Kentucky Bankruptcy Lawyer Blog

Fair Credit Reporting Act (FCRA), every consumer is entitled to receive one copy of their credit report from each of three major reporting agencies each year. That means you may request a report from all three at one time, or you can get a report every four months by making periodic requests. The free reports are available from one website and the contact information for Experian, TransUnion and Equifax are included.

Due to the reporting methods and sourcing of credit report data, 9 out of 10 persons will find errors on their report. It is so important to check your credit report for errors prior to applying for major credit purchases. It takes time to correct errors, and most corrections result in increases to your credit score. Increased credit scores results in lower interest rates for borrowers.

There are also other circumstances when you may be entitled to a free credit report. If you don't fit into these circumstances and you have already had your free annual report, credit reporting agencies are allowed to charge an $11.00 fee for a copy of your report.

1. Denial of credit or adverse employment decision based on your credit;
2. Victim of identity theft;
3. Recipient of government welfare benefits or;
4. Unemployed and applying for employment in 60 days.

Continue reading "When Am I Entitled To A Free Credit Report?" »

Let's get started on your treasure hunt. Get a copy of your credit report and begin the review process. By law, you are entitled to one free credit report from each of the major credit reporting bureaus.
To get your free credit report go to www.annualcreditreport.com.
You can get all three reports at one time or your can request a copy every four months to monitor your progress.

Personal Identifying Information

Check the accuracy of your personal data. Your legal name and all of the many variations that you use should be listed on your report. Have unfamiliar variations removed. It could be an attempt at identity theft or nothing at all. Better to be safe than sorry. Hopefully there are no errors in your social security number, but it is possible because all the data entered on your report is entered by humans. When I applied for a mortgage with my husband for our first home, I had so many variations on my name, I was confused about my name. Consistently using the same name when applying for credit will significantly cut down on tradelines missing from your report or other persons information erroneously being included in your report.

Creditor Information

The accounts or tradelines you have with banks, retailers, credit-card issuers, utility companies, and other lenders are included in this section. The accounts are listed by type, such as mortgage, student loan, revolving credit, or installment loan. It also includes the date you opened the account, the credit limit or loan amount, current balance, monthly payment obligation and your payment history for the past two years.
Review all aspects of this data for errors. Look for duplicate information on the same debt. Sold mortgages that appear more than once on your credit report; accounts that have been assigned to third parties and are being reported by both. Because your credit score is based on the accuracy of this information, removing these errors can result in an increase in your credit score.

Public Record Information

In this section you will see lawsuits filed, tax liens, judgment liens, releases, prior bankruptcy filings, child support liens. Check the information for accuracy and whether it should still be included on your report. Negative information can legitimately be reported for up to seven years and in some cases up to ten years. All federal, state and local court records or filings are included in this area. Pull all of your release, waivers or dismissal orders together to provide to the credit reporting agency if the public information has been cleared.

Recent Inquiries for Credit or Employment

In this section you will see the name of any creditor or employer that has recently reviewed your credit report in response to your request for credit or as part of an employment background check. Make sure that you authorized the inquiry and keep in mind that if you already have an open account, that creditor may review your file at any time. As I review credit reports with clients, it's not uncommon for them to report unauthorized views of their credit information from creditors when the consumer had specifically asked that their credit not be pulled. The only way to know if this is happening is to review your credit report on a fairly regular basis.

Get Your Map

Take advantage of the availability of free copies of your credit report by making an annual request from Equifax, TransUnion and Experian to review the accuracy of your information. In tomorrow's post, we will talk about how to report the errors to your credit bureaus and monitor their removal.

Continue reading "Your Credit Report: The Map For Your Treasure Hunt" »

Yesterday, I issued a challenge to readers to increase their credit score by 100 points within six months. Six months may seem quick, but the point is to get some good financial habits started that will benefit your credit score.

One of the tips was to review your credit report for discrepancies. Only 13% of consumers report that when they reviewed their credit report it contained no inaccuracies. That's astounding! By simply reviewing your credit report and removing inaccurate information you immediately produce a higher score.

