What You Need To Know About Credit Cards
Posted on | August 20, 2010 | No Comments
WHAT YOU NEED TO KNOW ABOUT CREDIT CARDS
By: Lauren Timmerman, Esq.
The Wright Firm, L.L.P.
August 20, 2010
Credit cards can be a useful tool, if you know how to play by the credit card issuers’ rules. Those rules changed substantially in 2009, when President Obama signed the Credit Card Act of 2009 into law.
The Credit Card Act of 2009 serves to benefit consumers and prohibit unfair practices of credit card companies. A few benefits of the Credit Card Act, which are important for every credit card holder to know, are:
- Retroactive interest rate increases on existing balances are prohibited, except in very limited situations. Prior to this new law, interest rates could be increased on an entire existing balance for a number of reasons, including a late payment. Now, interest rates can only be increased as to future charges.
- No more “universal default” – Credit card issuers used to, under the terms of their contracts, periodically check a cardholder’s credit report to look for any delinquencies or defaults on any account. If the credit card issuer found a default on any other account (any account, including other credit cards, utilities, etc.), then the credit card issuer could increase the cardholder’s interest rate, even if the cardholder was in perfect standing with the credit card issuer. The Credit Card Act banned this practice for existing card balances.
- Over- limit fees are banned if consumers don’t “opt-in” to them. Prior to this legislation, credit card issuers would automatically charge cardholders substantial over-limit fees for transactions that exceeded the cardholder’s credit limit. Now, credit card issuers must decline all such transactions unless the cardholder has given specific permission to approve said transactions and be charged over- limit fees.
- Credit card issuers may no longer charge cardholders a fee for paying their bill online, via telephone, or via mail.
- Finance charges for previous billing cycles may no longer be charged to a cardholder unless there was a returned payment for insufficient funds or a disputed transaction.
- Monthly statements must disclose how long it will take the cardholder to pay off his/her current balance if he/she only pays the minimum payment due each month. The minimum payment is usually 4% of the current balance.
- Offering free gifts in exchange for college students signing up for a credit card is banned if done within 1,000 feet of a college campus.
The Credit Card Act of 2009 was Congress’ attempt to level the playing field between card issuers and consumers by requiring card issuers to enact policies that are clearer and more fair to consumers. Although the legislation was signed into law in April 2009, it remains to be seen whether it will be as helpful as intended to consumers.
According to Fitch Ratings, the current credit card default rate amongst consumers nationwide is approximately 13%. The average cardholder has 4 credit cards, and the average credit card debt per U.S. household is approximately $16,000.00. According to the Federal Reserve, the total U.S. consumer revolving debt is $853 billion, and credit card debt makes up approximately 98% of that. It is clear from the statistics that credit cards use remains popular, even with the rise in popularity of debit cards.
Debit cards can help reduce credit card balances for consumers. Debit cards work just like credit cards, but are instead linked to a consumer’s bank account, so the consumer is not borrowing money every time he/she uses a debit card, and instead, the money comes directly out of the debit card holder’s bank account, just as if the holder had paid cash. Debit cards have most of the same protections against fraud that credit cards do, and are accepted everywhere credit cards are accepted.
Consumer advocacy organizations strongly promote debit card use as a way for consumers to lessen their debt and cut excessive spending, with good cause: according to AACER, total consumer bankruptcy filings reached 1.4 million in 2009, up from previous years. Various studies have shown the catalyst of over 90% of bankruptcy filings to be excessive credit card debt.
When used sparingly, credit cards can be a useful tool. However, dealing with credit card debt is never easy and can be overwhelming at times. As always, consumers with questions about credit card debt and its possible effects should consult a licensed attorney in their state.
Choosing a bankruptcy attorney to guide you through the process is a crucial decision. At The Wright firm, we will do our best to show you that choosing The Wright Firm as your legal representative is the right choice. Let us help you begin your journey to a fresh financial future.
Feeling crushed under the weight of:
- Too much credit card debt?
- Late home mortgage and car payments?
- Lawsuits and eviction?
