Total Debt Relief, Inc.

Settling Your Credit Card Debt

2011-04-02T08:16:00.000-07:00

If you've maxed out your credit cards and are getting deeper in debt, chances are you're feeling overwhelmed. How are you ever going to pay down the debt? Now imagine hearing about a company that promises to reduce – or even erase – your debt for pennies on the dollar. Sounds like the answer to your problems, right?

Total Debt Relief, Inc. the nation’s leading financial solutions company says slow down, and consider how you can get out of debt the right way!

Debt Settlement Companies

Many different kinds of services claim to help people with debt problems. Among them are "debt settlement" companies that say they'll negotiate with your creditors to reduce the amount you owe. Some debt settlement companies claim that they can arrange for your debt to be paid off for less than the amount you owe – for anywhere from 30 to 70 percent of the balance. For example, if you owe $10,000 on a credit card, a debt settlement company may claim it can arrange for you to pay off the debt for less, say $4,000.

But there is no guarantee that debt settlement companies can persuade a credit card company to accept partial payment of a legitimate debt. Even if they can, you must put aside money for your creditors each month. Meanwhile, it may be months – or even years – before the debt settlement company negotiates with your credit card company to settle your debts. And, if you stop making your payments in the meantime, the credit card company usually adds late fees and interest to the debt each month. That can cause your original debt to double or triple.

Researching Companies

If you decide to pay a company to negotiate your debt, do some research before you choose one. Consider other people's experiences with debt settlement companies. One way to do that is to enter the company name with the word "complaints" into an Internet search engine. Read what others have said. You are making a big decision to spend money that could go toward paying down your debt.

Debt Settlement Fees

Starting October 27, 2010, companies that sell debt settlement and other debt relief services by phone cannot charge or collect a fee before they settle or reduce your debt.

If you do business with a debt settlement company, you may be required to deposit money in a dedicated bank account, which will be administered by an independent third party called an account administrator. The account administrator may charge you a reasonable fee, and is responsible for transferring funds from your account to pay your creditors and the debt settlement company when settlements occur – as long as:

The account is at an insured financial institution
You own and control the funds (and any interest accrued), and can withdraw them at any time
The debt settlement company doesn't own, control or have any affiliation with the account administrator
The debt settlement company doesn't split fees with the account administrator
You can stop working with the debt settlement company at any time without paying a penalty. If you decide to end the relationship with the company, it must return the money in the account to you within seven business days – minus any fees the company legitimately earned.

Disclosure Requirements

The debt settlement company must give you information about the program before you enroll:

Fees and terms- Before you sign up for the service, the company must explain its fees. If the company charges a specific dollar amount for services, it must tell you what it is. The company can charge you only a portion of its full fee for each debt it settles. For example, say you owe money to five creditors. The company successfully negotiates a settlement with one of your creditors. The company can charge you only a portion of its full fee at this time because it still needs to successfully negotiate with four other creditors. Each time the debt settlement company successfully settles a debt with one of your creditors, the company can charge you another portion of its full fee. If the company's fees are based on a percentage of the amount you save through the settlement, it must tell you both the percentage it charges and the estimated dollar amount that it represents. This may be called a "contingency" fee. The company also must tell you about any conditions on its services. For example, if it has a refund policy, it must tell you the terms and conditions for getting a refund. If the company has a no-refund policy, it must tell you so before you enroll.

Results- The Company must tell you how many months or years it will be before the company will make an offer to each creditor.

Offers- The Company must tell you how much money or what percentage of each outstanding debt you must save before it will make an offer to each creditor.

Non-payment- If the company asks you to stop making payments to your creditors – or if the program relies on you not to make payments – the company must tell you about the possible negative consequences of doing so, including:

Damage to your credit report and credit score
Your creditors may sue you or continue with the collections process
Your credit card companies may charge you additional fees and interest, which will increase the amount you owe.

Tax Consequences

Depending on your financial condition, the money you save by using debt settlement companies can be considered taxable income. Credit card companies and others may report debt settlements to the IRS, and the agency may consider it income, unless it finds you are "insolvent." You are insolvent when your total debts are more than the fair market value of your total assets. It can be complicated to determine whether someone is insolvent. If you're not sure whether you qualify for this exception, talk to a tax professional.

Red Flags

Avoid doing business with any company that promises to settle your debt if the company:
Charges fees before it settles your debts
Touts a "new government program" to bail out personal credit card debt
Guarantees it can make your unsecured debt go away
Tells you to stop communicating with your creditors
Tells you it can stop all debt collection calls and lawsuits
Guarantees that your unsecured debts can be paid off for just pennies on the dollar

Other Options

Working with a debt settlement company is just one option for dealing with your debt. You also could: negotiate directly with your credit card company, work with a credit counselor, work with a debt settlement or consider bankruptcy.

Recommended Option

Contact a financial solutions company reputable Solutions Company will advise people on their debt relief options. They will provide you with a free consultation and debt analysis and assist you in getting into a program that best meets your financial needs. They should discuss your entire financial situation with you, and help you develop a personalized plan to get you out of debt. Once they have completed your financial analysis they will refer you to one of the following:

-A reputable non-profit credit counseling organization. Most credit counselors offer services through local offices, the Internet, or by telephone.

-An attorney–that provides debt settlement services, one that is in your state and will meet face-to-face with you. Attorney should offer full representation, this means they will represent you in court should a one of your creditors file a lawsuit against and/or defend you and your consumer rights against all creditor actions.

Occasionally, the financial solutions company may suggest that you consider filing for bankruptcy. Declaring bankruptcy has serious consequences, including lowering your credit score, but credit counselors and other experts say that in some cases, it may make the most sense. Filing for bankruptcy under Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car that they might otherwise lose through the Chapter 7 bankruptcy process. In Chapter 13, the court approves a repayment plan that allows you to pay off your debts over a three to five year period, without surrendering any property. After you have made all the payments under the plan, your debts are discharged. As part of the Chapter 13 process, you will have to pay a lawyer, and you must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief.

For more information on financial solutions available to you contact Total Debt Relief, Inc. at 800-627-9667 to discuss your financial troubles or click here.

What is Identity Theft?

2011-02-28T18:05:00.000-08:00

The short answer is that identity theft is a crime. Identity theft and identity fraud are terms used to refer to all types of crime in which someone wrongfully obtains and uses another person's personal data in some way that involves fraud or deception, typically for economic gain.

An identity is stolen every 3 seconds and takes an average of six hundred hours to resolve and generally cost several thousand dollars to resolve. The FTC estimates that as many as 9 million Americans have their identities stolen each year. In fact, you or someone you know may have experienced some form of identity theft.

For the next few days I will be writing about identity theft– these blogs are intended to explain why you need to take precautions to protect yourself from identity theft. Unlike your fingerprints, which are unique to you and cannot be given to someone else for their use, your personal data especially your Social Security number, your bank account or credit card number, your telephone calling card number, and other valuable identifying data can be used, if they fall into the wrong hands, to personally profit at your expense. In the United States and Canada, for example, many people have reported that unauthorized persons have taken funds out of their bank or financial accounts, or, in the worst cases, taken over their identities altogether, running up vast debts and committing crimes while using the victim’s names. In many cases, a victim's losses may include not only out-of-pocket financial losses, but substantial additional financial costs associated with trying to restore his reputation in the community and correcting erroneous information for which the criminal is responsible.

In one notorious case of identity theft, the criminal, a convicted felon, not only incurred more than $100,000 of credit card debt, obtained a federal home loan, and bought homes, motorcycles, and handguns in the victim's name, but called his victim to taunt him -- saying that he could continue to pose as the victim for as long as he wanted because identity theft was not a federal crime at that time -- before filing for bankruptcy, also in the victim's name. While the victim and his wife spent more than four years and more than $15,000 of their own money to restore their credit and reputation, the criminal served a brief sentence for making a false statement to procure a firearm, but made no restitution to his victim for any of the harm he had caused. This case, and others like it, prompted Congress in 1998 to create a new federal offense of identity theft.

Cash vs. Credit Cards

2011-01-12T18:16:00.000-08:00

Many folks believe that there are positive uses for credit cards. Example rebates and airline miles. The true fact of the matter is– responsible use of a credit card does not exist. Credit card debt is a huge problem in America.

Regardless what the credit cards marketing ploy is to get you to use their credit card is the reality is there simply isn’t a positive side to credit card usage. You will spend more if you use credit cards, even if you pay your bills on time and in full. The average family is carrying eight to eleven thousand dollars in credit card debt according to the American Bankers Association.

Cash vs. Credit Cards

When you pay for things using cash there is an emotional attachment because you can feel the money leaving you and you know that you now have less cash in your pocket. This is not true when using a credit card. A study if credit card use at McDonalds found that people spent 47% more when paying by credit cards instead of using cash.

If you are traveling or renting a car I suggest using a debit card. I do not suggest using them for daily purchase because again you do not physically see the money leaving your pocket and there is no emotional attachment. Studies show that you can reduce your spending but ten percent or more simply by using cash for your purchases instead of credit or debit cards.

Personal finances are 80% behavior. You need to stop the habits that make you spend more. You cannot build wealth with credit cards. There is a reason credit card companies are multi-billion dollar companies…and it’s because they are giving rebates and frequent flyer miles to credit card users– please do not be naive and think that you are getting something for free.

For information on debt resolutions call Total Debt Relief, Inc. at 800-627-9667 or click here to visit us online.

Debt Settlement Programs

2010-12-28T14:34:00.001-08:00

Debt settlement also known as debt negotiation is not the same thing as credit counseling or a debt management program (DMP). It can be very risky and have a long term negative impact on your credit report and, in turn, your ability to get credit. That’s why many states have laws regulating debt negotiation companies and the services they offer.

The Claims

As discussed in previous blogs– debt negotiation firms may claim they’re nonprofit. They also may claim that they can arrange for your unsecured debt — typically, credit card debt — to be paid off for anywhere from 10 to 50 percent of the balance owed. For example, if you owe $10,000 on a credit card, a debt negotiation firm may claim it can arrange for you to pay off the debt with a lesser amount, say $4,000.

The Truth

Just because a debt negotiation company describes itself as a “nonprofit” organization, there’s no guarantee that the services they offer are legitimate. There also is no guarantee that a creditor will accept partial payment of a legitimate debt. In fact, if you stop making payments on a credit card, late fees and interest usually are added to the debt each month. If you exceed your credit limit, additional fees and charges also can be added.

While creditors have no obligation to agree to negotiate the amount a consumer owes, they have a legal obligation to provide accurate information to the credit reporting agencies, including your failure to make monthly payments. That can result in a negative entry on your credit report. And in certain situations, creditors may have the right to sue you to recover the money you owe. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.

