Posts Tagged ‘bankruptcies’

Top Credit Repair Myths & the Truth

November 15th, 2009

ApplesAndOrangesCredit repair is a hot topic no matter who you ask.  Credit counselors and debt managers will tell you it doesn’t exist, the FTC and Consumer watchdog groups will tell you its a scam, but the truth is, it is real… but proceed with caution.

What the actual problem with credit repair is, isn’t the repair itself, its the methods used and the lies spread through mass marketing to make it a billion dollar industry.

Lots of people prey on the desperation of a consumer to make big money off their bad situation. If you are going to even think about credit repair, do your homework first to avoid scams and pitfalls– and potentially a lot of money.

Below is an absolute legal way to repair your credit and how it should be done.

Can bad credit be fixed?
The short answer is yes. Credit reports contains a lot of information and because of federal laws, that information must be accurate. If an account IS negative but inaccurate or obsolete, it has to be removed. That IS a fact- end of story.

Is is true that Bankruptcies  can  be deleted?
You may not believe this, but yes. A bankruptcy record is a reported item to your credit reports and even a bankruptcy MUST be accurate in order to remain. If there is something about the bankruptcy that is false, it can be questioned just like any other tradeline. This is exactly how credit repair companies approach removing a bankruptcy. There is no secret, there is no relationship that the credit repair company has with the courts or credit bureaus- as many of them like to “lead” you to believe.

Does closing accounts improve your credit?
That depends. If you’ve got accounts in good standing that you have maintained for years, you will not want to close those because it can impact your credit score. On the other hand if you have multiple accounts open that you are not using, those should be closed. An example of this would be useless credit cards or unsecured lines of credit such as furniture loans, department stores etc. Ideally you want 3-4 credit cards only. Having 20 open credit cards on your credit reports wont make your credit score higher and in fact, can lower it. Keep the ones you’ve had for many years and close those more recent ones that you don’t use.

How does the Statute of Limitations help me fix my credit?
This is one of the biggest fundamentals of credit repair. A debt has a SOL (statute of limitations) and if that debt is expired, it cannot be legally enforced. There are two separate SOLs when it comes to accounts, and one is the SOL for reporting the item to the credit  bureaus, and the other is the SOL for collecting. If a debt is legally expired in collection terms, then you can use that to stop a collection agency in their tracks and that includes lawsuits. If the debt is expired in reporting terms, you can use that to force the credit bureaus to remove it from your record.

Will paying off a past due debt erase it from my credit?
It could. Generally speaking it will not- however, that really depends on two things. Who is reporting it (creditor or collector) and have you asked to have it removed. Seems like common sense doesn’t it? Surprisingly people payoff collection accounts everyday without ever asking for it to be deleted in exchange. That’s a very big mistake because a paid collection account is still negative. If you negotiate with the creditor or collector before you pay it, then be sure to get that agreement in writing to prove to the credit bureaus that it should be deleted. FYI: collectors agree to remove tradelines every day! This method is called credit repair by debt settlement.

Is debt management credit repair?
No. People often confuse credit counseling as credit repair. Credit counseling is a service to help you manage your monthly payments with your creditors but they do not repair your credit.

Do cease and desist letters really work?
Cease and desist letters can be very effective but its not a cure all. A debt collector can still sue you even if you’ve sent them a cease and desist letter and consumers misuse them all the time, believing that it will stop a collection agency. A cease and desist letter should be used if you want to stop a debt collector  from bothering you when you know the debt is not legitimate. For example: you have discovered that the SOL has expired and told the collector yet they continue to harass you or threaten suit. You can send a cease and desist letter certified mail to advise them of the facts and stop communication. If they continue to contact you, they can be sued under the Fair Debt Collections Act.

