There have been a lot of changes recently to how the credit bureaus calculate our credit score. Many of these changes are designed to help you improve your credit score! Our friends a NerdWallet have a great article with some updates on new products designed to help raise your credit score. You can access the article here.
HAPPY HOLIDAYS FROM MY FAMILY TO YOURS!
I can't think of any better way to summarize it.... IT JUST SUCKS that senior citizens in America are now filing bankruptcy in record numbers. Since the early 90's, the percentage of total bankruptcy filings by consumers over the age of 65 has more than TRIPLED. Less than 30 years ago seniors made up approximately 2% of the total consumer bankruptcy cases filed (Chapters 7 & 13). Today, more than 1 out of 10 cases is filed by a senior citizen.
What happened? Why are so many good people who should be enjoying their "Golden Years" struggling financially? Well, there are a variety of factors at play, but the biggest culprit is easy to identify: soaring health care costs. If you are on a fixed income, such as a pension (if you are lucky) and/or Social Security how do you account for exploding health care costs (not to mention soaring housing and other living expenses)? For many people, the only option is to put those additional and unexpected expenses on credit.
Taking on an additional job or "side hustle" is not always an option for our seniors. While technically illegal, age discrimination is very real and rampant (ask anyone over 55 if you don't believe me); faster and faster changes in technology have made many senior's skill sets obsolete; health challenges are a real obstacle to working and many seniors just can't grind it out anymore. Putting medical bills, medications and every day expenses on the credit cards is a logical step to take when your expenses begin to exceed your fixed income.
The problem is, that solution can only last for so long. Eventually, you hit the wall on your credit limits and/or the payments on the credit cards become too much to handle. Thankfully, there is the social safety net of bankruptcy available to help our seniors when they find themselves in this hole. It still absolutely sucks that so many seniors have to face this scenario when the main culprit is our broken health care system.
While I was doing my research for this blog post, one thought kept popping into my mind: I wonder how many of these seniors filed for bankruptcy when they really didn't need to? Many senior citizens are what I like to call "judgment proof." Basically, creditor are not allowed to touch pension benefits, Social Security or other retirement benefits. These assets are considered "exempt" under the law and protected from creditor actions (levy, garnishment, etc). Seniors also enjoy expanded protection when it comes to equity in their homes and cars. Many seniors are completely protected from their creditors, but just don't know it.
Seniors who find themselves struggling with debt should consult with an attorney who is not only knowledgeable about bankruptcy, but who is also committed to giving them ALL of their options. For some seniors, the best option might just be to NOT file a bankruptcy and put that money to other uses.
For some seniors, telling your creditors to "go pound sand" is a perfectly viable legal strategy.
Happy birthday America! (and my amazing wife!)
I was on the train today heading downtown to go to Court reflecting on the long holiday weekend. The 4th of July is a big deal in our house because my wife shares her birthday with our country. Most of my focus over the holiday is spent celebrating her, but as I was getting back to work this week I took some time to think about what I appreciate about America.
When you hear people talk about America, you often hear the same phrase repeated: "The Land of Opportunity." Whether you agree with that statement or not, it's hard to argue against the fact that America does present a LOT of different opportunities for various people. Now, many of these "opportunities" are bad ideas or simply traps that corporate America tries to wrangle people into. But, there are genuine opportunities in this country that just might work out for someone who puts in a lot of hard work and gets a little lucky. America's promise is an opportunity, but it is not a guarantee of success. That promise of an opportunity is still awesome! I truly believe it exists for many of us. The harsh reality of life though, is that things don't always work out. Stuff happens. Life can be hard... and unfair.
I think that what makes America's promise of an opportunity actually work, is that there are safety nets in place for when things don't go as planned. Businesses fail, economies crash, jobs are lost, people get sick... there are countless ways that things can go wrong and that "opportunity" you were pursuing... it turns into a nightmare. Without some form of a safety net there to catch you when you fall, almost all failures would be devastating and you might never recover.
Bankruptcy is one of those safety nets that allows people to pursue the American Dream. Did you know that going back to the 1800's and beyond if you couldn't pay your creditors back you were sent to a "debtor's prison." If you had to risk going to jail, would you really take out that mortgage to buy your dream home? Would you risk starting that business when jail time is the result of the business not succeeding? Some say we still have a form of "debtor's prisons" (blog topic for another time), but for the most part, in modern times, if you can't pay back your debts there is relief and protection from your creditors through our bankruptcy system.