Truth of the matter is creditors do settle millions of dollars a month in debt. But a debt negotiation company’s cannot guarantee your debt will be settled nor can they promise a specific dollar amount. All debt negotiations done are on a best efforts basis and quotes given for saving should be estimates based on previous dealing with your creditors. Every creditor has their own settlement criteria just like each person in debt has their own reasons for their current financial troubles.

Tip-offs to Rip-offs

Steer clear of debt negotiation companies that:

Do not offer a full financial analysis budgeting advice for free
Only offer debt negotiation/settlement (reputable companies offer multiple financial solutions)
Do not offer attorney representation
Do not represent you in court if a creditor files a lawsuit against you
Do not schedule a face-to-face meeting with you and your attorney
Do not have attorneys in your state within a 15-30 mile radius of you
Guarantee they can remove your unsecured debt
Promise that unsecured debts can be paid off with pennies on the dollar
Require monthly service fees of more the $79
Demand payment of a percentage of savings
Tell you to stop making payments to or communicating with your creditors
Claim that creditors never sue consumers for non-payment of unsecured debt
Promise that using their system will have no negative impact on your credit report
Claim that they can remove accurate negative information from your credit report.

If you are interested in debt negotiation for you are a family member call Total Debt Relief, Inc. at 800-627-9667 to get more information and details of the financial solutions available or click here and visit them on the web.

Chapter 7 Bankruptcy Part 2 of 2

2010-12-08T11:42:00.000-08:00

How Chapter 7 works

A chapter 7 case begins with the debtor filing a petition with the bankruptcy court serving the area where the individual lives or where the business debtor is organized or has its principal place of business or principal assets. (3) In addition to the petition, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a statement of financial affairs; and (4) a schedule of executory contracts and unexpired leases. Fed. R. Bankr. P. 1007(b). Debtors must also provide the assigned case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). 11 U.S.C. § 521. Individual debtors with primarily consumer debts have additional document filing requirements. They must file: a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). Even if filing jointly, a husband and wife are subject to all the document filing requirements of individual debtors. (The Official Forms may be purchased at legal stationery stores or downloaded from the internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)

The courts must charge a $245 case filing fee, a $39 miscellaneous administrative fee, and a $15 trustee surcharge. Normally, the fees must be paid to the clerk of the court upon filing. With the court's permission, however, individual debtors may pay in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006. For cause shown, the court may extend the time of any installment, provided that the last installment is paid not later than 180 days after filing the petition. Id. The debtor may also pay the $39 administrative fee and the $15 trustee surcharge in installments. If a joint petition is filed, only one filing fee, one administrative fee, and one trustee surcharge are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 707(a).

If the debtor's income is less than 150% of the poverty level (as defined in the Bankruptcy Code), and the debtor is unable to pay the chapter 7 fees even in installments, the court may waive the requirement that the fees be paid. 28 U.S.C. § 1930(f).

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must provide the following information:

A list of all creditors and the amount and nature of their claims;
The source, amount, and frequency of the debtor's income;
A list of all of the debtor's property; and
A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse are required so that the court, the trustee and creditors can evaluate the household's financial position.

Among the schedules that an individual debtor will file is a schedule of "exempt" property. The Bankruptcy Code allows an individual debtor (4) to protect some property from the claims of creditors because it is exempt under federal bankruptcy law or under the laws of the debtor's home state. 11 U.S.C. § 522(b). Many states have taken advantage of a provision in the Bankruptcy Code that permits each state to adopt its own exemption law in place of the federal exemptions. In other jurisdictions, the individual debtor has the option of choosing between a federal package of exemptions or the exemptions available under state law. Thus, whether certain property is exempt and may be kept by the debtor is often a question of state law. The debtor should consult an attorney to determine the exemptions available in the state where the debtor lives.

Filing a petition under chapter 7 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. 11 U.S.C. § 362. But filing the petition does not stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Between 20 and 40 days after the petition is filed, the case trustee (described below) will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator (5) schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the order for relief. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee puts the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding the debtor's financial affairs and property. 11 U.S.C. § 343. If a husband and wife have filed a joint petition, they both must attend the creditors' meeting and answer questions. Within 10 days of the creditors' meeting, the U.S. trustee will report to the court whether the case should be presumed to be an abuse under the means test described in 11 U.S.C. § 704(b).

It is important for the debtor to cooperate with the trustee and to provide any financial records or documents that the trustee requests. The Bankruptcy Code requires the trustee to ask the debtor questions at the meeting of creditors to ensure that the debtor is aware of the potential consequences of seeking a discharge in bankruptcy such as the effect on credit history, the ability to file a petition under a different chapter, the effect of receiving a discharge, and the effect of reaffirming a debt. Some trustees provide written information on these topics at or before the meeting to ensure that the debtor is aware of this information. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the meeting of creditors. 11 U.S.C. § 341(c).

In order to accord the debtor complete relief, the Bankruptcy Code allows the debtor to convert a chapter 7 case to a case under chapter 11, 12, or 13 (6) as long as the debtor is eligible to be a debtor under the new chapter. However, a condition of the debtor's voluntary conversion is that the case has not previously been converted to chapter 7 from another chapter. 11 U.S.C. § 706(a). Thus, the debtor will not be permitted to convert the case repeatedly from one chapter to another.

The Role of the Case Trustee

When a chapter 7 petition is filed, the U.S. trustee (or the bankruptcy court in Alabama and North Carolina) appoints an impartial case trustee to administer the case and liquidate the debtor's nonexempt assets. 11 U.S.C. §§ 701, 704. If all the debtor's assets are exempt or subject to valid liens, the trustee will normally file a "no asset" report with the court, and there will be no distribution to unsecured creditors. Most chapter 7 cases involving individual debtors are no asset cases. But if the case appears to be an "asset" case at the outset, unsecured creditors (7) must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed to file a claim. 11 U.S.C. § 502(b)(9). In the typical no asset chapter 7 case, there is no need for creditors to file proofs of claim because there will be no distribution. If the trustee later recovers assets for distribution to unsecured creditors, the Bankruptcy Court will provide notice to creditors and will allow additional time to file proofs of claim. Although a secured creditor does not need to file a proof of claim in a chapter 7 case to preserve its security interest or lien, there may be other reasons to file a claim. A creditor in a chapter 7 case who has a lien on the debtor's property should consult an attorney for advice.

Commencement of a bankruptcy case creates an "estate." The estate technically becomes the temporary legal owner of all the debtor's property. It consists of all legal or equitable interests of the debtor in property as of the commencement of the case, including property owned or held by another person if the debtor has an interest in the property. Generally speaking, the debtor's creditors are paid from nonexempt property of the estate.

The primary role of a chapter 7 trustee in an asset case is to liquidate the debtor's nonexempt assets in a manner that maximizes the return to the debtor's unsecured creditors. The trustee accomplishes this by selling the debtor's property if it is free and clear of liens (as long as the property is not exempt) or if it is worth more than any security interest or lien attached to the property and any exemption that the debtor holds in the property. The trustee may also attempt to recover money or property under the trustee's "avoiding powers." The trustee's avoiding powers include the power to: set aside preferential transfers made to creditors within 90 days before the petition; undo security interests and other prepetition transfers of property that were not properly perfected under nonbankruptcy law at the time of the petition; and pursue nonbankruptcy claims such as fraudulent conveyance and bulk transfer remedies available under state law. In addition, if the debtor is a business, the bankruptcy court may authorize the trustee to operate the business for a limited period of time, if such operation will benefit creditors and enhance the liquidation of the estate. 11 U.S.C. § 721.

Section 726 of the Bankruptcy Code governs the distribution of the property of the estate. Under § 726, there are six classes of claims; and each class must be paid in full before the next lower class is paid anything. The debtor is only paid if all other classes of claims have been paid in full. Accordingly, the debtor is not particularly interested in the trustee's disposition of the estate assets, except with respect to the payment of those debts which for some reason are not dischargeable in the bankruptcy case. The individual debtor's primary concerns in a chapter 7 case are to retain exempt property and to receive a discharge that covers as many debts as possible.

The Chapter 7 Discharge

A discharge releases individual debtors from personal liability for most debts and prevents the creditors owed those debts from taking any collection actions against the debtor. Because a chapter 7 discharge is subject to many exceptions, debtors should consult competent legal counsel before filing to discuss the scope of the discharge. Generally, excluding cases that are dismissed or converted, individual debtors receive a discharge in more than 99 percent of chapter 7 cases. In most cases, unless a party in interest files a complaint objecting to the discharge or a motion to extend the time to object, the bankruptcy court will issue a discharge order relatively early in the case – generally, 60 to 90 days after the date first set for the meeting of creditors. Fed. R. Bankr. P. 4004(c).

The grounds for denying an individual debtor a discharge in a chapter 7 case are narrow and are construed against the moving party. Among other reasons, the court may deny the debtor a discharge if it finds that the debtor: failed to keep or produce adequate books or financial records; failed to explain satisfactorily any loss of assets; committed a bankruptcy crime such as perjury; failed to obey a lawful order of the bankruptcy court; fraudulently transferred, concealed, or destroyed property that would have become property of the estate; or failed to complete an approved instructional course concerning financial management. 11 U.S.C. § 727; Fed. R. Bankr. P. 4005.

Secured creditors may retain some rights to seize property securing an underlying debt even after a discharge is granted. Depending on individual circumstances, if a debtor wishes to keep certain secured property (such as an automobile), he or she may decide to "reaffirm" the debt. A reaffirmation is an agreement between the debtor and the creditor that the debtor will remain liable and will pay all or a portion of the money owed, even though the debt would otherwise be discharged in the bankruptcy. In return, the creditor promises that it will not repossess or take back the automobile or other property so long as the debtor continues to pay the debt.

If the debtor decides to reaffirm a debt, he or she must do so before the discharge is entered. The debtor must sign a written reaffirmation agreement and file it with the court. 11 U.S.C. § 524(c). The Bankruptcy Code requires that reaffirmation agreements contain an extensive set of disclosures described in 11 U.S.C. § 524(k). Among other things, the disclosures must advise the debtor of the amount of the debt being reaffirmed and how it is calculated and that reaffirmation means that the debtor's personal liability for that debt will not be discharged in the bankruptcy. The disclosures also require the debtor to sign and file a statement of his or her current income and expenses which shows that the balance of income paying expenses is sufficient to pay the reaffirmed debt. If the balance is not enough to pay the debt to be reaffirmed, there is a presumption of undue hardship, and the court may decide not to approve the reaffirmation agreement. Unless the debtor is represented by an attorney, the bankruptcy judge must approve the reaffirmation agreement.