What is Validation of Debt?
Validation of debt also known as VOD is a method you use to force a collection agency to prove a debt is valid. If the collector cannot, you can  cease and desist them and demand the item be taken off your credit reports. VOD simply means you are asking the collector to show you proof. If the collector sends you a bill, you have a right to ask for VOD after you receive the first notice from them. They have 30 days after that to show you proof of the debt. This is how many items are removed from credit reports because collectors often fail to show proof. The reason for this can vary, but usually its because the debt was sold to a junk debt buyer and there are no records other than a printout.

Are collection agencies able to ruin your credit?
If you believe that a collection agency has purposely reported a debt to your credit in an attempt to coerce you, then consider this. Debt collectors CAN be sued for purposely reporting a debt that is false or misleading. This method is called credit repair by civil suit. If a debt is false or does not belong on your credit (perhaps its expired) then you can sue for damages.

What is the foundation of REAL credit repair?
The FDCPA, FCRA and FCBA. These federal laws are for your protection. An uneducated consumer is an easy target for collection or credit bureau abuse. If you repair your credit using this foundation, you will absolutely be able to remove items that you have discovered to contain erroneous information or to be inaccurate. This is credit repair. Remember, 70% of credit reports contain errors. Chances are, so do yours.

Are credit repair companies really able to remove bad credit?
Credit repair companies are good at marketing probably more so than they are at credit repair. That’s generally speaking, of course. Some companies will be a good source to help you fix your credit but you need to choose wisely. If you find that doing the work yourself  is just not your thing, then you can pay someone else to do it for you. Credit repair companies pop up all over the place so before you give a dime to any of them, be sure to thoroughly research them via the Better Business Bureau and the FTC.

That, my friend, IS real credit repair.

DIY Credit Repair Article credit: Credit expert, Kristi Feathers contributes to this blog. If you want to use this article on your website, you must include a link back to this page. All material written here is property of Carreonandassociates.com.

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What is the Bankruptcy Means Test

March 29th, 2009

In the old days a person could file for bankruptcy will relative ease. As long as you had the money to hire a bankruptcy attorney and did not incur the debts via fraud, it was pretty easy to file for bankruptcy and discharge all your obligations to pay the debts back.

With the BK reform, it’s now a matter of qualifying to file for bankruptcy. You can thank all those who abused the system for this new tougher stance.

The chapter 7 bankruptcy discharges all of your debts (wipes away) via court approval. The debts that are included are not to be collected by any creditor or third party debt collector. The court will have you complete a bankruptcy means test to show that you qualify for a chapter 7 bankruptcy.

The bankruptcy means test is just a way for the debtor to show that he qualifies to file for a chapter 7 bankruptcy. If approved, the debts are wiped away and the bankruptcy will stay on your credit reports for 10 years from date of discharge. The requirements of the bankruptcy means test is to ensure that you don’t have the ability to repay the debts and therefore qualify for discharge of said debts.

The bankruptcy means test accomplishes several things for the bankruptcy system. It makes sure that only those who really qualify, file and are discharged. It works to weed out those who are attempting to abuse the system, especially if they have the ability to pay but just want to take the easy way out.

This new BK means test is a step that helps the bankruptcy system work better. Millions of people have filed for bankruptcy when they were able to pay. Many have hidden assets and property to pay off the debts but simply chose not to and take the easy way out. All of this unpaid debt is passed down to you and I to cover, so the bankruptcy means test is a way to clean up the system and help stop abuse and fraud and help those who really need relief.

Related articles you may find interesting
Bankruptcy FAQ

Bankruptcy and your car

Not ready to file for bankruptcy, but in debt? Careone credit counseling can offer you immediate relief and stop the bill collectors.

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FTC Charges Seven Credit Repair Companies with Deceiving Consumers

March 21st, 2009

When are credit fixers’ going to learn that you CANNOT guarantee to fix someones credit and you cant charge money up front for work you havnt performed yet? Is the reward really worth the risk?

We’ve been pushing DIY credit repair education since 1995 and can only hope we’ve helped thousands of consumers avoid these credit repair scams.