That protection...that relief from the unseen calamity... that is what makes "The Land of Opportunity" real. In America, you can take a chance and if it doesn't work out, you get to live to fight another day. Ain't it great! 'MERICA!
Is that smoke I smell? Is there a fire coming to our economy?
For almost two decades I have represented consumers who are struggling with debt. This job has put me in a unique position to see financial storms come and go, not only for individuals and families, but also for the economy as a whole. I have been a practicing attorney through three major meltdowns and I'm starting to see signs of the next one!
We are now in the ninth year of the current economic expansion and if it makes it to next summer, it will be the longest economic expansion in US history! Boom times don't last forever and this is probably the greatest boom Colorado has ever seen (possibly with the exception of the Gold Rush and I was NOT around for that). All parties come to an end... it's just matter of when.
Specifically, here are several recent signs that we might be headed for trouble again:
- Subprime auto debt is booming while defaults are soaring. Hello? Does this sound familiar? However, I don't think that a collapse in the subprime auto loan industry will wreck the economy the way the subprime housing collapse did (it's a problem in the Billions while the housing problem was in the Trillions). It isn't going to help! There's also a new trend of people taking out 96 month auto loans! Eight years of high interest payments on a depreciating asset. This is not going to end well.
- Consumer debt is exploding. Total US consumer debt grew 9% in 2017 and credit card debt increased over 13%! The banks have very short memories... They probably don't really care anyway. The Board and C-level executives all get paid millions in the good times and when the tide goes out and they're caught swimming naked the taxpayers get to bail them out. Why worry if you are running a major US financial institution? It's a win-win proposition. They just don't care because they don't have to. They are reckless with their lending in the good times and overly stingy in the bad times. If you think we can rely on the leadership of the financial industry to keep us out of trouble you are mistaken!
- Credit card defaults for the major banks increased 20% in 2017 alone. Ouch!
- THERE IS 1.4 TRILLION DOLLARS IN STUDENT LOAN DEBT with approximately 22% of that in default! That's about $300 Billion dollars in default and 1/2 the student loan debt hasn't even come out of deferment yet. Guess who guaranteed all those student loan obligations? YOU DID! They are guaranteed by the federal government (US taxpayer).
We are over-extended my friends. The US economy is reliant on consumer spending. Something is going to have to give.
The cycle is playing out (as it always does). An economic slowdown hits... fear takes over... money gets tight... the slowdown gets worse...eventually, things start to pick up...greed takes over...money gets loose... things pick up even more...we get over-extended.... a slowdown hits...
Is that smoke I smell?
Well, Spring is in full effect in Colorado and the annual gathering of fox kits (pups) is on in our backyard. This year we have NINE baby foxes who were born in the den underneath our back deck. So many people loved watching my Facebook video posts of the kits playing that the local CBS station picked up the story! You can see some SUPER CUTE video below and the link to the CBS story is here.
In less than a month, major changes will be in effect for how the three major credit reporting agencies (Experian, TransUnion and Equifax) report on your credit. These changes must be implemented and in effect by June 8, 2018. As most of the changes are actually pro-consumer, this is a rare win for US consumers and should have a positive impact for thousands of Coloradans.
Our resident credit expert, Jim Spray, has an excellent blog post detailing some of these changes. You can read his update here: JAMES SPRAY BLOG POST
Did you also know that you are entitled to one free credit report every 12 months from each of the credit reporting agencies? Pull your credit report for free at www.annualcreditreport.com
There may not be a more important "number" associated with you than your credit score. This seemingly arbitrary number has an incredible impact on your life. Whether or not you can buy a house, job prospects, car options, lease options, interest rates you pay and several other factors are all impacted by your credit score. Your credit score ("FICO"), is based on data compiled from the major credit bureaus (Equifax, Experian, TransUnion). The information that makes up your credit score includes payment history, amounts owed, length of credit history, type of credit and new credit. Given the importance of your credit score, it would make sense that the credit reporting agencies would tell you how your score is calculated. Well, shocker here.... they don't do that! It's your credit score, it profoundly impacts your life, but good luck figuring out the mystery of how that score is calculated (and how to improve it).