If the debtor was represented by an attorney in connection with the reaffirmation agreement, the attorney must certify in writing that he or she advised the debtor of the legal effect and consequences of the agreement, including a default under the agreement. The attorney must also certify that the debtor was fully informed and voluntarily made the agreement and that reaffirmation of the debt will not create an undue hardship for the debtor or the debtor's dependants. 11 U.S.C. § 524(k). The Bankruptcy Code requires a reaffirmation hearing if the debtor has not been represented by an attorney during the negotiating of the agreement, or if the court disapproves the reaffirmation agreement. 11 U.S.C. § 524(d) and (m). The debtor may repay any debt voluntarily, however, whether or not a reaffirmation agreement exists. 11 U.S.C. § 524(f).

An individual receives a discharge for most of his or her debts in a chapter 7 bankruptcy case. A creditor may no longer initiate or continue any legal or other action against the debtor to collect a discharged debt. But not all of an individual's debts are discharged in chapter 7. Debts not discharged include debts for alimony and child support, certain taxes, debts for certain educational benefit overpayments or loans made or guaranteed by a governmental unit, debts for willful and malicious injury by the debtor to another entity or to the property of another entity, debts for death or personal injury caused by the debtor's operation of a motor vehicle while the debtor was intoxicated from alcohol or other substances, and debts for certain criminal restitution orders. 11 U.S.C. § 523(a). The debtor will continue to be liable for these types of debts to the extent that they are not paid in the chapter 7 case. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for willful and malicious injury by the debtor to another entity or to the property of another entity will be discharged unless a creditor timely files and prevails in an action to have such debts declared non-dischargeable. 11 U.S.C. § 523(c); Fed. R. Bankr. P. 4007(c).

The court may revoke a chapter 7 discharge on the request of the trustee, a creditor, or the U.S. trustee if the discharge was obtained through fraud by the debtor, if the debtor acquired property that is property of the estate and knowingly and fraudulently failed to report the acquisition of such property or to surrender the property to the trustee, or if the debtor (without a satisfactory explanation) makes a material misstatement or fails to provide documents or other information in connection with an audit of the debtor's case. 11 U.S.C. § 727(d).

For information on bankruptcy alternatives call Toatal Debt Relief, Inc. at (800) 627-9667 or click here to visit them online

About Chapter 7 Bankruptcy- Part 1 of 2

2010-12-02T10:56:00.000-08:00

Chapter 7 Bankruptcy– Background

A chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor's nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor's property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain "exempt" property; but a trustee will liquidate the debtor's remaining assets. Accordingly, potential debtors should realize that the filing of a petition under chapter 7 may result in the loss of property.

Chapter 7 Eligibility

To qualify for relief under chapter 7 of the Bankruptcy Code, the debtor may be an individual, a partnership, or a corporation or other business entity. 11 U.S.C. §§ 101(41), 109(b). Subject to the means test described above for individual debtors, relief is available under chapter 7 irrespective of the amount of the debtor's debts or whether the debtor is solvent or insolvent. An individual cannot file under chapter 7 or any other chapter, however, if during the preceding 180 days a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court, or the debtor voluntarily dismissed the previous case after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

One of the primary purposes of bankruptcy is to discharge certain debts to give an honest individual debtor a "fresh start." The debtor has no liability for discharged debts. In a chapter 7 case, however, a discharge is only available to individual debtors, not to partnerships or corporations. 11 U.S.C. § 727(a)(1). Although an individual chapter 7 case usually results in a discharge of debts, the right to a discharge is not absolute, and some types of debts are not discharged. Moreover, a bankruptcy discharge does not extinguish a lien on property.

In part 2 of this blog I will discuss How Chapter 7 works, the role of the case Trustee and The Chapter 7 Discharge. For more information on bankruptcy and bankruptcy alternatives visit us on the web at www.tdrelief.net or call us toll free (800) 627-9667

Alternatives to Chapter 7 Bankruptcy

2010-11-24T08:37:00.000-08:00

Debtors should be aware that there are several alternatives to chapter 7 relief. For example, debtors who are engaged in business, including corporations, partnerships, and sole proprietorships, may prefer to remain in business and avoid liquidation. Such debtors should consider filing a petition under chapter 11 of the Bankruptcy Code. Under chapter 11, the debtor may seek an adjustment of debts, either by reducing the debt or by extending the time for repayment, or may seek a more comprehensive reorganization. Sole proprietorships may also be eligible for relief under chapter 13 of the Bankruptcy Code.

In addition, individual debtors who have regular income may seek an adjustment of debts under chapter 13 of the Bankruptcy Code. A particular advantage of chapter 13 is that it provides individual debtors with an opportunity to save their homes from foreclosure by allowing them to "catch up" past due payments through a payment plan. Moreover, the court may dismiss a chapter 7 case filed by an individual whose debts are primarily consumer rather than business debts if the court finds that the granting of relief would be an abuse of chapter 7. 11 U.S.C. § 707(b).

If the debtor's "current monthly income" (1) is more than the state median, the Bankruptcy Code requires application of a "means test" to determine whether the chapter 7 filing is presumptively abusive. Abuse is presumed if the debtor's aggregate current monthly income over 5 years, net of certain statutorily allowed expenses, is more than (i) $11,725, or (ii) 25% of the debtor's non-priority unsecured debt, as long as that amount is at least $7,025. (2) The debtor may rebut a presumption of abuse only by a showing of special circumstances that justify additional expenses or adjustments of current monthly income. Unless the debtor overcomes the presumption of abuse, the case will generally be converted to chapter 13 (with the debtor's consent) or will be dismissed. 11 U.S.C. § 707(b)(1).

Debtors should also be aware that bankruptcy is not their only option to get out of debt. There are out-of-court agreements with creditors through debt counseling services that may provide an alternative to a bankruptcy filing. For more information on these services call Total Debt Relief, Inc. at (800) 627-9667 or click here

About Chapter 13 Bankruptcy- Part 2 of 2

2010-11-15T08:21:00.000-08:00

Making The Plan Work

The provisions of a confirmed plan bind the debtor and each creditor. 11 U.S.C. § 1327. Once the court confirms the plan, the debtor must make the plan succeed. The debtor must make regular payments to the trustee either directly or through payroll deduction, which will require adjustment to living on a fixed budget for a prolonged period. Furthermore, while confirmation of the plan entitles the debtor to retain property as long as payments are made, the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the debtor's ability to complete the plan. 11 U.S.C. §§ 1305(c), 1322(a)(1), 1327.

A debtor may make plan payments through payroll deductions. This practice increases the likelihood that payments will be made on time and that the debtor will complete the plan. In any event, if the debtor fails to make the payments due under the confirmed plan, the court may dismiss the case or convert it to a liquidation case under chapter 7 of the Bankruptcy Code. 11 U.S.C. § 1307(c). The court may also dismiss or convert the debtor's case if the debtor fails to pay any post-filing domestic support obligations (i.e., child support, alimony), or fails to make required tax filings during the case. 11 U.S.C. §§ 1307(c) and (e), 1308, 521.

Chapter 13 Discharge

The bankruptcy law regarding the scope of the chapter 13 discharge is complex and has recently undergone major changes. Therefore, debtors should consult competent legal counsel prior to filing regarding the scope of the chapter 13 discharge.

A chapter 13 debtor is entitled to a discharge upon completion of all payments under the chapter 13 plan so long as the debtor: (1) certifies (if applicable) that all domestic support obligations that came due prior to making such certification have been paid; (2) has not received a discharge in a prior case filed within a certain time frame (two years for prior chapter 13 cases and four years for prior chapter 7, 11 and 12 cases); and (3) has completed an approved course in financial management (if the U.S. trustee or bankruptcy administrator for the debtor's district has determined that such courses are available to the debtor). 11 U.S.C. § 1328. The court will not enter the discharge, however, until it determines, after notice and a hearing, that there is no reason to believe there is any pending proceeding that might give rise to a limitation on the debtor's homestead exemption. 11 U.S.C. § 1328(h).

The discharge releases the debtor from all debts provided for by the plan or disallowed (under section 502), with limited exceptions. Creditors provided for in full or in part under the chapter 13 plan may no longer initiate or continue any legal or other action against the debtor to collect the discharged obligations.

As a general rule, the discharge releases the debtor from all debts provided for by the plan or disallowed, with the exception of certain debts referenced in 11 U.S.C. § 1328. Debts not discharged in chapter 13 include certain long term obligations (such as a home mortgage), debts for alimony or child support, certain taxes, debts for most government funded or guaranteed educational loans or benefit overpayments, debts arising from death or personal injury caused by driving while intoxicated or under the influence of drugs, and debts for restitution or a criminal fine included in a sentence on the debtor's conviction of a crime. To the extent that they are not fully paid under the chapter 13 plan, the debtor will still be responsible for these debts after the bankruptcy case has concluded. Debts for money or property obtained by false pretenses, debts for fraud or defalcation while acting in a fiduciary capacity, and debts for restitution or damages awarded in a civil case for willful or malicious actions by the debtor that cause personal injury or death to a person will be discharged unless a creditor timely files and prevails in an action to have such debts declared non-dischargeable. 11 U.S.C. §§ 1328, 523(c); Fed. R. Bankr. P. 4007(c).

The discharge in a chapter 13 case is somewhat broader than in a chapter 7 case. Debts dischargeable in a chapter 13, but not in chapter 7, include debts for willful and malicious injury to property (as opposed to a person), debts incurred to pay non-dischargeable tax obligations, and debts arising from property settlements in divorce or separation proceedings. 11 U.S.C. § 1328(a).

Chapter 13 Hardship Discharge

After confirmation of a plan, circumstances may arise that prevent the debtor from completing the plan. In such situations, the debtor may ask the court to grant a "hardship discharge." 11 U.S.C. § 1328(b). Generally, such a discharge is available only if: (1) the debtor's failure to complete plan payments is due to circumstances beyond the debtor's control and through no fault of the debtor; (2) creditors have received at least as much as they would have received in a chapter 7 liquidation case; and (3) modification of the plan is not possible. Injury or illness that precludes employment sufficient to fund even a modified plan may serve as the basis for a hardship discharge. The hardship discharge is more limited than the discharge described above and does not apply to any debts that are non-dischargeable in a chapter 7 case. 11 U.S.C. § 523.

To find a bankruptcy alternative or be connected with a Bankruptcy attorney click here or call Total Debt Relief, Inc. (800) 627-9667.

About Chapter 13 Bankruptcy- Part 1 of 2

2010-11-08T06:09:00.000-08:00

Chapter 13 Bankruptcy Background

A chapter 13 bankruptcy is also called a wage earner's plan. It enables individuals with regular income to develop a plan to repay all or part of their debts. Under this chapter, debtors propose a repayment plan to make installments to creditors over three to five years. If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." (1) If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years. 11 U.S.C. §1322(d). During this time the law forbids creditors from starting or continuing collection efforts.

