About Me
“ Craig D. Robins, Esq., has been a practicing Long Island bankruptcy attorney for over twenty-four years ”
Consumer Advice
Getting Credit After Bankruptcy in 2011
Posted on
Written by Craig D. Robins, Esq.Re-establishing credit after filing bankruptcy is one of the most common questions my clients ask me.
That led to me write a rather detailed article about three years ago: Life After Bankruptcy: Getting Credit Has Become Too Easy . When I wrote that post, most of my bankruptcy clients were solicited for new credit cards just weeks after their cases were concluded.
Bouncing Back From Bankruptcy
Most of the concepts that I discussed in that article remain true today and I urge anyone concerned about this to read it: Life After Bankruptcy: Getting Credit Has Become Too Easy .
About a year after I posted it, our current recession started and the credit market tightened up. This made it somewhat more difficult for those emerging from bankruptcy to obtain new credit card accounts. However, credit cards are back in vogue for both issuers and consumers.
Banks are now eager to seek out new customers and open new accounts as they have retooled their business models to meet relatively new federal regulations that control the entire credit card industry.
Last year credit card solicitations doubled to about 2.75 billion. Financial experts predict that there will be a double-digit increase again this year. This is good news for those considering filing for bankruptcy who are eager to obtain new credit later on. Consumers emerging from bankruptcy are once again seeing their mailboxes flooded with credit card offers according to recent news reports.
Generally, consumers who emerge from bankruptcy are considered sub-prime borrowers, which is the category that includes those with blemished credit. These consumers can often get credit, but will end up paying a higher rate of interest and will likely have a lower credit limit.
The most important aspect of bankruptcy and credit is that the negative weight caused by bankruptcy diminishes over time. The sooner a debtor re-establishes credit with one account, and demonstrates responsibility with that account, the sooner the next account can be opened up, and so on.
The Path to Good Credit After BankruptcyThe first step is to apply for a gas card or small store card — both of which typically come with a small debt limit. It is extremely important to make regular and timely payments. It is also important to use the card, even if it means just charging relatively small amounts. This shows that you can again handle credit responsibly.
Then, after a few months, apply for a sub-prime card. These are regular Visa or Mastercard accounts offered by banks that cater to those with bad credit. The interest rate will be high, there may be a annual account fee, and the credit limit will be low. However, having a card with less than favorable conditions is temporary. Use the card, but try to pay off all balances in a relatively short period or right away.
Perhaps six to twelve months later, after having used and timely paid for purchases on these cards, apply for a more conventional card with better terms.
For More Info About Getting Credit After Bankruptcy
Please see my prior post: Life After Bankruptcy: Getting Credit Has Become Too Easy .
I urge my bankruptcy clients to go to any big-box bookstore and look at the dozen or so books they will have on re-establishing credit. For an investment of ten to fifteen dollars, you can’t go wrong.
Written by Craig D. Robins, Esq.With so many consumers hurting from the economy, they are often tempted to run to their retirement funds first, as soon as the money runs out, so that they can pay the mortgage or their credit card bills. However, this is often a major mistake.
Fidelity Investments, the powerhouse mutual fund company, recently reported that 11% of its active 401-K plan participants borrowed or withdrew funds from their retirement accounts during a recent twelve-month period. This is up nine percent from a year ago, and represents a ten-year high. Also, the amounts withdrawn are almost triple what they were last year.
The biggest reason consumers give for tapping into their retirement accounts is job loss and reduction of income. However, many consumers are spread very thin financially and simply do not have sufficient funds to make ends meet. It is thus quite tempting to dip into the retirement accounts.
Why Using Retirement Funds to Pay Credit Card Debt Can Be a Major Mistake
First, you lose a lot of the value of what you are taking out. This is because there is a 10 percent IRS tax penalty and also because the funds are taxed as ordinary income.
But here is how you can protect your retirement accounts. Many individuals can discharge and eliminate credit card debt by filing for Chapter 7 bankruptcy. If you can do this, you do not need to waste your precious retirement funds. Some people feel opposed to filing for bankruptcy relief but this can often be the best option to preserve your retirement nest egg.
