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September 20th, 2017

Equifax Data Breach and You

By now, everyone knows that Equifax, the largest repository of credit information, suffered a major data breach over the summer. The result is approximately one-half of all Americans’ personal data will be available for scammers on the Internet. The risk is that a scammer, with your date of birth, social security number and other personal data, can use your identity to set up credit accounts and leave you holding the bag facing claims for payment and damaged credit.

 

The best way to protect yourself is to obtain a CREDIT FREEZE. Once in place, only you, your current creditors and collectors can access your credit information. New applications will be unavailable since the credit grantor can’t verify your credit information.

 

A credit freeze must be applied for to each of the big three credit agencies, Equifax, Experian and TransUnion. The best way to obtain the freeze if by calling them directly, the phone numbers are:

Equifax 800-349-9960, Experian 888-397-3742 and Trans Union 888-909-8872

 

The freeze prevents new creditors from getting any information, so you won’t be able to get a new credit card, rent an apartment or buy/lease a car while in effect. The work-around is to ask the creditor which agency they use, and call it to temporarily lift the freeze. A small fee of $5 or $10 for each freeze-lift is charged.

 

I would appreciate any feedback regarding your experiences with the Equifax debacle.

 

August 7th, 2017

Should I file My Own Bankruptcy Case?

Many folks are not aware that persons seeking bankruptcy protection are not required to be represented by a lawyer. However, this comes with a caveat, in a recent study prepared by the American Bankruptcy Institute the success rate for Chapter 13 cases (meaning completion of a confirmed plan) overall is 41.5% for filers with an attorney but only 2.3% without. That’s almost a 20 times improvement. See Ed Flynn, Success Rates in Chapter 13, American Bankruptcy Institute Journal, August, 2015, p. 38.

May 24th, 2017

What does 1099-C mean to me? Homeowners May Face Large Tax Bills

Not many consumers know that the IRS treats forgiveness of debt as income. That means that a borrower whose lender “forgives” the debt – completely waives the debt or accepts less than the full amount, is taxed on the savings, and reported to the IRS on Form 1099-C. This occurs with mortgages as well as other debts, except that the amounts involved are larger. While commonly seen with credit cards for many years, in 2017 homeowners will now feel the sting.

The forgiveness of debt rule applies to mortgages as well. So, if a mortgage holder forgives part of the debt, either by principal reduction, short sale or foreclosure, the owner gets the 1099-C for the lender’s loss. An example, in foreclosure, a $400,000 mortgage sold at auction with a fair market credit of $250,000, leaves the homeowner with $150,000 in income to be taxed at his/her top rate for federal and NJ income tax, which is frequently over 33%, resulting in a $50,000 tax. And the homeowner has lost the home.

The Mortgage Debt Relief Act granted relief from 1099-C income for the home for the years up to 2016, but it expired on January 1, 2017, so folks will be expected to pay up the taxes on the lender’s losses.

The best protection against this is by having the forgiveness to occur through a Bankruptcy, which is exempt from taxation, both for the home and any other forgiveness (credit cards, etc). Anyone facing the situation where lender will either grant relief or foreclose are well advised to talk to a their tax advisor and a competent bankruptcy lawyer about their particular situation.

May 15th, 2017

Student Loan Traps for Parents and Grandparents Or, Why Co-Signing Student Loans May Be Hazardous

Who doesn’t want to see their children or grandchildren further their education? While this sentiment is laudable, new statistics by the federal Consumer Financial Protection Board (CFPB), set up in the Obama administration, point out the potential for catastrophic outcome.

 

Student loans were made virtually impossible to shed by revisions in the Bankruptcy Code in the early 2000’s. Increasingly, student loans entrap not only the young person but also the parents or grandparents.

 

The CFPB reports that between 2005 to 2015, the number of persons age 60 or older with student loan liabilities increased more than 400% from 700,000 to 2,800,000. During the same period, the average outstanding balance increased from $12,000 to $23,000.

 

Some 40 percent of the federal student loan borrowers over 65 are in default. If the loans are not paid, the lender can seize tax refunds, wage garnishment, and, in the case of federal loans, take a part of the recipient’s Social Security.

 

Improper loan servicing may contribute to the high default rate. Collectors may not tell the borrower of the right to “cure” the default by “rehabilitating” the loan, by making a series of on-time, income-driven payments to the collector. Once the loan is “cured”, the loan goes back to the loan servicer and may be eligible for income contingent repayment (ICR) that limits monthly payments to a fraction of disposable income and forgives the principal in the future.

 

Litigation is pending between the CFPB, State attorneys general against Navient, the largest student loan servicer with claims that it hid available affordable repayment options.

 

Certainly, parents and grandparents should seriously consider long and hard before co-signing for student loans.

October 24th, 2016

Did You Know? Bankruptcy Fact of the Week #6

Did you know that the last five digits of your drivers license number is your month and year of birth and eye color?

October 17th, 2016

Did You Know? Bankruptcy Fact of the Week #5

Did you know that most credit card issuers will cut you off if you open more than 5 cards in a 24 month period?

October 10th, 2016

Did You Know? Bankruptcy Fact of the Week #4

Did you know that applying for multiple cards lowers your credit score in the short term?

October 3rd, 2016

Did You Know? Bankruptcy Fact of the Week #3

Did you know that a credit card holder’s liability for unauthorized use is limited to $50.

September 26th, 2016

Did You Know? Bankruptcy Fact of the Week #2

DId you know that the first number of our credit card account identifies the type of institution that issued the card?

September 20th, 2016

Did You Know? Bankruptcy Fact of the Week #1

Did you know that the highest percentage of credit card companies’ income comes from the monthly interest by those that carry balances, more than fees, merchant charges, and data sales?