For example, in Chapter 13 bankruptcy, debtors are allowed to keep their assets while developing a workable debt payment plan with the court. Consumers who go through Chapter 13 proceedings generally have regular income and need to keep their assets -- like a house or a car -- to continue to earn money. One downside to Chapter 13 is that it can take a considerable amount of time for debtors to pay off the debt.
]]> Another option for consumers is Chapter 7 bankruptcy, which is generally used by individuals who do not have many assets and are simply looking to recover from debt and stop creditor harassment. With Chapter 7, the debtor's assets are sold, and the proceeds are used to pay off debts. The majority of the remainder of debts is wiped out, and the consumer is afforded a re-start, financially speaking. However, it is possible for Chapter 7 bankruptcy to have a considerably negative impact on a consumer's credit score.After filing for either type of bankruptcy and going through the process with the court, many consumers are immediately concerned with rebuilding their credit. Unfortunately, repairing credit takes some time, and consumers should be wary of agencies claiming to rapidly improve credit scores. We've discussed the dangers of dealing with such repair companies in previous posts.
Most importantly, consumers should create a post-bankruptcy budget not only to help them in rebuilding their credit but also to help prevent future debt struggles.
Source: San Francisco Chronicle, "How to Survive Bankruptcy," Angie Mohr, May 9, 2012
]]>Some of the more roguish collectors have resorted to calling debtors inappropriate names, making threats of arrest and lawsuits and even calling employers. These tactics have left debtors so frustrated that the number of federal lawsuits against collectors has exploded since 2005. Last year alone the number of federal lawsuits claiming violation of the Fair Debt Collection Practices Act in one state escalated from 230 to 1,255.
]]> According to federal and state law, debt collectors are only allowed to call consumers between the hours of 8:00 AM and 9:00 PM. In addition, they are not allowed to discuss outstanding debt with employers or third parties. They are certainly not allowed to make derogatory remarks and threats.However, consumers are finding that collectors are not following these regulations. The only thing that seems consistent is that collectors often will not leave many messages, because they do not want to be recorded making harassing and threatening comments.
Collectors may call about numerous types of debt including credit card debt or medical bills. Sometimes the debts are as low as $80. But this does not stop them from using harassing tactics.
If a lawsuit is not the desired result for some debtors, it may be a good idea to consider filing for bankruptcy. Filing for Chapter 7 Bankruptcy will help consumers to put an immediate end to creditor harassment.
Source:, McClatchy, "Debtors filing lawsuits over aggressive collection tactics," Marjie Lundstrom and Sam Stanton, The Sacramento Bee, April 23, 2012
]]>Student loan debt in the United States has escalated to $1 trillion. According to the Consumer Financial Protection Bureau, this number exceeds the amount of credit card debt owed by consumers across the United States.
]]> If this statistic is not concerning enough for parents and soon-to-be college students, colleges are not doing much to help consumers understand the potential debt they will incur from education loans.Financial aid letters are the main source of confusion for college-bound students and their parents. Although mortgage companies and banks are required by federal law to disclose interest rates and total loan payments, financial aid letters can be murky and elusive about how much families will truly have to pay to send a loved one to college.
Some of the things that make these letters difficult are finding the fine print, understanding the fine print and having access to a computer to even be able to see these items on the letter. In addition, there is not a required standardized format for this kind of notification. Financial aid letters from different institutions may each have a different format, potentially confusing parents and students.
There is a push to standardize financial aid letters so that consumers can better understand them. The move is likely a good idea since students and their families are making decisions that could cost them hundreds of thousands of dollars over a four-year span. However, only Congress has the power to drive this change.
Regarding standardization, there has been some push-back from institutions that claim they would lose negotiating power if forms were standardized. Financial aid officers will often try to match an offer that a student has received from a similar institution, making the presentation of financial aid documents important for setting up accounts.
The moral of the story is that college-bound students should be careful as they read through financial aid letters. The picture may not be as pretty as the educational institution paints it to be. Know that there is fine print and make sure you understand it. If you do not understand, ask questions until you do.
Source: Business Week, "Colleges Confuse Students With Letters Offering Aid That's Debt," Janet Lorin, April 24, 2012
]]>Missouri residents with heavy debt who are looking for an easy and effective payment plan may be especially susceptible to the ploys of credit repair or debt settlement companies. These companies often draw consumers in with claims of raising credit scores "up to 130 points" or even by providing 100 percent guarantees of "fast credit repair."