- Tax debts and liens?
- Auto repossession?
- Creditors calling at all hours of the day and night?
Please call us! Call Toll-Free: (877) 353 4600. Our bankruptcy attorneys will work with you to develop a strategy that is right for you. We’ll help you evaluate your options using the Federal legal protection of bankruptcy, as well as discuss with you any non-bankruptcy options, such as debt and credit counseling, that may fit your unique circumstances.
Call The Wright Firm today to book a free consultation!
Tags: bankruptcy attorney > bankruptcy attorneys > bankruptcy filings > consumer bankruptcy > consumers > Credit CARD Act of 2009 > credit card balances > credit card debt > credit cards > debit cards > excessive credit card debt > The Wright Firm
Strategic Foreclosures – Is It Better To Save Your Home Or Walk Away?
Posted on | June 30, 2010 | No Comments
STRATEGIC FORECLOSURES – IS IT BETTER TO SAVE YOUR HOME OR WALK AWAY?
By: Lauren Timmerman, Esq.
The Wright Firm, L.L.P.
June 30, 2010
One of the most talked about topics in the area of mortgage default is the issue of “strategic defaults”. A strategic default occurs when a homeowner is able to pay his/her mortgage, but chooses to stop paying it and allows the home to go into foreclosure. A traditional default occurs when a homeowner can’t pay his/her mortgage, can’t work out any other options with the mortgage company, and is forced into foreclosure.
The number of strategic mortgage defaults is steadily rising. According to the Wall Street Journal, current studies show that as many as 12% of current mortgage defaults are strategic defaults. The most common reasons for strategic defaults are that the homeowner decides it’s a better plan, economically, to walk away from a home that’s valued significantly lower than what’s owed on the home (the homeowner is “underwater” on the home), or the homeowner knows, in the current real estate market, that the homeowner can buy a similar home in the same neighborhood for much less that what’s owed on his/her current home. Current statistics show that approximately one out of four homeowners is “underwater” on his/her home – he/she owes more on his/her house than what the house is worth.
Mortgage default, whether strategic or not, has significant negative effects on one’s credit, with the resulting foreclosure staying on one’s credit report for at least seven years. Those homeowners who engage in strategic default may feel the economic benefits outweigh the negative impact to their credit scores. Traditionally, people who had experienced a foreclosure had to wait five years from the date of their prior foreclosure to be considered for a new government-backed mortgage through Fannie Mae or Freddie Mac. This has changed, however, due to the rise in strategic defaults.
Fannie Mae recently implemented new rules that are much tougher on homeowners who strategically default as opposed to homeowners who face traditional foreclosure. Fannie Mae will now make homeowners who went through a strategic default/foreclosure wait seven years from the date of foreclosure to be considered for a new government-backed mortgage, while those homeowners who can show they made a good faith effort to repay their loan or work out an alternative arrangement (loan modification, deed in lieu of foreclosure, etc.) with their lender but still suffered through foreclosure will only have to wait three years to be considered for a new government-backed mortgage. If those homeowners completed a short sale or deed in lieu of foreclosure to avoid foreclosure, then they only have to wait two years to be considered for a new mortgage.
Fannie Mae has also promised to ramp-up its litigation efforts and sue those homeowners that have strategically defaulted for the balance left on the mortgage once the home has been sold at a foreclosure sale (“deficiency”), in states that allow for recovery of that deficiency. Industry experts have opined that Fannie Mae is trying to prevent strategic defaults from becoming socially acceptable, as strategic defaults can harm the value of neighboring homes and slow the recovery of real estate values across the country.
Fannie Mae’s recent announcement of these new rules and policies caused much debate in the legal and financial community, with experts coming out in support of strategic default, and others supporting Fannie Mae in its tougher policies. Fannie Mae spokespeople maintain that the tougher rules are an effort to encourage homeowners to work with their mortgage lenders to find an alternative solution to foreclosure.
Dealing with mortgage default and making the decision to walk away from one’s home, whether voluntarily or involuntarily, is never easy. As always, consumers with questions about mortgage default and its possible effects should consult a licensed attorney in their state.
