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From Diane: In line with our firm’s commitment to financial education I suggest reading this short article about the CFPB’s focus on helping manage money, achieve financial goals and attain greater financial stability. The following are some very helpful tips on rebuilding credit, plus lots more.
The following is a reprint of: Prepared Remarks of Richard Cordray Director of the Consumer Financial Protection Bureau “CFPB”
Financial Literacy and Education Commission Meeting Washington, D.C. June 29, 2016
Over the past five years, the Bureau has focused on helping to create a financial marketplace that works for consumers, not against them. We try to do this by both protecting and supporting consumers. Our work to protect consumers involves making the rules governing the marketplace more effective, consistently and fairly enforcing those rules, and engaging in evenhanded oversight of financial institutions. Our work to support consumers includes creating resources and information directly for the public to use and engaging in foundational research to spread effective approaches to financial education.
As is true of the Financial Literacy and Education Commission itself, we recognize that promoting financial education depends on creating and fostering a diverse array of partnerships and collaborations. Currently, we are engaged around the country with libraries, social service providers, community groups, state and local policymakers, and various other partners.
All of these groups share our interest in helping the people we serve better achieve their financial goals and attain greater financial stability in their lives. In particular, we have come to value our partnerships with legal aid groups. They have helped us reach out to low-income consumers and those who are economically vulnerable. They play crucial front-line roles to ensure access to justice and promote financial security for consumers who may be unbanked, under-banked, or credit invisible.
With our Your Money, Your Goals initiative:
Nearly two years ago, we partnered with social service providers and trained them to provide financial education and tools to their clients. We then expanded on this work to offer the same resources to legal aid groups. The toolkit we have developed as part of the Your Money, Your Goals initiative addresses topics such as emergency savings; building credit history; managing debt; cash flow budgeting; and identifying financial products that consumers can use to pursue various financial and life goals.
The toolkit also includes templates for organizations that are interested in developing a resource and referral network so their clients know how to access help from specialized providers in their local communities. Since we launched the initiative, we have reached more than 450 legal aid staff and volunteer lawyers with in-person and webinar trainings.
Another resource that legal aid organizations may find useful is our Managing Someone Else’s Money guides. The guides are aimed at lay fiduciaries who have been named to manage money or property for a relative or friend who is unable to pay bills or make financial decisions. These financial caregivers include agents under a power of attorney, court-appointed guardians and conservators, trustees, and government benefit fiduciaries.
The guides are written in plain language to explain the duties and responsibilities of people who are acting in each of these fiduciary roles. They also describe how to watch out for scams and what to do if a family member or friend is a victim of financial exploitation. The guides can be distributed to low-income populations by legal services programs; they also can be distributed to adults aged 60 and older by legal services programs funded under the Older Americans Act. They can be shared with older adults who are deciding whom to name as their fiduciaries as well as with individuals who will themselves act as fiduciaries. Since the program launched nearly two years ago, we have distributed over 600,000 printed copies of the guides nationwide.
The Consumer Financial Protection Bureau is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit consumerfinance.gov.
The post Need Help Managing Your Money and Planning for Your Future? Read further…. appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
The purpose of filing for Chapter 7 bankruptcy is to discharge debts. But even after obtaining a discharge, a debtor is not totally in the clear. A recent case in the United States Bankruptcy Court for the Western District of Michigan involves an adversary proceeding in which the United States Trustee sought to revoke a Chapter 7 debtor’s (the “Debtor”) discharge.[i] Read More ›
Tags: Chapter 7, Fraud & Abuse
MORTGAGE SERVICERS ARE VIOLATING CFPB RULES DUE TO ONGOING TECHNOLOGY FAILURES AND PROCESS BREAKDOWNS
Consumer Financial Protection Bureau (CFPB) released a special report focused on mortgage servicers. The report found that some mortgage servicers continue to use failed technology that has already harmed consumers.
Mortgage servicers bully innocent homeowners.
According to the CFPB Mortgage servicers are responsible for collecting payments from the mortgage borrower and forwarding those payments to the owner of the loan. They handle customer service, collections, loan modifications, and foreclosures. Even before the financial crisis, the mortgage servicing industry at times experienced problems with bad practices and sloppy recordkeeping. As millions of borrowers fell behind on their loans because of the crisis, many servicers were unable to provide the level of service necessary to meet homeowners’ needs.
“Mortgage servicers can’t hide behind their bad computer systems or outdated technology. There are no excuses for not following federal rules,” said CFPB Director Richard Cordray. “Mortgage servicers and their service providers must step up and make the investments necessary to do their jobs properly and legally.”