I've been helping people with debt issues for sixteen years now. During that time, I've learned a lot and made some great connections. Within my professional network are some of the best mortgage brokers, FICO pros and consumer credit professionals (I'm happy to put you in touch with these resources!). Based on my experience and advice from consumer credit professionals I deal with regularly, here are some tips and tricks on how to improve your credit score (beyond the obvious, "pay your bills on time"):
- Open up three unsecured credit cards or lines of credit. Not two... not four... but THREE. You should have exactly THREE open unsecured credit cards or lines of credit (Victoria's Secret, Barclays, Fingerhut, Tigerdirect.com, bank credit cards, etc.)
- NEVER go over 20% of the available balance on any line of credit. NEVER go over 20% of the available balance. NEVER GO OVER 20% OF THE AVAILABLE BALANCE (get it?)!
- Regularly use these lines of credit (never exceeding the 20%) and pay them off monthly.
- Diligently follow this plan for a year and you will see a drastic improvement in your credit score.
The above tips can help anyone improve their credit score. However, some people may have so much debt that following the above steps is just not possible. If you are overwhelmed with debt, the first step is to address your debt. Bankruptcy may be an option to help you move forward. Often people will tell me that they are worried that a bankruptcy will "ruin their credit score" when their score is already damaged. For many people, bankruptcy is actually the fastest way to repair their credit score. It helps you address the debt (discharge it) and THEN you can follow the steps above to quickly improve your score and move on with a FRESH START!
Consumer focused Colorado mortgage broker James Spray has an excellent blog post on establishing new credit after a Chapter 7 bankruptcy. You can access his post HERE.
If you are currently in an active Chapter 13 bankruptcy case, this announcement is EXTREMELY important to you! There have been new case law developments in Colorado that could have a huge impact on your ability to get a discharge in your Chapter 13 case. There are two recent legal theories that you should be aware of:
The first only applies to Chapter 13 debtors who have home mortgage loans. Historically, as long as you made all your Trustee payments you would get a discharge at the end of your Chapter 13 case. If you were behind on your mortgage loans you would still get a discharge and then you could attempt to work something out with your lender. However, several years ago there were some changes made to the Federal Rules of Bankruptcy Procedure that required the Chapter 13 Trustee to inquire whether the mortgage payments had all been made during the life of the plan. Ironically, these rule changes were intended to help the debtors (mortgage lenders were adding on BS fees during the life of the plan that the debtor was unaware of). Well, what eventually happened because of this rule change is a local Chapter 13 Trustee started contesting the discharge for a debtor who was not "substantially current" with their mortgage loan at the end of the Chapter 13 case. The Trustee's position was that the mortgage payments that were supposed to be made outside of the plan (after filing) were required payments of the plan and that the debtor did not honor all required terms of the plan when they fell behind on the mortgage payments. The Courts agreed. YOU CAN NO LONGER GET A DISCHARGE IN A CHAPTER 13 CASE IF YOU ARE NOT CURRENT WITH YOUR POST-PETITION MORTGAGE PAYMENT(S) AT THE END OF THE PLAN! If you are currently in a Chapter 13 and looking forward to that date "when this is all behind" you, you better make sure you are current with all your mortgage obligations when you get to the end of your plan! If you are not, no Chapter 13 discharge for you!
The second recent issue applies to ALL Chapter 13 debtors. A Chapter 13 plan can be no less than three years and no more than five years. In a recent opinion, one of our local judges refused to allow a final payment to complete a Chapter 13 plan that was to be made several months after the expiration of the five year period. As the debtor couldn't make this final payment to complete the plan, the debtor wasn't allowed a Chapter 13 discharge and had to convert to Chapter 7 (which can have numerous negative consequences). Practically speaking, it's fairly common for a debtor to make the final payment(s) outside of the five year period. Over the course of five years, a few payments can get missed and overlooked. It happens... Historically, nobody cared if the final payment was made a few months late or so since no creditors were harmed and nobody objected. That is no longer that case! This recent issue is just another example of how difficult it is getting to successfully complete a Chapter 13 plan. IF YOU ARE IN A CHAPTER 13 CASE, YOU BETTER STAY CURRENT WITH ALL PAYMENTS AND IF YOU ARE COMING TO THE END OF YOUR PLAN, YOU SHOULD CONTACT THE TRUSTEE TO MAKE SURE YOU ARE "ON SCHEDULE" TO COMPLETE YOUR PAYMENTS ON TIME!
