Los Angeles Bankruptcy Lawyer Blog

A recent survey conducted by the Employment Benefit Research Institute revealed that only 13 percent of workers were "very confident" with regard to being secure in their funding and ability to retire.

Our Los Angeles bankruptcy lawyers understand that twice that number, nearly 30 percent, responded they weren't at all confident when it came to whether they could retire comfortably. That is three times as many as had responded this way in 2009.

About a fifth of the respondents said they were not very confident about 40 percent said they were somewhat confident. So essentially what we are looking at here is almost 90 percent of people who are lacking confidence in their retirement.

This is despite the fact that the housing market has been reporting significant gains and the Dow has been hitting all-time highs.

There are a number of reasons why this could be. Those include:

• A rising cost of day-to-day living expenses;


• Soaring costs for health care and long-term care;


• Inflation that has outpaced earnings, meaning money doesn't go as far as it once did.

Even those who seemingly did everything right - made smart investments, squirreled away as much savings as possible and worked to live within a budget - are still worried that there would be no way they could retire in a reasonable amount of time.

Another key reason people aren't able to stockpile as much savings as they need is because they are often still working to pay off piles of debt. This is where a Chapter 7 bankruptcy filing can be a strategic move to help you become better prepared for retirement.

Consider that you may technically be able to continue paying on your debts. However, if doing so has become a significant impediment to your ability to set aside an adequate retirement fund, it may be time to explore a discharge of those debts through bankruptcy.

Aside from child support payments, student loans, alimony and certain kinds of taxes, most debts can be discharged in a bankruptcy. That includes medical bills, credit card debt and most other types of loans.

Consider that in 1997, about 2 percent of all Chapter 7 bankruptcy filers were over the age of 65. By 2007, that figure had climbed to 7 percent. And it has continued to increase as we have trudged on through the recession, during which the housing crisis in particular delivered a painful blow to older Americans.

There are certainly benefits to filing for bankruptcy while you're in retirement. However, if you can get ahead of the problem before you find yourself on a fixed income, you may be able to secure yourself a more stable financial position.

It may be especially important to do so now, as we know that certain federal income supplements are increasingly uncertain. The funding for Social Security Disability Insurance, for example, is set to be completely depleted within just three years. There has also been a fair amount of speculation on the health of Social Security retirement funds.

Even though we all paid into those programs, there are fewer people contributing today than there were even 20 years ago because the population is aging - and will continue to do so for the next several decades.

Filing for bankruptcy doesn't make you failure. Many times, it's the smartest financial move you can make.

Continue reading "Los Angeles Retirement Confidence Shot, According to Study" »

A real estate research firm has reported that in the first quarter of this year, California foreclosure activity declined sharply to 18,600 - a 51 percent dip from the previous quarter and a nearly 70 percent drop from last autumn.

However, our Los Angeles foreclosure attorneys know that this is nowhere near the end of the story.

For those foreclosures that do remain, many California homeowners are having a a difficult time determining who owns the legal right to their home. Each mortgage is accompanied by reams of complicated paperwork, and banks have counted on the fact that most people don't understand or even really read these documents. In fact, in far too many cases the lending institution has lost the paperwork and simply forged a new set of documents.

Most people aren't able to tell when looking at their property records whether they are fraudulent.

This was clearly evidenced in the so-called "robo-signing" scandal a few years ago, in which both banks and mortgage services were churning out foreclosure documents that swore to property rights - even though it wasn't actually clear whether they actually owned the property. As a result, many people were improperly foreclosed upon.

Some of these concerns remain relevant today, and that's why having an experienced foreclosure lawyer is so critical. It's important for homeowners to know that they are not being taken advantage of or wrongly evicted.

A recent investigation by the Center for Investigative Reporting and NBC Bay Area found that several banks - namely, Bank of America and its subsidiaries - have continued to sidestep proper procedure in the course of filing for foreclosure.

For example, one woman in Oakland was reportedly thrust into foreclosure after a trustee for Bank of America improperly inserted its name on the loan document, which effectively allowed the bank to take over the loan.

In another case, the bank reportedly somehow "lost" a $28,000 cashier's check sent by one homeowner in order to catch up on his mortgage. Not only was he not credited for that loss, but he lost his home.

A big part of the reason that foreclosures in California are down has to do with the Homeowner Bill of Rights, which is an attempt to address many of the systematic problems with foreclosures. It took affect January 1st of this year. Part of what it does is bar banks from foreclosing on a property while the loan modification is ongoing. It also mandates that banks have to establish a single point of contact for each homeowner.

However, the legislation fails to address one key aspect, and it's a big one: Fraudulent foreclosure documents. Of course, legislators likely figured there was no need to address this, as this practice is already illegal. The problem is this hasn't seemed to deter many firms.