You are not on your own, the newly formed Consumer Financial Protection Bureau (CFPB) monitors the activity of credit reporting agencies to ensure that your financial information is handled appropriately. With the importance of your credit score, there's no room for sloppy reporting by credit reporting agencies. Errors on your credit report can increase your interest rate by 2-5% or thousands of dollars in additional interest.

90% Chance of Finding An Error
Correcting your credit report is a treasure hunt. Your chances of finding an error that results in an increase in your credit score is almost a guarantee. 90% of person's who review their report will find at least one error. Not reviewing your credit report at least twice a year, is just leaving points on the table. Not to mention leaving an opportunity for identity theft.

Almost A Guarantee To Add Points To Your Credit Score
It's a treasure hunt for points that can be added to your score. Credit reporting bureaus make so many errors that nine out of ten credit reports contain inaccurate information. And get this, there are 30 top credit reporting agencies. Imagine consolidating the same information from thirty different sources. Next to impossible. If you don't believe it, line up 30 persons and have them pass the message everyone and it's hilarious what you get on the other end.

That's exactly what happens with the inaccurate information that's reported on your credit report. It seems like a funny story until that error keeps you from getting the best interest rate on your car or home purchase or your poor credit keeps you from getting employment.

What Could Be Wrong On My Report
Inaccurate information includes errors in the details of your account; late payments, credit you never had, double reporting of the same credit or trade line, even misspelled names and many other errors. No matter the error, your credit score bears the impact of the negative information. Unless corrected, negative information stays on your credit report for up to seven years.

What Do I Do If I Find A Mistake
Whenever you find inaccurate info on your credit report, absolutely demand that the information is removed. The best thing about this tip is that it doesn't cost you anything. You do not have to pay anyone to do this for you. Avoid the scams that promise an increased credit score for a payment of money. You can pay for anything, but that doesn't mean that you should! Mistakes never add to your credit score, so take the time to clear up any discrepancies.

In our next post, we will discuss how to get a copy of your credit report, your credit score and how to report errors.

Continue reading "A Treasure Hunt: Checking Your Credit Report For Errors!" »

Every month my daughter asks me for new ways to increase her credit score. As a recent college graduate, she is all about getting the best interest rates for big ticket purchases. So she is wisely planning major purchases to leverage her credit score for the best interest rate. Her problem is not having enough credit.

After a little research, I gave her these ideas and put her on a six month challenge to increase her score by 100 points. Keep in mind these tips will work whether you lack enough credit or your credit score has been dragged down by poor credit choices.

To start, a good credit score is any score over 700. Credit scores range from 300-850. Between 750-850 is an excellent score that will guarantee the best interest rates and rewards from any lender.

Here are five things you can do to jump start your credit score from 30-40 points each month. Achieving results will take discipline, but in the end, an improved credit score is well worth the sacrifice.

1. Obtain a Secured Credit Card: Paying off your secured credit card every month can increase your credit score by 40 points each month. Secured credit cards are trade lines that are reported monthly. Use your secured card to make gas or grocery purchases that you immediately pay off. Beware of making charges and forgetting to pay. Set auto pay with your bank to ensure you don't forget.

2. Keep Credit Card Balances Below 50% Of Your Credit Limit: Having low credit card balances indicates that you have sufficient disposable income to meet your reasonable living expenses. Getting your unsecured debt balances 50% below the original high credit limit can increase your credit score by 20-40 points for each account thats below this 50% threshold.

3. Clear Up Credit Report Discrepancies: Sometimes looking at your credit report can be the most difficult thing to do. On the other hand, it's also the most liberating financial move you can make. Reviewing your annual free credit report provides you with the opportunity to correct any errors on your credit report. Another area to watch out for a duplication of negative reports on the same debt. The original debt, the collection of the original debt and the ultimate judgment on that same debt. Each progressive action on the same debt is a duplicate and you should not get three dings for essentially the same debt. Pointing out duplicate reporting on the same debt allows two of the negatives to be removed and increase your credit score.

4. Try an UnSecured Credit Card: The same strategies used for secured credit cards can work for unsecured credit cards. Just make sure that on your closing date, your balance is paid off. Each month that you pay off your balance you should receive a boost of up to 40 points on your credit score.

5. Stay Current On All Monthly Obligations: Consistent, timely monthly payments comprise 35% of your FICO score. One missed payment won't tank your credit score, but several missed payments will negatively impact your score and increase your interest rates and result in additional late fees.

