with a potential suitor.

Similarly, many marriage counselors relate that improving credit scores is a frequent topic of discussion with marital and relationship counseling clients. Dissimilar levels of concerns about maintaining an acceptable credit score can lead to significant friction in a long term relationship.

So how does bankruptcy fit into the universe of dating, marriage and credit scores?

Credit scores affect us all. Credit scores are kept on about 200 million Americans by FICO. More than 34% of these Americans (68.6 million) tracked by FICO have subprime credit scores of less than 660. FICO is short for Fair Isaac Corporation.

About 18.5% of Americans (37 million) enjoy the highest credit score range of 850-900, another 19.0% (38 million) enjoy very good credit scores of 750-800. About 16.0% of Americans (32 million) enjoy “good” credit scores of 700 – 750 and 12.2% of Americans (24.4 million) have borderline FICO credit scores of 650-700.

If unpaid bills, high credit card balances, lingering tax debts, old foreclosures and unresolved vehicle repossession deficiency obligations are keeping you in the “below 700” catagory with respect to FICO scores, what can you do?

How about a bankruptcy? What? Doesn’t bankruptcy ruin your credit, you ask?

Well, sometimes you have to go down before you can go up.

Many experts recite that a bankruptcy will temporarily dump your credit score down to 550, but then in many circumatances you will automatically start a very steady and sure climb back to a level of 700 (good), 750 (very good) or maybe even higher.

The New York Time (April 12, 2012) reports that the car loan or credit card for which you were unable to qualify right before bankruptcy can very likely immediately be yours right after a bankruptcy filing. This might suprise you, but after bankruptcy, many creditors will actively and very aggressively again solicit your business. This sounds very counterintuitive and maybe even a bit crazy, but strangely it is true.

After almost 19 years, I keep thinking that some day I will have seen it all when it comes to Creditors. However, the Creditors keep suprising me with new ideas and schemes, and these are often to your benefit, so check out this new shocking twist: I have had a few Chapter 7 clients show up at Court bearing letters that recite in essece the following:

“Dear Newly Bankrupt Potentially Valued Client: We have reviewed that you have a vehicle financed with another lender. We want you talk to your lawyer at court about giving up that old financed car in a voluntary repossession, thus giving the car back to your lender. If you do this, then on your way home from bankruptcy court just stop by our car lot and secure quick financing for a newer and better car.”

How does that grab you? Stop by the car lot on the way home from bankruptcy court and pick up a new car? Strange, but often true.

If your marriage relationship is suffering the stress of not meeting financial and mateiral goals due to chronically low credit scores, then consider a bankruptcy filing to charge up the material needs which, face it, are an important part of living with some contentedness in a long term relationship.

We all like to say that love is enough, but we all know that every marriage has material needs and material aspirations. Even if such material goals are modest, such as replacing that aging car, starting to save for retirement or college, moving up to a more suitably sized home, getting on a cell phone data plan instead of being stuck with an expensive “prepaid phone” or maybe even renting a little nicer place to live – we all have needs and aspirations. Chronically low credit scores can take away some of the material comforts that we look forward to enjoying with our mate in a long term relationship, and these disappointments can take a little of the joy out of your daily walk of relationship and marriage.

And in Jessica’s LaShawn’s date with Mr. Right, he had her at hello…but it was quickly goodbye due to Jessica’s chronically low credit score. If Jessica had filed for bankruptcy well before her dream date appeared and had thus already started the amazingly quick post-bankruptcy credit score recovery process, she would probably have received that offer of a second date. But she was not proactive and did not file for bankruptcy. Jessica just ignored her declining credit situation because it was too uncomfortable to face. The result? Sadly, for Jessica the story is “white picket fence postponed”.

Get on with your life and start living now: Consider bankruptcy as a strategic tool for your long term dating, relationship and marital hapiness. You will be shocked at how quickly your creditworthiness is restored post-bankruptcy.

And while you are at it, spread the good news that there is hope for the future through bankruptcy- people need to know, and if you won’t tell them, they will never learn.

[Special thanks to Jessica Silver-Greenberg, for writing “Perfect 10? Never Mind That. Ask Her for Her Credit Score.” NY Times, Page A1, Wednesday, December 26, 2012.]