As a representative with the National Consumer Law Center was quoted recently by the CIR as saying, banks have a major monetary incentive not to comply with state and federal mortgage laws. They have been doing it illegally and sloppily for a long time, and there is this sense that they are entitled to continue doing so.

We won't let them get away with it with our clients.

Continue reading "California Foreclosures Still Nightmarish, Despite Decline" »

You are no doubt familiar with the storefront payday lenders who have come under intense scrutiny from state and federal regulators critical of the practices that keep consumers in a seemingly endless cycle of debt.

A lot of people won't even go near these stores for this very reason.

But you may not realize your bank could be doing the exact same thing - ie, handing out "emergency" loans that customers can't afford and then charging them sky-high interest rates until they can repay them -- or severe penalties if they can't.

Our Los Angeles bankruptcy lawyers understand that these kind of practices, known as "loan-sharking," have become common place at some of the country's biggest financial institutions. According to a recent article by MSN Money Columnist Liz Weston, U.S. Bank, Fifth Third Bank, Regions and Wells Fargo all have some type of high-cost loans that end up leaving customers worse off than they were when they signed on the dotted line.

The banks, and even some consumers, say there can be benefits to a short-term credit service, even when pricey. Some say it's a life-saver in a pinch.

And that may be true for some.

But consider that most consumers are paying anywhere from $15 to $20 on every $100 that they borrow, which breaks down to an annual interest rate of about 400 percent - sometimes more - just for a two-week loan.

The other problem is that for a lot of the people who are borrowing, the loans aren't short-term. First off, they are using the loans not for some unanticipated, one-time expense, but rather for essentials such as gas, groceries and utilities. Once they get into a cycle of doing this once or twice, they soon fall into a situation where they can't cover that post-dated loan on their next paycheck. So, they end up rolling over their loans until the next payday cycle - of course, for an additional fee.

The Center for Responsible Lending reports this often goes on for an extended period of time, with the average customer trapped in the cycle for about a 1.5 years, or through a cycle of nine transactions.

While it's true that the payday loans offered by banks are a bit cheaper than the ones you will find at storefront venues, they will still run you an annual APR of somewhere between 225 and 300 percent.

The median bank payday loan borrower took out nearly 14 loans in 2011, and more than 33 percent took out more than 20 loans. According to research by the CRL, these borrowers were two times as likely to rack up overdraft fees and in most cases, they created more problems than they solved.

The Department of Defense, recognizing what a big problem these storefront venues were to military members, capped interest rates for active members at 36 percent. That was a huge blow to the industry, but they continue to thrive elsewhere across the country.

Most of the regulation that has been passed so far has been aimed squarely at those smaller, storefront lenders. But it is possible that could change, with the Consumer Financial Protection Bureau and the FDIC taking a closer look at how larger banks are able to sidestep certain state laws against high-interest loans using online channels.

Even if you feel confident that your payday loan debt isn't holding you back, you should consider a consultation with an experienced bankruptcy lawyer if you routinely use this type of service for the basic necessities.

Continue reading "Los Angeles Bankruptcy Lawyers Warn Against Big-Bank Loan Sharking" »

The Times reports that health insurance premiums in California spiked by 170 percent over the last 10 years - at a rate that is quintuple the 32 percent inflation rate -even as fewer employers are offering health care benefits.

Our Los Angeles Chapter 7 bankruptcy attorneys know that this means more of a burden is being shouldered by employees.

Inevitably, this is going to push a lot of Californians deeper in debt, as medical care, particularly in the midst of a major illness or serious injury, is a cost few can afford.

Thankfully, a bankruptcy gives you the opportunity to discharge all those medical debts, hopefully leaving you with nothing but a clean bill of health.

The California HealthCare Foundation conducts an annual survey on the issue of employer-provided health care coverage and found that while 73 percent of workplaces offered health benefits in 2009, just 60 percent offered it last year.

In addition to companies slashing benefits, many are forcing workers to either pay more of the cost or to accept fewer benefits. Even if the latter means workers would be paying somewhat less upfront, they would have to really hope they don't become sick or injured, as the bills can be astronomical.

It's a problem that it doesn't seem will be abating anytime soon. More than 30 percent said they intended to increase workers' contributions toward premiums next year, and another 35 percent said they have every intention of raising employees' deductibles.

The actual figures could be even higher.

About a quarter of small company employees had yearly deductibles of $1,000 or more for a single individual last year. That was a jump of about 7 percent from what we saw in 2006.

Perhaps the only good news is that while employer insurance premiums continue to increase, they may be doing so at a slightly slower rate. While they climbed at a pace of more than 8 percent the last two years, they climbed by just 6.5 percent last year.

