How much will a bankruptcy filing affect my FICO score?

How much does a bankruptcy filing affect your FICO score?  We now have a better sense of the answer, though in the big picture, it may not be the right question to ask.

FICO recently decided to make public some–not all, just some–of the information behind their mysterious, black-box credit scoring system.

The answer to the bankruptcy question is:  It depends on the individual.  But it appears to be somewhere in the neighborhood of a 130 to 240 points, according to the data released by FICO.  Though FYI, FICO stresses that the data is only a guide and the actual impact depends on the individual.

If you’re contemplating a bankruptcy filing in New York or anywhere else, however, how much it affects your credit score may not be the question on which to focus.  Why?  Because if you’re seriously considering bankruptcy as an option, then odds are you’re already in a difficult position and filing or not filing for bankruptcy won’t do much to hurt your score at that point anyway.  In fact, one of the interesting things revealed by FICO is that the lower your credit score is, the less it is impacted by a bankruptcy filing.

If you file for bankruptcy, your credit score will be affected.  But with your slate wiped clean, at least you have an opportunity to start rebuilding your credit.  And many of our clients actually rebuild their credit rather quickly.

If you try to tough it out, you may avoid whatever affect bankruptcy has on your score in the short run.  But if you’re laboring under significant debt and unable to make payments over time, then your credit score may be affected even more over time.  Plus, you won’t have that clean slate to give you breathing room to get things in order.

If you’re not sure what the right option is for you, the best thing you can do to address the situation is to talk to an experienced and trustworthy bankruptcy lawyer in New York.  A good bankruptcy lawyer with an established reputation is only going to recommend you file for bankruptcy if you really need to.  They’re going to ask you questions and make sure you understand the ins and outs of all of your options.

Please feel free to contact me if you’d like a free initial bankruptcy consultation so you can start addressing your financial issues, getting your questions answered and getting your financial life back under control.

Contact

EMAIL Bruce Weiner
Phone
(718) 855-6840 (Local)
(866) 402-8476 (Toll Free)
Fax (718) 625-1966

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Credit card companies increase rates as holiday season approaches

If only it were just the Christmas tree...

Just in case you thought things weren’t bad enough, the credit card companies are stepping up to make sure you know that things can get worse according to a recent article in the Denver Post.

As holiday season approaches, credit card companies have been raising rates (sometimes double or event triple the previous rate), increasing the monthly minimum payment and lowering credit limits on unsuspecting consumers.  In some instances, credit card companies have sent notices of rate increases using mail designed to look like junk mail to increase the likelihood that consumers won’t notice.

Ironically, this is happening right now because of the Obama Administration’s attempt to curb the abusive practices of credit card companies.  In February 2010, the Credit Card Accountability Responsibility and Disclosure Act of 2009 (or, “Credit CARD” Act for short) will go into effect.  If there was any debate about the need for such a law, the blatant actions of the credit card companies to take full advantage of the remaining window of opportunity makes very clear that the credit card industry does in fact need to be reigned in and that increased protections for consumers are very much in order.

If you’re struggling with too much credit card debt in New York and are in need of legal advice about New York bankruptcy and non-bankruptcy options, please feel free to contact me for a free initial consultation.  I’ve been helping individuals fight back against unscrupulous credit card companies for years, and I’ll make sure you get the benefits to which you’re entitled under the law.

Contact

EMAIL Bruce Weiner
Phone
(718) 855-6840 (Local)
(866) 402-8476 (Toll Free)
Fax (718) 625-1966

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Loan modification scams and U.S. Foreclosure Relief

There’s a great recent post by Professor Katie Porter on the CreditSlips.org blog about loan modification scams.

If you’ve read other posts on NYBankruptcyNet on the topic of loan modifications, hopefully you’re familiar with the basic gist:  namely that any non-lawyer loan modification service (and unfortunately, some lawyer loan modification services) are almost always scams.  The same lowlifes who scammed people with loan originations are have shifted shapes to become the scammers in the loan modification business.

What’s striking about the post, though, is some of the information revealed:

There’s really no lawful way to run a loan modification business that makes a sufficient profit.  The business model for loan modification services relies on high pressure, cash-up-front sales pitches.  And misleading statements that they help 90% of their customers obtain loan modifications.