Continue reading "Increase Your Credit Score by 100 points! Take the Six Month Challenge!" »

With student loan debt exceeding one trillion dollars, life without student loan debt is a dream that many recent graduates wish was their reality. The high cost of education coupled with slow economic growth has turned the dream of a college education into a nightmare Not so for Kristin Gourlay of Kentucky.

Kristin filed for Chapter 7 debt relief in the bankruptcy court for the Eastern District of Kentucky. As a part of her relief, an adversarial proceeding was filed to contest the dischargeability of $25,495.06 of student loan debt owed to Sallie Mae, Inc. Sallie Mae was timely served with notice of the adversarial proceeding, but did not file a timely response. Kristin filed a default certificate and with no answer in the court record, the bankruptcy court entered the default judgment and effectively discharging Kristen's student loan debt!

Upon discovery of this judgment, Sallie Mae filed a motion to set aside the judgment on grounds of excusable neglect citing internal processing breakdown as the reason why no answer was filed in the adversarial proceeding. Rejecting this argument, the bankruptcy court denied the motion to set aside the entry of default judgment and Sallie Mae appealed the denial as an abuse of the court's discretion.

On appeal, the 6th Circuit Bankruptcy Appellate Panel affirmed the decision of the lower court entering a default judgment against Sallie Mae, Inc. The appeals court stated that Sallie Mae had not met its burden of demonstrating the the lower court had abused its discretion in granting the default judgment. Citing a stricter standard of review after the entry of default judgment, the court stated that the bankruptcy court's ability to set aside the judgment was limited by the public policy favoring finality of judgments and ending litigation.

With this framework, the appeals court looked to consider the more specific circumstances that Sallie Mae, Inc evidenced as "good cause" and reviewed whether the default was due to mistake, inadvertence, surprise or excuseable neglect. The court considered the question of whether Sallie Mae's had put in place internal safeguards to ensure that important documents reached the right person or department. Determining that it was unclear whether there was a policy regarding these important documents, the court opinied that Sallie Mae had not met its burden of establishing excusable neglect. Affirming the lower court decision, Kristen Gourlay received a discharge of her student loans to Sallie Mae, Inc.

For information on whether your student loan is eligible for discharge contact Denise Brown's Legal Direction at 502-587-0331.

In re Gourley Decision

Student Loan debt exceeds 1Trillion!

In every Chapter 13 Plan, the Debtor is required to pay into the plan all available disposable income for the benefit of creditors. For the duration of your Chapter 13 Plan your disposable income must be used to pay your creditors. If you plan pays less than 100% to your unsecured creditors, the Chapter 13 Trustee will continue to review your income and monthly expenses to determine if your plan percentage or monthly plan amount should be increased.

At the outset of your proposed plan, the court considers your disposable monthly income to determine the commitment period for your plan. That is whether your plan is required to be more that three years. Using Form B22, if your current monthly income is below the median for your household size, your commitment period is three years. If your current monthly income is above the median, your commitment period is extended to five years.

Once your plan is confirmed, the Chapter 13 Trustee can also adjust your disposable monthly income based on your projected disposable income. Projected disposable income allows the court to consider both future and historical finances in determining your disposable income. Projected disposable income is inclusive of all monies received irrespective of the source of the funds.

In the Western District of Kentucky, the Chapter 13 Trustee requires a yearly update of your income and expenses and a copy of your yearly tax return. If you are entitled to receive a refund that is primarily based on an overpayment of taxes, this "projected disposable income" is required to be turned over to the Trustee for additional payments to your secured creditors.

The only way to avoid this outcome is to fund your Chapter 13 Plan with 100% repayment to all creditors. In a majority of cases, 100% repayment is not possible for the obvious reason. Many Debtors would not file for bankruptcy protection if they could afford to fully repay their creditors.

Failure to pay all disposable income into the Chapter 13 Plan is a legitimate objection that will be sustained by the bankruptcy court prior to confirmation and can result in dismissal of your plan, post confirmation. Unless the Debtor can show that the additional income is subject to some exception, the Court will require it to be paid into the plan even after confirmation has occurred.

