individuals

Consumers with debt-related complaints have a solution

In a prior post, we discussed the biggest complaints that consumers have and how credit card and other individual debt-related issues consumed two of the top three spots on the “Top Consumer Compliant List.”

Threatening collection practices seemed to play the largest role in causing debt to rise so high on the complaint list along with collection confusion and errors that should have been easily detected and avoided.

Laws related to debt and debt collection are constantly being reviewed and changed as societal needs develop. The Credit CARD Act of 2009 created new requirements for disclosures and protections for credit card users, but according to consumers, it is not enough. Approximately 252,009 complaints were made to consumer protection agencies in 2010. Despite the new protections, consumers continue to experience deceptive practices.

Consumers are calling for even stricter laws against creditors who misbehave not just laws that provide more disclosure requirements.

Many governmental consumer agencies that participated in the survey admitted a sort of failure to handle the large number of complaints that roll into their offices daily. The failure, they say is largely due to the budget cuts that have occurred across the board. As their funding decreases, their staff size decreases, their resources decrease and they have trouble giving every complaint the attention it deserves.

“Consumer protection agencies need more funds to do their jobs effectively,” said the director of consumer protection for the Consumer Federation of America. “They provide essential public services, like firefighters and police, and deserve the same support.”

Source: Fox Business, “Auto Repair, Credit and Debt Issues Top Consumer Complaint List,” Aug. 3, 2011

Consumers say debt-related issues cause them significant headache

Filing for bankruptcy protection is very helpful for people who have found themselves with too much financial stress to handle on their own. Often, individuals file after credit card and other kinds of debt become too high as a result of a change in economic circumstances like the loss of a job, large medical bills and many other situations.

Although filing for bankruptcy is helpful, most people did not plan to end there. They try to make the payments that they can, but when they are illegally threatened by creditors, it is hard to even want to pay. According to the most recent “Consumer Complaint List,” complaints related to credit card debt collection rank number two on the list, with other debt-related complaints trailing just behind in slot number three. Number one was auto-repair transactions.

According to consumers, credit card debt collection has gotten out of control despite laws that are supposed to protect them. Consumers reported that creditors were using highly offensive and illegal techniques like saying that they would kidnap their children unless they paid or extradite them to the Dominican Republic.

A lot of the threatening calls related to online loan applications. The major problem for some consumers was that the calls were being made for debts that were not even due. Many people had already paid off the loans while others said their information was obtained in a loan application process that they never even finalized.

Attorneys can help people with debt-related issues all the way from ensuring creditor workouts to dealing with threatening collection practices. Debt is stressful enough, but when you try to go about it alone, it can be even tougher.

Source: Fox Business, “Auto Repair, Credit and Debt Issues Top Consumer Complaint List,” Aug. 3, 2011

Credit card debt is not to blame for dip in credit scores says CreditKarma

According to a recent report by CreditKarma, a company that follows national credit scores and household debt by studying data and publishing it on their website, credit card debt is not to blame for the recent three point drop in average credit scores.

The corporation found that since May of 2010, the credit scores of individual consumers nationwide have dropped three points to an average of 667. Although credit card debt has been a very real issue for many Americans, in the same time period, the level of credit card debt has been reduced by about 15 percent to an average of $6,740.

While overall the average credit card debt has decreased, Colorado Springs, Colorado remains one of the top cities for individuals with the largest amount of credit card debt averaging at a slightly higher rate of $7,000 or more.

There is a kind of false hope, says the credit tracking company as they reported that the average mortgage debt has also fallen by two percent. “As the housing market begins to double-dip and home prices plummet, it’s not surprising that homeowner debt and equity fell,” says the CEO of the corporation. “Banks aren’t going to enter into new housing loans or provide equity loans when home values continue to decrease.”

Other mentionable areas of debt that have experienced a change since 2010 are auto loan debt which is up by two percent, home equity debt which has fallen by five percent, and student loan debt which has also increased by five percent.

Source: Collections & Credit Risk, “Credit Scores Drop Three Points; Card Debt Down 15%,” Darren Waggoner, 9 June 2011

Bankruptcy Filings Rose 9 Percent in 2010, Experts Predict Reduction in 2011

Personal bankruptcy filings in 2010 hit one of the highest recorded numbers; approximately 1.53 million people filed for bankruptcy this past year, a 9 percent increase from the previous year. While 9 percent is the nationwide average, some areas of the country, mostly situated in the southwest and southeast, experienced a 24 or 25 percent increase. The bankruptcy rate for 2010 was the highest it has been since the restructuring of the law in 2005.

The bankruptcy revision was structured in a way that legislators hoped would reduce the amount of debt forgiven in the process. Law makers hoped that the revision would force more people to choose filing under Chapter 13, a process that encourages workouts and new repayment plans instead of Chapter 7 where debtors forfeit their assets. According to the American Bankruptcy Institute, only one third of debtors chose to file under Chapter 13.

According to surveys conducted by the nonprofit Institute of Financial Literacy, there has been an increase in the amount of middle-class families making over $60,000 per year or have obtained college degrees who have filed for bankruptcy.

Experts have predicted a reduction in 2011 of the number of personal bankruptcy filings. The prediction is based upon the tightened lending procedures and the fact that people simply are not borrowing right now. “[When] borrowing’s down,” said one law professor, “there’s less of a reason for people to take the legal step of filing for bankruptcy.”

As we discussed in our prior post, other changes to the Chapter 7 filing procedures could also have an effect on the number of personal bankruptcies filed in 2011.

Source: The Wall Street Journal “Bankruptcy Filing Leapt 9% Last Year” Sara Murray1/4/11

New Year Brings New Requirements for Chapter 7 Bankruptcy

New Years Day is a day for new resolutions and fresh starts after the mistakes of the past year have been forgotten or forgiven. While individuals across the nation make promises to themselves about changes they plan to make in their daily lives, the New Year is also a time for the federal government to make changes of their own.

This beginning of 2011 has been no different from the beginnings of years past, and the federal government has announced the new changes that were made to bankruptcy law. Specifically, changes were made to the rules governing the filing of personal bankruptcy under Chapter 7. These changes, in this economy, make it even more vital to seek out the assistance of an experienced bankruptcy attorney when considering the future of your financials.

Where a chapter 7 bankruptcy could generally discharge all personal debts through a liquidation of the assets owned by the debtor, the same individual may not even qualify for Chapter 7 if their income is high. Also, those who have already filed for bankruptcy must now wait at least eight years before doing so again. The changes may force individuals who once considered filing to seek alternatives to bankruptcy in order to lower their debt including creditor workouts that restructure previous payment plans.

Experienced attorneys remains abreast of new changes in the law and can help someone struggling with debt relief navigate the confusing rules and regulations that govern bankruptcy, and while creditors want to get paid, an attorney can make sure that repayment plans protect the individual’s interest and suit their needs.

Source: Mortgage11.com “New Bankruptcy Laws: Chapter 7 and Chapter 13 Bankruptcy Information” 1/4/11