Fortunately, to the relief of these people, their temptation to go for the quick refund diminished as of April 30 - because that was the last day banks offered tax refund loans. Similar to demise of payday loans in Arizona, banks will no longer be able to take advantage of those who are in desperate need of refunds.
According to the National Consumer Law Center, more than 12 million people got tax anticipation loans during their heyday in 2004. The market boomed in the early 2000s when the IRS made available a debt indicator tool that permitted lenders to verify if borrowers had debts that would lead to their tax refund being seized, eliminating the risk for the banks.
]]> Following this, banks provided the capital for tax preparers to offer these refund loans to customers - with the tax preparers acting merely as agents for the banks.Eventually, the IRS got rid of its debt indicator tool, leading to an FDIC decision that banks could not make tax refund loans. Some banks fought the decision, but they ultimately settled with the FDIC and agreed they would not make any anticipation loans after April 30, 2012.
While some taxpayers may miss the option of a tax refund loan in the short-run, it will save the same taxpayers millions of dollars in the long-run as banks are not going to prey on those who need their refund the most.
Source: Reuters, "Good riddance to the tax refund loan," Kai Wright, April 17, 2012
]]>The Department of Education has a long history with debt collectors. The collection agencies it contracts with, however, do not always explain the full range of options to borrowers. This can result in a borrower who makes monthly payments of several hundred dollars a month, while he or she may be entitled to make payments of less than a hundred dollars per month.
The root of the issue appears to be the way debt collectors are compensated for their success. A debt collector who secures a minimum-percentage payment on a loan that is in default can earn a reward of up to 16 percent of the loan amount. This payment structure has prompted many student loan debt collectors to avoid discussing options such as Income Based Repayment with borrowers.
In addition to helping to give borrowers the impression that their options are very limited, this reward system can lead to aggressive debt-collection tactics. Indeed, the most recent statistics show that complaints against these debt collection agencies have risen 41 percent above the previous year.
]]> The Proposed System: Debt Agencies Must Provide Best OptionsThe Obama administration has proposed banning debt collection agencies from making payment plans based on the amounts of student loans. Rather, the debt collectors would have to factor in borrowers' incomes to arrive at figures that are seen as more appropriate.
Many former students in Arizona who have overwhelming student loans know what it is like to be pursued by a debt collection agency. The new regulations, which could be in place by July 2013, will help provide borrowers the information they need to make informed, financially intelligent decisions.
Source: Bloomberg News, "Obama Plans Overhaul of Student-Loan Debt Collector Practices," John Hechinger, March 30, 2012
]]>The Federal Trade Commission issued a consumer alert on March 22, 2012, to be wary of firms that promise to include consumers - for large fees - in mass joinder lawsuits against mortgage lenders. The firms describe the suits as protection against foreclosure or the source of relief from high mortgage rates - tempting for people seeking debt relief.
The lawsuits in theory would join together many plaintiffs in the same situation to go after lenders together. However, too often the lawsuit never happens, but the "fee" the vulnerable consumer couldn't afford in the first place is long gone, making a bad situation even worse.
]]> The FTC is warning consumers to be wary of such fraudulent practices, as the agency recently brought a lawsuit to stop one such enterprise. The firm subject to the FTC suit has an Internet presence with three websites that apparently give the false impression that the operation is nonprofit. That operation appears to have charged up to $10,000 for a person to join a legal action against lenders. Reportedly, the judge issued a temporary restraining order freezing the firm's assets.Source: Los Angeles Times, "FTC cracks down on foreclosure-rescue scheme," E. Scott Reckard, March 23, 2012
]]>Besides TaxMasters, JK Harris & Co. filed for bankruptcy last October. JK Harris at one time operated hundreds of locations throughout the county, but in December it went into liquidation and stopped operations - leaving thousands of customers in limbo. The JK Harris bankruptcy followed several lawsuits filed by both customers and states.
The "Tax Lady" Roni Deutch has also had her share of problems. In 2010, a state attorney general claimed she "engaged in a scheme to swindle taxpayers" by exaggerating her firm's ability to obtain concessions from the IRS. Although Deutch believed these allegations were motivated by politics, she also filed for bankruptcy last year.
]]> Because of these allegations and poor financial well-being, the ability of these tax resolution companies to provide all the services they promise is questionable. Forbes has offered some tips for tax debtors that these companies would likely never provide:Source: Forbes, "Owe The IRS? TaxMasters Bankruptcy Shows Why Not To Get Help From TV Pitchmen," Janet Novack, Mar. 18, 2012
]]>General Information About Credit Score Calculation
Although there are different types of credit scores, they all generally reward consumers who do these two things:
FICO, one of the major credit score calculator companies, uses a calculation that weighs payment history at 35 percent of your final score. Balances owed take another 30 percent - highlighting the importance of both promptly paying bills and keeping overall debts low.
Other factors taken into consideration include the length of credit history and the amount of new credit the consumer applies for. Generally, a longer credit history is preferred because it allows the establishment of clear payment patterns.
]]> Credit Scores and BankruptcyA credit score can be restored after filing for bankruptcy, but it takes time. Often it takes three to five years of timely payments and debt management to establish a full recovery.
