“Healthcare” approach to banking may help reduce bankruptcy filings in the future

Bank of America for the un-banked

There is often talk about how to reduce bankruptcy filings.

The credit industry’s oh-so-caring approach was to make it harder to file for bankruptcy by adding various speed bumps and obstacles to the 2005 Bankruptcy Law (aka BAPCPA).  That was a very reactionary, not to mention sloppy, approach that was really intended to serve the credit industry’s short time desire for profit.

But what if there were a more thoughtful and proactive approach?  For example, many people fall into debt traps because they don’t have access to banking services.  They use check cashing and payday loan services and other services that prey on their financial vulnerability.

This is the point made by Michelle Singletary in her “Color of Money” column in the Washington Post (“An attempt to open banks’ doors to all“).  She explains that for a certain percentage of the population, banks simply don’t provide basic services such as a place to open an account and the ability to write checks.  She refers to this segment of the population as the “unbanked.”  And she points out that non-bank financial services tend to cost more to a segment of the population that can less afford to pay for them, citing an FDIC report that 17 million Americans are “unbanked” and an additional 43 million Americans are “underbanked.”

In response, the FDIC and consumer groups are attempting to work under the Community Reinvestment Act of 1977 to come up with ways to encourage and incentivize banks to create banking services for the unbanked and underbanked.  The idea being that in helping this segment of the population, we would be helping out our society and our economy as a whole by reducing the costs associated with financial problems and bankruptcy (e.g., non-producing members of the work force; money being spent on ballooning interest payments rather than on more productive uses).

It strikes me that this is comparable to our country’s concern for the un-insured and under-insured.  And our recognition that relying on the emergency room as the default source of health services for the un-insured is extremely inefficient and ineffective.

Hopefully Michelle Singletary’s column will result in additional attention being drawn to this issue.  Because it’s the thoughtful, proactive solutions that ultimately help our country deal with complex issues such as these.  Not the reactionary, selfish ones.

For more information about bankruptcy as well as alternatives in New York, please contact me for a free initial consultation.

Contact Bruce Weiner, Esq.

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.

How does debt and bankruptcy affect senior citizens?

Elderly Americans are frequently victims of debt problems and need to file bankruptcy.  Especially those on fixed incomes.  However, many senior citizens don’t realize that they also have certain advantages afforded to them under the bankruptcy laws.

For example, retirement accounts and social security income are almost always protected from creditors. And many senior citizens are “judgment proof,” which means that even if a creditor takes legal action and sues such a person, they won’t be able to recover anything because there aren’t enough assets and/or the assets that do exist are protected by the bankruptcy laws.

A problem for many senior citizens is that they feel obligated to make the minimum monthly payments on their credit cards, even though it may take years and years to pay off the debt and even at the expense of cuts to what they spend on basics like food and healthcare.  What they may not realize is that filing for bankruptcy no longer has the same stigma it used to have.  And that the bankruptcy laws are in place specifically to help people in their situation so that they don’t have to live in an inescapable “debtor’s prison.”

If you’re facing financial struggles and are considering filing for bankruptcy in New York, please feel free to contact me for a free initial consultation.  I’ll help you understand your options and how to best protect your assets and get the full benefit of the bankruptcy laws available to you.

Contact Bruce Weiner, Esq.

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.

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.

BAPCPA Man #15 – BAPCPA Man continues his battle with Mortgantua (Part 3)

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 #15:  BAPCPA Man vs Mortgangua #3.

If you’re worried about foreclosure and mortgage problems and are contemplating filing bankruptcy in New York along with other options, please feel free to 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.

Happy Thanksgiving from Rosenberg Musso and Weiner and BAPCPA Man!

Wishing you peace and happiness for the Thanksgiving holiday.  May you and your family be well protected from creditors by BAPCPA Man and a good, experienced New York bankruptcy lawyer from Rosenberg Musso & Weiner LLP.

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

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.