According to the CFPB problems with the mortgage servicers include:
- Information about loan modifications is late, incorrect, or deceptive due to technological breakdowns or malfunctions.
- Consumers get the runaround when loans transfer to a new servicer with incompatible computer systems
Read the full report….
The post Mortgage Servicers Cannot Hide Behind Outdated Technology appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
In recent memory, the city of Chicago had a slogan that was plastered all over town. You would see it in campaign ads, hear it on the radio, see it written in the newspaper and talked about in City Hall. Chicago was declared the “city that worked.” It was the model case, the shining example+ Read More
The post Chicago, The City That Works: Not So Much During Saturdays Hours appeared first on David M. Siegel.
BANKRUPTCY COURT ORDERS BERNADETTE GUZMAN BARBA TO CEASE PREPARING BANKRUPTCY DOCUMENTS UNTIL REINSTATED LEGAL DOX BY BERNADETTE, PHOENIX, AZ – 2:16-mp-00002-DPC
BANKRUPTCY COURT: IT IS ORDERED FINDING THERE HAS BEEN A VIOLATION UNDER 11 U. S. C. § 110(I)(1) IN CONNECTION WITH THE SERVICES BERNADETTE GUZMAN BARBA PROVIDED AND WAS TO PROVIDE TO MR. XXX AND AWARDING SANCTIONS IN THE AMOUNT OF $2,000.00 TO BE PAID IN MONTHLY INSTALLMENTS IN THE AMOUNT OF $500.00 OVER THE NEXT FOUR MONTHS. PAYMENTS ARE TO BE DELIVERED TO XXXX. IT IS FURTHER ORDERED DIRECTING MS. BARBA TO MAKE A COMPLETE DISGORGEMENT OF ALL FEES PAID BY THE OTHER DEBTORS AS EVIDENCED BY THE NOTICE OF RECIPIENTS DATED MARCH 29, 2016, AT DOCKET #5. THE PAYMENTS ARE TO BE MADE IN NO FEWER THAN THREE DEBTORS IN AGGREGATE AMOUNTS OF NO LESS THAN $550.00 PER MONTH WHICH PAYMENTS ARE TO COMMENCE AFTER MR. XXX HAS BEEN FULLY SATISFIED.
IT IS FURTHER ORDERED ENJOINING BERNADETTE GUZMAN BARBA FROM ENGAGING IN ANY FURTHER BANKRUPTCY DOCUMENT PREPARATION WORK UNTIL SUCH TIME AS THE BOARD OF LEGAL DOCUMENT PREPARERS APPROVES HER RECERTIFICATION APPLICATION. UPON THAT RECERTIFICATION, SHE IS DIRECTED TO FILE AN APPROPRIATE MOTION WITH THIS COURT REQUESTING THAT SHE BE ALLOWED TO AGAIN PREPARE BANKRUPTCY DOCUMENTS IN THE DISTRICT OF ARIZONA.
IT IS FURTHER ORDERED DIRECTING BERNADETTE GUZMAN BARBA TO PROVIDE NOT LESS THAN 20 HOURS OF COMMUNITY SERVICES PER MONTH FOR THE NEXT 12 MONTHS TO A CHARITY OF HER CHOICE NAMELY TO CHICANO POR LA CAUSA, DECOLORES DOMESTIC VIOLENCE CENTER AND/OR MUJARES DEL SOL OJARES STARTING JULY 1, 2106 (sic).
It is very important that everyone understand their legal rights. If you need guidance in how bankruptcy works please talk to a competent bankruptcy attorney. Unfortunately, Arizona allows non-lawyers to prepare paperwork which will affect you for the rest of your life (bad child support orders, faulty bankruptcy documents, etc).
The post Bernadette Guzman Barba Sanctioned by Bankruptcy Court appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Bankruptcy Attorneys Must Ask Personal Questions: Bankruptcy Is Personal Attorneys Ask Questions If you are someone who is considering bankruptcy, you may have already spoken to or met with a bankruptcy attorney about your situation. Whether you had an initial consultation over the telephone or whether you appeared in the attorney’s office, you will recall+ Read More
The post Bankruptcy Attorneys Must Ask Personal Questions: Bankruptcy Is Personal appeared first on David M. Siegel.
Bankruptcy Is More Difficult It’s a lot harder to file for bankruptcy now than it was prior to 2005. That was the year the federal government passed sweeping changes and reforms to the then existing bankruptcy laws. Since then, there are pre-requisites to filing as well as financial documentation that must be submitted contemporaneously with+ Read More
The post Bankruptcy Relief: A Little Pain For A Lot Of Gain appeared first on David M. Siegel.