Instead of writing off bankruptcy as on option, you should consider meeting with an experienced Long Island bankruptcy attorney who can discuss exactly how a bankruptcy filing could benefit you and help you safeguard the retirement funds.
Generally all retirement funds are exempt and protected by federal statutes such as ERISA or state statutes that permit consumers to exempt retirement funds even though they eliminate their debts in bankruptcy.
Written by Craig D. Robins, Esq.
So many consumers have complained about debt settlement companies that the federal government has finally taken some action.
Yesterday, the Federal Trade Commission announced a new restriction on debt settlement companies which is designed to address the growing nationwide problem of so-called debt relief companies making outlandish promises of success, but ultimately failing to do anything.
Up-Front Fees Charged by Debt Settlement Companies to be Prohibited
The new rules, which will take effect in the fall, will prevent debt settlement companies from charging any up-front fees before they settle or reduce a customer’s credit card debt.
I have reported previously that I regularly meet with clients who were promised the moon by debt settlement companies; yet these companies ripped them off after charging large up-front fees, failing to achieve settlements, and leaving the consumers in a worse position than they were to begin with. I ultimately end up filing a bankruptcy proceeding for many of these clients. See: Debt-Settlement Firms Misled Consumers According to FTC .
There Has Been Rampant Abuse by Debt Settlement Companies Across the Country
According to an article in today’s New York Times, attorneys general in more than 20 states have brought enforcement actions against debt-relief companies in the past six years. The FTC has also received one of the highest amount of complaints for debt relief companies than any other type of business. The number of consumer complaints has doubled in the past two years.
Unfortunately, the new rules will not protect everyone, and some loopholes leave many consumers open to abuse. The new rules only cover agreements with debt settlement companies made over the phone. They do not cover agreements made on line or through face-to-face meetings.
Written by Craig D. Robins, Esq.The consumer public can be very gullible. Long Island brokerage firm David Lerner Associates — exceptionally well known in the New York metro area for saturating the radio airwaves with advertising spots for its services — was just charged with ripping off consumers by charging excessive fees.
The Financial Industry Regulatory Authority (FINRA) has accused the Lerner firm of charging excessive markups on normally-safe municipal bonds and high-grade mortgage backed securities.
Consumers Fell for David “Poppy” Lerner — Coming Across as a Wise and Trustworthy Father Figure
I remember hearing ads for Lerner’s financial services business on the radio for almost 20 years. His ubiquitous spots seem to run nonstop night and day.In the past decade, Lerner came up with a family-friendly advertising campaign in which he calls himself “Poppy”, referring to the grandfatherly nickname his grandkids call him.
His radio spots created the impression that he was a fatherly figure, out to protect the retired consumer by selling them safe investments.
He also featured numerous spots from alleged customers providing testimonials, praising and thanking him. New Yorkers have heard, “Take a tip from Poppy” a million times.
As it turned out, he generated so much trust that well over a thousand consumers, who I suspect are mostly senior citizens investing their retirement savings, were lulled into, what appears to be, a false sense of security, believing Lerner would treat them well and charge them reasonable fees.
However, Lerner totally ripped off these consumers by unreasonably jacking up the prices that his Long Island financial services business charged, according to the FINRA complaint.
FINRA is now seeking to obtain full restitution for the consumers and a stiff fine against David Lerner Associates and his top-level broker, William Mason.
Incidentally, this is not the first time Lerner has been in trouble. He paid a hefty fine to NASD several years ago.
Many Consumers in Financial Difficulty are Just as Susceptible to Those Taken Advantage of by Lerner
Just last night I met with a very nice couple that consulted me for a bankruptcy filing. They, too, were taken advantage of by smooth-talking radio spokesmen.
They fell for an out-of-state debt settlement program that ripped them off for thousands of dollars while promising them the moon. The couple came to me after just being served with a collection law suit.
Every day I hear convincing radio spots and see slickly-produced television commercials touting debt settlement services. Many of these companies pour big bucks into the commercial production and use quality actors. The commercials boast (unrealistic) promises of curing debt problems.