]]> In addition, these unlikely services are advertised at prices as low as $29. However, in reality, complaints with the St. Louis BBB show that consumers paid an average of $816 but rarely received any refunds when they became unhappy with the service.The debt settlement companies claim that they will use the money paid by consumers to negotiate lower payments and provide debt relief more quickly. However, the companies require money up front before performing any services, and when consumers do not see the results they were hoping for, the so-called repair agencies refuse to return the money.
The BBB suggests that debtors stay away from credit repair agencies and understand that the only thing that can be removed from a credit report is incorrect or outdated information.
At the end of the day, the lesson is clear: consumers beware. In this economy, there are many companies undertaking sketchy business practices in an effort to make an easy income, but the best option may be one of the oldest. Bankruptcy remains a viable option for all St. Louis residents who are looking to stop creditor harassment and start off on a new financial path.
Source: STL Today, "BBB Study: Consumers Pay Scammers Thousands For Credit Repair They Could Do Themselves For Nothing," April 12, 2012
]]>The woman was a nurse for 16 years. Three years ago, she began experiencing health problems after injuring her right wrist. However, she was unemployed and uninsured. Afraid of incurring unnecessary medical expenses from high hospital bills, she refused to seek medical attention.
]]> It was not until blood clots stopped the flow of blood to her arm that she finally went to the emergency room, but by that time it was too late for treatment. Doctors had to amputate her right arm.Statistics show that this type of medical treatment avoidance is becoming common practice among consumers. Since 2007 doctors' visits have decreased by 4.7 percent. In the same timeframe, emergency room visits increased by 7.4 percent. Hospitals also state that they are seeing people stop taking prescription medications due to the high costs.
Bills from hospitals and other high medical expenses can cause enough financial turmoil on their own. However, when an individual experiences an injury that not only results in medical expenses but also negatively impacts the ability to work, the result can be even more stressful and disastrous.
Recently, the medical expenses of those who are unemployed and uninsured have become one of the most common causes of bankruptcy. However, there are options available to discharge these debts. Missouri residents who struggling with unmanageable medical debt will want to be aware of all the viable paths out of these rough times and into a more a stable financial situation..
Source: KSPR, "Camdenton woman loses arm because she didn't go to doc soon enough," Joanna Small and Jason Crow, April 5, 2012
]]>Now St. Louis residents who were not able to stop foreclosure on their homes may be entitled to financial compensation from the settlement. Depending upon the number of people who enroll in this process, it is expected that each homeowner who fell victim to foreclosure could receive up to $2,000. Many people are likely to say that this amount comes nowhere close to covering their losses, but the money is nonetheless welcome as individuals try to stabilize their financial situations and work toward rebuilding credit.
]]> The settlement also provides current homeowners who are underwater on their mortgages the option to refinance. In addition, the settlement offers assistance to people with lower types of loans but who are behind on payments and also owe more than their home is worth.Attorney General Chris Koster in Missouri recently held information sessions across the state, including one in St. Louis. However, the turnout was not as high as expected in some areas. It is important that Missouri residents hoping to take advantage of this program attend an information session. The good news is that the attorney general plans to hold more public information sessions in the near future.
It is unclear yet when the funds will be distributed, but the attorney general's office has indicated its commitment to answering all consumer questions and to partner with the banks to move this process along as expeditiously as possible.
Source: The Republic, "Foreclosure abuse victims sought as Mo. seeks to dole out $155M from mortgage settlement," Alan Scher Zagier, March 30, 2012
]]>A 1099-C form is issued when a creditor relieves a consumer of his or her debt. When a consumer is relieved of debt, the Internal Revenue Service actually regards the relieved debt as income, therefore making it taxable. But debtors should beware that not all 1099-C forms are correct, and it is important to do your homework before succumbing to what may not be debt relief.