The Federal Trade Commission has charged seven related companies with violating federal law by falsely promising to remove negative information from consumers’ credit reports, even information that is accurate and current, and by charging an up-front fee and failing to provide written disclosures. The agency seeks to make them stop the violations and pay restitution to consumers.

According to the FTC, the defendants charge consumers up to $2,000, including $300 in advance, promising to improve credit scores by removing information such as late payments, charge-offs, collections, inquiries, delinquencies, judgments, and accounts discharged in bankruptcy. Their promotions include an ad on a third-party Web site stating, “100% Guarantee to raise your credit score!” Transcripts from telephone calls with consumers include statements such as, “I can’t tell you much because I’ll be giving you my trade secrets, but I can definitely guarantee that we’ll take care of anything that’s derogatory on her credit report. It’s all legal.”

In addition to facing deceptive marketing charges under the FTC Act, the defendants are charged with violating the Credit Repair Organizations Act by misrepresenting their services; charging in advance for credit repair services; and failing to provide consumers with written contracts and other materials that contain written disclosures required by law or deviating from the required wording for the disclosures.

The defendants are United Credit Adjusters Inc., doing business as United Credit Adjustors and UCA; United Credit Adjustors Inc., d/b/a United Credit Adjusters and UCA; United Counseling Association Inc., d/b/a UCA; Bankruptcy Masters Corp., National Bankruptcy Services Corp., Federal Debt Solutions Ltd., United Money Tree Inc., and Ahron E. Henoch, Ezra Rishty, and Gerald Serino, also known as Jerry Serino. The Commission vote to authorize staff to file the complaint was 4-0. The complaint was filed in the U.S. District Court for the District of New Jersey.

Recognizing a Credit Repair Scam
Everyday, companies target consumers who have poor credit histories with promises to clean up their credit report so they can get a car loan, a home mortgage, insurance, or even a job once they pay them a fee for the service. The truth is, these companies can’t deliver an improved credit report for you using the tactics they promote. It’s illegal: No one can remove accurate negative information from your credit report. So after you pay them hundreds or thousands of dollars in fees, you’re left with the same credit report and someone else has your money.

If you see a credit repair offer, here’s how to tell if the company behind it is up to no good:

The company wants you to pay for credit repair services before they provide any services. Under the Credit Repair Organizations Act, credit repair companies cannot require you to pay until they have completed the services they have promised.

The company doesn’t tell you your rights and what you can do for yourself for free.

The company recommends that you do not contact any of the three major national credit reporting companies directly.

The company tells you they can get rid of most or all the negative credit information in your credit report, even if that information is accurate and current.

The company suggests that you try to invent a “new” credit identity — and then, a new credit report — by applying for an Employer Identification Number to use instead of your Social Security number.

The company advises you to dispute all the information in your credit report, regardless of its accuracy or timeliness.

If you follow illegal advice and commit fraud, you may find yourself in legal hot water, too: It’s a federal crime to lie on a loan or credit application, to misrepresent your Social Security number, and to obtain an Employer Identification Number from the Internal Revenue Service under false pretenses. You could be charged and prosecuted for mail or wire fraud if you use the mail, telephone, or Internet to apply for credit and provide false information.

Learn how to help yourself

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Debt settlement and the 1099-c don’t fall for the hype

March 17th, 2009

We hear this every tax season, people becoming so anxious about settling their debts but then being reamed by the IRS because that debt becomes taxable. We’ve  written about this issue many times but it seems to arise again and again, especially at tax time.

Today we are featuring the full explanation of the 1099-c taxable income issue by expert debt settlement coach Charles Phelan of ZipDebt.com.  He offers up a complete explanation of how the 1099-c issue can affect you when settling your debts and puts to rest those mis truths.

With collection agencies and debt sales reps getting more desperate to collect dollars during this credit crisis, they are telling many mis truths to consumers in an attempt to get payment. Only a true debt settlement expert will tell you the facts without an agenda.

Here is the guest post by Charles Phelan, an expert debt settlement coach and author of the ZipDebt system. You can visit his site to get a copy of his free debt settlement ebook  and learn more about debt settlement done by the consumer, for the consumer.

