Money Law Blog

April 3, 2015

What’s Worse Than a BAD Credit History? NO CREDIT HISTORY AT ALL!

It may not be a well-know fact, but the truth is a lot of financially-responsible people are turned down for loans because they have NO history of recent borrowing. None.

This may be because the person saves up and pays for purchases without financing, or because they have not bothered to start building a new credit history by borrowing (and showing on-time payments) after a major financial event such as a bankruptcy or foreclosure.

After a bankruptcy discharge, a debtor needs to make sure that, after his or her case closes, there is a new credit history being reported with either new lines of credit that are opened, or old lines that were maintained and still being used.

Many of these individuals are credit-worthy but the current credit reporting and scoring system is not set up to evaluate this.

March 4, 2015

If You Have a Mortgage With Chase and Were in Bankruptcy, You May Be Getting a “Break” from Them Soon

By Edward Gonzalez, Esq.

Admitting it was a “bad boy” handling mortgages in bankruptcy, Chase recently entered a settlement with the federal government to compensate more than 25,000 US homeowners. The settlement is subject to court approval.

The United States Trustee Program, a unit of the Department of Justice whose attorneys at the bankruptcy court oversee the integrity of the system, announced on March 3 it had reached an agreement with Chase forcing it to pay homeowners $50 million in cash, mortgage loan credits and loan forgiveness for “robo-signing” and other improper practices before the bankruptcy court. Chase also agreed to change internal operations and submit to the oversight of an independent compliance reviewer.

Chase admitted it submitted more than 50,000 mortgage “payment change notices” that were signed by persons who had no knowledge of the accuracy of the notices they signed:

More than 25,000 of the notices were signed by employees or former employees who had nothing to do with reviewing the accuracy of the notices.
The rest of the notices were signed by employees of third party vendors who also were not involved in verifying the accuracy.

Chase also admitted it failed to file the notices in a timely fashion, as well as failing to provide timely escrow statements to homeowners in bankruptcy.

January 20, 2015

Avoid Scams: IRS does NOT contact taxpayers by email!

By Edward Gonzalez, Esq.

It’s tax season and the scam artists are also out in force. Even our law office — which specializes in tax matters — recently got an email asking us to pay a phony tax bill!

There are a number of scams out there with criminals pretending to be IRS agents and contacting persons by email and telephone trying to get them to pay up a phony tax debt.

The single most effective rule to remember is this: IRS does not make initial contact with taxpayers by email. If there is a tax problem, you will be notified by mail. Period.

Below is a press release from IRS warning taxpayers about telephone scams that are also common.

IRS Reiterates Warning of Pervasive Telephone Scam

R-2014-53, April 14, 2014
WASHINGTON — As the 2014 filing season nears an end, the Internal Revenue Service today issued another strong warning for consumers to guard against sophisticated and aggressive phone scams targeting taxpayers, including recent immigrants, as reported incidents of this crime continue to rise nationwide. These scams won’t likely end with the filing season so the IRS urges everyone to remain on guard.

The IRS will always send taxpayers a written notification of any tax due via the U.S. mail. The IRS never asks for credit card, debit card or prepaid card information over the telephone. For more information or to report a scam, go to www.irs.gov and type “scam” in the search box.

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December 10, 2014

Five Holiday Deal “Gotcha’s”

By Edward Gonzalez, Esq.

Here are common holiday “deals” that look good on the surface — but are financial time bombs waiting to go off. Thanks to USAA financial services for bringing them to my attention. I share them with you:

1) “90-days same as cash.” Don’t pay it in time and you could be hit with accumulated finance charges and double-digit interest rates. Now it’s no longer such a good deal.

2) “5 years interest free.” Don’t believe it. They cannot stay in business if they don’t put interest somewhere in the charge to pay for their own loans. The charge is probably hidden in the price. Or maybe enough borrowers fail to meet the terms and get hit with suspended accumulated interest to make the business practice a money-maker.

3) “Skip a payment.” There’s no free lunch (if I may coin a phrase). The interest may be folded into principal increasing the cost of your financing. They are not doing you favors.