Many of these spots claim that the debt settlement company is part of some federal debt settlement program, when there is no such thing. Yet, an incredible number of consumers are falling for this.
Two weeks ago I discussed the problems created by debt settlement companies who heavily advertise on radio and TV, making false promises: Debt-Settlement Firms Misled Consumers According to FTC .
Consumers need to become more aware that slick advertising does not make a company reliable. New York Commences Nationwide Investigation Into Debt Settlement Industry — Many Offers to Eliminate Credit Card Debt are False and Misleading.
The bottom line is that consumers need to be much more vigilant. Just because a radio or TV spokesperson appears trustworthy, does not mean that they are.
By Craig D. Robins, Esq.For several years I have volunteered for the mortgage foreclosure clinics put on by the Nassau County Bar Association.
Tonight, Gale Berg, Director of Pro Bono Activities for the Bar Association, will be discussing the Foreclosure Clinic Program on “Long Island Talks” tonight on News 12, between 7:00 and 7:30 p.m.
Pictured above right is our associate, Jason S. Leibowitz, Esq., who recently volunteered at one of the Clinic’s events in which he provided free foreclosure advice to Nassau County homeowners.
Getting Credit After Bankruptcy
Posted on
Written by Craig D. Robins, Esq.How easy is it to get credit after filing for bankruptcy? This is a question that clients ask me every day. It’s on almost every client’s mind who is considering filing for bankruptcy.
About three years ago I wrote an article that was published in the Suffolk Lawyer entitled, Life After Bankruptcy: Getting Credit Has Become Too Easy . At the time I discussed how my bankruptcy clients were inundated with credit card offers and solicitations to open new credit card accounts, and that they received a flood of these offers immediately after emerging from bankruptcy.
I haven’t addressed this topic in a while. Over the past few years, as a result of an economic change to recessionary times, such offers have not flowed as much — but times may be changing.
The Tightening of the Credit Market Has Affected Everyone’s Ability to Get Credit
Just over two years ago when the we saw a mortgage meltdown, and banking institutions started to run into trouble, the credit market tightened. This had an impact on almost everyone. Banks became very reluctant to extend credit except to those in the highest echelons of good credit.
As a result, many individuals were no longer able to obtain credit and actually had to file for Chapte 7 bankruptcy as a result.
Up until this tumultuous economic time, credit card companies and banks extended credit cards to everyone like they were going out of style (and in fact, they were, for a period of time). Lenders flooded the mailboxes of consumers who had filed for Chapter 7 bankruptcy and Chapter 13 bankruptcy, almost immediately after they received their bankruptcy discharges.
I used to regularly hear from my clients that they were amazed to receive offers for new credit cards just weeks after their bankruptcy cases were finished. However, the tighter credit market changed that for everyone — at least until recently.
Banks Increasing Credit Card Offers Again
According to a recent report by Synovate Inc., a company that provides market data research and monitors credit card solicitations, there was a 29% increase in credit card solicitations over last year’s levels.
Last year apparently produced a recession that was the worst we’ve seen in years, and as a result, credit card issuers pulled back dramatically on offers. As a result, annual mail volume of credit card offers dropped to its lowest levels since 1993.
Now, however, banking institutions believe the economy is strengthening, and they are renewing their efforts to again flood the mail boxes of consumers with offers of new credit card accounts.
One major bank, HSBC, actually considered leaving the credit card industry entirely last year. However, just tripled the number of credit card offers that they mail consumers.
Another bank, Capital One, had pulled out of the sub-prime market last year. However, they recently announced their intention to re-enter it. They, too, have started flooding mail boxes again.
Reasons Why Banks Are Upping Credit Card Solicitations
– Legislation which placed stricter rules on interest rates and fees took effect in February. Initially, banks were reluctant to extend additional credit after these new laws went effect. However, the banks have worked out the kinks. (You will note that as a result of the credit CARD Act, all Credit card statements now have additional disclosures).