California's employer coverage rate is on par with the national average of about 60 percent.

Another piece of good news is that those who aren't able to secure health care coverage through their employer are going to soon have coverage options under Obamacare, though that won't start until January.

Those option will include subsidies on premiums for individuals looking to purchase private coverage. In some places, there will be an expansion of Medicaid, which provides both state and federal funding for health care to the nation's poor.

Still, the fact is, many workers at the moment are receiving less coverage than they otherwise would, and that means people are finding themselves in a deep mess of debt.

While there are certain kinds of debt that aren't dischargeable with a bankruptcy, medical bills.

Even if you aren't eligible to file for a Chapter 7, a Chapter 13 plan could allow you to repay those bills at a lower rate over a longer term.

Your bankruptcy attorney should discuss all of these options with you.

Continue reading "Reduction in Healthcare Benefits Could Increase Bankruptcy Risks for Struggling California Families" »

Talking money with parents who are aging is rarely a comfortable - or even welcome - discussion.

Sometimes, though, it's a necessary one.

Our Los Angeles bankruptcy lawyers know that not only are they more likely to fall victim to scams, they are coping with a dwindling income, spiking medical bills and age-related memory problems - all of which may make them more vulnerable to a potential debt problem.

While bankruptcy is often considered as a last resort, particularly for someone in retirement, it can sometimes be the best solution. Older folks have increased costs for taxes, medical expenses, groceries, gas and more. Their income has taken a dive. Social Security's incremental cost-of-living adjustment isn't enough to keep pace with rates of inflation. Medicare doesn't cover everything, and out-of-pocket expenses can quickly pile up.

Although many people - and older adults in particular - view bankruptcy as a kind of a failure, the reality is there are benefits to this route, especially for someone in retirement.

First, it's not as awful as one might expect. It alleviates the worry. It can be a huge relief. Every dollar you aren't shelling over to your creditors is another that can be used to cover your everyday expenses.

Many states have homestead exemption laws, so your home equity is often protected in these proceedings, as are your retirement and Social Security funds, up to $1.1 million.

And while you may not want to slip this into the conversation at the very outset, it's important for you to know that nursing homes and assisted living facilities are barred from using a bankruptcy against you as a means to reject an application. It's considered a form of discrimination.

But all of this is a discussion that you'll need to approach gingerly with your parents. A study last year by Fidelity found that while a quarter of adult children believe their parents need assistance in managing their money, an overwhelming 97 percent of our older parents don't feel the same.

At the end of the day, it's a discussion about control. Even though you have the best of intentions, your parents are not eager to concede any portion of their independence - and that is something to which you must be sensitive.

As you consider your approach, understand that first of all, you'll need to drop any air of condescension. Your tone of concern will be lost if all they hear is that you are questioning their intellect. In that same vein, try to avoid saying the words, "You should." Nothing will put them more on the defensive than demanding action.

You might consider bringing in a neutral third party to help make the case, either for financial help or a bankruptcy filing. No matter how old you are, to your parents, you will always be their child. If you have someone like an experienced bankruptcy lawyer there to help you have this discussion will not only give legitimacy to your words, it may offer opportunity to have questions answered that you may not have previously considered.

Call us today to learn more about how we might be able to help.

Continue reading "L.A. Bankruptcy in Retirement: Talking With Your Parents" »

Part of the reason people may hold off so long on a Chapter 7 bankruptcy filing is the emotional aspect of it.

Our Los Angeles bankruptcy lawyers would be remiss if we didn't acknowledge the fact that some people still unfortunately cling to negative perceptions about filing for bankruptcy. They associate it with failure, which is then accompanied by feelings of shame, grief and sadness. They may actually go through a period of mourning, as it may represent a shift in their own perceptions of themselves.

However, attitudes are shifting, we are happy to say. No longer are we seeing the kind of stigma that was so often associated with these filings even just a couple decades ago.

For many filers, it is a matter of re-framing the discussion amid false perceptions. Hanging onto the beliefs such as "bankruptcy means I'm a failure" or "my credit score is permanently destroyed" or "I have so much debt, nothing is going to help" - that only serves to pile up fear and anxiety.

You have to start thinking off this in terms of a new beginning. You are being offered the chance at a fresh start. If some of your loved ones view it otherwise or judge you for it, then they don't understand how it really works either.

There is no arguing that bankruptcy is going to tarnish your credit - but it's temporary. In seven to 10 years, it will be as if it never happened. In 2-3 years, you will qualify for mortgages, car loans and credit cards. If you have been struggling financially for some time and you're burdened with a great deal of debt, your score isn't thriving as it is anyway.