Sales agents for the U.S. Foreclosure Relief (a loan modification agency recently shut down by the Missouri State Attorney General’s Office) offered Rolexes to the top salespeople and used other high-pressure, low ethics sales incentives usually associated with vacuum cleaner salesmen.

It’s also worth reading some of the back and forth in the comments section following the post as CreditSlips.org tends to attract a very experienced and educated readership.

In the meanwhile, if you’re facing foreclosure in New York, considering filing bankruptcy in New York or need other questions answered to help you save your home and stay afloat, please contact me for a free initial consultation.

Contact

EMAIL Bruce Weiner
Phone
(718) 855-6840 (Local)
(866) 402-8476 (Toll Free)
Fax (718) 625-1966

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Bankruptcy Bill’s Bankruptcy Song Contest

A song contest might not be the first thing that comes to mind when you think of bankruptcy.  But apparently it is for the folks at the Bankruptcy Bill cartoon site.

So if you have any thoughts or feelings about the topic of bankruptcy, whether from personal experience or otherwise, here’s a wonderful opportunity to express yourself.

Go here for the complete bankruptcy song contest details:  http://bankruptcybill.us/2009/11/10/bankruptcy-bills-bankruptcy-song-contest/

Key information:

• The contest is open to anyone.
• The deadline for song submissions is December 9.
• First prize will be announced in a cartoon in which you (if you’re the winner) will start as one of the characters.

I’m also proud to be one of the sponsors.  Particularly because, along with the other sponsors, we’ll be making a donation to the National Consumer Law Center based on the number of songs submitted.

If there was ever a time for songs about bankruptcy, perhaps now is that time.  So start tapping your toe and figuring out what rhymes with “preference defense” and maybe you can be christened the Rogers & Hammerstein of the bankruptcy world.

Contact

EMAIL Bruce Weiner
Phone
(718) 855-6840 (Local)
(866) 402-8476 (Toll Free)
Fax (718) 625-1966

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Wall Street Journal says “Beware of ‘Debt-Relief’ offers”

I always try to warn people to avoid the empty promises of debt relief and debt settlement companies that require up-front fees and imply that you’ll only need to pay pennies on the dollar.

Now, the Wall Street Journal is warning people as well in a recent article (“Beware of ‘Debt-Relief’ Offers“).  The article notes that consumer are more vulnerable than ever to the tempting sales pitches of debt relief and debt settlement companies.  However, the article also notes that complaints against these companies are on the rise and that lawsuits against debt relief companies by state attorney generals have been increasing as well.

The problem with debt relief agencies is that the solution they offer is really only appropriate for a very small percentage of consumers.  However, they’re just interested in taking your money (which they require you to give them up front).  They’re not interested in telling you if you do fit in that very tiny percentage.  In other words, the debt relief business is an attractive vehicle for unethical and unscrupulous business people for essentially stealing money from consumers in dire straits.

Other disadvantages of using a debt relief agency are that you can be sued by your creditors, and also that many loans that are forgiven in the process are viewed by the IRS as income, which means you’ll incur tax liabilities.  (By contrast, if you file for bankruptcy, you cannot be sued by creditors and you do not incur any tax liability for reduction in the amount you ultimately end up repaying.)

If you’re facing financial troubles in New York, a good first step is to have a free initial consultation with an experienced and trusted New York bankruptcy lawyer.  A good lawyer will inform you of all of your options–bankruptcy and alternatives to bankruptcy.

Please contact me to set up a free initial consultation to discuss your situation and get answers to your questions.

For additional reading on the topic of debt relief agencies, see the following:

• Don’t believe the hype: Credit counseling services and debt settlement companies
• Debt management and debt settlement companies invade Twitter-sphere!
• Debt settlement company exposed by ABC News
• Debt settlement company files for bankruptcy!?

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Debit cards, overdraft fees and involuntary loans

The Center For Responsible Lending, a nonprofit and non-partisan research and policy organization focused on fighting abusive lending practices, is warning people to beware of recent changes banks have made to their debit card policies.

Previously, if you attempted a transaction with your debit card and you did not have enough money in your account to cover the transaction, then the transaction would be denied.

Recently, however, banks have changed the default option to “overdraft protection.”  That means that if you don’t have enough money in your checking or savings account to cover the transaction, they will allow the transaction to go through and you will be charged an overdraft fee.  Sometimes multiple fees.