Advantages of Chapter 13

Chapter 13 Eligibility

Any individual, even if self-employed or operating an unincorporated business, is eligible for chapter 13 relief as long as the individual's unsecured debts are less than $360,475 and secured debts are less than $1,081,400. 11 U.S.C. § 109(e). These amounts are adjusted periodically to reflect changes in the consumer price index. A corporation or partnership may not be a chapter 13 debtor. Id.

An individual cannot file under chapter 13 or any other chapter if, during the preceding 180 days, a prior bankruptcy petition was dismissed due to the debtor's willful failure to appear before the court or comply with orders of the court or was voluntarily dismissed after creditors sought relief from the bankruptcy court to recover property upon which they hold liens. 11 U.S.C. §§ 109(g), 362(d) and (e). In addition, no individual may be a debtor under chapter 13 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing. 11 U.S.C. §§ 109, 111. There are exceptions in emergency situations or where the U.S. trustee (or bankruptcy administrator) has determined that there are insufficient approved agencies to provide the required counseling. If a debt management plan is developed during required credit counseling, it must be filed with the court.

How Chapter 13 works

A chapter 13 case begins by filing a petition with the bankruptcy court serving the area where the debtor has a domicile or residence. Unless the court orders otherwise, the debtor must also file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and expenditures; (3) a schedule of executory contracts and unexpired leases; and (4) a statement of financial affairs. Fed. R. Bankr. P. 1007(b). The debtor must also file a certificate of credit counseling and a copy of any debt repayment plan developed through credit counseling; evidence of payment from employers, if any, received 60 days before filing; a statement of monthly net income and any anticipated increase in income or expenses after filing; and a record of any interest the debtor has in federal or state qualified education or tuition accounts. 11 U.S.C. § 521. The debtor must provide the chapter 13 case trustee with a copy of the tax return or transcripts for the most recent tax year as well as tax returns filed during the case (including tax returns for prior years that had not been filed when the case began). Id. A husband and wife may file a joint petition or individual petitions. 11 U.S.C. § 302(a). (The Official Forms may be purchased at legal stationery stores or downloaded from the Internet at www.uscourts.gov/bkforms/index.html. They are not available from the court.)

The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee. Normally the fees must be paid to the clerk of the court upon filing. With the court's permission, however, they may be paid in installments. 28 U.S.C. § 1930(a); Fed. R. Bankr. P. 1006(b); Bankruptcy Court Miscellaneous Fee Schedule, Item 8. The number of installments is limited to four, and the debtor must make the final installment no later than 120 days after filing the petition. Fed. R. Bankr. P. 1006(b). For cause shown, the court may extend the time of any installment, as long as the last installment is paid no later than 180 days after filing the petition. Id. The debtor may also pay the $39 administrative fee in installments. If a joint petition is filed, only one filing fee and one administrative fee are charged. Debtors should be aware that failure to pay these fees may result in dismissal of the case. 11 U.S.C. § 1307(c)(2).

In order to complete the Official Bankruptcy Forms that make up the petition, statement of financial affairs, and schedules, the debtor must compile the following information:

A list of all creditors and the amounts and nature of their claims;
The source, amount, and frequency of the debtor's income;
A list of all of the debtor's property; and
A detailed list of the debtor's monthly living expenses, i.e., food, clothing, shelter, utilities, taxes, transportation, medicine, etc.

Married individuals must gather this information for their spouse regardless of whether they are filing a joint petition, separate individual petitions, or even if only one spouse is filing. In a situation where only one spouse files, the income and expenses of the non-filing spouse is required so that the court, the trustee and creditors can evaluate the household's financial position.

When an individual files a chapter 13 petition, an impartial trustee is appointed to administer the case. 11 U.S.C. § 1302. In some districts, the U.S. trustee or bankruptcy administrator (2) appoints a standing trustee to serve in all chapter 13 cases. 28 U.S.C. § 586(b). The chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. 11 U.S.C. § 1302(b).

Filing the petition under chapter 13 "automatically stays" (stops) most collection actions against the debtor or the debtor's property. 11 U.S.C. § 362. Filing the petition does not, however, stay certain types of actions listed under 11 U.S.C. § 362(b), and the stay may be effective only for a short time in some situations. The stay arises by operation of law and requires no judicial action. As long as the stay is in effect, creditors generally may not initiate or continue lawsuits, wage garnishments, or even make telephone calls demanding payments. The bankruptcy clerk gives notice of the bankruptcy case to all creditors whose names and addresses are provided by the debtor.

Chapter 13 also contains a special automatic stay provision that protects co-debtors. Unless the bankruptcy court authorizes otherwise, a creditor may not seek to collect a "consumer debt" from any individual who is liable along with the debtor. 11 U.S.C. § 1301(a). Consumer debts are those incurred by an individual primarily for a personal, family, or household purpose. 11 U.S.C. § 101(8).

Individuals may use a chapter 13 proceeding to save their home from foreclosure. The automatic stay stops the foreclosure proceeding as soon as the individual files the chapter 13 petition. The individual may then bring the past-due payments current over a reasonable period of time. Nevertheless, the debtor may still lose the home if the mortgage company completes the foreclosure sale under state law before the debtor files the petition. 11 U.S.C. § 1322(c). The debtor may also lose the home if he or she fails to make the regular mortgage payments that come due after the chapter 13 filing.

Between 20 and 50 days after the debtor files the chapter 13 petition, the chapter 13 trustee will hold a meeting of creditors. If the U.S. trustee or bankruptcy administrator schedules the meeting at a place that does not have regular U.S. trustee or bankruptcy administrator staffing, the meeting may be held no more than 60 days after the debtor files. Fed. R. Bankr. P. 2003(a). During this meeting, the trustee places the debtor under oath, and both the trustee and creditors may ask questions. The debtor must attend the meeting and answer questions regarding his or her financial affairs and the proposed terms of the plan.11 U.S.C. § 343. If a husband and wife file a joint petition, they both must attend the creditors' meeting and answer questions. In order to preserve their independent judgment, bankruptcy judges are prohibited from attending the creditors' meeting. 11 U.S.C. § 341(c). The parties typically resolve problems with the plan either during or shortly after the creditors' meeting. Generally, the debtor can avoid problems by making sure that the petition and plan are complete and accurate, and by consulting with the trustee prior to the meeting.

In a chapter 13 case, to participate in distributions from the bankruptcy estate, unsecured creditors must file their claims with the court within 90 days after the first date set for the meeting of creditors. Fed. R. Bankr. P. 3002(c). A governmental unit, however, has 180 days from the date the case is filed file a proof of claim.11 U.S.C. § 502(b)(9).

After the meeting of creditors, the debtor, the chapter 13 trustee, and those creditors who wish to attend will come to court for a hearing on the debtor's chapter 13 repayment plan.

The Chapter 13 Plan and Confirmation Hearing

Unless the court grants an extension, the debtor must file a repayment plan with the petition or within 15 days after the petition is filed. Fed. R. Bankr. P. 3015. A plan must be submitted for court approval and must provide for payments of fixed amounts to the trustee on a regular basis, typically biweekly or monthly. The trustee then distributes the funds to creditors according to the terms of the plan, which may offer creditors less than full payment on their claims.

There are three types of claims: priority, secured, and unsecured. Priority claims are those granted special status by the bankruptcy law, such as most taxes and the costs of bankruptcy proceeding. (3) Secured claims are those for which the creditor has the right take back certain property (i.e., the collateral) if the debtor does not pay the underlying debt. In contrast to secured claims, unsecured claims are generally those for which the creditor has no special rights to collect against particular property owned by the debtor.

The plan must pay priority claims in full unless a particular priority creditor agrees to different treatment of the claim or, in the case of a domestic support obligation, unless the debtor contributes all "disposable income" - discussed below - to a five-year plan.11 U.S.C. § 1322(a).

If the debtor wants to keep the collateral securing a particular claim, the plan must provide that the holder of the secured claim receive at least the value of the collateral. If the obligation underlying the secured claim was used to buy the collateral (e.g., a car loan), and the debt was incurred within certain time frames before the bankruptcy filing, the plan must provide for full payment of the debt, not just the value of the collateral (which may be less due to depreciation). Payments to certain secured creditors (i.e., the home mortgage lender), may be made over the original loan repayment schedule (which may be longer than the plan) so long as any arrearage is made up during the plan. The debtor should consult an attorney to determine the proper treatment of secured claims in the plan.

The plan need not pay unsecured claims in full as long it provides that the debtor will pay all projected "disposable income" over an "applicable commitment period," and as long as unsecured creditors receive at least as much under the plan as they would receive if the debtor's assets were liquidated under chapter 7. 11 U.S.C. § 1325. In chapter 13, "disposable income" is income (other than child support payments received by the debtor) less amounts reasonably necessary for the maintenance or support of the debtor or dependents and less charitable contributions up to 15% of the debtor's gross income. If the debtor operates a business, the definition of disposable income excludes those amounts which are necessary for ordinary operating expenses. 11 U.S.C. § 1325(b)(2)(A) and (B). The "applicable commitment period" depends on the debtor's current monthly income. The applicable commitment period must be three years if current monthly income is less than the state median for a family of the same size - and five years if the current monthly income is greater than a family of the same size. 11 U.S.C. § 1325(d). The plan may be less than the applicable commitment period (three or five years) only if unsecured debt is paid in full over a shorter period.

Within 30 days after filing the bankruptcy case, even if the plan has not yet been approved by the court, the debtor must start making plan payments to the trustee. 11 U.S.C. § 1326(a)(1). If any secured loan payments or lease payments come due before the debtor's plan is confirmed (typically home and automobile payments), the debtor must make adequate protection payments directly to the secured lender or lessor - deducting the amount paid from the amount that would otherwise be paid to the trustee. Id.

No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing and decide whether the plan is feasible and meets the standards for confirmation set forth in the Bankruptcy Code. 11 U.S.C. §§ 1324, 1325. Creditors will receive 25 days' notice of the hearing and may object to confirmation. Fed. R. Bankr. P. 2002(b). While a variety of objections may be made, the most frequent ones are that payments offered under the plan are less than creditors would receive if the debtor's assets were liquidated or that the debtor's plan does not commit all of the debtor's projected disposable income for the three or five year applicable commitment period.

If the court confirms the plan, the chapter 13 trustee will distribute funds received under the plan "as soon as is practicable." 11 U.S.C. § 1326(a)(2). If the court declines to confirm the plan, the debtor may file a modified plan. 11 U.S.C. § 1323. The debtor may also convert the case to a liquidation case under chapter 7. (4) 11 U.S.C. § 1307(a). If the court declines to confirm the plan or the modified plan and instead dismisses the case, the court may authorize the trustee to keep some funds for costs, but the trustee must return all remaining funds to the debtor (other than funds already disbursed or due to creditors). 11 U.S.C. § 1326(a)(2).