And no matter how much debt you have racked up, bankruptcy is almost always going to be an option on the table. In fact, the more debt you have the stronger a Chapter 7 bankruptcy candidate you are.

Another way to think of this is a learning experience. Bankruptcy is not your end goal - it's a means to an end. What you're really striving for is long-term financial stability. That takes time, planning and discipline. It's part of an entire lifestyle change, and those who have decided to file for bankruptcy need to commend themselves on taking the first step toward making that a reality.

The other thing that you need to put into perspective is that many times, the circumstances behind a loss of financial control are beyond our personal control. The Great Recession was hard on almost everyone. Those who emerged completely unscathed can mostly attribute that to luck. People don't choose to be laid off. People don't choose to suffer a serious illness. And many millions of people gravely suffered as a result of the housing crisis, spurred by greed and fraud on Wall Street.

You may not have been able to control those outside forces, but you are in a position now to control your reaction to it.

Separate your personal net worth from your financial worth.

Formulate a plan that will allow you to achieve reasonable financial goals.

Consider this not the end, but the beginning.

Let us help you on the first leg of this journey.

Continue reading "Chapter 7 Bankruptcy: Re-framing The Discussion" »

Regardless of whether you actually lost your home in a foreclosure sometime in 2009 and 2010, you could be entitled to a piece of the pie from a $3.6 billion foreclosure settlement agreement.

Our Los Angeles foreclosure defense attorneys understand those payments are just now beginning to trickle out, with cash reimbursements ranging anywhere from $300 to $125,000. The money is being doled out to some 4 million borrowers by the 13 mortgage servicers.

These are the firms that struck a deal with the Federal Reserve and the Office of the Comptroller of the Currency over the robo-signing scandal, failure to modify underwater mortgages as promised and violations of the Servicemembers Civil Relief Act. In some cases, homeowners were foreclosed upon, despite the fact that their assets were protected under bankruptcy law. In other cases, borrowers were current on their mortgage payments, and the banks foreclosed on them anyway.

Initially, when the deal was first announced back in the spring of 2011, the OCC had ordered independent reviews of each foreclosure, with the banks picking up the tab for those costs. However, not only were those reviews costly and inefficient, there were significant questions raised regarding the independence of the reviewers. There was ample evidence that those outside firms were finding in favor of the banks more often than not, regardless of the information in those files.

What's more, many borrowers who were eligible either didn't know it or didn't know how to properly apply. Four million were eligible, yet only 440,000 applied for a review.

Ultimately, the reviews were scrapped in favor of this multibillion-dollar settlement.

A later report by the Government Accountability Office slammed both the OCC and the Federal Reserve for failing to establish guidance and accountability in the review process.

In some cases, those borrowers who requested a review may actually get double the compensation, according to the OCC.

It's worth noting that homeowners who accept this cash payment aren't tossing their right to file additional legal action against their servicer at a later time, and no one should ask you to sign a waiver of this nature in exchange for accepting this payment. You should contact an experienced foreclosure lawyer before signing anything of this nature from your bank or mortgage servicer.

You would be covered under this deal if your mortgage was serviced by one of the following:

• Bank of America;


• Chase;


• Citibank;


• Aurora;


• Goldman Sachs;


• Morgan Stanley;


• Wells Fargo;


• U.S. Bank;


• SunTrust;


• PNC Bank;


• Sovereign Bank;


• MetLife Bank;


• HSBC.

On the other hand, if your mortgage was held by Everbank, OneWest and Ally Financial (formerly GMAC Mortgage) are still cooling their heels, as talks of a settlement agreement between these firms and the OCC are still ongoing.

Those currently facing the possibility of a foreclosure should seek the services of an experienced Los Angeles foreclosure defense attorney to learn more about your options.

Continue reading "$3.6B Foreclosure Settlement Payments Begin Rolling In " »

The average cost of a motor vehicle these days is $31,000.

It's a price tag few can afford, especially with traditional, 60-month loan, which breaks down to more than $500 monthly.

Our Los Angeles bankruptcy lawyers know that is why many are turning to loans that stretch anywhere from 75 to 100 months, extending repayment lengths by several years.

The practice, which has financial pros and cons, has increased as consumers, still on shaky financial ground, are seeking to keep payments low, while banks are just now loosening the reins and allowing longer-term loans.

In the last quarter of last year, average new car loans were up to 65 months, the longest in history. Experion Information Solutions Inc. reports that nearly a fifth of all new car loans were between 74 and 84 months. A handful were up to 97 months.

Looking back to 2009, only about 10 percent of loans fell into this category.

On one hand, this type of loan allows consumers to have nicer vehicles and keep payments lower so they can better afford day-to-day expenses.