]]> First of all, there are certain situations in which creditors are required to issue a 1099-C even if the consumer has not been relieved of the debt in question. For example, the law requires creditors to issue a 1099-C for any debt they did not attempt to collect on in the past 36 months.Therefore, upon receipt of a 1099-C regarding a debt forgiveness of which the consumer is unaware, it is important for the consumer to call the lender and ask if the debt was actually forgiven. If it wasn't, the consumer can request a written letter stating that the lender is still owed that money. Then, the IRS won't regard the amount on the 1099-C as taxable income.
In other situations, a 1099-C is issued for a debt that was relieved due to insolvency or bankruptcy. In the case of a consumer who is insolvent or has filed for bankruptcy, that debt forgiveness is not considered taxable income. However, the IRS will look for proof of bankruptcy or insolvency, so it is very important to hold onto financial records and court documents.
Lastly, it is important not to simply take a 1099-C at face value and assume that it contains completely correct information. 1099-C forms are often issued containing errors or issued in duplication. It is always a good idea for people to fully understand their financial situation and history in order to prevent paying unnecessary taxes.
Source: creditcards.org, "Warning! Forgiven Credit Card Debt May Be Taxable!" Dan Seitz, March 26, 2012
]]>Many consumers with medical debt are finding bankruptcy is their only option for debt relief. Situations such as missing due dates on bills and filing for bankruptcy are known to negatively impact credit scores. However, what many people do not realize is that unpaid medical debt is a type of debt that can most negatively impact a person's credit record.
]]> Hospitals and doctors turn unpaid medical bills over to collection agencies. No matter how miniscule the amount owed, if it is not paid on time, it is likely to go to a collection agency. In 2005, collection agencies contacted 22 million Americans about unpaid medical bills. This number went up to 30 million by 2010.It is common for unpaid medical expenses to be included on patient accounts incorrectly. Still, when these bills are not paid, the charges are nevertheless sent to a collection agency. This type of activity would have an erroneous but negative impact the consumer's credit without his or her awareness of the situation.
When a collection agency takes over unpaid bills, this action remains on credit reports for seven years. If there is an erroneous entry on a consumer's credit report, it is the consumer's responsibility to prove that it was entered incorrectly. In addition, even after the debt is paid off, the activity remains on credit reports for up to seven years.
Debts that are sent to collection agencies can impact credit scores up to 100 points. Therefore, it is important for consumers to save all financial records and to regularly take a look at their credit scores and reports to validate the information submitted to the credit agencies.
Source: Opposing Views, "Medical Debt: The Silent Financial Killer," March 21, 2012
]]>Telephone cramming refers to the practice of adding undue charges onto consumer telephone bills. The charges usually show up for products and services that the consumers never purchased. These charges have appeared on thousands of telephone bills throughout St. Louis and Jackson counties, and Missouri residents who are seeing these strange charges and also looking for debt relief may eventually see compensation.
]]> Consumers who are concerned about these fraudulent charges will want to keep a look out for certain items that might appear on a phone bill. These items include identity-theft protection, Internet faxing, toll-free voicemail, emergency contact texting or calling, streaming radio, small business services and grocery coupons. This list is by no means comprehensive, but consumers should check the last page of their phone bill under "enhanced services" or under the name of the bill aggregator for any items that shouldn't be there.Missouri residents who are experiencing this elusive form of creditor harassment would do well to fully understand the meaning of each charge listed on their phone bills, since there is a chance that some of those charges aren't legitimate.
It's estimated that telephone cramming resulted in hundreds of thousands of dollars in false charges against residents throughout St. Louis and Jackson counties in 2010 and 2011. And since heavy debt has made it quite clear for many people that every little bit counts, keeping a close eye on the phone bill is one more good idea for Missouri residents who are looking for a better financial future.
Source: St. Louis Business Journal, "Missouri Attorney General sues 6 companies for unauthorized phone charges to consumers," Greta Weiderman, March 7, 2012
]]>One common mistake among debtors is not tracking spending. Individuals often create a budget simply by estimating monthly expenses. The problem is that these individuals do not realize how spending on the small things, such as going out to lunch or coffee, can add up and affect their finances. In order to avoid this scenario, it is important to track actual expenses for at least two months.