Just as the Debtor may bring a motion for a reduction in the plan payment when there has been a downward adjustment in disposable income, the Trustee is allowed to request an increase when there has been an upward adjustment in disposable income. In other words, what's good for the goose is also good for the gander!

Ch 13 Local Rule re Tax Refunds

Form B22

For information on what is your disposable income for purposes of a Chapter 13 Plan contact Denise Brown's Legal Direction at 502-587-0331.

The average tax refund is $3000.00 and that's a nice chunk of change. Now that you've filed your taxes and are waiting to receive your refund, what you should do with it? I discussed several options with my son, Ronel, daughter, Ahsha and family friend, Danielle. There was a definite list of what they would not spend their refund on such as paying down student loan debt, Several options are available.

Start an Emergency Fund: With your windfall, you now have the opportunity to start that emergency savings fund that you never seemed to have enough money to fund. In this economy, everyone should have an emergency fund to cover your monthly expenses in case of layoff or other job loss.

Pay off Debt: In most cases, its always a good time to pay off debt. The only time this doesn't work is if you are thinking about filing bankruptcy. If that's your situation, you don't want to use your money to pay off debts. You want to use your tax refund to pay ordinary living expenses, but not to pay off debt. Filing bankruptcy under Chapter 7 and paying more than your monthly amounts, can leave you open to a claim by the Trustee of preferential treatment. If you're not filing bankruptcy, you should select at least one debt that can be paid off and saive the rest. While paying more than the usual amount to a creditor is not permitted, paying your attorney is permitted. Often this is the way that clients pay for their Chapter 7 bankruptcies or get set up on one of our reasonable auto payment options.

Invest It: Another idea is to invest the windfall into you received for college education, to fund your 2012 IRA account. You could also buy some stock in a company that you use a lot...Facebook! Investing in what you know is always the best bet. This could also be the opportunity to start that new business you've always wanted to start.

Do Something For Yourself or Others: My final suggestion is to consider taking a vacation or making an extra charitable donation to your church or other charity. Think out of the box and see if you can apply your creative thinking to find something financially productive to do with your windfall. Don't forget that tax refunds are often the result of over withholding your yearly tax obligation. If you have monthly living expenses and other debt obligations, perhaps you should consider adjusting your tax withholding to have access to your monies and earned income during the tax year through the Advance Earned Income program. Use this withholding calculator to help you determine how to adjust your withholding for 2012.

Guide on How To Make The Most of Your Tax Refund

Continue reading "I Received A Large Tax Refund: Should I Pay Debts or Start An Emergency Fund?" »

Change Your Attitude Toward Money: It's Not How Much You Make, It's What Do You Do With It.

MYTH: People file Chapter 7 and Chapter 13 Bankruptcy because they don't have money.

Absolutely not, most people file bankruptcy because they don't change their attitude toward money. Ask MC Hammer, Antoine Walker, Scottie Pippen, Toni Braxton, Lenny Dykstra, Eva Longoria, Donald Trump or Sonja Morgan of the JP Morgan clan. Money was not the issue, but their attitude toward money was a significant factor that contributed to their bankruptcy filing. To further prove this point, a whopping 78% of former NFL players and 60% of former NBA players become broke or financially distressed after their careers. this distress leads to bankruptcy. Sheryl Swoopes career earnings approached $50M, but due to bad investments, she filed bankruptcy in 2004.

Prior to filing bankruptcy, most consumers believe that bankruptcy is possibly the worst event that has happened in their lives. There is still great emotional stigma attached to filing a public document that essentially says, "I can't handle my finances." Many have waited until the very last moment to make this difficult decision and are often desperately trying to hold on to some semblance of pride in addition to their home, paycheck or car.

From the first consultation, Denise Brown's Legal Direction will begin to address the obvious symptoms of what pushed you to the point of filing. As the pre-bankruptcy process moves forward, I begin to address some of the less apparent root causes of financial distress. So in effect, filing bankruptcy and receiving a discharge becomes a new beginning, rather than a disastrous end.

The first step toward changing your financial situation is to change your attitude about what you do with your money.