Considering the need for a bankruptcy filing to get your credit back on track? Contact us at 253-383-1001 for an appointment in Tacoma, Puyallup, Olympia, Chehalis, Renton or Bremerton.

Does the bankruptcy double standard play a role in personal bankruptcy?

A recent article from The New Yorker highlights a troubling disparity in the way we view bankruptcy and loan restructuring in general in this country. As was evidenced in the recent bankruptcy filing of American Airlines, bankruptcy for corporate entities is generally considered part of an overall savvy approach to managing debts and investments.

While American Airlines could have continued paying its debts (it filed bankruptcy with more than $4 billion in the bank), it opted to take the bankruptcy route, which will allow it to restructure its debts into ones that make more financial sense. After the company filed its Chapter 11 bankruptcy petition, most analysts praised its decision, citing the success other airlines have had with reorganization bankruptcies in recent years.

However, for consumers interested in filing personal bankruptcy, the attitude of the general public is vastly different.

The current turmoil in the housing market highlights exactly how differently the general public views personal bankruptcy:

The housing bubble falsely inflated housing prices. Arguably, the analysts and economists who were equipped to recognize this bubble for what it was an attempt to prevent its burst did not. Also arguably, consumers might have recognized the bubble, but were less likely to do so than those trained in economic fields.
Lenders and homebuyers took on risky debts, betting on rising home prices to pay them off. We now know that those debts were not so good.
Many banks lost millions or billions of dollars on bad home loans. Some of those banks benefitted from taxpayer-funded bailouts. Others have staunchly refused to refinance (on a significant scale) mortgage loans that have become untenable for their borrowers.
Many homeowners are underwater on their homes. Sources note that many Americans owe up to 50 percent more than their home’s value on their loan. The “smart move” financially for these people would be to walk away from their mortgage, to abandon their homes and stop paying their mortgages. Most don’t, though.

One of the major reasons more homeowners aren’t walking away from their unaffordable homes, even though such a move would be financially logical, is that nonpayment of loans has been morally stigmatized in the media.

Figures including the head of the Mortgage Bankers Association have reportedly noted that defaults on home loans “send the wrong messages” to community and family members. Others have hinted that we would do well to bring back debtors’ prisons. The total effect, in other words, is that personal bankruptcy and similar moves (even when they’re financially savvy) have been labeled as morally deleterious.

The New Yorker article summarizes the problem in its closing paragraphs, noting that the prevailing attitude in the U.S. runs that individuals ought to “do the right thing” by honoring their debts, but that large businesses, banks, and corporations—who usually have much more capital at their disposal—can do whatever earns them the greatest profits.

Many experts believe that we may be headed for another recession. Don’t enter a second recession with piles of debts. I can counsel you on your debts. I am sure that I can be of assistance to you, a family member or a friend as we all know someone experiencing trouble these days even if we are not experiencing our own financial troubles. Please do not hesitate to make contact with me. I emphasize courteous and discrete consultations packed with plenty of information. The life impact of meeting with me in person will be unforgettable. You will enjoy a new peace of mind and a fresh hope for the future with a new roadmap for financial success that we develop together. You can email my scheduler through our website for your free 30 minute consultation at www.washingtonbankruptcy.com or e-mail directly at [email protected]. To schedule immediately, we can be reached at 253-383-1001 M-Th 9am-5:45pm and Friday 9am – 12pm.

How can I avoid bankruptcy fraud allegations?

Every so often, there’s a local news story about someone who has been convicted of bankruptcy fraud. This week, the case belongs to one George Raynor, of Baileyville, Maine. While the case itself isn’t exceptional in any way, it highlights an important precaution for potential bankruptcy filers to note in order to avoid a fraud conviction.

Bankruptcy fraud is exactly what it sounds like: a bankruptcy filer’s provision of false information to the court that alters the outcome of his or her bankruptcy case. In some cases, bankruptcy fraud can be unintentional, but its penalties are steep: those convicted of bankruptcy fraud might face up to five years in jail and up to $250,000 in fines.

Common examples of bankruptcy fraud include an attempt to shield property from the court; a filer might attempt to transfer property from his or her name to the name of a friend or family member or might simply fail to report ownership of a piece of property or sum of money.