On the flip side, consumers who have taken on a loan that stretches six to seven years are assuming a loan that is going to take considerably longer amount of time to have positive equity in a vehicle. Positive equity is when you owe less on something than it's worth.

What that means is that we're going to be seeing more people "underwater" on their vehicles. For some, this may not be an issue, as they are planning to hang onto it long term.

However, if someone wants to later trade in the vehicle or sell it - or worse, if they have no choice but to do so - having a vehicle that is underwater can make this extremely difficult. It means that the consumer is going to have to assume a large amount of debt up front just to unload the vehicle.

There isn't a great deal of risk for auto lenders in this because if an individual can't keep up with payments, the vehicle can simply be repossessed. But this is bad for consumers because it will inevitably damage your credit, making it more difficult to get future loans for things like another vehicle or a home.

With the percentage of subprime loans expanding, consumers need to understand their options. A debt of $30,000 can quickly snowball into a very serious situation for someone who is not able to keep up on payments.

While this alone might not be enough to cause someone to file for bankruptcy, most people have more bills to pay than just their vehicle. If they have trouble covering one, inevitably, they have trouble covering the others.

Our Los Angeles bankruptcy lawyers are here to help you lay bare your financial options.

A Chapter 7 filing will allow you to walk away from most of your outstanding debts, while a Chapter 13 plan will offer you the chance to repay a reduced amount to your creditors over a longer period.

Continue reading "Underwater Autos Likelier With Longer-Term Loans " »

When you are working to rebuild your credit following a Chapter 7 bankruptcy, you need to be informed of and careful with every last corner of your financial profile - down to your utility payments and cell phone bills.

As our Los Angeles Chapter 7 bankruptcy attorneys recently reported, a new model of credit scoring is more inclusive than the FICO model and will cull information about everything from your mortgage and medical bills to your utility payments and gas card.

Generally speaking, this is a good thing because before, a good record on some of these smaller expenses wasn't likely to help you much at all. Now it can, as you have more opportunities on which to boost your score.

Be wary, though, because these small things can also result in a significant drag on your score as well.

To think of it another way: An unpaid cell phone bill could end up costing you thousands of dollars more in interest, because you couldn't get a lower rate due to the drop in your credit. Or consider your failure to pay your air conditioning bill ends up resulting in the mortgage company denying you a loan altogether.

If you are emerging from a bankruptcy, rebuilding is going to take some time, a fair share of calculated risks and keeping up on all your bills - no matter how small.

Part of that means proper planning beforehand. If you have recently had your debts discharged through a Chapter 7 bankruptcy, then you'll be starting from a good place. However, you still should practice some frugality at least initially and determine whether there are services or things that you can trim out of your budget to make sure you don't run into an unexpected situation.

For example, you might consider forgoing cable television or dinners out or the premium cell phone plan. You may be able to slowly begin folding some of those things back into your lifestyle as your finances permit, but take care not to rush anything soon after your discharge. Your goal is to show your current and future creditors that you can be trysted to spend and save responsibly.

We understand that when money is tight, it can be incredibly tempting to skip a payment here and there. Understand though that when you do this, you are denting your bankruptcy recovery and setting yourself back.

If you are one of those who has trouble keeping up or keeping track of every day bills, consider the following:

• Set up a bill calendar so you know exactly what bills need to be paid and when. This way, you don't wind up in a situation of simply having forgotten. Consider setting up an automatic bill pay situation so you don't have to remember every bill every single month.


• If you have a lot of different utility bills, consider bundling services, if possible.


• Only switch service providers when necessary. Your credit reports are pulled every time you go to a different provider.


• Ask your provider if you might be able to get on a fixed monthly average plan so that you end up owing a predictable amount each month.

Continue reading "Rebuilding After L.A. Bankruptcy: The Little Things that Kill Your Credit" »

Dionne Warwick may be saying a little prayer - for her bank account. For the rest of us, it's time to deal with the annual tax deadline.

The Rolling Stone reports the 72-year-old singer filed Chapter 7 bankruptcy in order to settle years-old tax issues dating back more than 15 years ago.

Our Los Angeles Chapter 7 bankruptcy lawyers know that while most tax debts can't be discharged in a bankruptcy, some can. As we approach the April 15 deadline to file your 2012 taxes, it's an appropriate time to discuss the differences.

It's worth noting first of all that if you file for a Chapter 13 repayment plan, you'll end up repaying your tax debts in full over a period of time as part of the repayment plan. A Chapter 7 is the only way you can fully discharge your tax debts, but you can only do so if a number of criteria are met.

Those are as follows:

• The taxes you owe are income taxes. Unfortunately, other forms of taxation, such as payroll taxes or fraud penalties, can't be eliminated no matter what kind of filing you choose.