Occasionally, a change in circumstances may compromise the debtor's ability to make plan payments. For example, a creditor may object or threaten to object to a plan, or the debtor may inadvertently have failed to list all creditors. In such instances, the plan may be modified either before or after confirmation. 11 U.S.C. §§ 1323, 1329. Modification after confirmation is not limited to an initiative by the debtor, but may be at the request of the trustee or an unsecured creditor. 11 U.S.C. § 1329(a).

To find a bankruptcy alternative or be connected with a Bankruptcy attorney click here or call Total Debt Relief, Inc. (800) 627-9667.

Can the government settle credit card debt?

2010-11-01T08:22:00.000-07:00

Currently, no government credit card debt settlement programs exist. What does exist, however, is advertising by companies, some of which are debt settlement companies, trying their best to mislead you. Consumers who are in debt trouble do not have the option of government assistance to get out.

Regarding debt settlement, the for-profit, debt settlement industry has recently come under fire by the Federal Trade Commission. Some debt settlement companies charged large upfront fees and had a low success rate with actually settling accounts. The FTC has adopted new regulations for debt settlers in response to these issues. The new rules will go into full effect October 27, 2010. In addition to improved disclosures, they require that fees for debt relief services may not be collected until:

The debt relief service successfully renegotiates, settles, reduces or otherwise changes the terms of at least one of the consumer's debts.
There is a written settlement agreement, debt management plan, or other agreement between the consumer and the creditor, and the consumer has agreed to it.
And, the consumer has made at least one payment to the creditor as a result of the agreement negotiated by the debt relief provider.

Dealing directly with credit card companies depends in large part on how many creditors you owe rather than how much you owe. My experience is that if you have only a few creditors, you are more likely to be able to come to terms than those who have many creditors. A creditor will want as large a payment as possible. You will be in a negotiating contest with people who do this every day. You might successfully negotiate with one or two lenders, but once you get beyond one or two, the odds are against you being successful in the long run.

So, if you have up to three or so bills and have not already tried communicating with your creditors, I would recommend that you start there. Ask your bank if it has hardship programs available to help consumers get back on track with credit card debt. Many do. The downside of many of these programs is that they are short term, usually six months or so.

If you have more than a few creditors, if their offers are not enough to allow you to make ends meet or if you just don't want to contact your creditors, you might consider seeking help from a reputable financial solutions company. Your counselor will thoroughly review your finances with you and determine what course of action is in your best interest. During the process, many people come to realize that they can make adjustments in areas of their monthly budgets. By making some simple spending adjustments, some find that they are able to handle their credit card debt without outside assistance.

Others, and this may include you, may benefit from a debt consolidation program such as a debt management plan DMP with a non-profit agency or an attorney debt settlement plan that provides full representation.

Consumers enrolled in a debt management plan receive assistance with lower interest rates and waived fees from their creditors. And the counseling agency does all the negotiating for you. The typical payback period on a debt management plan is four to five years or less. Consumers on a debt management plan can cancel at any time for any reason. For example, if your financial situation becomes worse and you cannot continue to make monthly payments or if your situation gets better and you wish to pay on your own, you can stop at any time without a penalty from the agency.

Consumers enrolled in a full representation attorney debt settlement program receive assistance with negotiating with their principal balance with their creditors and the law firm does all the negotiating for you. Should the creditor pursue legal actions against you your attorney will represent you in court. It typically takes consumers 36-42 months to complete a debt settlement program. If your financial situation gets better and you wish to settle your debt more quickly you can contact your attorney and they will expedite settlement proceedings, if your financial situation becomes worse the attorney can advise you on and/or file bankruptcy for you.

For more information call Total Debt Relief, Inc. (800) 627-9667 or click here and visit us on the web.

IRS Is Serious About Collecting Back Taxes

2010-10-28T09:16:00.000-07:00

With a record enforcement budget, the IRS is serious about collecting back taxes and penalizing those who have inadvertently or deliberately evaded their tax payments. A-list celebrities like Wesley Snips, Paul Hogan, Reggie Bush and many others have faced severe IRS charges and penalties for evading large sums of tax payments.

The media loves to play up the distress of big-name tax evaders who have been caught by the IRS, but the truth is that IRS is just as aggressively pursuing the average taxpayer for unpaid back taxes. The Internal Revenue Service will just as gladly audit you or your next-door neighbor as they will a celebrity.

Among the lessons taxpayers can learn from celebrity tax troubles are the following:

You can't hide from tax obligations. Australian tax authorities claim “Crocodile Dundee" actor Paul Hogan owes them $39 million in back taxes and refused to let him leave the country after he returned for his mother's funeral.
Waiting to get tax help can ruin your financial future. Baseball great Jose Canseco did on $320,000 in back taxes and now has multiple liens on his assets.
Don't ignore your tax issues. Treasury Secretary, Timothy Geithner was embarrassed in confirmation hearings by several tax discrepancies he hadn't dealt with.
IRS interest and penalties add up quickly. Football star Reggie Bush may owe as much as $200,000 in back taxes, interest, and penalties on an estimated $300,000 he allegedly received in illegal gifts while in college at USC.
Take advantage of legal tax benefits

Total Debt Relief, Inc is dedicated to assisting businesses and individuals alike who find themselves in trouble with the IRS in finding affordable solutions. Our tax services providers are attorneys, CPAs, and tax relief professionals and have successfully resolved thousands of cases since and are committed to making sure our clients' experiences exceed their expectations. For more information or to receive a free tax relief consultation, visit www.tdrelief.net or call 800-627-9667.

Fiscal Fitness: Choosing a Credit Counselor

2010-10-21T10:14:00.000-07:00

Fiscal Fitness: Choosing a Credit Counselor

Living paycheck to paycheck? Worried about debt collectors? Can’t seem to develop a workable budget, let alone save money for retirement? If this sounds familiar, you may want to consider the services of a credit counselor. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But beware — just because an organization says it is “nonprofit” doesn’t guarantee that its services are free or affordable or that its services are legitimate. In fact, some credit counseling organizations charge high fees, some of which may be hidden, or urge consumers to make “voluntary” contributions that cause them to fall deeper into debt.

Choosing a Credit Counseling Organization

Reputable credit counseling organizations advise you on managing your money and debts, help you develop a budget, and usually offer educational materials and workshops. Their counselors are certified and/or trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Once you’ve developed a list of potential counseling agencies, check them out with your state Attorney General, local consumer protection agency, and Better Business Bureau. They can tell you if consumers have filed complaints about them. (But even if there are no complaints about them, it’s not a guarantee that they’re legitimate.) The United States Trustee Program also keeps a list of credit counseling agencies that have been approved to provide pre-bankruptcy counseling. After you’ve done your background investigation, it’s time for the most important research — you should interview the final “candidates.”

Debt Management Plans

If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. Consider signing on for one of these plans only after a credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money.

How a DMP Works

You deposit money each month with the credit counseling organization. The organization uses your deposits to pay your unsecured debts, like credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates and waive certain fees, but check with all your creditors to be sure that they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or longer to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You also may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.

Is a DMP Right For You?

Here are some other important questions to ask if you’re considering enrolling in a DMP.

Is a DMP the only option you can give me? Will you provide me with on-going budgeting advice after I enroll in a DMP? If an organization offers only DMPs, find another financial solutions company that also will help you create a budget and teach you money management skills.

How does your DMP work? How will you make sure that all my creditors will be paid by the applicable due dates and in the correct billing cycle? If a DMP is appropriate, sign up for one that allows all your creditors to be paid before your payment due dates and within the correct billing cycle.

How is the amount of my payment determined? What if the amount is more than I can afford? Don’t sign up for a DMP if you can’t afford the monthly payment.

How often can I get status reports on my accounts? Can I get access to my accounts online or by phone? Make sure that the organization you sign up with is willing to provide regular, detailed statements about your account.

Can you get my creditors to lower or eliminate interest and finance charges, or waive late fees? If yes, contact your creditors to verify this, and ask them how long you have to be on the plan before the benefits kick in.

What debts aren’t included in the DMP? This is important because you’ll have to pay those bills on your own.

Do I have to make any payments to my creditors before they will accept the proposed payment plan? Some creditors require a payment to the credit counselor before accepting you into a DMP. If a credit counselor tells you this is so, call your creditors to verify this information before you send money to the credit counseling agency.

How will enrolling in a DMP affect my credit? Beware of any organization that tells you it can remove accurate negative information from your credit report. Legally, it can’t be done. Accurate negative information may stay on your credit report for up to seven years.

Can you get my creditors to “re-age” my accounts — that is, to make my accounts current? If so, how many payments will I have to make before my creditors will do so? Even if your accounts are “re-aged,” negative information from past delinquencies or late payments will remain on your credit report.

How to Make a DMP Work for You

The following steps will help you benefit from a DMP, and avoid falling further into debt.

Continue to pay your bills until the plan has been approved by your creditors. If you stop making payments before your creditors have accepted you into a plan, you’ll face late fees, penalties, and negative entries on your credit report.

Contact your creditors and confirm that they have accepted the proposed plan before you send any payments to the credit counseling organization for your DMP.

Make sure the organization’s payment schedule allows your debts to be paid before they are due each month. Paying on time will help you avoid late fees and penalties. Call each of your creditors on the first of every month to make sure the agency has paid them on time.

Review monthly statements from your creditors to make sure they have received your payments.

If your debt management plan depends on your creditors agreeing to lower or eliminate interest and finance charges, or waive late fees, make sure these concessions are reflected on your statements.

For more information or to receive a free debt analysis call Total Debt Relief at 800-627-9667 or click here to have a debt coach contact you.

Has Your Credit Counselor Gone Out of Business?

2010-10-20T07:23:00.000-07:00

What happens to your DMP if the credit counseling company that managed your debts shuts down? A counseling agency that is going out of business may send you a notice telling you that your DMP is being transferred to another company. Or it may tell you that you need to take some action to keep your financial recovery on track. If a government agency has filed an action against your credit counseling company, you may get a notice from a third party. If you discover that the organization handling your DMP is going out of business you need to:

contact your bank to stop payment if you are making your DMP payments through automatic withdrawal.
start paying your bills directly to your creditors.
notify your creditors that the organization handling your DMP is going out of business. Consider working out a payment plan with your creditors yourself. Ask if they will give you a reduction on your interest rate without a DMP.
order a copy of your credit report. Check for late payments — or missed DMP payments — that may result from the company going out of business. If you see “late” notations you don’t expect, call the creditor immediately and ask that the notation be removed. Understand that they have no obligation to do it.
If payments are late because the organization handling your DMP has failed to make scheduled payments, the consequences can be just as devastating as if you failed to make payments to the DMP. If you do not act quickly to make arrangements with your creditors, you could incur late charges that increase your debt, lose the lower interest rates associated with the DMP, and have “late” marks on your credit report.

