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Cambridge Credit Counseling has released its 8th Transparency Report, the only such report available in the credit counseling industry.
One of the more disturbing aspects of the nonprofit credit counseling industry is the complete lack of disclosure about the success rate of their programs.  In recent years the industry has come under fire for keeping such statistics a secret.

A poll of National Foundation for Credit Counseling (NFCC) members that was provided to university researchers found that only 21% of repayment plans were completed. Another 21% of participants pulled out in order to finish paying on their own, a form of success, while 51% simply dropped out or filed for bankruptcy. The figures were based on plans that terminated in 2002.”  Behind the Credit Counseling Curtain.

Realizing the need for disclosure and the opportunity presented, Cambridge Credit Counseling began to release reports of its operations. Some of the highlights of its reports include:

• Weak Graduation Rate.  Just 37.9% of enrollees from the first half of 2008 completed the full term of their program.
• Repayment Plans Accepted by Creditors.  96.9% of the payment proposals have been accepted by creditors.
• Reduced Interest Rates.  Those who enrolled during the first half of 2013 saw their interest rates reduced by an average of 54.6%, and their monthly payment reduced by 27.5%.
• Number of Debts in Plan.  The average number of creditors per enrolled client was 5.65, and average debt enrolled per client was $20,464.41.
• Length of Plan.  The duration of the typical payment plan was 49 months.
• Majority of Customers Not Offered Payment Plans.  Consumers who contacted Cambridge in the first half of 2013 were only offered enrollment in a DMP 34.4% of the time, with only 21.0% actually enrolling.

Cambridge reports that a key factor in improving the success rate of their Debt Management Plans is the constant monitoring and follow up with newly enrolled clients.  The establishment of routine financial check-ups were cited as a vital factor in boosting plan success rates.
A few things jump out in this report.  First, the success rate of the Cambridge program is almost double the rate of the industry as a whole.  Is that a result of Cambridge doing a better job of managing the plans or is that because Cambridge will not offer a DMP to those customers who lack the income to complete the process?    Most likely it is a combination of these factors.
Why is no other credit counseling agency reporting the success rate of their payment programs? No doubt the chief reason is that their success rates are significantly lower and the only way to boost their results would be to turn away clients who are unlikely to complete the payment plan. Credit counseling agencies are funded primarily by DPMs, so to turn away customers would have a dramatic impact on their bottom line.  Said another way, large credit counseling agencies are enrolling customers into plans that are unlikely to succeed just to generate revenue.
Only 21% of the people who contact Cambridge for help enroll in a DMP.  Of that amount, only 37.9% complete the plan.  Thus, only 8% of the customers who contact Cambridge actually complete the debt repayment process.  The success rate for other agencies that do not report results is undoubtedly lower.
Those who are considering whether to enroll in a credit counseling payment plan may want to see if Cambridge would accept them into their program.  If Cambridge does not recommend a DMP that is a good sign that repayment is unlikely to succeed.
There is a need for more accountability in the credit counseling industry.  Independent audits should be conducted and publicly disbursed. A uniform standard of reporting should be adopted. Nonprofit status should be automatically denied to those agencies associated with for-profit companies controlled by their executives. Those who claim to serve the public should have no objection to having a light shone on their activities.
Image courtesy of Flickr and Phil Comeau

I would like to thank all my fellow Arizona attorneys who gave me wonderful reviews over the last 10 years.  The end result was that I received AV Preeminent 10 year anniversary award.
For those who are not aware of the rating system for attorneys.  AV Preeminent is the “Highest Possible Peer Review Rating in Legal Ability and Ethical Standards”.  This recognition comes from Martindale-Hubbell.
WHAT ARE MARTINDALE-HUBBELL PEER REVIEW RATINGS?
“The Martindale-Hubbell Peer Review Ratings™ are an objective indicator of a lawyer’s high ethical standards and professional ability, generated from evaluations of lawyers by other members of the bar and the judiciary in the United States and Canada. The first review to establish a lawyer’s rating usually occurs three years after his/her first admission to the bar.