4) “20% discount for opening a store credit card.” Credit scores also take into account the amount of credit lines you have, as well as the frequency and recency of credit applications. You may be dinging your credit to save a few dollars. By the way, for many companies, the real money is in the financing, NOT the goods they selling. I remember the harangue I got from a dealer once for buying a car with cash and another time from a Dell salesman when I bought a set of office computers. That was instructive. (Undoubtedly the sales persons got bonuses for financed purchases.)

October 23, 2014

How to Pay for Your Bankruptcy Case

By Edward Gonzalez, Esq.

One of the most frequent questions I get is: “How am I going to pay the attorney’s fees and costs for a bankruptcy?”

Yes, we know you’re seemingly strapped, but you actually have more resources than you realize.

Here are some:

1) Stop paying on the debt you are going to discharge anyway. In bankruptcy, almost all debts are dischargeable (wiped out). (There are a few, such as governmental fines, recent taxes, etc., but your bankruptcy attorney will identify them and discuss them with you.) The majority, such as credit cards, unsecured lines of credit, judgments, will be gone. Stop paying immediately and save up that money to finance your case. These are professional lenders, they understand.

And, by the way, once you hire an lawyer, you can stop the collector calls by simply telling them you have hired a bankruptcy attorney to prepare a case. Give them the name of your attorney, because they will call to confirm, and the calls will stop.

Professional lenders know they will be violating a court order by calling once you have filed, and since they don’t know when you will file, as a matter of company policy, they usually stop the calls altogether. Whew.

2) Get a “loan” from your secured lenders. If you have a mortgage on a house you want to keep, you may actually be doing the mortgage lender a favor by skipping a couple payments to pay for your case. If your goal is to save your home, you will probably be filing a Chapter 13 bankruptcy to catch up on your back payments — “cure the default” — and make your regular payments going forward.

Believe me, the bank does NOT really want to take your home. They are not in the real estate business. They are in the lending business. They want you to pay the mortgage and pay the arrears — that’s where they make money. If you skip a couple payments to get the money to set up a payment plan to pay them in Chapter 13, as well as freeing up more money by wiping out your other “junk” debt, such as credit cards, as a business matter, they won’t mind. You’re going to pay back the missed payments in the plan anyway.

July 25, 2014

When Qualifying for a Loan: It’s Not Your Credit Score that Matters — It’s How Much Debt You’re Carrying

By Edward Gonzalez, Esq.

Probably the most frequent question I get from prospective clients is: “Will bankruptcy hurt my credit score?”

It’s a fair question, but I usually find it a little amusing. It’s a bit like the man who’s drowning worrying about how he’s dressed.

For most people, by the time they see a bankruptcy attorney the financial problem is extreme — the garnishment has begun, the foreclosure is imminent, the summons has arrived setting a court date, or the collector calls are now coming every hour. And, of course, at this stage, the person’s credit score is in the tank. It cannot get worse.

By clearing away debt, I explain, they will improve themselves to get a loan.

A recent survey of credit-risk managers at lenders by credit-score giant FICO, reported in the Washington Post, confirms what I have been saying all along: When it comes to qualifying for a loan, it’s the amount of debt you are carrying, not your credit score that matters most.

“Researchers asked a representative sample of them what single factor makes them most hesitant to fund a loan request — in other words, what’s most likely to prompt them to say no.

Tops on the list? Surprise, it’s not your credit scores. And it’s not how much you’ve got for a down payment or what you have in the bank. It’s your DTI — your debt-to-income ratio. Nearly 60 percent of risk managers in the FICO study rated excessive DTIs as their No. 1 concern factor. . . “

Again, I repeat, for 60% of bankers it’s the amount of debt the credit applicant is carrying that is the disqualifier, not the credit score!

June 17, 2014

It’s Still Not Easy, But IRS May Be Moving Toward Granting More Back Tax Relief

By Edward Gonzalez, Esq.