Important Questions to Ask When Choosing a Credit Counselor

If the organization you were working with shuts down, you may be able to work a payment plan on your own directly with your creditors. But if you decide that you need additional credit advice and assistance, or if you are considering working with a credit counselor for the first time, asking questions like these can help you find the best counselor for you.

What services do you offer?
Look for an organization that offers a range of services, including budget counseling, savings and debt management classes, and counselors who are trained in consumer credit, money and debt management, and budgeting. Counselors should discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems now and avoid others in the future. An initial counseling session typically lasts an hour, with an offer of follow-up sessions. Avoid organizations that push a debt management plan as your only option before they spend a significant amount of time analyzing your financial situation. DMPs are not for everyone. You should sign up for a DMP only after a credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. If you were on a DMP with an organization that closed down, ask any credit counselor that you are considering what they can do to help you retain the benefits of your DMP.
Are you licensed to offer your services in my state?
Many states require that an organization register or obtain a license before offering credit counseling, debt management plans, and similar services. Do not hire an organization that has not fulfilled the requirements for your state.
Do you offer free information?
Avoid organizations that charge for information about the nature of their services.
Will I have a formal written agreement or contract with you?
Don’t commit to participate in a DMP over the telephone. Get all verbal promises in writing. Read all documents carefully before you sign them. If you are told you need to act immediately, consider finding another organization.
What are the qualifications of your counselors? Are they accredited or certified by an outside organization? If so, which one? If not, how are they trained?
Try to use an organization whose counselors are trained by an outside organization that is not affiliated with creditors.
Have other consumers been satisfied with the service that they received?
Once you’ve identified credit counseling organizations that suit your needs, check them out with your state Attorney General, local consumer protection agency, and Better Business Bureau. These organizations can tell you if consumers have filed complaints about them. The absence of complaints doesn’t guarantee legitimacy, but complaints from other consumers may alert you to problems.
What are your fees? Are there set-up and/or monthly fees?
Get a detailed price quote in writing, and specifically ask whether all the fees are covered in the quote. If you’re concerned that you cannot afford to pay your fees, ask if the organization waives or reduces fees when providing counseling to consumers in your circumstances. If an organization won’t help you because you can’t afford to pay, look elsewhere for help.
How are your employees paid? Are the employees or the organization paid more if I sign up for certain services, pay a fee, or make a contribution to your organization?
Employees who are counseling you to purchase certain services may receive a commission if you choose to sign up for those services. Many credit counseling organizations receive additional compensation from creditors if you enroll in a DMP. If the organization will not disclose what compensation it receives from creditors, or how employees are compensated, go elsewhere for help.
What do you do to keep personal information about your clients (for example, name, address, phone number, and financial information) confidential and secure?
Credit counseling organizations handle your most sensitive financial information. The organization should have safeguards in place to protect the privacy of this information and prevent misuse.

Debt Management Plans (DMP): What you need to know!

2010-10-18T12:36:00.000-07:00

Reputable credit counseling organizations employ counselors who are certified and trained in consumer credit, money and debt management, and budgeting. Those organizations that are nonprofit have a legal obligation to provide education and counseling.

But not all credit counseling organizations provide these services. Some charge high fees, not all of which are disclosed, or urge you to make “voluntary” contributions that can cause you to fall deeper into debt. Many claim that a debt management plan is your only option before they spend time reviewing your financial situation, and offer little or no consumer education and counseling. Others misrepresent their nonprofit status or fraudulently obtained nonprofit status by misrepresenting their business practices to regulators.

The Federal Trade Commission (FTC), the nation’s consumer protection agency, and some state Attorneys General have sued several companies that called themselves credit counseling organizations. The FTC and the states said these companies deceived consumers about the cost, nature, and benefits of the services they offered; some companies even lied about their nonprofit status. Several of these companies are now going out of business. Similar companies also may be shutting their doors, even though they haven’t been sued by the FTC or the states. That could be of special concern if you have a debt management plan with one of these companies.

Organizations that advertise credit counseling often arrange for consumers to pay debts through a debt management plan (DMP). In a DMP, you deposit money each month with a credit counseling organization. The organization uses these deposits to pay your credit card bills, student loans, medical bills, or other unsecured debts according to a payment schedule they’ve worked out with you and your creditors. Creditors may agree to lower interest rates or waive certain fees if you are repaying through a DMP.

According to the FTC they have found that some organizations that offer DMPs have deceived and defrauded consumers, and recommends that consumers check their bills to make sure that the organization fulfills its promises. If you are paying through a DMP, contact your creditors and confirm that they have accepted the proposed plan before you send any payments to the organization handling your DMP. Once the creditors have accepted the DMP, it is important to:

make regular, timely payments.
always read your monthly statements promptly to make sure your creditors are getting paid according to your plan.
contact the organization responsible for your DMP if you will be unable to make a scheduled payment, or if you discover that creditors are not being paid.

You need to be aware that if payments to your DMP and creditors are not made on time, you could lose the progress you’ve made on paying down your debt, or the benefits of being in a DMP, including lower interest rates and fee waivers. Although creditors may have forgiven late payments that you made before you began the DMP, the creditors may be unwilling or unable to do so if payments are late after you have enrolled in a DMP. If you fall behind on your payments, you may not be able to have your accounts “re-aged” again (reported as current), even if you start a new DMP with a new counselor. That means your credit report will have “late” marks and you will rack up late fees, which, in turn, will lead to more debt that could take longer to pay off.

Before You File for Personal Bankruptcy:

2010-10-13T12:42:00.000-07:00

Information about Credit Counseling and Debtor Education

Produced in cooperation with the Department of Justice’s U.S. Trustee Program

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 launched a new era: With limited exceptions, people who plan to file for bankruptcy protection must get credit counseling from a government-approved organization within 180 days before they file. They also must complete a debtor education course to have their debts discharged.

The Department of Justice’s U.S. Trustee Program approves organizations to provide the mandatory credit counseling and debtor education. Only the counselors and educators that appear on the U.S. Trustee Program’s lists can advertise that they are, indeed, approved to provide the required counseling and debtor education. By law, the U.S. Trustee Program does not operate in Alabama and North Carolina; in these states, court officials called Bankruptcy Administrators approve pre-bankruptcy credit counseling organizations and pre-discharge debtor education course providers.

Counseling and Education Requirements

As a rule, pre-bankruptcy credit counseling and pre-discharge debtor education may not be provided at the same time. Credit counseling must take place before you file for bankruptcy; debtor education must take place after you file.

In general, you must file a certificate of credit counseling completion when you file for bankruptcy and evidence of completion of debtor education after you file for bankruptcy – but before your debts are discharged. Only credit counseling organizations and debtor education course providers that have been approved by the U.S. Trustee Program may issue these certificates. To protect against fraud, the certificates are produced through a central automated system and are numbered.

Pre-bankruptcy Counseling

A pre-bankruptcy counseling session with an approved credit counseling organization should include an evaluation of your personal financial situation, a discussion of alternatives to bankruptcy, and a personal budget plan. A typical counseling session should last about 60 to 90 minutes, and can take place in person, on the phone, or online. The counseling organization is required to provide the counseling free of charge for those consumers who cannot afford to pay. If you cannot afford to pay a fee for credit counseling, you should request a fee waiver from the counseling organization before the session begins. Otherwise, you may be charged a fee for the counseling, which will generally be about $50, depending on where you live, the types of services you receive, and other factors. The counseling organization is required to discuss any fees with you before starting the counseling session.

Once you have completed the required counseling, you must get a certificate as proof. Check the U.S. Trustee’s website to be sure that you receive the certificate from a counseling organization that is approved in the judicial district where you are filing bankruptcy. Credit counseling organizations may not charge an extra fee for the certificate.

Post-Filing Debtor Education

A debtor education course by an approved provider should include information on developing a budget, managing money, using credit wisely, and other resources. Like pre-filing counseling, debtor education may be provided in person, on the phone, or online. The debtor education session might last longer than the pre-filing counseling – about two hours – and the typical fee is between $50 and $100. As with pre-filing counseling, if you are unable to pay the session fee, you should seek a fee waiver from the debtor education provider. Check the list of approved debtor education providers at www.usdoj.gov/ust/eo/bapcpa/ccde/de_approved.htm or at the bankruptcy clerk’s office in your district.

Once you have completed the required debtor education course, you should receive a certificate as proof. This certificate is separate from the certificate you received after completing your pre-filing credit counseling. Check the U.S. Trustee’s website to be sure that you receive the certificate from a debtor education provider that is approved in the judicial district where you filed bankruptcy. Unless they have disclosed a charge to you before the counseling session begins, debtor education providers may not charge an extra fee for the certificate.

Important Questions to Ask When Choosing a Credit Counselor

It’s wise to do some research when choosing a credit counseling organization. If you are in search of credit counseling to fulfill the bankruptcy law requirements, make sure you receive services only from approved providers for your judicial district. Check the list at www.usdoj.gov/ust/eo/bapcpa/ccde/cc_approved.htm or at the bankruptcy clerk’s office for the district where you will file. Once you have the list of approved organizations in your judicial district, call several to gather information before you make your choice. Some key questions to ask are:

What services do you offer?
Will you help me develop a plan for avoiding problems in the future?
What are your fees?
What if I can’t afford to pay your fees?
What qualifications do your counselors have? Are they accredited or certified by an outside organization? What training do they receive?
What do you do to keep information about me (including my address, phone number, and financial information) confidential and secure?
How are your employees paid? Are they paid more if I sign up for certain services, if I pay a fee, or if I make a contribution to your organization?

Debt settlement/debt negotiation programs

2010-10-11T08:41:00.000-07:00

Debt settlement/debt negotiation programs

Debt settlement/negotiation differs greatly from credit counseling and debt management plans (DMPs). It can be very risky, and have a long term negative impact on your credit report and, in turn, your ability to get credit. That’s why many states have laws regulating debt negotiation companies and the services they offer.

When looking for debt help make sure you go to a full service financial solutions company that offers credit counseling and DMPs and debt settlement services. By doing this you will get the true fact on both debt consolidation services and will not be pressured into enrolling in a program that will not be beneficial to you.

Claims made by debt settlement companies

Debt negotiation firms may claim they’re nonprofit. They also may claim that they can arrange for your unsecured debt — typically credit card debt — to be paid off for anywhere from 10 to 50 percent of the balance owed. For example, if you owe $10,000 on a credit card, a debt negotiation firm may claim it can arrange for you to pay it off with a lesser amount, say $4,000.

The firms often pitch their services as an alternative to bankruptcy. They may claim that using their services will have little or no negative impact on your ability to get credit in the future, or that any negative information can be removed from your credit report when you complete their debt negotiation program. The firms usually tell you to stop making payments to your creditors, and instead, send payments to the debt negotiation company. The firm may promise to hold your funds in a special account and pay your creditors on your behalf.