Charles wrote about this issue on the ZipDebt blog which is very valuable to subscribe to if you’re interested in debt settlement and the industry. The original post can be found here.  If you are interested in debt settlement but do not want to approach the issue alone, Hoffman, Brinker Roberts offers a full service that is fair and effective.

1099-c Taxable Income Issue
Two different consumers have informed me that a “debt consultant” (i.e., sales rep) at a settlement company made a specific claim about the 1099-C taxable income issue. The pitch is that if the client handles the negotiation themselves, they will be issued 1099-Cs by the original creditors and the forgiven balances will be fully taxable. Naturally, they also claim that if their company is contracted to handle the negotiations, they have some special method for getting around the 1099-C issue.

So we have two lies in one sales claim. That takes real creativity (or desperation). The first lie is that the forgiven balance is fully taxable when you get a 1099-C. That is false for the majority of debt settlement clients, due to the “insolvency” exemption. If you have a negative net worth, the IRS permits you to exclude the 1099-C amounts from income up to the amount by which you are negative. Therefore most debt settlement clients don’t have to pay taxes on the 1099-C amounts.

The second falsehood is the claim that a settlement company has some method of avoiding the issuance of the 1099-C in the first place. Nonsense! This is a blatant lie, period.

I’m not sure what magic-bullet technique these guys are claiming to have for eliminating the 1099-C factor. One possibility is a truly stupid tactic where you dispute the forgiven balance – the exact opposite of what you want to achieve through the settlement process.

Anyway, leaving aside idiotic tactics that will only backfire, it simply DOES NOT MATTER whether you settle the debt before or after charge-off. Either way, the creditor is REQUIRED BY LAW to issue a 1099-C for any forgiven amount of $600 or greater. Purposely waiting until after charge-off, the way one rep phrased the claim, does not create a path for avoiding the 1099-C. And if you were to follow this wonderful “advice,” it would also cost you some of the best potential settlements. (Some of the best deals available happen before the charge-off deadline via negotiation with the original creditors.)

What’s going on here is that it’s getting tougher and tougher for these settlement company sales reps to “close the deal.” Their huge fees are a tough sell, and smart consumers do their homework before signing a contract. Many of them find my website, realize that all is not as they were told, and start thinking about taking charge of the project with help from ZipDebt. The sales rep finds out they lost another big commission, and they start thinking of ways to convince people they should not handle their own settlement program. Hence the new “angle” on the tax issue.

Then again, now that I think of it, there may be some truth to their claim. Since many of their clients will either be forced into bankruptcy or get sued into paying back 100% of the debt anyway, then I suppose they can make the case that there will be no 1099-C forms issued. No settlements = no forgiven debt = no 1099-C .

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Debt tips

February 28th, 2009

You can make debt collectors follow the rules

Debt collectors calling you? Tips to handle it right

Advice for bill collector harassment

Avoiding debt collectors

Overview of Bankruptcy

Credit repair by debt settlement

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Charge offs and delinquency rise for credit card issuers

November 1st, 2008

Credit card companies are next in line to feel the credit crunch. Credit card companies say that their charge-offs of delinquent debt from card-holders have spiked to 5.5 percent, and could jump to 8 percent in coming months, a level not seen since the dot-com bust in 2001, according to Washington Post.

Banks considering debt settlements
USA Today reports that banks are proposing that they forgive up to 40% of the credit card debt owed by the most financially stressed consumers, who are close to bankruptcy. These consumers would then get five years to pay off their remaining card debt, interest-free. Banks would pilot this program with 50,000 consumers, in hopes of expanding it to tens of thousands of others to avoid their debts being lost all together through a bankruptcy.

We’ve known for years that debt settlements is a very sound solution to critical credit issues. Banks have always been resistant to debt settlements but now, they may have little choice. It’s a simple question really. Would you rather get half or lose it all?