– Banks lost a great deal of money last year. Now that they have written off substantial losses, their account balances have stabilized, and they are in a better position to extend new credit.
– It appears that the economy is rebounding and consumer spending is increasing again. With such signs of economic recovery, banks can look forward to better times again and go back to soliciting new customers.
What Else Should Debtors Know About Reestablishing Credit After Bankruptcy?
Most of the matters that I discussed in my older article still apply. Please see: Life After Bankruptcy: Getting Credit Has Become Too Easy .
Remember: Nothing is Forever
Although a bankruptcy filing is certainly a negative factor that creditors will consider in deciding whether to extend credit, this fact becomes less and less important over time.
Even though a bankruptcy can remain on one’s credit report for up to 10 years, its effect diminishes on a regular basis each month that goes by after the bankruptcy cases is closed.
Get a Secured Credit Card
It’s a generally accepted fact that a consumer needs two types of credit to quickly rebuild a credit score. One is installment credit, which includes auto loans or leases, student loans, and mortgages.
The other is revolving credit, which includes credit cards and home equity lines of credit.
Since someone emerging from a recent bankruptcy may have a tougher time qualifying for a regular credit card, the best solution may be to obtain a “secured” credit card, which is one in which you place a deposit with the bank, and then get a line of credit for that amount, typically about $500.
Get a Book on Rebuilding Credit
Any big box book store like Borders or Barnes and Noble will have a whole shelf of books on how to rebuild credit. Go there, take your time looking at the books, and then buy the one that looks best.
For about ten to fifteen bucks, it will be a great investment. You can also look at Amazon.com. In a future blog post, I will review some of the credit repair books.
Written by Craig D. Robins, Esq.It’s hard to believe the number of radio ads and TV commercials hawking debt settlement services. Many of them falsely create the impression that the debt settlement services are part of a federal program.
Now the Government Accountability Office and the Federal Trade Commission have concluded that the great majority of debt settlement firms have misled consumers. The report was issued last week and it was extremely critical of the debt settlement trade.
The government reports indicated that many of these firms made false and misleading claims that they were affiliated with federal stimulus programs. They also exaggerated their ability to obtain settlements.
Debt Settlement Companies Are Becoming a National Problem
In the past five years, the number of debt settlement companies across the country has ballooned to over a thousand. I’ve written extensively about the problems with debt settlement companies during the past year.
See: Debt Settlement Industry Criticized by New York Times , in which the New York Times stated, The common complaint is that debt settlement companies are more interested in helping themselves earn fees than aiding their beleaguered clients.”
The GAO study also concluded that debt settlement companies lied about their success rates. Apparently, many companies falsely represented that their success rates were 85 to 100 percent. However, the FTC concluded that the rate is less than 10 percent.
The report also pointed out how debt relief companies rip off consumers by charging hefty up-front fees before they perform any services.
Consumers Who Hire Debt Settlement Companies Often End Up Filing for Bankruptcy
As a Long Island bankruptcy attorney, I regularly see the fall-out when consumers are taken advantage of by debt settlement companies. They come to me when their debt settlement plan fails, which is inevitably after they’ve paid significant funds to the debt settlement company without accomplishing any results.
However, they could have saved a great deal of money had they considered bankruptcy in the first place.
There is a Major Distinction Between Debt Negotiation and Debt Settlement
The services offered by debt settlement companies are very different from debt negotiation services offered by certain law firm such as my own. With debt settlement companies, the consumer makes monthly payments to the company, and the company first applies these payments to their own fees before any settlement is actually made.
Debt settlement companies will often sign up consumers who they know, or should have known, would not be able to complete the program. What’s more, the companies keep the fees even when services are not provided!
Debt negotiation offered by attorneys, however, is much different and involves negotiating settlements with the creditors. The client typically does not pay any advance fees, other than an initial retainer.
Written by Craig D. Robins, Esq.Although debt collection law firms are the fierce and hated adversaries of my Long Island bankruptcy clients, I have gotten to know several collection attorneys fairly well over the years.