The True Facts

If it sounds too good to be true…chances are it is!
Just because a debt negotiation company describes itself as a “nonprofit” organization, there’s no guarantee that the services they offer are legitimate.
There also is no guarantee that a creditor will accept partial payment of a legitimate debt.
If you stop making payments on a credit card, late fees and interest usually are added to the debt each month. If you exceed your credit limit, additional fees and charges also can be added. This can cause your original debt to increase.
While creditors have no obligation to agree to negotiate the amount a consumer owes
Non-payment of you accounts will have a negative impact you your credit
Creditors may have the right to sue you to recover the money you owe. In some instances, when creditors win a lawsuit, they have the right to garnish your wages or put a lien on your home.
The Internal Revenue Service may consider any amount over six hundred dollars of forgiven debt to be taxable income.

Damage Control

Debt settlement is a viable option for reducing and eliminating your debt. Turning to a business that offers debt help solutions is a solution when your bills become unmanageable, if you turn to a reputable company. Some businesses that offer to help you with your debt problems may charge high fees and fail to follow through on the services they sell. Others may misrepresent the terms of a debt settlement.

Most debt negotiation companies charge consumers 15% of the amount debt being placed for settlement. They also charge a monthly service fee that ranges from $49 to $79. The majority of companies/attorneys do not offer full representation. Example: if you get sued a traditional debt settlement company cannot represent you on that lawsuit. And most debt settlement attorneys have a clause in their agreement stating that they will not represent you in court if you are sued but they will try to settle the account outside of court.

Be forewarned most companies will place you with an attorney that does not offer you full representation. This means– if a creditor files a lawsuit against you, you will not have attorney representation on that lawsuit in court. The truth of the matter– this is when you need your attorney most!

Creditors are becoming more aggressive in their collection efforts and are more likely to file suit to recover their money. Therefore, you need a debt settlement program that offers full representation and if you are speaking with someone who does not offer full representation, look elsewhere for a service provider!

If you are interested in debt settlement with full representation expect to pay a fee equal to 15% of the total debt being placed and a monthly maintenance fee ranging between $79 dollars per month.

The attorney representing you has an office in your state
You are signing a contract with the attorney or his/her paralegal in the attorney’s office
Contact will be initiated with your creditors within 30 days of your enrollment
Your attorney represents you on lawsuits filed by you enrolled creditors
Your attorney represents you Fair Debt Collection Practice Act (FDCPA) Violations
You must have full representation from an attorney within your state! Otherwise, the likelihood of you being successful in debt settlement will be very slim.

If you’re thinking about getting debt help to stabilize your financial situation, do some homework first. Find out what services a business provides and what it costs, and don’t rely on verbal promises. Get everything in writing, and read your contracts carefully. You can start by clicking here or calling Total Debt Relief, Inc. toll free 800-627-9667 and get a complete financial analysis and find out if credit counseling debt management plan or debt settlement is right for you.

Total Debt Relief, is one of the only financial solutions companies offering a variety of consumer and business debt solutions.

Bankruptcy

2010-10-08T09:05:00.000-07:00

Personal bankruptcy generally is considered the debt management option of last resort because the results are long-lasting and far reaching. People who follow the bankruptcy rules receive a discharge — a court order that says they don’t have to repay certain debts. However, bankruptcy information (both the date of your filing and the later date of discharge) stay on your credit report for 10 years, and can make it difficult to obtain credit, buy a home, get life insurance, or sometimes get a job. Still, bankruptcy is a legal procedure that offers a fresh start for people who have gotten into financial difficulty and can’t satisfy their debts.

There are two primary types of personal bankruptcy: Chapter 13 and Chapter 7. Each must be filed in federal bankruptcy court. As of April 2006, the filing fees run about $274 for Chapter 13 and $299 for Chapter 7. Attorney fees are additional and can vary.

Effective October 2005, Congress made sweeping changes to the bankruptcy laws. The net effect of these changes is to give consumers more incentive to seek bankruptcy relief under Chapter 13 rather than Chapter 7. Chapter 13 allows people with a steady income to keep property, like a mortgaged house or a car, that they might otherwise lose through the bankruptcy process. In Chapter 13, the court approves a repayment plan that allows you to use your future income to pay off your debts during a three-to-five-year period, rather than surrender any property. After you have made all the payments under the plan, you receive a discharge of your debts.

Chapter 7 is known as straight bankruptcy, and involves liquidation of all assets that are not exempt. Exempt property may include automobiles, work-related tools, and basic household furnishings. Some of your property may be sold by a court-appointed official — a trustee — or turned over to your creditors. The new bankruptcy laws have changed the time period during which you can receive a discharge through Chapter 7. You now must wait 8 years after receiving a discharge in Chapter 7 before you can file again under that chapter. The Chapter 13 waiting period is much shorter and can be as little as two years between filings.

Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments and utility shut-offs, and debt collection activities. Both also provide exemptions that allow people to keep certain assets, although exemption amounts vary by state. Note that personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations. And, unless you have an acceptable plan to catch up on your debt under Chapter 13, bankruptcy usually does not allow you to keep property when your creditor has an unpaid mortgage or security lien on it.

Another major change to the bankruptcy laws involves certain hurdles that a consumer must clear before even filing for bankruptcy, no matter what the chapter. You must get credit counseling from a government-approved organization within six months before you file for any bankruptcy relief. You can find a state-by-state list of government-approved organizations at www.usdoj.gov/ust. That is the website of the U.S. Trustee Program, the organization within the U.S. Department of Justice that supervises bankruptcy cases and trustees. Also, before you file a Chapter 7 bankruptcy case, you must satisfy a “means test.” This test requires you to confirm that your income does not exceed a certain amount. The amount varies by state and is publicized by the U.S. Trustee Program at www.usdoj.gov/ust.

Knee Deep in Debt

2010-10-07T09:38:00.001-07:00

Having trouble paying your bills? Getting dunning notices from creditors? Are your accounts being turned over to debt collectors? Are you worried about losing your home or your car?

You’re not alone. Many people face a financial crisis some time in their lives. Whether the crisis is caused by personal or family illness, the loss of a job, or overspending, it can seem overwhelming. But often, it can be overcome. Your financial situation doesn’t have to go from bad to worse.

If you or someone you know is in financial hot water, consider these options: realistic budgeting, credit counseling from a reputable organization, debt consolidation, or bankruptcy. Debt negotiation is yet another option. How do you know which will work best for you? It depends on your level of debt, your level of discipline, and your prospects for the future.

Self-Help

Developing a Budget: The first step toward taking control of your financial situation is to do a realistic assessment of how much money you take in and how much money you spend. Start by listing your income from all sources. Then, list your “fixed” expenses — those that are the same each month — like mortgage payments or rent, car payments, and insurance premiums. Next, list the expenses that vary — like entertainment, recreation, and clothing. Writing down all your expenses, even those that seem insignificant, is a helpful way to track your spending patterns, identify necessary expenses, and prioritize the rest. The goal is to make sure you can make ends meet on the basics: housing, food, health care, insurance, and education.

You can click here to download a free book about budgeting and money management techniques. In addition, computer software programs can be useful tools for developing and maintaining a budget, balancing your checkbook, and creating plans to save money and pay down your debt.

Contacting Your Creditors: Contact your creditors immediately if you’re having trouble making ends meet. Tell them why it’s difficult for you, and try to work out a modified payment plan that reduces your payments to a more manageable level. Don’t wait until your accounts have been turned over to a debt collector. At that point, your creditors have given up on you.

Dealing with Debt Collectors: The Fair Debt Collection Practices Act is the federal law that dictates how and when a debt collector may contact you. A debt collector may not call you before 8 a.m., after 9 p.m., or while you’re at work if the collector knows that your employer doesn’t approve of the calls. Collectors may not harass you, lie, or use unfair practices when they try to collect a debt. And they must honor a written request from you to stop further contact.

Managing Your Auto and Home Loans: Your debts can be unsecured or secured. Secured debts usually are tied to an asset, like your car for a car loan, or your house for a mortgage. If you stop making payments, lenders can repossess your car or foreclose on your house. Unsecured debts are not tied to any asset, and include most credit card debt, bills for medical care, signature loans, and debts for other types of services.

Most automobile financing agreements allow a creditor to repossess your car any time you’re in default. No notice is required. If your car is repossessed, you may have to pay the balance due on the loan, as well as towing and storage costs, to get it back. If you can’t do this, the creditor may sell the car. If you see default approaching, you may be better off selling the car yourself and paying off the debt: You’ll avoid the added costs of repossession and a negative entry on your credit report.

If you fall behind on your mortgage, contact your lender immediately to avoid foreclosure. Most lenders are willing to work with you if they believe you’re acting in good faith and the situation is temporary. Some lenders may reduce or suspend your payments for a short time. When you resume regular payments, though, you may have to pay an additional amount toward the past due total. Other lenders may agree to change the terms of the mortgage by extending the repayment period to reduce the monthly debt. Ask whether additional fees would be assessed for these changes, and calculate how much they total in the long term.

If you and your lender cannot work out a plan, contact a housing counseling agency. Some agencies limit their counseling services to homeowners with FHA mortgages, but many offer free help to any homeowner who’s having trouble making mortgage payments. Call the local office of the Department of Housing and Urban Development or the housing authority in your state, city, or county for help in finding a legitimate housing counseling agency near you

Credit Counseling and Debt Management Plans

Credit Counseling: If you’re not disciplined enough to create a workable budget and stick to it, can’t work out a repayment plan with your creditors, or can’t keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But be aware that, just because an organization says it is “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, which may be hidden, or urge consumers to make “voluntary” contributions that can cause more debt.

Most credit counselors offer services through local offices, the Internet, or on the telephone. If possible, find an organization that offers in-person counseling. Many universities, military bases, credit unions, housing authorities, and branches of the U.S. Cooperative Extension Service operate nonprofit credit counseling programs. Your financial institution, local consumer protection agency, and friends and family also may be good sources of information and referrals.

Reputable credit counseling organizations can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in the areas of consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.

Debt Management Plans: If your financial problems stem from too much debt or your inability to repay your debts, a credit counseling agency may recommend that you enroll in a debt management plan (DMP). A DMP alone is not credit counseling, and DMPs are not for everyone. You should sign up for one of these plans only after a credit counselor has spent time thoroughly reviewing your financial situation, and has offered you customized advice on managing your money. Even if a DMP is appropriate for you, a reputable credit counseling organization still can help you create a budget and teach you money management skills.