Banks seem to finally have their heads out of the sand on this issue and this could be great news for consumers. One, it will cause consumers to think twice about filing for bankruptcy if the banks are willing to work with them, and two- banks will decrease their total charge off amounts by recouping at least half of the debt.

“With consumers losing their homes at record numbers, the last thing they are worried about is credit card debt. If they are already in a position to lose their biggest (secured) asset, their home, then the credit card debt will do little to jar them. It’s unsecured and much easier to discharge in a bankruptcy”,  says Credit Expert, Kristi Feathers.

Bully Debt Collectors
The other issue that’s going to be at hand here is the on-slot of debt collector abuse to consumers with accounts referred to collections. Debt collectors are probably a few of the only businesses thriving in this downturn and they will be all over these debtors, and that is going to cause more complaints nationwide to groups like the FTC.

Right now, consumers with credit card debt mounting and considering bankruptcy need to contact the card issuers and try to work out a debt settlement. They should explain their situation and see if a 40% debt reduction is possible and above all, get these agreements in writing.

A settled debt on a consumers credit report is much better than a charge off and once the debts are settled, the consumer can focus on rebuilding their credit from a stronger standpoint. Remember, settled debts will show paid whereas a charge off is unpaid, so that’s motivation in settling your debts if you are able.

At least with the banks being open to the idea of debt settlement, you have an advantage that once was harder to achieve.

Remember the following;

  • Get all agreements in writing with your creditors/collection agencies
  • Follow up with the credit bureaus to make sure debts are reported accurately as “settled” not “charged off”
  • Be sure to ask the creditor to also settle the rating from paid collection to settled
  • Try to handle the issue BEFORE its assigned to the collection agency
  • Educate yourself on debt settlement issues (you can do so here free)
  • Report any abuse by debt collectors to the Federal Trade Commission at FTC.gov
  • Keep a log of all your communications with creditors and collectors
  • Use DIY help if needed (FDCPA, FCRA)

If you credit card issuer isn’t willing to settle or If you are not in a position to settle your debts, you can contact a credit counseling firm to spread your payments out, reduce interest and fees, and help you get breathing room. Debt settlements is different from debt management.

N2credit.com

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Don’t let yourself be taken by shady credit repair offers

October 25th, 2008

This economy is causing consumers with credit issues to become more desperate and seek out quick fixes to their credit problems rather than do the real work needed to clean up credit issues. We’ve been educating consumers on line since 1995 about do it yourself credit repair, and more than ever, consumers should be very careful when choosing a credit repair company to help clean up their credit.

Credit repair agencies are legal but they must follow certain laws to make sure they comply.  A credit repair company who is promising all sorts of major changes to your credit reports should be avoided. A credit repair company has to follow the Credit Repair Organizations Act (CROA) and they cant charge you in advance for work they have yet to do, nor can they make exaggerated claims of guaranteed removals.

This week we told you about the latest crackdown by the FTC against these shady offers and according to the L.A Times, a credit repair company based in Woodland Hills California has been targeted by the FTC for violating such laws.  Success Credit Services was accused in an FTC civil suit of violating the Credit Repair Organizations Act by contending that it could quickly clean up credit reports by removing legitimate negative items, such as late payments, bankruptcies and tax liens.

You’d think by now, with all the crackdowns across the nation by the FTC, that credit repair companies would get a clue that they cannot get away with taking our money and doing nothing. They are sitting ducks for groups like the FTC and the Attorneys General. It’s a risk these companies should not be taking.

There’s a reason we decided in 1995 to bring credit education online to consumers nationwide. People were desperate for information about how to clean up their credit reports and not get ripped off in the process. By educating you to do the work yourself, you are going to not only save money but you’ll be sure to stay in control of exactly what is being done along the way. A shady credit repair company CAN make your credit worse.

We’ve never wanted to go into the business of fixing your credit for you and there’s a simple reason for that. We feel it’s very possible to do the work yourself by simply following some key educational steps. It’s that simple. Learn to understand the credit industry and how it works and you can take on the task of credit issues yourself. With what you learn, you could see dramatic improvements in your credit reports and spend next to nothing to do it.