One tip for a timely rebound is to get and use a credit card shortly after filing for bankruptcy. This may seem counterintuitive, but using a credit card wisely will help build your credit score. Use it for things like groceries and gas, but be sure to pay off the balance on time every month. Also take advantage of the various tools available to help ensure payments are made on time, from cellphone text alerts to email reminders from banks.
Rebuilding a credit score is unique to each individual situation, and can often benefit from repairing errors on your credit report. The best way to ensure your score rebounds quickly is to discuss your situation with an experienced bankruptcy lawyer.
]]>While it is a good sign that January marked the 12 month of consecutive declines in the number of filings in Arizona, the broader conclusions to be drawn from these numbers are limited.
According to AZCentral.com, the jobs situation in Arizona has improved, with unemployment declining to 8.3 percent - down from the summer of 2011 rate of 9.1 percent.
So, while more people have jobs, many of those jobs will be the first jobs that will be cut if there is another downturn in the economy. This leads to an unsettledness that leaves the employees uncertain about their future and unlikely to engage in a great deal of major spending.
The decline could also be a result of the temporary lull in foreclosure activity by lenders after the robo-signing issues and other problems with documentation in foreclosure actions.
]]> Already Hit Bottom?Another fact is that simply after three years of near record filing activity, large numbers of people have already passed through the bankruptcy system or our currently engaged in a Chapter 13 reorganization.
This means the potential pool of bankruptcy filers; those in the most difficult financial circumstances (job loss, underwater mortgage, large credit card debt) have been reduced.
This reduced rate doesn't mean the economic situation has improved greatly however - at even the reduced January rate, it would still indicate that there could be an additional 15,000 people moving through the bankruptcy courts in Phoenix for the remainder of the year.
Given that our consumer-driven economy needs people to be able to buy enough products to cause employers to hire, the recovery will probably remain slow, and many people in the Phoenix area will find it necessary to speak with a bankruptcy attorney in 2012.
]]>The good news is statistics show that the housing market is rebounding, albeit at a very, very slow pace. The International Business Times reports that Arizona's foreclosure rate in September 2011 was 3.09 percent, a reduction from the previous month's foreclosure rate of 3.14 percent, and a fairly big drop from the previous year - in September 2010, Arizona's foreclosure rate was 3.82 percent.
At this rate, Wells Fargo Economist Eugenio Aleman noted, "the foreclosure rate could reach its historical level in 2016."
Additionally, the 90-day delinquency rate fell to 7.45 percent in September 2011, down from 7.64 percent in August 2011.
While this is all good news for Arizona homeowners, the downside is that home prices remain depressed. In fact, during the second quarter of 2011 housing prices in Arizona fell 22.3 percent. However, they did manage a slight rebound in quarter three with an increase of 4.7 percent.
]]> The depressed home values are keeping many homeowners' mortgages underwater; meaning that more is owned on the mortgage than the house is worth. If homeowners with underwater mortgages face financial difficulties and are struggling to make their monthly payments, they may feel stuck on the path to foreclosure, with few options for relief.For homeowners that are either facing foreclosure, or are in foreclosure, there may be help. Filing for bankruptcy will stop the foreclosure proceeding and may allow the homeowner to save their house. For instance, by filing for Chapter 13 bankruptcy a homeowner may be able to make current any previously missed mortgage payments over the life of the Chapter 13 payment plan.
Source: Arizona's Foreclosure Rate Could Reach Historic Levels by 2016
]]>Do your homework to avoid being taken advantage of by a charity scam. It may be tempting to donate in response to a natural disaster or other emergency need but resist the urge open your wallet right away. Taking the time to do some research can minimize your risk.
If you are solicited by a charity, investigate by contacting the organization to make sure they are aware of the solicitation. Legitimate organizations can offer written information about their mission, structure and how they use donations. In addition to protecting you from a scam, this information can help you find a charity that uses donations in a way you most support.
]]> To protect yourself and your money, take these basic precautions when dealing with charities:If you have fallen victim to a charity scam, your credit and security may be put in jeopardy. An experienced bankruptcy attorney may be able to help you restore your credit and protect your financial future.
]]>Many Arizona seniors are already forced to live on a tight budget, losing even a small amount of money to these scam artists can make it difficult for them to pay their bills - as such; they need to be vigilant in protecting their assets and avoiding creditor harassment.
This particular scam usually involves a call to an Arizona senior with the caller claiming to be a relative - often a grandchild, distance cousin or another family member - in an emergency situation. The caller generally gives very little information about their identity, or what the emergency is, and usually requests the senior to wire money immediately. Unfortunately, wired money is difficult, if not impossible, to trace - which means it is gone as soon as you wire it.
]]> The Arizona Attorney General has offered some tips to avoid being scammed by these fraudsters. Some of the tips include:This scam generally involves someone professionally dressed convincing an Arizona senior to invest in a business venture, note, stock or other "secret" investment in which only certain people are allowed to invest - with guarantees of huge returns. Often times, the fraudster keeps a big part of the investment as a "commission" and the promised returns never materialize. Moreover, these "brokers" are usually not even licensed to sell securities in the first place.