• You did not commit willful evasion or tax fraud. That is, you didn't try to evade paying your taxes or file a fraudulent return or use a false Social Security number, etc.


• Your debt is a minimum of three years-old.


• You have filed a tax return, and you have to have done it at least two years prior to filling.


• Your income tax debt was assessed by the IRS at least 240 days prior to your filing or has not yet been assessed.

An experienced bankruptcy lawyer can help you determine if your situation meets all the above criteria and if not, whether there is any action you may be able to take to change the situation.

In Warwick's case, her attorney told Rolling Stone that her tax troubles stemmed from mismanagement of funds by a business manager who had been fired a number of years ago. While Warwick had trusted this individual to appropriately handle her finances, at the end of the day, it is she who is responsible for the outcome.

Warwick had reportedly been attempting to hammer out a deal with the IRS for the last several years. Her attorney said that while she continued to pay the IRS, the money she handed over was only applied to the interest and penalties, as opposed to the actual principal amount.

Her total liability was calculated at $1 million. While she's paid about $1.3 million, her attorney says, the interest and penalties have resulted in a situation where she has been unable to keep up with the payments.

At her age, she is not bringing in enough in performances to cover the cost of her expenses plus the amount demanded in back taxes. Although the IRS is going after her hard as a "celebrity," her attorneys says her ability to pay is severely limited. Her average monthly income is somewhere around $20,950, while her expenses tally up to $20,940 - meaning she makes a net income of $10. This isn't necessarily unusual with celebrities or even wealthy individuals.

Warwick has completed the required credit counseling.

Reports indicated that while her credit would be damaged at least initially, it's believed most of her assets would be protected under the filing.

Continue reading "Filing for L.A. Bankruptcy to Cope With Tax Debt" »

Through many years of experience, our Los Angeles Chapter 7 bankruptcy lawyers have found that one of the primary reasons people wait so long to file for this type of protection is their concern regarding their credit.

Our response is usually two-fold:

1. If you are mulling a bankruptcy, your credit is probably suffering - or going to suffer - as it is.


2. While your credit will inevitably take a hit, it's not as difficult to bounce back as you might think.

People have a lot of misconceptions about how a bankruptcy is going to impact their financial future. For example, they mistakenly believe that it will be many years before they can buy a vehicle or a home or even get an unsecured credit card.

All of this is simply untrue.

Let's take a closer look at that last one - getting an unsecured credit card.

Why would you want one anyway?

It ultimately comes down to rebuilding your credit. A secured credit card could be a safer option, particularly if out-of-control spending was the problem to begin with. But you may see a faster, more noticeable credit score boost with an unsecured card.

The main difference is in the payment structure. A secured credit card will require that you keep the equivalent of the card's limit on deposit with the issuer of the card. Typically, you would start with a small amount, say $250. You keep that on file with the issuer and then borrow against it. An unsecured card, meanwhile, is one that you will not have to make a deposit on prior to use.

Contrary to popular believe, unsecured cards are not off-limits to those fresh off a bankruptcy. In fact, you may notice soon after your bankruptcy is discharged that you start getting offers from credit card companies.

One of the main reasons that newly-discharged bankruptcy candidates are desirable to financial institutions is the knowledge that you can only file a Chapter 7 once every eight years. So more than likely, whatever debt you do rack up after that point, you're almost assuredly going to have to pay.

Secondly, the banks know you aren't likely to ever need to file again. The vast majority of people who file bankruptcy only do it once in their lives.

So now that you have no debt and whatever debt you do incur you'll have to pay - and are likely to pay - banks want to make you an offer.

Bear in mind that many of these offers aren't going to be great. You'll be looking at high annual fees and interest rates. However, you have to start somewhere. Re-establishing that trust with mainstream lenders will make you a good candidate for better deals down the road. So long as you remain in good standing, you may even be able to explore new card options within a year or so.

It may seem tempting to swear off credit cards altogether after a bankruptcy, but that's not usually advisable. The sooner you start aggressively working to rebuild your credit, the faster you can move on to the next chapter.

Continue reading "Unsecured Credit Cards Following L.A. Chapter 7 Bankruptcy" »

Banks are reportedly making greater strides with regard to forgiving mortgage debt for California homeowners who are behind on their payments, per a multibillion-dollar settlement reached last year.

However, our Los Angeles foreclosure lawyers have also learned that more than half of the nearly $17 billion that marked California's share of the mortgage settlement deal is still being funneled to efforts that actually get people OUT of their homes.

You may recall this was the agreement signed by the five largest mortgage servicing banks in the country and attorneys general from 49 states, including California. Now, a new report indicates that while there has been a marked increase in the number of principal reductions offered to struggling homeowners, the largest amount of that settlement money so far doled out has gone to short sales.