Chapter 13 is complicated! If you are in an existing case, contact your attorney to make sure you are on the right path to discharge! If you are considering filing for Chapter 13, make sure you have competent legal counsel to help you navigate this mine field!
Denver Bankruptcy Attorney Matt McCune explains the basic concepts that make up a Chapter 13 Bankruptcy.
Denver Bankruptcy Attorney Matt McCune explains the basic concepts that make up a Chapter 7 Bankruptcy.
You are in a tough spot. Your resources are limited and hard questions need to be answered. How you answer these questions in the coming days, weeks and months will have a huge impact on how your life goes for the next several years.
If you are considering filing for bankruptcy, you probably have dozens of questions you need to get answered. However, before you can get those answers, you need to ask yourself the most important question: WHO CAN YOU TRUST?
If you hire the wrong bankruptcy lawyer, the implications can be severe! I've seen it happen countless times during my sixteen years of doing bankruptcy work. Fly-by-night bankruptcy attorneys have come and gone and left thousands of their former clients devastated. Take a look at this Order from the Colorado State Supreme Court disbarring (former attorney) Kevin Huepel. He was once the #1 bankruptcy filing attorney in the state. He got disbarred in 2017 for doing things you just can't believe a lawyer would ever do. If the lawyer who filed more bankruptcy cases than any other attorney in Colorado (for several years) can get disbarred for violating SEVENTEEN separate ethical rules, you better be careful about who you hire!
WHO CAN YOU TRUST? It's a hard question to answer. Online reviews are often fake. I personally know of several bankruptcy lawyers in Colorado who have mostly fake reviews on their Google business profiles. It's not that hard to do. Create a bunch of fake gmail accounts and leave yourself a bunch of glowing reviews. Unfortunately, too many lawyers just don't seem to have a moral compass these days.
WHO CAN YOU TRUST? You can trust me. Thousands of people in Colorado have trusted me over the past decade and a half. However, don't just take my word for it! Do some research... check out my AVVO profile HERE (AVVO is a rating site for attorneys). I've got a 10 out of 10 ranking and there are REAL reviews that you can trust on my AVVO profile. Compare my ranking to that of former attorney Kevin Huepel (disbarred and has a 1 out of 10 ranking). Do you think all those people that hired Mr. Huepel and got treated unethically wish they could go back and hire me?
You must be careful!
Call me. Find out what your options are (no charge). Let's have a talk to discuss your options and you can see for yourself whether or not I'm the right lawyer for you.
A lot of times people don't even know whether or not bankruptcy is an option for them. For some people it's more obvious. If you are currently experiencing any of the following, it would be a good idea for you to talk to a bankruptcy attorney:
Harassment by creditors
Running behind on bills
For others it might be less clear that bankruptcy is something they should at least consider. Even if you are current on all your bills, you may feel like there is no end in sight to your debt problems. A lot of people are "robbing Peter to pay Paul" and simply shuffling their debt around. This house of cards is bound to fall!
If you are just scrapping by and making the minimum payments on your credit cards, you may feel like you are making it. However, how long do you think it will take you to pay off your debt? If you never pay more than the minimum, you will most likely NEVER pay off the debt. You are stuck in a debt trap. This is where the banks LOVE to have you...only paying interest and not paying down any principal balance. Banks make BILLIONS of dollars a year off of the backs of consumers who only pay the minimum payments. They collect the interest and fees, but the debt never goes away.
Here's a dirty little secret from the financial services industry. They INTENTIONALLY lend people more money than they know people can pay back. Why would they do this? Because even if they never get paid back in full... the bank still makes money. They know this... they've run the numbers. The banks are not dumb. They know that by the time someone pays high interest, fees and penalties for several years they are going to make big money... even if the debtor never pays back the debt in full.
Are you stuck in a debt trap? Sit down and run your own numbers. Is there any reasonable likelihood that you can completely pay off your unsecured debt (not secured by a house or car) in the next few years? If the answer is no, give me a call. There's no charge to discuss what your options are to find out how you can break free from the trap of debt.