]]> Secondly, people often have one bank account to pay fixed expenses such as a mortgage, while reserving another account to pay variable expenses such as groceries. This dual-account method can make managing finances much more complex, but calculating the amount of variable and fixed expenses ahead of time allows the individual to deposit the necessary amount of money into each account.Budgeters also forget to account for irregular expenses. CPAs suggest avoiding this debt-incurring situation by dividing the annual total of irregular expenses by 12 and depositing that much into a bank account reserved for monthly bills. Then, when that irregular expense comes due, there is no need to scramble to find the money for the payment.
It is also important to compare prices before making a purchase and to avoid impulse purchases as much as possible. As readres in Missouri likely know, the Internet provides a great avenue for comparing prices.
In addition to avoiding these commonly made mistakes, it is important to consider putting as much money as possible into savings. Do not wait until the end of the month to transfer money into savings, or there likely will not be much leftover to transfer.
Making a conscious effort to save money and avoid these simple mistakes will prove beneficial for Missouri residents who are planning for a better financial future.
Source: Milford Daily News, "Buttoned Up: How to avoid the five biggest budget mistakes," Sarah Welch and Alicia Rockmore, March 7, 2012
]]>The list of ailments the 13-year-old girl suffered may be difficult to hear. She endured a brain tumor; acute myeloid leukemia; blindness from the removal of a tumor and scar tissue; dramatic weight gain from the medication used to treat her vision loss; two hernias; and a stroke.
]]> These problems not only led to numerous medical expenses; the girl's mother, who is now a single parent, was also forced to leave her job at a pharmacy in order to take care of her daughter.As if the mother and daughter hadn't already faced enough, the state of Missouri has also sued the mother three times for a total of $2,500 in unpaid taxes. She isn't sure if the taxes are related to a few work-from-home jobs she took on to try to keep up with the bills. The mother intends to contact her tax advisor for help.
As many readers in the St. Louis area know, situations such as the one faced by this family can result in a perfect storm for a financial disaster. When the weight of debt becomes crushing, often the best course of action is to look into the benefits of personal bankruptcy.
Most medical bills are categorized as unsecured debt that can be relieved from payment by filing for Chapter 7 or Chapter 13 bankruptcy. Unsecured debts include the following:
Missouri residents who are struggling with medical debt will want to keep in mind that there are still options available. And there may come a time -- perhaps sooner than you realize -- when a fresh financial start isn't just a dream anymore, but a reality.
Source: Kansas City Star, "Despite litany of challenges, 13-year-old inspires others," Brian Burnes, Feb. 21, 2012
]]>Reportedly, millions of calls from India are reaching residents throughout the United States. The callers are posing as debt collectors and demanding money from U.S. citizens. In each call, the fraudulent debt collector asks for money, the amount generally ranging from $300 to $2,000.
]]> It is believed the callers use information stolen from payday loan companies.The fraudulent callers are said to be very aggressive, often threatening individuals who owe money. The callers will tell debtors that if they do not pay what they owe, the debtors will be arrested. Sometimes the false creditor threatens to call the debtor's employer or even sue the debtor. The person receiving the call may not even owe any money but pays the non-existent debt to prevent any negative ramifications.
Since 2010, the fraudulent scheme has garnered these criminals nearly $5 million.
Debtors can stop this type of false creditor harassment and avoid becoming the victim of a fraudulent scam by demanding documentation of debts and creditor names. Having clear knowledge of the Fair Dept Collection Practices Act and Missouri law is also an excellent defense.
Dealing with debt collectors and collection agencies can be emotionally draining even when phone calls are legitimate. Scams like this one put additional and unnecessary stress on individuals who are looking for debt relief and already facing significant financial hardship.
It is important that Missouri residents stand up and protect themselves from this type of scam. It is also important to ask the necessary questions to ensure that the claims are actually valid.
Source: Associated Press, "Authorities: Debt-collector scam bilked millions," Michael Tarm, Feb. 22, 2012
]]>Under the settlement, Missouri could potentially receive more than $195 million. The five banks involved in the settlement are Bank of America, Ally Financial, Citigroup, Wells Fargo and JP Morgan Chase. In order for Missouri residents to qualify for funding under the settlement, they must have a home previously foreclosed upon by one of the five banks or carry a mortgage with one of the banks.