Some of them are the same age as I am, and we started practicing at the same time, and were members of the same young attorney groups 25 years ago. My practice happened to take me in the direction of helping consumers, whereas some of my colleagues ended up representing credit card companies.
Although my practice only helps consumers and business owners who have financial problems, I like to hear what it’s like on the other side — from those attorneys who actually pursue my clients before they have the opportunity to file for bankruptcy relief or achieve a negotiated settlement.
A Collection Attorney Colleague Recenty Confided In Me
My clients are always complaining about the unabated and aggressive pressure that bill collectors put on them, so it was interesting to have an informal chat with a collection attorney colleague who I’ve known for years and years. He complained that those law firms who specialize in debt collection in New York are not exactly doing so well these days.
He commented that his firm is facing the horrifying prospect of taking in millions of dollars in collection proceeds, but not making any profit whatsoever.
Here’s Why Bill Collectors and Collection Law Firms Will Have a Tough Time in 2010:
1. Debt Collectors and Collections are Under Greater Scrutiny. It’s no secret that the entire debt collection business has come under great scrutiny during the past year as the result of some unscrupulous debt collection practices. I’ve written extensively about this previously. See:
2. It’s Harder to Collect. My colleague complained that he and his firm were working incredibly hard, yet not making much money. Apparently, the economic pressures that are pushing more and more Long Island families to seek bankruptcy relief also mean that collection firms are having a much more difficult time collecting the amounts that they’ve collected in the past.
3. Lenders and Their Collectors Are Paying the Price for Easy Credit. One of the key reasons for the relatively low rate of collectability is that several years ago, banks and lenders were so loose with their credit policies and underwriting standards that they extended credit to too many consumers who weren’t credit-worthy. That translates into greater difficulty collecting on delinquent accounts.
4. Unemployed Debtors Mean No Funds for Creditors. Many consumers do not have the funds to make any payment simply because they are unemployed. Projections for continued unemployment mean continued difficulty into the new year with trying to collect.
5. Changing Sentiment Against Banks, Bill Collectors and Collection Law Firms. We now have a more consumer-friendly atmosphere in which courts tend to side with the consumer as opposed to the creditor. In addition, there are always new debt collection laws and regulations, and the trend is to make it harder for the debt collector and easier for the consumer.
6. BANKRUPTCY. I saved the best for last. Over a million and a half American consumers will probably file for bankruptcy in 2010, and most of them will be able to totally eliminate all credit card debts. This is how my Long Island bankruptcy law firm and I will be helping many consumers in 2010.
Written by Craig D. Robins, Esq.The two major reasons why people who know they need to file for bankruptcy, but put off doing so, is anxiety about filing, and concern about paying the legal fees.
Some consumers consider filing themselves. However, this can be a major mistake and create additional problems. Here’s why:
In every bankruptcy case, the debtor must appear before a court-appointed trustee. The trustee is not your friend. To the contrary, the essential purpose of the trustee is to investigate the debtor and determine if there are any assets that can be taken for the benefit of creditors. Meeting with an experienced bankruptcy attorney will enable the debtor to have his or her assets reviewed.
What many debtors do not realize is that certain conduct that may have occurred years before filing can have a major impact. For example, giving away assets or transferring an interest in real estate can result in significant litigation in the bankruptcy case. Such matters are regularly reviewed by bankruptcy counsel before a bankruptcy petition is filed. There are many reasons Why Consumer Debtors Can’t Transfer Assets Like a House or Car Before Filing Bankruptcy on Long Island .
The bankruptcy petition is written in plain English, so one would think that it is quite readable. However, a fully-completed petition in a Chapter 7 bankruptcy in New York, when including all of the various forms and schedules, can easily exceed 40 pages. The petition requires preparing numerous schedules and budgets. Proper information about debts and assets must be listed. Not necessarily an easy task.
Then, there are several dozen questions in a Statement of Financial Affairs that must also be answered. The creditors and their addresses must be listed not only ih a schedule of debts (that is broken into three separate categories) but also in a special format called a Matrix.