Four Focus Areas:
• Set A Family Budget and Check Your Progress
• Educate Your Family on the New Normal Regarding Finances
• Don't Let Procrastination Make the Decision for You
• Build Savings into Your Budget

How I Changed My Attitude Toward Money

Pro Athletes Filing Bankruptcy

Continue reading "It's Not How Much You Make, It's What You Do With It!" »

The start of the year is underway and by now, most have made and forgotten the resolutions made just a few weeks ago. Before you let January slip away, get started on these five important checkups to ensure that the New Year is on track for your family.

Credit Report Checkup: Take advantage of the free annual credit report offered by credit reporting agencies. Your credit report can alert you to opportunities to improve your credit score; helps identify report inaccuracies and most importantly, alert you top potential threats of identity theft. If your credit score is low, set a goal to increase your score and commit to paying obligations on time and reducing debt. Potential creditors look at your capacity, credibility and collateral in making a credit decision. If you are anticipating a divorce or bankruptcy, check your credit score prior to filing.

Family and/or Business Budget Checkup: Organize your spending for 2011. Often times the reason we are unable to move forward in establishing better financial habits is because we fail to do the basics. Know what is essential for family support and track your spending. One or two months of tracking expenditures really opens your eyes to invisible spending. Establish a budget and analyze your monthly spending to see how your budget is working. In addition to necessities, include regular savings and opportunities for charitable giving.

Insurance Checkup: Many have insurance, but fail to review to insurance coverage on a yearly basis to determine if that coverage is still adequate for new purchases for home or business. The top of the year is the perfect time to meet with your insurance professional to conduct this review. Review your purchases for each year and update insurance coverage when needed. Prior to your meeting, take an inventory of any new purchases along with pictures. Don' forget to include health and disability insurance checks in your analysis as well as a review of your beneficiaries on your insurance policies.

Will, Living Will and Power of Attorney Checkup: Every individual needs a basic estate plan in place to protect their family and assets from unnecessary expenses and to ensure the speedy transfer of estate assets to your loved ones. If you don't already have the basic documents, get started by identifying an executor to carry out your final wishes, designating a health care surrogate and identifying an appropriate power of attorney to assist in the handling of your personal affairs. Most persons believe you should definitely have a will, but over 60% of persons do not take the time to complete this most important task.

Bank and Credit Card Fee Checkup: Take the time to review your bank, credit card and other statements for hidden and forgotten fees. The New Card Act makes it very difficult for banks and other financial institutions to hide fees and costs, but make sure you are reading the updated changes statements that are now being provided in regular sized print. Whether the print is small or large, it doesn't help you if you don't read it. Also, cancel those services that you are no longer using like the delivered newspaper you no longer read, close out bank accounts that you no longer use, review those auto or online expenditures to avoid wasting money on fees and costs that remain invisible because we "set them and forget them.

Insurance Checkup
You Could Die Tomorrow
21 Day Financial Fast

After how fast can I get my refund, the next most frequently considered question for debtors in bankruptcy is "Will I Get To Keep My Tax Refund?" And the answer to that question is MAYBE! It depends on the Chapter of the Bankruptcy Code that you filed under, when you filed and were confirmed and when you actually receive the refund.

Chapter 7 and Tax Refunds

Filing under Chapter 7 means that you are liquidating all of your unsecured debt and specified secured debt. All non-exempt assets become part of the bankruptcy estate and can be attached by the Chapter 7 trustee and sold to pay your debts. Kentucky uses the federal exemptions, so can retain your tax refund as exempt property using the personal property and wildcard exemption.

The next question to consider is should I file bankruptcy before I filing my tax return or should I wait? In most cases, my recommendation would be to not file bankruptcy until after you have received your tax refund. This benefits you in two ways. One, you will be able to use the refund to pay for monthly living expenses and you may also use it to pay your attorney to file your bankruptcy. Avoid purchases for luxury goods, loan repayments to relatives and paying creditors more than their regularly scheduled payment.

Chapter 13 and Tax Refunds

In the Western District of Kentucky, each order of confirmation for Chapter 13 states that if the Debtor is paying less than 100% to unsecured creditors, they are required to turn over their tax refund to the Chapter 13 Trustee, William Lawrence. This should not be "new" news to the Debtor. The tax refund turnover is included in the Debtor's Order of Confirmation and Mr. Lawrence is kind enough to send you a reminder letter in December so that you don't forget. The language in the order reads as follows:

"IT IS FURTHER ORDERED that any debtor(s) paying less than 100% to unsecured creditors submit copies of federal and state income tax returns, execute an assignment of federal and state income tax refunds to the Chapter 13 trustee, and submit a current income and expense statement annually, before May 15 or each year of the plan, pursuant to the local rules.'