]]> Those individuals with a home foreclosed upon between the dates of January 2008 and December 2011 will receive a check for $2,000. Although the foreclosure rate is lower in St. Louis than it is nationally, there are still 20,000 Missouri residents that will qualify to receive that check.For borrowers current on their mortgage payments but owing more on the home than the assessed market value, it will be possible to refinance at a lower market interest rate. Borrowers behind on their payments and owing more on a mortgage than the assessed market value of the home can reduce their debt and receive additional assistance.
Although Missouri is receiving almost $200 million, Governor Jay Nixon is diverting $40 million toward the state's educational budget. According to the governor, the money will provide relief from "severe budget shortages."
While the diversion will leave less money for Missouri residents who fell victim to the cruelty of foreclosure, $2,000 will still provide some assistance to residents who are deep in a financial hole. For those experiencing severe financial problems or considering filing for bankruptcy, the available funds will be a welcome addition as Missouri residents struggle to get back on their feet.
Source: stltoday.com, "Mortgage deal provides limited relief to foreclosed homeowners," Jim Gallagher, Feb. 10, 2012
Source: thinkprogress.org, "Missouri Becomes Second State to Divert Foreclosure Funds Away From Homeowners To Balance Its Budget," Travis Waldron, Feb. 13, 2012
]]>A payday loan is an unsecured loan of $500 or less. Currently, under Missouri law, borrowers must pay off these loans in 31 days. In addition, if these loans are not paid off in 31 days, the borrower can perform a "rollover," which allows the lender to charge even more interest.
]]> The main goal of the senator's proposed legislation is to provide Missouri residents with more time to pay off their payday loans. He is proposing that borrowers not only have 90 days to pay off their payday loans but also that the lenders are no longer allowed to roll over a debt that remains unpaid after 90 days.In addition to extending the repayment period and limiting lenders' ability to roll over debts, the proposed legislation would require payday loan lenders to enter borrowers' names into a Missouri state database. The goal of this database would be to ensure that no Missouri resident is taking out more than one payday loan at a time.
Although the senator's legislation would not limit interest rates, there is also a proposal for a 2012 ballot measure that would allow residents to cap payday loan interest rates at 36 percent. This is a staggering decrease when one considers that current interest rates on payday loans can escalate higher than 400 percent.
The senator's proposed legislation would potentially allow Missouri residents who are in serious payday loan debt to pay off that debt faster and without it rolling over and compounding at such a high rate. For those in Missouri seeking to stop creditor harassment, this could be a very welcome change.
Source: stltoday.com, "Mo. Senator calls for changes to payday loan laws," Feb. 6, 2012
]]>In most cases, the following types of debts cannot be eliminated by filing for bankruptcy:
• Secured debt
• Student loans
• Alimony or child support
• Restitution
• Car wrecks caused by the influence of illegal substances or malicious intent
• Income tax debt
• Ex-spouse credit card debts or legal fees
]]> Although the above is true in the majority of cases, there are a few very limited exceptions. In the case of secured debt, if a debtor surrenders the item to which the secured interest is attached -- such as a vehicle -- then the monetary debt will be eliminated. In the case of student loans, if the borrower can prove that he or she has suffered a permanent disability, then the student loan debt may be eliminated.Although some debts might remain after a bankruptcy filing, there are still numerous debts that can be wiped out. Chapter 7 and Chapter 13 bankruptcy will deliver different types of relief to individuals who are experiencing financial hardship and considering bankruptcy.
If someone is experiencing continued creditor harassment and has large amounts of unsecured debt, Chapter 7 bankruptcy may be the best option. Chapter 7 discharges most debts and prevents creditors from continuing harassment or seeking collection options. There are some exceptions to Chapter 7 filings and eligibility, so it may be best to seek assistance from a legal professional who focuses on bankruptcy.
Chapter 13 bankruptcy may be the best option if a person is facing foreclosure on a home and is worried about giving up assets and life savings. Upon filing for Chapter 13 bankruptcy, the debtor will be able to stop the foreclosure of the home while a payment plan is implemented that will assist in paying off debts and getting back to a less stressful financial situation. Chapter 13 allows an individual to keep assets, and after fulfilling a debt repayment plan for three to five years, the remainder of the debt will be forgiven.
Before filing for bankruptcy, it is important to know the details of your situation, your options and what type of relief they may provide.
Source: Fox Business, "Debts That Can't Be Wiped Out in Bankruptcy," Justin Harelik, Jan. 31, 2012
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