Sure, there are some people that just do not want to undertake the task themselves, and they have the right to hire someone to do it for them, but just realize you are hiring someone to do pretty basic tasks like letter writing and debt negotiating.  What you are paying for is a service to simply do “the steps” you don’t want to bother with. That’s fine. You are paying a “service fee”. Just make sure the company is reputable and I’d recommend checking their record with the BBB (Better Business Bureau), completely reading their terms before you sign anything, and most importantly research them online. You can uncover a lot by reading what past customers have to say about them.

You don’t have to fall victim to these credit correction scams. Choose wisely just as you would choose a bank, mechanic, or mortgage broker. If the service is offering all sorts of exaggerated promises then it’s a pretty sure bet that you are going to get taken. These types of so called “businesses” are just waiting for the desperate buyer.

There is no reason that all rational should fly out the window when choosing a credit repair company. Many of these crackdowns could be avoided all together if consumers would use great caution when dealing with credit repair companies and do their homework. Common sense should prevail and if it doesn’t feel quite right then trust your instinct.

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Court orders credit bureaus to clean up consumer credit reports

October 4th, 2008

We just covered this issue again last week in the members area. Old zombie debts that just live on and on, often outliving you. Our credit system is very unforgiving. If they don’t get you for 7 years from the bankruptcy, they’ll try to get you for another 6-10 through erroneous reporting, either on the suppliers end or the credit bureaus end.

It’s a vicious cycle and is it a wonder people give in and hire credit repair attorneys?

This court order is going to make some consumers and credit repair agencies very happy- and make their jobs easier when it comes to deleting negative trade lines that were part of a bankruptcy.

The issue is millions of debts that were included in a bankruptcy are being reported incorrectly as delinquent or past due with a balance. The debts, however, should be listed as “included in bankruptcy” with a zero balance. This can have a major impact on your credit score.

According to the WSJ; Erica Noe of Burke, Va., says an old debt on her husband’s credit file cost them their home — in part because it prevented them from being able to refinance their interest-only adjustable-rate mortgage last year. Her husband, Kenneth, had filed for Chapter 7 bankruptcy in 2002; in that proceeding, the court discharged his prior debts. Nevertheless, they were unaware that a previous $7,000 credit-union loan remained on his report, pulling down his credit score for several years.

“We thought that once we filed for bankruptcy, it would go away,” says Ms. Noe. “But it didn’t. It affected everything.” The 31-year-old nurse says they didn’t find out about the error until they tried — but failed — to refinance their mortgage. When the rate reset, the Noes’ monthly mortgage payments shot up by about $1,000; they lost their home to foreclosure last November. “It was a snowball effect,” she says. “Unfortunately, everything just kind of worked against us at the same time.

“I tried to fix the error on the report by calling the credit union and telling them to stop reporting,” she says. Currently, their lawyer, Robert Weed, is filing a separate lawsuit against Equifax and the credit union. Equifax declined to comment on an ongoing suit.

A recent court order requires the three major credit-reporting bureaus — Experian Group Ltd., Equifax Inc. and TransUnion LLC — to clean up the credit files of millions of consumers who have filed for Chapter 7 bankruptcy. The problem: Old debts, which are typically forgiven by the courts in a bankruptcy filing, are still being reported as active on many consumers’ credit reports.

The changes could be particularly important to borrowers now, as consumer credit tightens across the board. It is perhaps more important than ever for people to make sure their credit scores are accurate and as high as possible.

This ruling is expected to clean up the credit files — and potentially boost the credit scores — of an estimated six million to 10 million people who have filed for Chapter 7 bankruptcy but still had errors in their files, according to plaintiffs’ attorneys. Consumers with so-called zombie debt — old loans they may have paid off years ago that can resurface when an aggressive debt collector erroneously demands payment — are also likely to get some relief, if those debts also were discharged under Chapter 7 protection.

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