All cases confirmed prior to June 30th of the tax year are required to provide a copy of the filed return, updated income and monthly budget and the state and federal tax refund. Earned income is not required to be turned over, only the overpayment in taxes. To alleviate the need for a yearly turnover, you can work with your CPA or tax preparer to adjust your tax withholdings so that you do not receive a refund, but have full access to more of your paycheck each pay period.

So the timing of your confirmation is important. If you filed in 2011 and your case was confirmed before June 30, 2011 and you are paying less than 100% to your unsecured creditors, you will be required to turn over your refund. Failing to turn over your refund will result in dismissal of your Ch 13 case and you lose the protection of the automatic stay. If you have unexpected or extraordinary expenses you can always ask the court for permission to keep a portion of your refund to cover those expenses. Be sure to ask in advance of spending the monies.

The easiest way to avoid the yearly tax refund turnover is to adjust your tax withholdings so that there is little or no tax overpayment. The withholding adjustment will allow you to have the extra funds available for use in your monthly budget rather than waiting for the tax refund.

Continue reading "Kentucky Tax Refunds and Louisville Bankrutpcy-How to Keep your Refund" »

Your financial situation is already bad and now it has just moved to worse. You're leaving home for work and you find out that your car has been repossessed by the creditor. In a panic, you are unable to think of anything other than, "How can I get my car back? I need it to get to and from work." Once your car has been repossessed, there are only a few options available to get it back.

YOU CAN GET YOUR CAR BACK and you may even be able to reduce the amount you owe on the car and get the interest rate reduced. Either alternative makes retaining the car worthwhile as it allows you to reduce your payment, potentially reduce the contract amount owed and pay reasonable interest.

Don't wait too long. The Creditor has the right to sell the property within a very short period of time. The Creditor is also required to provide you with notice of the sale and the sale must be performed in a commercially reasonable manner. If you have received notice of sale from your creditor, time is of the essence.

How To Get It Back

Call Your Rich Aunt, Uncle, Parent or Friend
There's always the old fashioned way to get it back; Call the creditor and ask how much will they require to release the vehicle to you. In most cases they will let you pay the past due amount and with proof of insurance and payment of the towing costs, you can retain the vehicle.

Chapter 13 Bankruptcy

If the amount the creditor needs to release the vehicle is more than you are able to pay, you can consider filing Chapter 13 bankruptcy. Filing Chapter 13 allows you the opportunity to propose to the court a reasonable repayment plan based on your disposable income. Once Chapter 13 is filed and the Creditor is notified of the filing, the vehicle must be returned to the Debtor.

It's not uncommon for the Creditor to request "adequate protection" payments prior to confirmation. Adequate protection payments are designed to compensate the creditor for the loss in value to vehicle while the debtor is under the automatic stay protections. These payments are limited to 1% of the contract value. So if you owe $10,000, the adequate protection payment is $100. Of course once your case plan is approved and confirmed by the court, these payments will be made by the Ch 13 Trustee.

Chapter 7 Bankruptcy

A Debtor can file under Chapter 7 to regain possession of their car, however, the Debtor must be able to make arrangements to bring the account current and to sign a reaffirmation agreement. A reaffirmation agreement states to the Court that you want to continue to pay the dischargeable debt in order to keep the collateral. This is usually done for vehicles and furniture loans.

Yes, You can get your vehicle back after it's been repossessed by filing bankruptcy under Chapter 7 and Chapter 13. A Chapter 13 is more advantageous to the Debtor as can allow for a cram down of the value and a reduction in the interest rate.

To determine which Chapter is best for you, call Denise Brown's Legal Direction, at 888-309-8985, an experience bankruptcy attorney for a free in person or phone consultation.