That means that rather than taking steps to keep people in their homes, the banks are making a more concerted effort to get them out. A principal reduction is an agreement whereby the banks will aid a borrower by agreeing to write down the total outstanding mortgage debt on the home. On the other hand, a short sale will grant the homeowner permission to sell their property for less than they owe (which is usually more in line with what the house is actually worth). Both options would cause the bank to take some type of financial hit, but short sales are usually seen as preferable to the bank, as it will receive a faster, more definite return on its investment.

For some buyers, this is the solution they are looking for. They simply want to rid themselves of the property and be done with it. However, those who want to keep their homes end up finding themselves in an uphill battle to try to win a principal reduction.

Since the settlement was inked last year, some 500,000 homeowners have received some $46 billion in assistance from the five banks. That may seem like a lot, but remember, it was the shoddy practices of these banks that fueled the housing crisis flames in the first place. The settlement was to resolve numerous investigations into widespread (and substantiated) allegations that these banks had used forged and fraudulent paperwork, among other tactics, to foreclose on homes when the housing market imploded.

Prior to the agreement, many of those lenders were quote vocal about their opposition to writing down principal payments, saying that such action does little more than reward borrowers who had been delinquent.

However, consumer advocates prevailed in the implementation of a wide-scale principal reduction deal. It appears, though, that banks are still less than eager to extend principal reductions if they have other alternatives.

Officials with the Housing and Urban Development had previously estimated that the banks would provide roughly $35 billion in direct assistance to homeowners, though that figure was recently upped to an estimated $50 billion.

It appears we may have a long way to go to reach that goal. While 60 percent of the relief in the form of principal reductions, so far, it's only accounted for less than a quarter of the relief - $11 billion of $46 billion.

In California, roughly $5 billion of the total $17 billion has gone toward first-mortgage principal reduction, while about $9 billion has gone to offering short sale options.

Continue reading "L.A. Foreclosure Help Necessary, Despite More Mortgage Forgiveness" »

A recent report shows that the rate of bankruptcy filings among recent college graduates has spiked by nearly 20 percent in the last few years.

Our Los Angeles bankruptcy attorneys know there tends to be a misconception about the typical filer as being someone who is low income and less educated. But even high-earning, recently graduated individuals can sometimes find themselves in financial trouble.

The study reached some 50,000 respondents over a four-year time frame in an effort to measure the financial status and make-up of debtors in the wake of the 2005 passage of the Bankruptcy Abuse Prevention and Consumer Protection Act. This was a measure that applied more stringent restrictions on filers as a way to curb alleged abuse of Chapter 7 filings.

But the effect that it's had on people who are just trying to lay the foundation to strike out on their own and build their own lives has been undeniable. It's a combination of high student loan debt, a sluggish economy that has led to less employment opportunity and credit card companies that market aggressively to naive students on college campuses.

As parents, we may not be able to control the cost of tuition or the pace of the economic recovery, we can control the level of preparedness of our children. That means laying a strong foundation in childhood, and particularly driving home money management skills for teens.

Some schools have added financial literacy to their education programs, but parents have been proven to have the greater influence.

To begin, consider putting your teen on a monthly budget. Rather than just handing your teen $20 as they're heading out with their friends on a Saturday, limit the amount you give them each month and consider requiring that money be in exchange for completing a certain task or set of tasks regularly.

You can also underscore the importance of saving by providing incentive to save. Automatically transfer 10 percent of any gift or money they receive into a savings account. For any additional amount they choose to save, you can offer to match those funds.

If your teen already has a job, he or she may be ready for a checking account with a debit card. Make sure you have a talk with them about racking up overdraft fees and other expenses if they fail to be responsible with it. You may teach them how to connect their savings account to their checking to cover overdrafts just in case.

Assign budgeting homework. For example, if you are trying to figure out which new cell phone plan to take on or planning some kind of a trip, bring your teen into the fold by asking him or her to do the research for you. This will underscore the value of operating on a budget - and may even give them a better appreciation of why you say no when you do.

You may also want to teach them the value and the art of of "vintage" and "thrift." Learning to be frugal is a skill they will carry with them throughout their lives.

Continue reading "College Grad Bankruptcy Filings Spike, Teach Teens Early " »

Working to rid yourself of credit card debt is a smart move that can lead to better credit and greater financial stability and freedom.

Our Los Angeles bankruptcy lawyers believe if you are in a position to comfortably pay down your debt, you should do it.

But the big key word here is "If."

One common mistake that too many of our clients make is approaching credit card debt the wrong way, believing that it must be paid down at the cost of your retirement savings or by taking out another high-risk loan.