That free advice you get from friends, co-workers or the "charming" bill collector on the phone could be worth even less that what you paid for it.
From the perils of acknowledging old debts to the odds of "inheriting" financial obligations, here are nine myths that need to be permanently busted, along with a few things it pays to know about debts:
Myth No. 1: Paying old debt always raises your credit score.
Not always. This much is true: If a debt is seven years old or younger, and it's on your credit report, paying it could improve your credit score, says Anthony Sprauve, spokesman for myFICO, a division of FICO. How much depends on how old the debt is.
The myth part comes in if a debt is too old, or isn't on your credit report.
If a debt is older than seven years, by law it should have already come off your crdit report. So repaying it won't raise your score because it's no longer considered, says Sprauve.
In fact, if the debt is younger than seven years old and for some reason is not on your report, paying it could potentially lower your score, Sprauve says. The reason: If the collector reports the payment to credit bureaus, suddenly that old debt will be added to your report. Even though the debt is now paid, it's a negative mark your report didn't previously have.
When it comes to debt, time really is on your side. New debts affect your score more than old ones, says Laura Udis, senior financial services advocate at the Consumer Federation of America.
Myth No. 2: Paying an obligation 'restarts' the clock on your debt.
Half right. There are two clocks to consider. One is the length of time in which a creditor can force payment on a debt. The second is the length of time a debt can stay on your credit reports.
Forced-collection clock: Under state statutes of limitations for debts, creditors can use the courts system only so long to sue you for debt, get a judgment and garnish wages. But watch out: A consumer can unwittingly restart the collections clock on old debt, says Gail Hillebrand, associate director for consumer education and engagement at the Consumer Financial Protection Bureau.
Acknowledging a debt (verbally or in writing), making a partial payment or accepting a payment plan can all risk "re-aging" the debt, restarting that clock.
Credit history clock: No matter who owns the debt, how many times it has been sold or whether you acknowledge it, it has to come off of your credit history after seven years, says Chi Chi Wu, staff attorney at the National Consumer Law Center.
And it's illegal to tag an old debt with a new "birthday," she says.
This seven-year clock starts 180 days after the last payment the consumer made on the accounts.
One notable exception to the seven-year reporting rule: collection judgments. A judgment is considered a separate item from the original debt, Wu explains.
Myth No. 3: Once the statute of limitations on forced collection passes, creditors can't sue.
Not entirely. You have no legal obligation to pay a debt that's passed the state statute for forced collection, says Ira Rheingold, executive director of the National Association of Consumer Advocates. But creditors or collectors can still file a lawsuit.
If a creditor or collector sues, and you don't have someone in court to contest the claim, the courts may assume it's valid and grant the judgment, Rheingold says. Then, just like a B-movie zombie, that once-expired debt is alive and kicking again.
So if a collector sues, you or your attorney need to show up in court and demonstrate that the statute of limitations has expired, he says. Merely sending a letter to the courts or the creditor often isn't enough to prevent a default judgment, he adds.
Short on funds? You can contact NACA.net to find a consumer attorney who will take the case for a reduced fee, Rheingold says.
Myth No. 4: Making a small or partial payment stops lawsuits and debt collection attempts.
No matter who owns the debt, how many times it has been sold or whether you acknowledge it, it has to come off of your credit history after seven years.
-- Chi Chi Wu
National Consumer Law Center
Not true, unless that's part of a payment arrangement you have in writing, says Udis.
When dealing with representatives for creditors or collectors, get any promises or payment arrangements in writing or record those calls, if that's legal in the consumer's state, she says.
Myth No. 5: Paying old debt removes it from your credit report.
Nope. If an old debt is on your report and you pay it, that doesn't mean it will stop appearing on your credit history, says Udis.
What's most likely: It will still be reported, along with a status of paid or settled, she says.
And if the original debt is more than seven years old, it shouldn't still be on your report, which means it won't be included in your credit score, whether you pay it or not.
Myth No. 6: If you're in debt, collectors' efforts will make sure everyone around you finds out.
"Not true at all," says Udis. In fact, just the opposite.
"Under federal law, they cannot discuss the debt," she says. The Fair Debt Collection Practices Act prohibits collectors from even disclosing that there is a debt, Udis says.
So while a debt collector could conceivably call friends or family to find you, he or she may only call one time, she says. Collectors are not even allowed to say they're calling because of a debt, she adds.
And that reason doesn't hold water if they already have your contact information.