Here's a situation where a little patience will definitely save you a lot of money. An tax return prepared and electronically filed can result in receipt of your tax refund within eight to 15 days for free. Surprisingly, for many, even a week is too long to wait for the monies to be direct deposited. Tapping into so called consumer need, Refund Anticipation Loans (RALs) were born. A RAL is a high interest short term loan that uses your tax refund as collateral for the loan. .

This impatience leads to a high interest short term loan where the consumer pays a tax preparation fee and interest on the refund anticipation loan (RAL) between 149% and 500% for the privilege of receiving their own money in less than eight days. It sounds crazy. Who would knowingly pay 150% interest? Especially after you allowed the government to keep your overpayment for the past 11 months; how much financial impact can one more week have on your life situation.

According to Chi Chi Wu of the National Consumer Law Center, it's persons who need their money the most--the working poor who most often live in impoverished communities. So if you live in a neighborhood where new businesses seem to sprout up at tax time, its not urban renewal, it's just predatory lenders coming to your community between December and April to separate you from your hard earned cash. RALs have decreased in the past year, but not before consumers lost more than 1.3 B in their own hard earned funds and taxpayer dollars.

RALs were possible because the IRS shared Debt Indicator information with banks that allowed the ability to know if the taxpayers refund was likely to be intercepted for child support, delinquent taxes or defaulted student loans. Since the IRS has decided not to issue the Debt Indicator, assessing the risk of this type of loan has become so risky that the FDIC has labeled them as "unsafe and unsound."

JP Morgan Chase voluntarily left the RALs business in 2010, leaving only Republic Bank and River City Bank as the only local entities offering the high interest loans. In December, 2011, Louisville based, Republic Bank agreed to phase out its Responsible RAL program after the 2012 tax season and pay a $900,000 civil penalty in settlement of the action filed by the Federal Deposit Insurance Corporation (FDIC).

The FDIC's action follows a similar procedure by the Office of Comptroller of Currency, which issued a regulatory directive last year against HSBC - H&R Block's tax loan partner bank - prohibiting it from making the loans. Republic is the RAL lender for Jackson Hewitt and Liberty Tax Service, the second and third largest tax-preparation chains in the country.

So hold on to your money in 2012! E-file and wait for your tax refund to arrive direct deposit. No extra fees, no loans for tax preparation, just full access to your hard earned money.

Continue reading "Don't Be Fooled by Tax Refund Anticipation Loans: Interest Rates from 149%- 500%" »

Who talks about tax refunds at this time of year? Bankruptcy attorneys. Knowing how most people tend to ignore information they are reluctant to follow, I feel the need to get an early start reminding Chapter 13 bankruptcy filers about their upcoming 2011 Tax Refund.

Black Friday retails sales are said to have increased by 26%. That means a lot of folks were out spending money for the holiday season. With so many without jobs or underemployed, 2011 provides many opportunities to adopt a family for the holiday season. It's still true, it is always better to give than receive!

Don't forget your holiday budget, 10% of one month's income for gifts, dinner and everything else for the holidays. If you can get by on less, that's even better. Don't feel compelled to spend more than is necessary. Whether you have filed bankruptcy or not, don't let the holidays cause you to abandon your monthly budget.

Follow the golden rule, 10% of your monthly income should be used for extra spending during the holiday season. So if you bring home $3000.00 per month, you need to budget $300.00 for the holiday season. Set it aside in an envelope and commit to using only cash during the holiday season and you will be surprised at your new found wisdom. Consumers spend twice as much when they use debit/credit cards versus cash.

Don't use your credit cards for holiday purchases: if you need to charge it and pay later, you probably don't need it.

Watch out for layaway fees: Sometimes the fees are higher than waiting for the item to go on sale. There will be plenty of sales during the holiday and end of year season.

Be aware of gift card restrictions: Gift cards are much more accepted these days with longer expiration dates and fewer restrictions. Be sure to know the limitations if you give a gift card this year.

When a debtor files Chapter 13 bankruptcy, the debtor proposes 100% repayment to secured creditors and an unsecured repayment dividend between 0-100% of the allowed unsecured claims.

In the Western District of Kentucky, if your plan is confirmed for less than 100% repayment to your unsecured creditors, you are required to provide the Chapter 13 Trustee with a copy of your yearly federal and state tax return, the actual federal and state tax refund check and a revised statement of your monthly income and expenses.