According to the CRL, these fees average around $34, while the average shortfall that triggers the overdraft protection is $17.  Not a great lending rate.  Especially given that most people replenish their accounts right away after realizing their mistake.

Banks claim that they implemented the policy change for customer convenience.  However, given the recent trend by banks to come up with new and creative ways to charge fees, this “overdraft protection” policy change smacks of a cynical effort to increase their profit margin on their customers.  And this is the last thing most people need during tough economic times.

If you’re a New York resident or business facing financial troubles and you need help working out your loan situation or are considering filing for bankruptcy in New York, please feel free to contact me for a free initial consultation.  I’ll answer all of your questions and help figure out the best options and strategy for you to move forward with your financial life.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Preference Actions: What is the “New Value” defense?

"New Value" Defense. Not "True Value."

In a previous post (“Defenses to Preference Actions – Part I“), I explained that there are three common defenses to preference actions (also often called “preference lawsuits”) that you can use if you’ve received a demand letter from a bankruptcy trustee, from counsel to a Debtor-In-Possession or counsel to a creditors committee.

In subsequent posts I explained the “Ordinary Course of Business” Defense and the “Contemporaneous Exchange” Defense.  Next I’ll explain the…

“NEW VALUE” DEFENSE

The “New Value” Defense (also known as the “Subsequent Extension of New Value” Defense) is used in situations where a trade creditor was providing goods to a debtor (well, before the debtor was a debtor) on credit on a periodic basis and the debtor made a series of payments to the creditor during the preference period (i.e., the period of 90 days prior to the debtor’s bankruptcy filing).

In other words, you deliver goods to your customer on several different days over the course of a month, and your customer gradually makes several different payments to you over the same period.  And each delivery doesn’t necessarily match neatly up with each payment.  Then the debtor files for bankruptcy, and a year later you get a letter from the trustee who is suspiciously eying those payments you received 90 days prior to your customer’s bankruptcy filing.

The “New Value” Defense simply helps you make the argument that if you received a payment of $10,000 on November 1, and you had subsequently delivered $4,000 worth of goods on November 5, and your customer filed for bankruptcy on November 6, then the “preference payment” in dispute would be reduced to $6,000 rather than $10,000.

Notably, in this situation you could still apply the “Ordinary Course of Business” Defense and dispute the $6,000 “preference payment” claim on that basis.

Most trade relationships, of course, are not as simple as the one described above.  There may be multiple transactions and deliveries of goods.  And calculating the amount of the “new value” can be complicated, both mathematically and legally, as courts have differed in their interpretations.  More on that in a future post.

The key to defending yourself is to have an experienced bankruptcy lawyer, particularly one who knows the ins and outs of preference actions.  Rosenberg Musso & Weiner’s experience both representing trustees and representing creditors against trustees gives us unique perspective on how to help our clients deal with preference actions.

If you’re facing a preference action in New York and need a skilled and experienced New York lawyer to help you navigate and figure out the best and most practical strategy, please feel free to contact me for a free initial consultation.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Preference Actions: What is the “contemporaneous exchange” defense?

In a previous post (“Defenses to Preference Actions – Part I“), I explained that there are three common defenses to preference actions (also often called “preference lawsuits”) that you can use if you’ve received a demand letter from a bankruptcy trustee, from counsel to a Debtor-In-Possession or counsel to a creditors committee.

In a subsequent post I explained the “Ordinary Course of Business” Defense.  Next I’ll explain the…

“Contemporaneous Exchange” Defense

The “Contemporaneous Exchange” Defense (also sometimes referred as the “Contemporaneous Exchange for New Value” Defense, but not to be confused with the “New Value” Defense), simply means that in the debtor paid money to you in exchange for something of value.

For example, if you delivered goods to the debtor, and right then and there the debtor paid you for those goods, then that would be a contemporaneous exchange for new value.  If a trustee pursued a preference action against you for that transaction, then you would likely be successful employing the “Contemporaneous Exchange Defense.”

Of course, the devil is in the details and the facts of a particular situation are the key to a successful or unsuccessful defense.

Timing, for example, is an important element.  If you deliver goods or perform a service for the debtor without receiving payment.  Then a month later you get the debtor to pay what they owe you, you have a much weaker “contemporaneous exchange” defense.  Why?  Because the exchange was not contemporaneous.