But bankruptcy fraud can also occur when a filer fails to mention income he or she is expected to receive in the future. Raynor’s case falls into this category.

According to the Bangor Daily News, Raynor and his wife filed a bankruptcy petition in 2006 but, in their list of assets, did not mention:

A savings account in a bank;
A deferred compensation retirement account valued at roughly $150,000;
A lump sum payment from his retirement account in the amount of $97,000; and
A payment from his former employer of $12,000 as compensation for unused sick and vacation days.

Now convicted of the charges, Raynor could see as much as five years behind bars and fines of up to a quarter of a million dollars. To date, Raynor’s sentencing has apparently not been scheduled. Often, the amount of the fine assessed on a bankruptcy fraud conviction roughly equals the amount of money or value of property that the filer attempted to withhold from the court.

One of the easiest ways to avoid bankruptcy fraud is to work with a bankruptcy lawyer. Working with someone who is familiar with state bankruptcy laws and the procedures of the bankruptcy court can go a long way toward avoiding mishaps that could delay or derail a case.

Lawyers can also advise filers about which of their assets they must list, whether gifts or property transfers will be considered legal by the court, and what outcomes they can expect from their bankruptcy case.

In cases where a filer may have future income due to him or her, a lawyer can help determine how to calculate the value of that income and how to report it on bankruptcy filing paperwork.

Is student loan debt a bigger problem than credit card debt?

USA Today recently reported that student loan debt in the United States, which totals $850 billion, now exceeds outstanding credit card debt in the U.S., which totals $828 billion.

USA Today gets its numbers from a web site publisher named Mark Kantrowitz, who publishes two scholarship matching services called FinAid.org and FastWeb.com.

A more interesting element of this issue has to do with the monthly repayment numbers facing borrowers. The USA Today article suggests that $30,000 of student loans, payable at 6.8% interest over ten years would amount to $350 per month. At this level of debt, the average person would need to earn at least $42,000 per year.

In a bankruptcy context, student loan debt is not dischargeable except in cases of “undue hardship.” In most cases, “extreme hardship” has essentially been limited to student loan debtors who have a medical issue that prevents them from working. At this point in time, debtors have not been successful in arguing for hardship discharge on the grounds that they cannot find a job in this economy that pays enough to support their student loan obligations. There was a recent Supreme Court decision involving student loans and bankruptcy, but that case did not address the substantive issue of what constitutes “undue hardship.”

Why does it seem like everyone is filing for bankruptcy these days?

A growing number of baby boomers are going bust.

A newly released study found that 42% of all individuals filing for bankruptcy were between the ages of 45 and 64 in 2007 and that older Americas are filing for protection from creditors at a much faster rate than younger adults.

“The baby boomers are disproportionately represented in bankruptcy proceedings,” wrote John Golmant and James Woods, who compiled the study that appears in the September issue of the American Bankruptcy Institute’s ABI Journal. Golmant is a statistician and Woods is a social science analyst, both with the Administrative Office of the U.S. Courts in Washington.

Bankruptcy filings are increasing fastest among individuals between the ages of 55 and 64, the study found. From 2002 to 2007, the percentage of filers in that category grew 65%.

By comparison, the demographic group that experienced the largest percentage drop in bankruptcy filings was Americans 25 and younger, down 60% in 2007 from 2002.

“This significant demographic uptick in older bankruptcy filers has outstripped the aging of the general population as a whole,” Golmant and Woods wrote.

The authors said the recent housing crisis is at least partly to blame, as falling home prices left baby boomers with little or no home equity. The study noted that persons older than 50 were often targeted during the refinancing boom in the early part of last decade.

High levels of credit card debt and mounting health care bills also contributed to the higher number of filings among older Americans, the study found.

The recent study shows the continuation of trend stretching back to at least 1994. In that year, people between the ages of 55 to 64 accounted for 7% of all individual filings. In 2007, the same group accounted for 15.2% of consumer bankruptcies.

Do I have to include credit cards with a zero balance on my bankruptcy petition?