 Martindale-Hubbell facilitates Peer Review Ratings surveys of lawyers across multiple jurisdictions and geographic locations, in similar areas of practice as the lawyer being rated. Reviewers are asked to assess their colleagues’ general ethical standards and legal ability in a specific area of practice.”
What this means is that Arizona lawyers have acknowledged my expertise in the areas of bankruptcy and real estate law and my commitment to ethical standards.  I am extremely flattered by this recognition.

The post Diane Drain Receives AV 10 Year Preeminent Award appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

Have you ever opened your credit card statement only to find that despite last month’s payment, your unpaid balance has actually increased because of credit card interest, penalties or fees?As a practicing consumer bankruptcy attorney in Atlanta, Georgia for over 25 years, I know that out of control credit card debt can force people in to Chapter 7 or Chapter 13 bankruptcy. In many cases credit card debt that was manageable becomes unmanageable because of common mistakes made by individuals in how they handle their credit card debt.If you can avoid these mistakes you may be able to avoid the stress and financial distress caused by excessive credit card debt.How Credit Card Debt and Credit Card Interest can Get Out of ControlThe first step towards controlling your credit card debt involves your spending. This may seem obvious but many of my bankruptcy clients fail to recognize this reality. If you find yourself carrying a balance (rather than paying off your debt in full at the end of the month) you need o change your usage habits.  If you carry a balance you will end up paying unnecessary and expensive credit card interest.Your credit card is not a substitute for cash – instead your credit cards represent a high interest loan with a 20 days repayment term. Interest on unpaid balances will eat you alive. Most cards obligate you to pay an 18 to 20% annual interest rate on balances carried more than 20 days. To give you some perspective, your interest rate on mortgage debt will end up in the 3 to 4% per year range, and the annual percentage rate on your car note will generally be 5 to 6% per year.As a rule, if you make only the minimum payment, your balance will stay the same, or actually increase month to month indefinitely. And if you are 1 day late, you will likely get hit with a penalty (often $35 or more) plus your interest rate may be increased to 28% or higher.Banks earn huge profits from consumers who consistently maintain monthly balances while making minimum payments and occasionally missing a payment deadline. I have represented numerous clients over the years whose $20,000 balances never changed despite hundreds or even thousands of dollars of payments over years and years.Credit cards can be a convenience – you can avoid the risks associated with carrying cash. But if you do not pay your balance in full each month, that convenience becomes an expensive, high interest short term loan that can cost you thousands of dollars.Step One – Stop Using Your Credit Cards and Create a BudgetThe rule of thumb I offer to my clients is simple: if you find yourself carrying a balance for more than 2 months, stop using your credit cards. If you do not have enough money in your budget to pay your bills without accessing short term credit (i.e., your credit cards), cut out all unnecessary expenses and/or get a part time job. Step one is to stop the bleeding by balancing your household budget.If your budget does not balance, everything should be on the table – and this includes cutting out or reducing expenses such as:

• restaurants
• entertainment (movies, premium cable channel)
• expensive cell phone plans
• magazine and newspaper subscriptions
• reducing your insurance coverage to get a cheaper premium
• electricity and gas by changing your thermostat and taking shorter showers