Hey... I get it. One thing I've never heard from ANY of my clients is... "I'm so excited that I have to file for bankruptcy protection!" This is a difficult thing to go through and a difficult spot to be in. I get it, because I'VE BEEN THERE MYSELF! Times like these are really emotional and you can feel guilty, ashamed and like a failure.
The best advice I can give my clients during this very difficult time is to treat the decision about whether or not to file for bankruptcy, as a BUSINESS DECISION. Try and remove the guilt and bad feelings. Ask yourself this one question: "What is the best thing for me and my family?"
The harsh reality today is that nobody else is going to look out for you and your family. You have to do it yourself. The politicians we elect to represent us are in the pockets of the big corporations. He who has the gold makes the rules. In America, bug business has all the gold. They make the rules... the deck is stacked against you!
One thing to remember is that there is rarely an actual person on the other side of your debts. You owe money to big banks and large corporations. Do you think the big banks felt bad a decade ago when they wrecked our economy and kicked off the Great Recession? Of course not, banks don't have feelings. Businesses don't have feelings!
Don't take the emotions that you have as a good person and apply them to a corporation that has no feelings. Corporations are designed to do one thing: make money. Every decision that the banks make is a business decision. When you owe them money, think like they think! Make a GOOD BUSINESS DECISION for you and your family.
I know these are hard times, but I'm here to help you navigate this tricky process so you can move forward and keep your dignity.
Take a deep breath....
It's going to be okay! Give me a call and let's discuss your options.
I've filed bankruptcy for thousands of good people in Colorado. No one has EVER said to me "I wish I wouldn't have done that." Life on the other side is better. Bankruptcy is not the end, but rather a new beginning!
To put it simply... YES!
Now, there are exceptions and there are a few non-profit debt counseling programs out there that try and do things the right way. However, you'll most likely never find those places when looking for a legitimate debt consolidation option.
The vast majority of "debt consolidation" or "debt relief" or "debt consolidation loan" entities are simply for-profit, private companies that spend millions each year in marketing to try and convince you to not file for bankruptcy and pay them instead. Let's take a look at an example of how many of these companies work:
It's important to understand that you are NOT getting a loan from these businesses that can be used for paying off debt. You do NOT actually get to consolidate credit card debt with them. They put you on a monthly payment plan and tell you they will negotiate with your creditors on your behalf. Your creditors (credit cards, medical bills, etc.) do not get paid off when you start the program!
While you are making monthly payments to the "debt consolidation" company you are no longer paying your actual creditors and you have no legal protection from them. Eventually, the creditors will come after you and sue you and garnish your wages or place liens on your assets.
The "debt consolidation" company tells you that they are trying to settle out with your creditors and that's why you are making the monthly payments. However, every month they are charging you a "service fee" and that is typically where the majority of the money you pay goes... to the "debt consolidation" company and not to your creditors.
Eventually, you figure it out... "Hey, I'm being scammed here." You call the "debt consolidation" company and tell them to stop taking money out of your account and to send your money back. What do you think happens next?
They typically don't return your money. Remember, it went to pay their "service fees." They often will continue to charge your bank after you've instructed them not to and you end up having to close that account.
Now, this sounds highly illegal or at the very least unethical. What recourse do you have against them? They operate out of state. They only have a PO Box and it's almost impossible to track them down. Good luck.
By this point, you've wasted a lot of time and thousands of dollars on this "debt consolidation" program. Your real creditors have racked up interest, late fees, attorney fees, court costs and are in the process of collecting from you (via court judgment, wage garnishment, liens, etc.).
Please explain to me how that helped you?
Eventually, you realize your only option now is bankruptcy and that you should have done it a while back (before you wasted precious time and money with this whole "debt consolidation" circus).
If you are considering paying one of these online "debt consolidation" programs, PLEASE DO THIS:
Contact a real bank or credit union and see if you can get a loan to truly consolidate your debt (at a lower interest rate) and pay off your existing creditors. The unfortunate reality is that by the time most people do this they are now a much greater credit risk and the bank/credit union is unlikely to offer a loan.
If you can't get a loan, contact a high quality bankruptcy attorney to find out what your other options are. You can reach me with any questions through our CONTACT PAGE.