While the federal law applies to third-party collectors (companies collecting debt for the original creditor or companies who buy the debt), some states also impose the same confidentiality restrictions on the original creditors, says Rheingold.
Worried about your job if a creditor gets a judgment to garnish your salary? Again, you're protected, says Udis. Federal law prohibits employers from firing employees because they're having wages garnished, she says.
Myth No. 7: Telling debt collectors to 'buzz off' means they can't call you.
Again, half right. You have the right to tell collectors (verbally) not to call you at work, and they are required to obey, says Tracy S. Thorleifson, attorney at the Federal Trade Commission.
You also have the right to ask them not to contact you again, and they have to comply. But to invoke that right (granted under the Fair Debt Collection Practices Act), you want to put the request in writing, says Udis. After that, the collector is barred from contacting you again.
One right you don't give up with a "drop dead" letter: Collectors still have to serve notice if they file a lawsuit.
Don't want to draft your own letter just to tell collectors to go away? The Consumer Financial Protection Bureau has issued a series of debt collection sample letters.
Myth No. 8: Divorce decrees split debts into piles of 'his' and 'hers.'
Definitely a myth. Sometimes divorce courts will parcel out the payment of debts (joint and otherwise) during a divorce. (She pays the card bill; he pays the house note, etc.)
But "the court order is between you and the ex-spouse," says Hillebrand. "It doesn't change the obligation you have with the credit card company."
When you walk into court with your name on certain bills and obligations, you are just as responsible to those creditors when you walk out, Udis says.
The best options for joint debt during a divorce are to either pay it all off before the divorce is final or contact the creditors to put the entire obligation solely in one name.
Whichever move you opt for, get proof in writing and hang onto it.
Myth No. 9: You can 'inherit' debts.
Totally wrong. Unless a friend or family member of the deceased was already liable for a debt before the death (think joint debts or community property situations), they're not responsible for it after the death, says Robert Hobbs, deputy director of the National Consumer Law Center.
Debts can't be reassigned by creditors or collectors after death or "inherited," he adds.
What is supposed to happen: Once the creditors find out someone has died, they contact the estate and ask to be paid. The estate pays the applicable bills and distributes the assets, says Hobbs.
The best move: If you're getting calls from creditors or collectors insisting you've "inherited" debts, it may be time to chat with an attorney.
Copyright 2013 CreditCards.com. All rights reserved.
By Kristin Wong
Bankruptcy is a last resort for people and businesses, including Gawker Media, the company that owns this site. Many companies, like United Airlines and General Motors, file for bankruptcy and continue business as usual. Individuals file for bankruptcy and often emerge in one piece, too. Bankruptcy is poorly understood, so let’s talk about how it affects your finances, or the finances of a company you follow.
The Differences Between Chapter 7, 13, and 11
In general, people file for bankruptcy when there’s no way in hell they can meet their debt obligations. Popular assumption is that those people are bad with money and take out too much credit card debt. Sure, that happens, but often, people and companies file bankruptcy after a major financial blow. It might be a lawsuit debacle. It might be digital obsolescence. It might be an unexpected illness.
A lot of people think bankruptcy wipes out any and all debt obligations, but that’s not the case. You still have to pay up, and how you’ll pay up depends on what kind of bankruptcy you file: Chapter 7, Chapter 13, or Chapter 11. There are other types of specific bankruptcies, too (Chapter 12 is for farmers and fishermen, for example), but these three are the most common.
With Chapter 7, you may have to liquidate certain assets (like a car or a second home) to pay off at least some of the debt. Most of your assets are probably exempt, but it depends on your state, your financial situation, and whether or not that asset is essential. You have to meet certain eligibility requirements to file, and income is perhaps the most important one. As legal site Nolo explains, there’s a whole set of criteria to determine your income eligibility, but generally, you have to have little to no disposable income.
With Chapter 13, you get a plan to pay off your debts within the next three to five years, but you get to keep your assets. After it’s all said and done, some of those debts will likely be discharged. You have to qualify, though, and that means your secured debts can’t be more than $1,149,525 and your unsecured debts cannot be more than $383,175. Secured debt is debt that’s backed by collateral, like your house or car.
Chapter 11 bankruptcy works kind of like Chapter 13, but it’s typically reserved for businesses, and basically means a reorganization or restructuring for the company. Businesses can file for Chapter 7 bankruptcy, too, but again, that means a liquidation of assets, so Chapter 11 is usually a more attractive option. Companies get to keep their stuff and keep their creditors at bay while they continue their operations, but they have to come up with a plan to pay off at least some of their debt, or get it forgiven.