While bankruptcy is designed to help people escape serious debt problems, the situation becomes interesting when it comes to credit accounts with zero balances. These are typically credit card debts, either through credit card companies or those issued by individual businesses. When filing for bankruptcy, debtors only need to include actual debts, so in theory, they do not need to list those zero balance accounts. The situation becomes a little murkier if these accounts include monthly or annual fees, and those fees will become due during the bankruptcy process.

In most instances, you can leave these accounts out of your bankruptcy petition. You should be aware that your petition for bankruptcy does become a matter of public record and that most credit providers regularly data match bankruptcy petition notices and their own records. While your account may have a zero balance, your credit provider is quite within their rights to cancel those cards to prevent you incurring new debt.

Should your credit provider not cancel those accounts, they will be available to use post bankruptcy. This can help to kick start a new positive credit history post bankruptcy so it is well worth considering paying down any credit accounts with low balances prior to filing for bankruptcy. Paying down those accounts will not guarantee they survive the bankruptcy process, however, it can be well worth exploring the option.

Bankruptcy will, especially in a Chapter 7 bankruptcy, discharge all eligible debt no matter how large or small the balance is. Paying down to zero any low value (less than $200) balances makes sense for a number of reasons, most particularly, having that account survive bankruptcy and available post bankruptcy.

Many experts believe that we may be headed for another recession. Don’t enter a second recession with piles of debts. I can counsel you on your debts. I am sure that I can be of assistance to you, a family member or a friend as we all know someone experiencing trouble these days even if we are not experiencing our own financial troubles. Please do not hesitate to make contact with me. I emphasize courteous and discrete consultations packed with plenty of information. The life impact of meeting with me in person will be unforgettable. You will enjoy a new peace of mind and a fresh hope for the future with a new roadmap for financial success that we develop together. You can email my scheduler through our website for your free 30 minute consultation at staff1. To schedule immediately, we can be reached at 253-383-1001 M-Th 9am-5:45pm and Friday 9am – 12pm.

I’m newly graduated, are there any jobs out there for me?

New census data recently revealed states that Americans between the ages of 20 and 40 have become a “lost generation” of unemployed and underemployed.

The once American dream of going to college, obtaining a degree, finding a career, and making it on your own, is now gone. The Associated Press says that only 2.4% of college graduates find a job that motivates them enough to move out of the state they grew up in. The other 97.6% of graduates will move back home and live with their parents. It is estimated that 5.9 million members of this so-called “lost generation” will finish school, and move back in with their parents. That number is 25% more than during the last recession the U.S. went through.

The even more frightening aspect of all this is that only 55.3% of this generation will ever start a career. Most will continue to work various odd jobs, just like they did when the first left school. That being said, the entire American process of growing up, getting married, buying a house, and having kids is delayed. Marriage among the “lost generation” has reached a new low of 44.2%, and homeownership fell from 67.3% in 2006 to 65.4% in 2010.

On top of all this, economists have squashed the idea of “things will get better soon”, by claiming that this trend will continue for at least the next ten years, and when it’s finally over, it will take another ten years for this generation to fully recover.

When the “lost generation” is finally “found” again, they will be older, but none the wiser, as they will have little experience and absolutely no assets to speak of.

What can a creditor do if I default on my debt?

A common question that people considering bankruptcy have, is what will happen if they don’t pay back their debt. There is a time frame limiting the ability of a creditor to pursue the collection of a debt. That time frame is in between the time of default and the expiration of the statute of limitations.

After plenty of phone calls and threatening letters, your creditor will have to go to court and obtain a judgment against you. A judgment is simply the official decision of a court at the completion of a lawsuit. If in favor of your creditor, it can be thought of as a court order to pay your debt.

The first step to obtaining a judgment is filing a lawsuit. If a creditor has filed a lawsuit, you will receive notice. It is a legal requirement that you are served with paperwork notifying you of the hearing time and location. This is commonly known as a “summons”.

In the hearing, the judge will decide if the creditor should be allowed to collect the debt. If the debtor fails to appear, the judge has no choice but to decide in favor of the creditor and a default judgment will be issued against you.

If the court rules in favor of the creditor, the creditor then has the right to pursue collection of the debt in question. At this point, the creditor will most likely attempt to collect the debt from you voluntarily. If you do not voluntarily pay back your debt, the creditor will proceed with collecting the debt through other means. This could include requesting a wage garnishment, a levy on the debtor’s bank accounts, and/or a lien on the debtor’s property.