Use coupons when shopping at the grocery store and buy cheaper food itemsIf those steps don’t get you back into balance, then look at trading your car or even moving to cheaper housing.  Yes, I am serious!If you have not done so, allocate an hour to create a household budget. I prepare budgets in bankruptcy cases and many of my clients are shocked at how much they spend each month.You and your family need to recognize that an out of balance budget is a huge red flag. And “Murphy’s Law” tends to mean that emergency car repair or leaky roof will appear just when you have the least amount of cash.After 25+ years of bankruptcy practice, I can tell you that if you do not get control of your budget sooner than later, the bankruptcy court will force you to make changes and often changes that you do not want. Here is a good resource for budgeting.Step Two – Attack Your Credit Card BalancesAs you work towards making your household budget balance, you will also need to attack your credit card balances. A cheap and easy tactic I use myself involves going online and creating an automatic minimum payment draft from your checking account on or before your payment due date.As we have seen, minimum payments won’t help pay down your balance but that minimum payment will avoid late payment fees and penalty interest rates.You can also use your bank’s notification features to send you alerts, reminding you that your payment due date is coming up in a certain number of days. I have these alerts emailed and texted to me so I will not forget.I also set up electronic payments from my checking account – this will allow you to pay on your balance at the last minute and avoid the risk of late payments or excess interest caused by slow mail.Next, create a plan for yourself to eliminate your credit card debt. You can approach this in different ways. Consumer advocate Dave Ramsey has developed a debt snowball plan which advocates paying off your smallest debts first and working up to the bigger ones. Dave argues that the psychological boost of seeing a debt eliminated will encourage you to sustain your efforts.Alternatively you can start by paying down the highest interest rate debts first and working backwards from there.However you decide to proceed, the key here is to balance your budget, find a way to generate extra money and chip away at your debt.What About Credit Counselors?My experience has been that private debt consolidation companies often cause more trouble than they are worth. Many of these companies run radio and TV ads touting their non-profit status (which means nothing) and promising reduced balances and favorable payment terms.Many of these companies have been sued by attorneys general in various states for a variety of reasons and many customers end up paying a lot of money they don’t have for very little result.Clearpoint (formerly CredAbility or Consumer Credit Counseling) is an exception – this company and others certified by the National Federation for Credit Counseling have helped consumers (including some of my clients) with legitimate, reasonably priced credit counseling services.While I do recommend ClearPoint, you should understand that this company is funded by credit card companies, banks and other consumer lenders. As such, ClearPoint plans are designed to help you pay your credit card debts in full, or mostly in full, with savings arising from (temporary) interest rate reductions and penalty waivers. Further, some consumer creditors will not participate in a ClearPoint plan.Credit Card Debt SettlementIn many circumstances you can eliminate interest, penalties and fees by settling your credit card debt for less than 100% on the dollar. Generally you will need access to a lump sum of cash and the amount of your discount will depend on how far behind you are and your employment status and asset picture.MindsetIn addition to the financial considerations, you can help yourself avoid penalty interest rates, fees and credit card interest by approaching this problem with the right mindset. Creditor representatives (collection agents) are trained to use emotions against you. Representatives will suggest that because you have not paid on time that you are dishonest, or that you are at the mercy of the lender.You should treat your credit card interest and debt issues as a business problem. This means that you should not be afraid to ask the lender’s representative to waive fees and penalties or to reduce interest rates. Remember – they want something from you – your money and they need to cooperate with you.Do not be afraid to pick up your phone and talk to a bankruptcy attorney about your bankruptcy options. You may discover that Chapter 7 or Chapter 13 may not work at all for you – which is important to know when you formulate your plan. You may also benefit from a lawyer’s perspective – for example, I sometimes speak to potential clients who owe $10,000 to $15,000 and I generally advise these people that bankruptcy does not make sense.On the other hand, if Chapter 7 would clearly work to wipe out tens of thousands of dollars of debt, that alternative would be helpful to have in your back pocket when negotiating with a credit card company.Big PictureThe big picture here is that just because a credit card company wants to charge you fees, penalty interest rates or to increase your interest rates there is no reason why you should simply accept their desires as your reality. You have leverage and that leverage arises from your knowledge of the options available to you.If I can be of help to you in better understanding those options, I invite you to call me at 770-393-4985, or to email me using the form on this page.The post How to Avoid Credit Card Interest, Penalties and Fees appeared first on theBKBlog.