What Happens When You FileWhen you file for bankruptcy, you get an “automatic stay.” Basically, this puts a block on your debt to keep creditors from collecting. While the stay is in place, they can’t garnish your wages, deduct money from your bank account, or go after any secured assets.
Ironically, bankruptcy isn’t free. The filing fee alone is a few hundred bucks for Chapter 7 and 13, and nearly $2,000 for Chapter 11. And then there are the attorney fees. You can file without a lawyer, but it’s not recommended since bankruptcy laws can be tough to navigate. Upright Law estimates the fees for Chapter 7 are $1,000-$2,000, and Chapter 13 are $2,200-5,000. Chapter 11 costs a lot more.
Over at Forbes, attorney Robert Bovarnick explains:
In my experience, attorney’s fees run about 4% of annual revenue. If your company has $2,000,000 in revenue, expect to pay between $75,000 and $100,000 to your bankruptcy lawyer–and there may be expenses for accountants and other professionals on top of that.
You’ll also have to take a class or two. The government requires individuals to take credit counseling 180 days before you file, and you also have to take a debtor education course if you want your debts discharged.
A couple of weeks after filing, you’ll have to attend a “creditors meeting,” which is basically what it sounds like: a court meeting between you, your bankruptcy trustee, and any creditors who want to attend. They’ll all ask you questions about your financial situation and decision to file bankruptcy.
Your Assets Get Liquidated With Chapter 7Nolo says that in most cases, Chapter 7 debtors don’t have to liquidate their property (unless it’s collateral) because it’s usually exempt or it’s just not worth it. They explain:
If the property isn’t worth very much or would be cumbersome for the trustee to sell, the trustee may “abandon” the property — which means that you get to keep it, even though it is nonexempt...Most property owned by Chapter 7 debtors is either exempt or is essentially worthless for purposes of raising money for the creditors. As a result, few debtors end up having to surrender any property, unless it is collateral for a secured debt…
After the creditors meeting, your trustee will figure out whether or not to liquidate your stuff. If it does get liquidated, that means you’ll have to either surrender it or fork over its equivalent cash value to pay back your debt.
You Get a Payment Plan With Chapter 13With Chapter 13, you get a plan to pay off your debts, and some of them have to be paid in full. These debts are “priority debts,” and they include alimony, child support, tax obligations, and wages you owe to employees.
Your plan is based on how much you owe and what your income looks like, and it will include how much you have to pay and when you have to pay it.
The “Best Interests Test” for Chapter 11After filing for Chapter 11, the company has to come up with a reorganization plan for their business and finances. While they can continue operating as normal, they do have to run major financial decisions, like breaking a lease or shutting down operations, by the bankruptcy court. Creditors and shareholders can offer their input on these decisions, too. This plan is basically an agreement between the debtor and creditors about how the company will pay its future debts.
The plan also has to pass a “best interests” test. This test ensures creditors will get as much money under the Chapter 11 as they would if the debtor filed for a Chapter 7 liquidation.
Filing usually takes a couple of months to wrap up, but it takes considerably longer for the actual bankruptcy to come to a close. According to Credit.com, Chapter 7 bankruptcy is generally pretty quick and closes in a few months. This makes sense, since Chapter 7 liquidates your stuff to pay off debts quickly. Chapter 13, on the other hand, can last up to five years. According to Nolo, some Chapter 11 cases can wrap up in a few months, but six months to two years is a more common time frame.
What Happens to Your CreditYour credit score will plummet with a bankruptcy. The higher your score, the more you’ll fall. FICO estimates someone with a score in the mid 700s might see a drop by over 100 points. Of course, a low score can make your life difficult in many ways.
In general, Chapter 7 and 11 bankruptcies remain on your credit report for ten years, and Chapter 13 stays on for seven.
After bankruptcy is all said and done, most debts are discharged, but not all of them. Student loans aren’t typically dischargeable in bankruptcy, for example. Here are a few other non-dischargeable debts, according to Sutton Law:
- Tax debts
- Alimony and child support
- Divorce-related debts, including property settlement debts.
- Debts for some fines or penalties.
- Debts for personal injury or death caused by drunk driving
In some cases, student loans are dischargeable after a bankruptcy, but you have to pass a federal test for hardship, and the Department of Education says it’s rare.
Bankruptcy is usually a desperate remedy to a helpless situation. Knowing how it works and what to expect can help you navigate some of the misconceptions and figure out what the process actually entails.
Copyright 2016 Gawker Media. All rights reserved.
Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.