Reminder letters are being prepared right now to be delivered to debtors before the end of the year. In the merriment of the holidays be careful that you don't spend your 2011 Tax Refund and risk having your bankruptcy dismissed. Stay tuned for more articles on protecting your tax refund from the trustee.

Avoid paying the Trustee your Tax Refund

Adjust your withholding so there's no refund

Keeping your tax refund in bankruptcy

There was great expectation that 2011 would be a year where the housing market would greatly improve. Well we are now in the final stages of 2011 and the housing market may not have worsened, but it hasn't improved very much. In addition to a slow housing market, many persons have the unfortunate circumstance of continued under or unemployment to add to their housing woes.

Since 2008, many programs have been initiated to help homeowners who are struggling to maintain their homes, while the economy recuperates. Even the mortgage companies have created their own programs to help. While their timing is off a bit, most mortgage companies will offer the opportunity for loan modification after a bankruptcy filing.

This is a very different scenario from the past two years. It was often the case that even though the opportunity existed, it was usually the last option offered and was fraught with bureacracy for the creditor and the homeowner. The process for obtaining a loan modification has improved and so have the programs that offer assistance.

Kentucky and Indiana share in a 7.6M Hardest HIt Fund that will assist each homeowner with up to $25,000.00 to pay mortgage arrears or current mortgage payments. The program is designed for homeowners who, due to no fault of their own, need a bridge to hold them up while they are in a period of unemployment or underemployment. If your mortgage difficulties are the result of a divorce, death or other disability, you will need to pursue the traditional loan modification process.

Applicants must be eligible for unemployment benefits, although Kentucky does allow self employed applicants to apply. If you are eligible for the program, the agency pays the arrears and mortgage in exchange for forgivable junior lien on the property. The amount of funds available depends on the program and your location. Kentucky residents may receive up to $25,000.00; Indiana residents may receive between $12,000.00 - $18,000.00, according to your county of residence.

If the homeowner remains in the property for an additional five years, the loan is forgiven. If not, sale proceeds are applied toward the loan and the balance is forgiven if the sale proceeds are not sufficient.

In Kentucky, to apply, call (866) 830-7868 or visit www.protectmykyhome.org; In Indiana, call, 1-877-GET-HOPE. Both offer foreclosure prevention assistance.

Kentucky Eligibility Requirements

Indiana Eligibility Requirements

Bailout Funds Available for Foreclosure Relief

Max Gardner's Loan Modification In a Box Program

If you are having trouble making your student loan payments, you may qualify for some form of payment relief such as a deferment, forbearance, graduated payment plans or income based payment plans.

The most important step is to take action before you loan is considered in default. Default has serious consequences and can result in ineligibility for additional loans, garnishment of wages, tax intercept and negative reporting to credit bureaus. Don't ignore notices from your student loan servicer. Even if you are in default, you may be able to rehabilitate your loan or consolidate your loan.

Bankruptcy is not the only option for seeking to cancel or discharge a loan. The Ombudsman website provides information on several situations that could result in cancellation of your loan.

If student loans cannot be discharged, you might ask yourself, "Why consult a bankruptcy attorney? For bankruptcies filed after 1998, your loan can be discharged only if the bankruptcy court enters a determination that repayment would impose undue hardship on you and your dependents. This decision must be made in an adversary proceeding filed during your bankruptcy. Contact an experienced bankruptcy attorney to find out what circumstances constitute undue hardship in Kentucky and Indiana.

The undue hardship standard is explained in In re Brunner, 46 B.R. 752, 753 (S.D.N.Y., 1985) (Aff'd by 831 F.2d 395 (2d Cir.1987)). In summary, Brunner requires a finding of the following:

(1) that the debtor cannot maintain, based on current income and expenses, a `minimal' standard of living for herself and her dependents if forced to repay the loans;
(2) that additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period . . .; and
(3) that the debtor has made good faith efforts to repay the loans.

The burden to establish undue hardship is on the debtor and most debtors lack a strong enough case to justify the expense of pursing an adversary proceeding. To avoid student loan defaults, start planning for repayment while still in college.

Continue reading "Are Student Loans are part of the next Bankruptcy Wave? Part Two" »