Let’s talk about the morality of being in – and being unable to get out of – debt.
There’s no clause in a credit card contract that speaks to morality or ethics. There are bad people who have credit cards and pay them on time.
There are also good people who can’t make their payments on time.
This is, after all, a business deal. There’s a contract, and everyone agrees to be bound by whatever it says.
If you pay back the money according to the terms of the agreement then the lender makes a profit. You, in turn, get the benefit of being able to use the money for awhile.
Still, my clients can’t shake the feeling that bankruptcy is somehow dishonest. After all, don’t good people pay their bills?
When you take a closer look at the Bible it’s easier to see that bankruptcy is acceptable
What Does the Bible Say About Bankruptcy?
Most bankruptcy lawyers can rattle off a bunch of verses about how the Bible looks at bankruptcy.
Deuteronomy 15:1-2 talks about the Lord’s Release, and how every seven years each creditor shall release what he has lent to his neighbor. In Luke 7:42, the Bible says, “When they were unable to repay, he graciously forgave them both. So which of them will love him more?”
And Romans 13:8 says, “Let no debt remain outstanding, except the continuing debt to love one another, for he who loves his fellowman has fulfilled the law.”
Bankruptcy, in other words, isn’t terrible when viewed in a vacuum. Nobody is a sinner because they walk into bankruptcy court.
Still, the question remains – aren’t people told to pay their debts?
The Bible Doesn’t Like Debt
The Bible makes it clear that there is no such thing as good debt and bad debt – it’s all bad debt.
Proverbs 22:7 says, “The rich rules over the poor, And the borrower becomes the lender’s slave.” It continues in Proverbs 22:26-27 by telling us, “Do not be among those who give pledges, Among those who become guarantors for debts. If you have nothing with which to pay, Why should he take your bed from under you?”
To help you stay out of debt, 1 Corinthians 16:2 instructs you to put away money for a rainy say. “On the first day of every week each one of you is to put aside and save, as he may prosper, so that no collections be made when I come,” it says.
If You Go Into Debt, Be Honest
We teach our children from an early age that honesty is the best policy. Don’t lie, don’t cheat, and don’t steal. The Bible reinforces those moral absolutes.
Psalms 37:21 makes clear that wicked people incur debt with no intention of paying it back. And Ecclesiastes 5:5 says, “Better you should not vow, than vow and not pay.”
But both of these sentiments speak to someone who makes a promise and then willingly breaks it. As in the modern world, the Bible is clear that bad people make promises with no intention of keeping them.
As in our day-to-day lives, it isn’t the failure to live up to an obligation that causes the problem.  It’s the deceit involved in having no intention to do so at the outset.
But what about someone who can’t pay debts because of circumstances beyond his or her control?
If You Can’t Pay, The Bible Encourages Mercy
When you want to pay your debts but aren’t able to do so, the Bible instructs your creditors to show mercy.
Beyond the Lord’s release, the Bible is clear that forgiveness is the right thing to do. Matthew 18:27 talks about the master who forgave his slave’s debt when he could not repay. Luke 7:41-42 tells of the moneylender who forgave two debtors unable to make payments.
These stories show that the Bible encourages creditors to show forgiveness.
Creditors Also Bear Responsibility
People hire me to file for bankruptcy when creditors refuse to work with them. Rather than lower payments or interest, creditors add fees and send them to collection.
Isn’t it wrong to charge 19.99% interest on a credit card?
Leviticus 25:35-37says, “If your brother becomes poor and cannot maintain himself with you, you shall support him as though he were a stranger and a sojourner, and he shall live with you. Take no interest from him or profit, but fear your God, that your brother may live beside you. You shall not lend him your money at interest, nor give him your food for profit.”
And Exodus 22:25 directs, “If you lend money to any of my people with you who is poor, you shall not be like a moneylender to him, and you shall not exact interest from him.”
Deuteronomy 23:19-20 says, “You shall not charge interest on loans to your brother, interest on money, interest on food, interest on anything that is lent for interest.”
People who are in the business of lending money need to make money, and charging interest is how they do it. But there’s a difference between a reasonable rate of return and what you see on the typical credit card agreement.
It’s All About Honesty and Fair Dealing
I’ve spent 20 years working with people who were over their heads in debt. They come to me because they have no reasonable way of paying it off.
My religious clients turn to me for financial guidance. When I suggest bankruptcy, they talk about morality and whether bankruptcy is dishonest.
Here’s what I tell them.
There’s a moral obligation to repay debts when you can, and to only incur debt you intend to repay.
People who lend money also have a moral obligation, and that is to be fair.
But banks aren’t people, and the credit card agreements aren’t fair. The lenders stack the deck against you by charging high interest rates and fees. They make it worse by refusing to work with you when you need help.
The system is good for profits, but not moral or ethical.
Bankruptcy is the law’s attempt to balance the scales and make the system fair. The law can’t legislate morality, but it does the next best thing by enforcing fairness.
Filing for bankruptcy isn’t easy, and it’s not always quick. Sometimes you lose a little money, a little property, or a great credit score for a few months.
But make no mistake – there’s nothing immoral, sinful, wicked, or evil about filing for bankruptcy.
The post The Bible on Debt and The Morality of Bankruptcy appeared first on Shaev & Fleischman P.C..