When Congress drastically overhauled the Bankruptcy Code in 2005, many new requirements were imposed. Now there is a complex and complicated means test, as well as the requirement for mandatory credit counseling. The Chapter 7 trustee as well as the Office of the U.S. Trustee reviews each and every petition to make sure all of the requirements under the new law are properly met. I reviewed issues under the new bankruptcy laws in several posts. Here’s one: Bankruptcy Judges Convene to Discuss New Bankruptcy Laws on their One Year Anniversary .
In addition, the means test is very tricky. Failure to properly prepare the bankruptcy means test can spell disaster as the United States Trustee can seek to have the bankruptcy case dismissed. The Means Test is Often the Key to a Successful Chapter 7 Bankruptcy Case .
Another important aspect is Determining Household Size for the Means Test . If the bankruptcy court determines that the debtor did not include the proper number of family or household members for the means test calculation, the means test eligibility can change, resulting in an abusive filing situation.
Consumers must also choose which Chapter 0f bankruptcy to file. If a consumer is seeking to stop foreclosure and cure mortgage arrears, A Chapter 7 filing won’t do the trick.
Of course, there are many books that explain how to do the process. They are all several hundred pages long. Yes, any American consumer can file their own bankruptcy petition. However, there are so many traps for the unwary that even attorneys who do not regularly practice bankruptcy often get their clients into hot water.
A good bankruptcy attorney will also prepare the client for the meeting of creditors. For example, How Much Should You Say at the Meeting of Creditors in Bankruptcy Court?
Every trustee I know on Long Island has expressed concern about those consumers who file bankruptcy without an attorney because these consumers often make serious mistakes with the procedure. Many consumers who file on their own get bad advice from a friend or relative. When it Comes to Bankruptcy, Don’t Listen to Uncle Joey .
Self-representation by pro-se debtors in bankruptcy matters can end up being penny-wise, but pound-foolish. This is one of Three Reasons Why a Chapter 7 Bankruptcy Case Can Go Bad .
Written by Craig D. Robins, Esq.
Government considers placing restrictions on loan modification companies
Fraudulent mortgage rescue schemes is reaching an “epidemic.” This is what several federal and state agencies said last week in a joint press conference as they pledged to increase efforts to investigate and crack down on loan modification abuse and companies offering help for homeowners.
Many Americans who have been caught hard by the recession and are scrambling to avoid foreclosure have become easy prey to dishonest mortgage modification companies.
.This is especially prevalent here on Long Island where I regularly meet with clients in my Long Island foreclosure defense and bankruptcy practice. I frequently hear tales of woe from clients who paid thousands of dollars upfront to companies who promised them the moon, but sadly produced absolutely no results.
See my previous post: Can You Trust a Mortgage Modification Company?
Many, many dishonest mortgage modification firms across the country
Now the Federal Trade Commission is considering an outright ban on upfront mortgage modification fees because so many dishonest companies have taken advantage of innocent homeowners.
In addition, the U.S. Treasury, Department of Housing and Urban Development, and Justice Department said they plan to alert financial institutions to emerging mortgage modification schemes, step up enforcement actions and educate consumers.
The FTC also said that when a mortgage modification firm asks for an advance fee, it’s a red flag that the service is bogus.
Another common problem involves the many companies who use deceptive advertising that is designed to trick consumers into thinking that they are participating in a government program.
Meanwhile, the FBI announced that it has over 2,600 mortgage fraud cases open, most of which involve substantial losses of more than $1 million.
Some Long Island homeowners have actually lost their homes because they relied upon mortgage modification companies to save them, but the companies utterly failed to do anything other than take their money.
A statement made by the Governor of Connecticut summed up well the current sentiment at the press conference: “These mortgage rescue scams raise false hopes and then cruelly exploit them, which is why my office is fighting them and welcomes the federal government as a strong ally.”
Free Housing Counselors
Although my office provides bankruptcy and foreclosure defense legal services, we do not do mortgage modifications. For that, we recommend obtaining free help from government-approved housing counselors..
Homeowners can locate free government-approved housing counselors at http://www.makinghomeaffordable.gov or by calling (888) 995-HOPE.