It's easy to understand why people reach these conclusions, given the pressure applied by card companies and collection agencies for overdue balances. It's their job to create a sense of urgency about their money, and make it seem as if it should be your top priority.

It's not. And many people end up falling into this trap of thinking they have to do everything in their power by whatever means necessary to pay off that debt in its entirely. In the end, they may end up not only unable to pay off that debt, but suddenly in even deeper financial trouble for having squandered their nest egg.

Understanding how you should approach debt means also understanding how you shouldn't.

First of all, reaching into your retirement savings should be No. 1 on your "Do Not" list. This involves taking out a 401(k) loan, which in the end will have you losing out on loads of interest you could be earning. And the second is to simply withdraw funds from your retirement account. Right off the bat, you're looking at a 10 percent penalty, an amount that is likely to be more than the interest on your card. Not only that, but you will then have to pay taxes on that money as if it were income.

Secondly, you want to avoid using a home equity line of credit. Although lower interest rates might make this seem like a wise move, the fact is, you're still paying for debt with different debt. This will generally kick off a pretty vicious cycle.

The same principal applies to payday loans. These are short-term, high interest loans that will give you an advance on your paycheck. The reality is, by the time you cover the cost of the loan's interest rate and fees, you're going to end up paying even more than you would have had you simply paid on the card directly.

If you have multiple credit cards, what you don't want to do is approach your payments without a plan. Paying just the minimum on all your cards is never going to get you out of debt. But it might be worth it to pay your lower-interest debts at the minimum rate while tackling hard those high-interest payments. Evaluate your priorities every few months.

Too often, we see clients who worked incredibly hard to try to pay off their balances, only to be unsuccessful and lose out on money and assets they may otherwise have been able to keep had they explored bankruptcy as an option much sooner.

It's not a given that bankruptcy will be the right answer for you, but we can help you decide upon the best course of action.

Continue reading "L.A. Bankruptcy Lawyers: Be Wise About Credit Card Debt Reduction" »

One would think it counterintuitive to target people with no jobs for higher fees.

And yet, our Los Angeles chapter 7 bankruptcy attorneys understand that this is exactly what's happening in at least 10 states in this country, including California.

According to a recent report by the National Consumer Law Center, nearly 4.5 million Americans are receiving unemployment benefits. The problem is that a large portion of those benefits are lining the pockets of big banks because of the massive "junk" fees that are associated with the prepaid cards that are used to disseminate the money.

Adding insult to injury, the exorbitant fees that financial institutions collect for this "service" aren't even required to be funneled into boosting their own employment rolls. Instead, it goes right to the bank's bottom line.

Prepaid debit cards are currently the top vehicle with which to distribute unemployment benefits. Some states are a bit stricter than others, but many seem to take no issue whatsoever in allowing banks to load on those "junk" fees.

California, which does have some stringent laws with regard to keeping those fees at bay, still lost nearly $2 million last year on state-issued, pre-paid debit cards. That's $2 million that didn't go to Californians who were struggling to pay for basic necessities like food, rent and gasoline. That's $2 million Bank of America certainly could have done without.

In some places, it's even worse. For example, in Alaska, JPMorgan Chase charges an unemployed beneficiary $5 each time that individual speaks to a teller. That individual is charged another $1.50 each time he or she makes a withdrawal more than once a week. If he or she calls an automated customer service line, there will be a 35 cent charge. Want to simply check your balance to make sure you're not overdrafting? That will be 40 cents.

In Minnesota, U.S. Bank rakes in $3 for any customers service line call after the first in a month-long period.

In Iowa, if your transaction is denied due to insufficient funds, Wells Fargo charges the unemployed beneficiary an additional 50 cents.

In Ohio, where U.S. Bank is contracted to provide the prepaid benefit cards, there is no charge to use an ATM. The problem is that 16 of Ohio's 88 counties don't have a U.S. Bank. Some of those include areas with some of the highest unemployment rates in the country, at between 12.6 and 15 percent.

Granted, these are not large sums, but they add up and this kind of nickel-and-diming is something our unemployed workers can scarcely afford.

What's more, federal law requires that recipients be offered a choice of how they want to receive their unemployment benefits. Options would include a check, a direct deposit or a debit card. But there are five states - including California - that are seemingly breaking the law in this regard by only offering the prepaid debit card options - which is where so many of those junk fees are hidden.

Certainly, banks have operating costs, but the current system is entirely unfair, and our L.A. bankruptcy lawyers hope lawmakers will take note and demand better of these financial institutions.

In the meantime, if you are unemployed and struggling with debt, call us today to learn more about how bankruptcy may be able to help you get back on your feet.

Continue reading "California Unemployed Gouged by Banks, Many Seek Relief in Bankruptcy" »