There may be some good news for taxpayers with problems since IRS loosened up the rules for relief in 2012, according to recently-released reports by the agency.

The IRS changes for granting tax relief recognize the downturn in the economy.

From 2012 to 2013 the number of so-called “offers in compromise” (proposed agreements by taxpayers to IRS to discount back taxes) increased from 64,000 to 74,000. And, more importantly, the number of offers accepted jumped from 24,000 to 31,000 — a 29% increase.

Likewise, the IRS seems to be moderating its forced collection efforts. IRS levies on bank accounts and paychecks dropped from 2,961,162 to 1,855,095 — a 37% decrease. And the number of seizures dropped from 733,000 to 547,000, which amounts to 25% fewer seizures of property.

Says Morgan King, a California attorney and tax relief expert: “Clearly, the new policies are making it feasible for more honest but delinquent taxpayers to wipe the slate clean, become compliant with the tax laws, and get a fresh start.”

February 12, 2014

Beware: Tax Preparer Mistakes Costs Consumers Big-Time

By Edward Gonzalez, Esq.

It happens almost every week. Somebody comes into our office with a serious tax problem — caused by a shoddy tax preparer, either through incompetence, negligence or sometimes downright fraud.

It boggles my mind that there is no regulation of tax preparers. I thought I was the only one who had noticed this problem. But no.

The National Consumer Law Center, a consumer watch-dog group, has recently issued a very good report on this. Following is from the press release announcing the report:

(BOSTON) One of the most surprising aspects about paying taxes in the United States isn’t about marginal rates, deductions, or loopholes – it’s the lack of regulation for most tax preparers.

Each year, tens of millions of consumers rely upon paid tax preparers to help them file accurate and compliant tax returns, yet the majority of these preparers are not subject to any minimum educational, training,competency, or other standards.

A new report from the National Consumer Law Center (NCLC) documents how a lack of regulation has allowed incompetence and abuses by tax preparers to flourish.

“All 50 states regulate hairdressers, but only three regulate tax preparers,” stated Chi Chi Wu, staff attorney at the National Consumer Law Center (NCLC) and author of the report. “Yet an inaccurate tax return can cause a lot more harm than a bad haircut.”

January 25, 2014

Getting Sued? Here’s One Very Easy Way to Defend.

By Edward Gonzalez, Esq.

A layperson is often at a disadvantage when defending against a debt collection suit filed by an attorney. The debtor as a defendant does not know the “rules of the game” and sometimes takes the advice or direction of court staff (who by the way should not be giving legal advice but often do.)

Talking to clients who have appeared to defend in small claim collection suits in this area (Northern Virginia, suburban Maryland and DC), I am surprised that many will meekly follow court staff instructions to come back to court on another date — when the collector’s attorney fails to show up or is late! This failing is a perfect opportunity to have the case thrown out!

You have a right to ask the court to proceed on the case. Tell the clerk that you are present and ready for the case to be called. When the case is called, proceed to the podium and ask the court to have the case “dismissed with prejudice.” That very important qualifier — “with prejudice” — means that you are asking the court to dismiss forever.

July 3, 2013

How Do You Know If You Could Be Sued by Your Mortgage Lender on a “Deficiency” After Foreclosure (or Short Sale)

By Edward Gonzalez, Esq.

A blog post here last month discussed the growing wave of lawsuits by lenders for the balance of mortgage loans left over from foreclosures (and in some cases short sales), known legally as lawsuits for the recovery of “deficiencies.”

As discussed, in most foreclosures the lender bids only a part of his loan to win the collateral (the house) at the auction. In most jurisdictions, including Virginia, Maryland and the District of Columbia, the balance will still be owing and the lender has a right to sue the signer of the mortgage for that balance, and many are beginning to do just that.

So you had a foreclosure on your house a few years ago. How do you know if there is still a balance owing and whether you may be facing a lawsuit? The bad news is, unless the value of the house was more than the loan, you are probably owing something, since lenders will only bid a part of the loan, especially if the house is devalued, and that is the case for houses bought during the peak of the market, around 2007, before the crash.