In a DMP, you deposit money each month with the credit counseling organization, which uses your deposits to pay your unsecured debts, like your credit card bills, student loans, and medical bills, according to a payment schedule the counselor develops with you and your creditors. Your creditors may agree to lower your interest rates or waive certain fees, but check with all your creditors to be sure they offer the concessions that a credit counseling organization describes to you. A successful DMP requires you to make regular, timely payments, and could take 48 months or more to complete. Ask the credit counselor to estimate how long it will take for you to complete the plan. You may have to agree not to apply for — or use — any additional credit while you’re participating in the plan.

Protect Yourself

Be wary of credit counseling organizations that:

charge high up-front or monthly fees for enrolling in credit counseling or a DMP.
pressure you to make “voluntary contributions,” another name for fees.
won’t send you free information about the services they provide without requiring you to provide personal financial information, such as credit card account numbers, and balances.
try to enroll you in a DMP without spending time reviewing your financial situation.
offer to enroll you in a DMP without teaching you budgeting and money management skills.
demand that you make payments into a DMP before your creditors have accepted you into the program.

For more information visit click here to visit Total Debt Relief, Inc.

Credit and Your Consumer Rights

2010-10-05T07:50:00.000-07:00

Credit and Your Consumer Rights

A good credit rating is very important. Businesses inspect your credit history when they evaluate your applications for credit, insurance, employment, and even leases. They can use it when they choose to give or deny you credit or insurance, provided you receive fair and equal treatment. Sometimes, things happen that can cause credit problems: a temporary loss of income, an illness, even a computer error. Solving credit problems may take time and patience, but it doesn’t have to be an ordeal.

The Federal Trade Commission (FTC) enforces the credit laws that protect your right to get, use and maintain credit. These laws do not guarantee that everyone will receive credit. Instead, the credit laws protect your rights by requiring businesses to give all consumers a fair and equal opportunity to get credit and to resolve disputes over credit errors. This brochure explains your rights under these laws and offers practical tips to help you solve credit problems.

Your Credit Report

Your credit report contains information about where you live, how you pay your bills, and whether you’ve been sued, arrested, or filed for bankruptcy. Credit reporting companies sell the information in your report to businesses that use it to evaluate your applications for credit, insurance, employment, or renting a home.

The federal Fair Credit Reporting Act (FCRA) promotes the accuracy and privacy of information in the files of the nation’s credit reporting companies. Under the Fair Credit Reporting Act:
You have the right to receive a copy of your credit report. The copy of your report must contain all the information in your file at the time of your request.
Each of the nationwide credit reporting companies – Equifax, Experian, and TransUnion – is required to provide you with a free copy of your credit report, at your request, once every 12 months. The companies are rolling this out across the country during a nine-month period. By September 2005, consumers from coast to coast will have access to a free annual credit report if they ask for it. For details, see Your Access to Free Credit Reports at ftc.gov/credit.
Under federal law, you’re also entitled to a free report if a company takes adverse action against you, like denying your application for credit, insurance, or employment, and you ask for your report within 60 days of receiving notice of the action. The notice will give you the name, address, and phone number of the credit reporting company. You’re also entitled to one free report a year if you’re unemployed and plan to look for a job within 60 days; if you’re on welfare; or if your report is inaccurate because of fraud, including identity theft.
Otherwise, a credit reporting company may charge you up to $9.50 for another copy of your report within a 12-month period.
You have the right to know who asked for your report within the past year – two years for employment related requests.
If a company denies your application, you have the right to the name and address of the credit reporting company they contacted, provided the denial was based on information given by the credit reporting company.
If you question the accuracy or completeness of information in your report, you have the right to file a dispute with the credit reporting company and the information provider (that is, the person, company, or organization that provided information about you to the credit reporting company). Both the credit reporting company and the information provider are obligated to investigate your claim, and responsible for correcting inaccurate or incomplete information in your report. For details, see How to Dispute Credit Report Errors at ftc.gov/credit.
You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction. You also can ask the credit reporting company to provide your statement to anyone who received a copy of your report in the recent past. You can expect to pay a fee for this service.

Your Credit Application

When creditors evaluate a credit application, they cannot engage in discriminatory practices.

The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of sex, race, marital status, religion, national origin, age, or receipt of public assistance. Creditors may ask for this information (except religion) in certain situations, but they may not use it to discriminate against you when deciding whether to grant you credit.

The ECOA protects consumers who deal with companies that regularly extend credit, including banks, small loan and finance companies, retail and department stores, credit card companies, and credit unions. Everyone who participates in the decision to grant credit, including real estate brokers who arrange financing, must follow this law. Businesses applying for credit also are protected by this law. Under the Equal Credit Opportunity Act:

You cannot be denied credit based on your race, sex, marital status, religion, age, national origin, or receipt of public assistance.

You have the right to have reliable public assistance considered in the same manner as other income.
If you are denied credit, you have a legal right to know why.

Your Credit Billing and Electronic Fund Transfer Statements

It is important to check credit billing and electronic fund transfer account statements regularly because these documents may contain mistakes that could damage your credit status or reflect improper charges or transfers. If you find an error or discrepancy, notify the company and dispute the error immediately. The Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA) establish procedures for resolving mistakes on credit billing and electronic fund transfer account statements, including:

charges or electronic fund transfers that you – or anyone you have authorized to use your account – have not made;
charges or electronic fund transfers that are incorrectly identified or show the wrong date or amount;
math errors;
failure to post payments, credits, or electronic fund transfers properly;
failure to send bills to your current address – provided the creditor receives your change of address, in writing, at least 20 days before the billing period ends;
charges or electronic fund transfers for which you ask for an explanation or written proof of purchase along with a claimed error or request for clarification.

The FCBA generally applies only to “open end” credit accounts – credit cards and revolving charge accounts, like department store accounts. It does not apply to loans or credit sales that are paid according to a fixed schedule until the entire amount is paid back, like an automobile loan. The EFTA applies to electronic fund transfers, like those involving automatic teller machines (ATMs), point-of-sale debit transactions, and other electronic banking transactions.

Your Debts and Debt Collectors

You are responsible for your debts. If you fall behind in paying your creditors, or if an error is made on your account, you may be contacted by a “debt collector.” A debt collector is any person, other than the creditor, who regularly collects debts owed to others, including lawyers who collect debts on a regular basis. You have the right to be treated fairly by debt collectors.

The Fair Debt Collection Practices Act (FDCPA) applies to personal, family, and household debts. This includes money you owe for the purchase of a car, for medical care, or for charge accounts. The FDCPA prohibits debt collectors from engaging in unfair, deceptive, or abusive practices while collecting these debts. Under the Fair Debt Collection Practices Act:

Debt collectors may contact you only between 8 a.m. and 9 p.m.
Debt collectors may not contact you at work if they know your employer disapproves.
Debt collectors may not harass, oppress, or abuse you.
Debt collectors may not lie when collecting debts, such as falsely implying that you have committed a crime.
Debt collectors must identify themselves to you on the phone.
Debt collectors must stop contacting you if you ask them to do so in writing.

Solving Your Credit Problems

Your credit report can influence your purchasing power, as well as your opportunity to get a job, rent or buy an apartment or a house, and buy insurance. When negative information in your report is accurate, only the passage of time can assure its removal. A credit reporting company can report most accurate negative information for seven years and bankruptcy information for 10 years. Information about an unpaid judgment against you can be reported for seven years or until the statute of limitations runs out, whichever is longer. There is no time limit on reporting information about criminal convictions; information reported in response to your application for a job that pays more than $75,000 a year; and information reported because you’ve applied for more than $150,000 worth of credit or life insurance. There is a standard method for calculating the seven-year reporting period. Generally, the period runs from the date that the event took place.

If you are having problems paying your bills, contact your creditors immediately. Try to work out a modified payment plan with them that reduces your payments to a more manageable level. Don’t wait until your account has been turned over to a debt collector.

Here are some additional tips for solving credit problems:

If you want to dispute a credit report, bill or credit denial, write to the appropriate company and send your letter “return receipt requested.”
When you dispute a billing error, include your name, account number, the dollar amount in question, and the reason you believe the bill is wrong.
If in doubt, request written verification of a debt.
Keep all your original documents, especially receipts, sales slips, and billing statements. You will need them if you dispute a credit bill or report. Send copies only. It may take more than one letter to correct a problem.
Be skeptical of businesses that offer instant solutions to credit problems: There aren’t any.
Be persistent. Resolving credit problems can take time and patience.
There is nothing that a credit repair company can charge you for that you cannot do for yourself for little or no cost.

If you’re not disciplined enough to create a workable budget and stick to it, work out a repayment plan with your creditors, or keep track of mounting bills, consider contacting a credit counseling organization. Many credit counseling organizations are nonprofit and work with you to solve your financial problems. But not all are reputable. For example, just because an organization says it’s “nonprofit,” there’s no guarantee that its services are free, affordable, or even legitimate. In fact, some credit counseling organizations charge high fees, or hide their fees by pressuring consumers to make “voluntary” contributions that only cause more debt.

For more information see Total Debt Relief

How to Read Your Credit Report

2010-10-04T09:21:00.000-07:00

You know you should get a copy of your credit report every year and check it over for any inaccuracies.

But do you actually do it?

Most people don't because they're confused by all the numbers and terms. Once you've learned what all that information means, you'll have no trouble reading your credit report. And since 79% of all credit reports contain some kind of error, it's important that you not only get an annual copy of your credit report, but that you check it over to make sure everything is correct.

Obtain a copy of your credit report from the three major credit-reporting agencies: Experian, TransUnion and Equifax. You are allowed one free copy every year from each of the agencies. The reports are not automatically mailed to you; you must ask for them.

There are four parts to any credit report:

Identifying Information

This section lists your name, address, Social Security number, date of birth and other information used to identify you. Read through the information carefully. It isn't uncommon to find your name misspelled or the wrong address listed.

Credit History

The bulk of the report is in this section. It's a list of your open and paid credit accounts. It also shows any late payments on your part. Things like total loan amount, high credit limit and how well you've paid the account are included as well. Read and re-read this section to make sure all information is correct. If you've closed a credit card account, double check to see if it's noted. Thirty percent of credit reports contain credit accounts that were closed by the consumer but are still listed as open on the report.

Public Records

You want this part to be blank. Financial activity like bankruptcy, tax liens and judgments are listed here. Everything given is public record, and you want to keep this section as clean as possible. It's not about saving your credit score; it's about saving your financial life. The smarter you are with money decisions, the better financial life you will have.

Inquiries

Everyone who has asked to see your credit report will be listed in this section. If anyone checks out your report, a detailed inquiry will be posted. This is extremely beneficial for you as the consumer. The inquiries are in two sections soft and hard. Soft inquiries are from companies who want to send you promotional materials or from current creditors who are checking your account. Hard inquiries are made when you fill out a credit card application.

Visit annualcreditreport.com or call 877.322.8228 to order your free annual credit report. Remember to obtain your report either through that website or phone number. If you order it directly from the agency or any "free" report scam sites, you will be charged a fee.