]]> The Arizona Attorney General has enumerated some tips to avoid being caught up in these scams. They include:Arizona seniors are especially susceptible since many fraudsters see them as "easy prey." These scams can leave seniors penniless and often unable to pay their bills. Seniors in Arizona need to protect their assets and avoid falling prey to these scams.
One particular scam perpetrated on Arizona seniors is the "Home Repair Scam." This posting will be Part 1 of a multi-part series addressing various scams against seniors in Arizona.
The home repair scam often involves a contractor offering to do a home repair at a very low cost - often claiming they can do it on-the-cheap because they have material left over from an earlier project - but ultimately charges more after the project is completed. Also, many times these contractors will collect an advanced fee and never return to complete the job.
These types of scams are especially prevalent after severe storms, when the homeowner is already emotionally dealing with terrible damage. In these situations, the homeowner is given verbal quote and the contractor ends up completing additional work the homeowner never asked for - and then bills the homeowner thousands of dollars more than originally agreed upon.
]]> How to avoid Home Repair ScamsThe Arizona Attorney General offers various tips to avoid being scammed. These include:
If you believe you are the victim of a home repair scam, it may be a good idea to not only contact the Arizona Attorney General but also the Better Business Bureau. Moreover, an experienced attorney may be able to help you deal with unruly creditors if you have fallen behind on bills due to the fraud; or may even possibly assist in collecting your money lost from the unscrupulous contractors.
]]>The Federal Trade Commission (FTC) is the federal agency that handles complaints regarding debt collectors. Recently, the FTC received a complaint from a woman who was having difficulties paying for her daughter's funeral. The woman alleged that a debt collector threatened to dig up her daughter's body and hang it from a tree if she did not pay. They also allegedly called her "white trash" and said that they would shoot her dog.
]]> In another instance, it was claimed that a debt collector allegedly lied to customers, telling them that they could be arrested for not paying their debts. The employees of the debt collector supposedly posed as lawyers and process servers and falsely claimed that a lawsuit had been filed against the customer. The debt collector allegedly told the customers that they could "settle" the lawsuit if they paid off the entire debt plus legal fees and court costs.In both of these cases, if the allegations are proven true then the debt collector may have violated federal law. By law, it is illegal to demand more than the actual amount of debt that a customer owes. It is also illegal to threaten to use violence or to use obscene or offensive language when collecting a debt. If you are facing debt collection efforts, an experienced bankruptcy attorney can help you consider your options and recommend a debt relief option based on your individual situation.
]]>Most foreclosure and mortgage modification scams work the same way. They generally involve a foreclosure "rescue" or loan modification company. These companies are often not interested in helping you out with your situation, but want to make a quick profit.
These companies generally promise to help you save your house or stop the foreclosure. They may advise you to quit working with your lender and promise that they will take care of everything. However, the companies rarely will deliver on their promise and leave you in a position worse than you were in before.
]]> Warning SignsIf a company contacts you and offers to help you with your foreclosure situation, there are several warning signs indicating that the offer may be a scam. The Arizona Attorney General advises you to be skeptical of any company that:
If you are having problems paying your mortgage or are facing foreclosure, an experienced attorney can advise you of your options and devise a legal way to save your house - for example there are several options available under bankruptcy law that may help save your home.
]]>Possibly prompted by this frightening statistic - in addition to "Occupy Wall Street" activists calls for student loan reform - President Obama outline a new plan for student loan repayment.
In the past, many believed that obtaining a college degree almost guaranteed a good job; making college a sound investment. However, recent college graduates not only face a decimated job market but owe, on average, $24,000 in student loans. In 2009, the default rate on student loans also rose to 8.8 percent.
Obama's most recent student loan reforms involve a cap of 10 percent of income payments and forgiveness of the loans after 20 years. However, some believe a more appropriate path would be to allow student to discharge certain student loans in bankruptcy, thereby making lenders more cautious when lending to students in the first place.
]]> Student Loans & BankruptcyUnder US bankruptcy law, government-backed student loans are non-dischargeable, except in rare circumstances. The belief was that students should not be able to reap the benefits of an education just to discharge it later in bankruptcy. However in 2005, the Bankruptcy Reform Bill made private student loans non-dischargeable as well.
Some members of Congress are attempting to make it possible for graduates to declare bankruptcy on private student loans. In an interview with Hotsheet, Rep. Steven Cohen stated, "the industry is giving out loans to people that may not be as creditworthy as they should be - because they know they can't bankrupt them." Cohen continued, "Why should private loans be different than debt you can accumulate with a credit card, or at a casino? There's just no good reason for it... It was a really bad bill if you were an average or even a middle-class American. This was done for the industry, not the student."
Making certain student loans dischargeable may not only help current graduates, but also past graduates that may find their payments impossible to keep up with. Unfortunately these changes may never be implemented, and students may be forced to continue dealing with the current bankruptcy laws - however, an experienced bankruptcy attorney can provide assistance in navigating these complicated bankruptcy laws.
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