One thing to remember is that this takes time. The time period from your initial summons to collection of debt, is normally several months. All current and future actions by creditors to collect debt will cease immediately once your bankruptcy petition is filed. While I do not recommend waiting until the very last minute to file, you have the time to make an educated decision about your current financial situation, and what you want your future situation to look like.

Is Credit Counseling really going to help me?

We’ve all heard clients complain about the pre-filing credit counseling requirement and ask why they have to jump through this hoop when they know they’re going to end up filing for bankruptcy anyway. In many cases, we may be inclined to agree: a client facing foreclosure or repossession is in a hurry, and we know that there aren’t any other realistic options on the table.

However, a new study released by the University of Illinois Department of Agriculture and Consumer Economics and MMI, suggests that the credit counseling requirement does benefit those bankruptcy debtors after the fact. The study sought to measure two general areas: change in knowledge and change in behavior.

The educational value, based on pre-test and post-test scores, seems clear: the average score jumped from 77.1% to 85.9%. And an overwhelming percentage of participants surveyed reported that they felt more knowledgeable about their options and more confident in their ability to make financial decisions after the credit counseling briefing.

The other conclusion drawn by researchers–that credit counseling impacts future behavior–is less clear. That conclusion rests on participant reactions to a list of financial behaviors pre- and post-counseling. However, the pre-briefing questions related to actual current behavior, whereas the post-briefing survey asked which behaviors participants plannedto implement. Good intentions being what they are, we’ll need to see some data on actual post-briefing behavior before drawing any firm conclusions on that point.

Why is the National Association of Consumer Bankruptcy Attorneys so important to James H. MaGee and his clients?

I am proud of my longstanding membership in NACBA. As most consumer bankruptcy attorneys are solo or small firm practitioners, NACBA forums and Members Only Workshops give us a location to learn new materials, trends and tactics, and give us a refuge and available community of like-minded, caring professionals. This is crucial to professional advancement, avoiding professional isolation and aids much in problem solving for our clients.

NACBA is crucial. Failing to join and participate in NACBA is foolish and short sighted, in my opinion.

So, it is with great pleasure that I announce…….the following…….!!!!!

BIG NEWS! I am off to Colorado Springs to attend the prestigious (and awesome!) Members Only Workshop of the National Association of Consumer Bankruptcy Attorneys October 27-29th, 2011.

Last October 2010, I attended the same annual three day workshop in Puerto Rico and was humbled and energized by the quality of people I met there. NACBA (of which I am a proud member) is a group of attorneys; NACBA really care about the practice of bankruptcy. NACBA members have an overwhelming compassion for the suffering and hardships of individuals and families that find themselves in a bankruptcy situation.

The NACBA Members Only Workshop education is top-notch! Few other local lawyers calling themselves bankruptcy attorneys bother to join NACBA….and even fewer attend the Members Only Workshops. In 2010, only four attorneys from the entirety of Washington state bothered to travel to Puerto Rico for the incredible October 2010 Members Only Workshop educational opportunity. Failing to attend at least one Members Only Workshop per year is a huge mistake. NACBA schools lawyers on the present practice and the future trends in representing people in federal bankruptcy court. Those attorneys calling themselves bankruptcy attorneys who do not participate in NACBA Members Only Workshop education offer only dated and dangerous information and technology …. Practicing bankruptcy law without the guidance and assistance of NACBA Members Only Workshops may be like driving around at night, in the fog, without bothering to turn on the headlights. Just a bit dangerous, you think?

Demand the best….demand that your bankruptcy attorney be an active and current member of the National Association of Consumer Bankruptcy Attorneys NACBA and that he/she attend at least one NACBA Workshop event per year.

Upon my return from NACBA Colorado Springs, I will write you a compelling email newsletter and some blog posts (see www.washingtonbankruptcy.com or www.jameshmagee.info for blog access) introducing you to some of the exciting new technology and information that I learned at the National Association of Consumer Bankruptcy Attorneys’ – Members Only Annual Workshop. I can hardly wait to share these new developments with you! Chat with you in November!

Very truly yours, James H. MaGee, attorney