Getting into the nitty gritty a bit, there was a big court decision in 2007 that revolved around the issue of credit transactions.  (Hechinger Investment Company of Delaware, Inc. v. Universal Forest Products, Inc., Nos. 06-2166, 06-2229, 2007 U.S. App. LEXIS 13155 (3rd Cir. June 7, 2007))  And the court decided that even in the instance of a credit transaction–in other words, where there’s a delay between the transaction for goods and the actual payment for those goods–it can still be valid to invoke the “contemporaneous exchange” defense.

The main takeaway for any creditor involved in transactions such as these is to be aware that trustees can pursue preference actions against you, even for seemingly valid and legitimate transactions.  However, you also have some good defenses at your disposal.

The key to defending yourself is to have an experienced bankruptcy lawyer, particularly one who knows the ins and outs of preference actions.

Our experience both representing trustees and representing creditors against trustees gives us unique perspective on how to help our clients deal with preference actions.

If you’re facing a preference action in New York and need a skilled and experienced lawyer to help you navigate, please contact me for a free initial consultation.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

BAPCPA Man #13: Halloween and Bankruptcy

What does BAPCPA Man dress up for on Halloween?  Read below and find out.

Note: This cartoon is posted on the NYBankruptcyNet site with the express permission of the creators of BAPCPA Man.

Click here to see a larger version of BAPCPA Man #13:  Halloween & Bankruptcy.

If the prospect of filing for bankruptcy in New York is scaring you and you’re looking for an escape from the nightmares, please feel free to contact me for a free initial consultation.  I’ll answer your questions and help you deal with all of your creditor demons.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.

Preference Actions: What is the “Ordinary Course of Business” Defense?

In a previous post (“Defenses to Preference Actions – Part I“), I explained that there are three common defenses to preference actions (also often called “preference lawsuits”) that you can use if you’ve received a demand letter from a bankruptcy trustee, from counsel to a Debtor-In-Possession or counsel to a creditors committee.

The first one I’ll explain is called the “Ordinary Course of Business” Defense.

Simply put, under the “Ordinary Course of Business” Defense a creditor makes the case that the payment they received from the debtor was not a payment for an outstanding debt, but rather a payment made in the “ordinary course of business.”

Example:

You’ve been providing materials, goods or services to the debtor for several years (i.e., before it became known as “the debtor”).  Every month you sent an invoice to the debtor.  Every month the debtor paid it.  Then one day the debtor filed for bankruptcy.  So you ended your relationship with the debtor and that was that.

Or so you thought.

Now it’s a year later (a trustee has 2 years from the date of a bankruptcy filing to initiate a preference action against a creditor), and you get a demand letter in the mail saying you owe money to the debtor’s estate.  The amount is the same as the last transaction you did with the debtor, right before they filed for bankruptcy.

“This is crazy,” you think.  “As an avid reader of the NYBankruptcyNet blog, I know full well what a preference is.  And I don’t think my transaction constitutes a preference.”

And you’re right.  A payment made in the ordinary course of business by the debtor to  the vendor, or a payment made to the vendor under “ordinary business terms,” is a valid defense against a preference action.*

You know that.  I know that.  And if the trustee is up on her bankruptcy law, then she knows that as well.  Great, so everyone can just forget this ever happened and go home, right?

Wrong.  Because the trustee’s duty is to recover as much as possible for the debtor’s estate.  So if you want to keep your money, you’re going to either have to prove your case in the bankruptcy court or negotiate a settlement with the trustee.

Still, it’s better than having no defense.  And it means that with the help of an experienced bankruptcy lawyer, you can sidestep the preference action.  Or at least negotiate a better result than you would without the “Ordinary Course of Business” Defense.

If you’re the subject of a preference action in New York, please contact me for a free consultation.

As a New York bankruptcy lawyer who has experience on both sides of New York preference lawsuits-–the trustee side as well as the creditor site–-I know the lay of the land, and I’ll help you figure out the best strategy for your situation.

*Note:  Before the 2005 bankruptcy law went into effect, the Ordinary Course of Business Defense required you to prove that the transaction was (1) in the ordinary course of business and (2) that the payment was made under “ordinary business terms.”  Under the new law, it’s “or” instead of “and,” which means you only have to prove one or the other.

Go to www.nybankruptcy.net to learn more about Rosenberg Musso & Weiner LLP and/or to set up a free consultation.