Lauren Timmerman is an associate with the firm, with a primary practice in Bankruptcy. She graduated Magnum Cum Laude with her Bachelor of Arts from Wayne State University in Detroit, Michigan, where she was a member of Phi Beta Kappa, Golden Key Honor Society and Phi Eta Sigma Honor Society. Lauren then continued on at Wayne State to receive her law degree. During law school, she served as Managing Editor of the Journal of Law in Society, and won numerous awards for Brief writing and Oral Argument in moot court competitions.
After receiving her Juris Doctor, Lauren worked with the firm of Deloitte & Touche, LLP, advising large scale corporate clients and high net worth individuals on tax and financial issues, including financial planning proposals and reviewing corporate, trust and individual tax returns. She then moved to the firm of Hammerschmidt, Stickradt & Associates, PLLC, where she primarily practiced in bankruptcy. She continued her focus on bankruptcy cases in her work at Marrs & Terry, PLLC, where she managed satellite offices in addition to her representation of debtor and creditor clients. Lauren also served as a Managing Attorney in bankruptcy at Schneiderman & Sherman, PC, where she managed creditor based bankruptcy and loss mitigation practices for nationwide clients.
Lauren is a member of The State Bar of Michigan, and is admitted to practice in the U.S. District Courts for the Eastern District of Michigan, the Western District of Michigan, The Eastern District of Texas and the Northern District of Texas. Lauren is not yet admitted to the State Bar of Texas. Her admission to The State Bar of Texas is pending.
Contact The Wright Firm Today!
Choosing a bankruptcy attorney to guide you through the process is a crucial decision. At The Wright firm, we will do our best to show you that choosing The Wright Firm as your legal representative is the right choice. Let us help you begin your journey to a fresh financial future.
Feeling crushed under the weight of:
- Too much credit card debt?
- Late home mortgage and car payments?
- Lawsuits and eviction?
- Tax debts and liens?
- Auto repossession?
- Creditors calling at all hours of the day and night?
Please call us! Call Toll-Free: (877) 353 4600. Our attorneys will work with you to develop a strategy that is right for you. We’ll help you evaluate your options using the Federal legal protection of bankruptcy, as well as discuss with you any non-bankruptcy options, such as debt and credit counseling, that may fit your unique circumstances.
Call The Wright Firm today to book a free consultation!
Tags: foreclosure > Foreclosures > home > homeowner > mortgage > mortgage default > Strategic > strategic defaults > Strategic Foreclosures > strategic mortgage defaults > The Wright Firm
Mortgage Loan Modification Scams – What Consumers Need to Know
Posted on | May 18, 2010 | No Comments
The economic recession and its effects on the real estate market have generated a new type of scam artist for consumers to be aware of: mortgage loan modification companies.
Mortgage loan modifications are a type of loss mitigation program, designed by mortgage lenders, to minimize their losses by working with consumers to make mortgage payments more affordable so that consumers can remain in their homes and avoid foreclosure. Through loan modification, consumers may be able to cure payment delinquencies, lower their monthly mortgage payments, lower the overall principal amount owed on the mortgage, lower the interest rate, or achieve all of the above. Most consumers are aware of loan modifications, but not aware of all that can be achieved through a loan modification.
Consumer awareness of mortgage loan modifications increased upon the enactment of President Obama’s “Making Home Affordable” program. This program gives incentives to mortgage companies to engage in loan modifications if the home and the consumer meet the following guidelines, according to the U.S. Treasury’s website:
1) Loans must have originated (been granted) on or before January 1, 2009.
2) The mortgage must be the primary mortgage on the consumer’s personal residence, and the mortgage may have an unpaid principal balance up to $729,750.
3) All borrowers (consumers) must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
4) Whether the consumer lives in the home will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.
5) Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.
6) Modifications can start from now until December 31, 2012; loans can be modified only once under the program.
Due to the current high demand for loan modifications, numerous “mortgage loan modification companies” have come into existence, claiming to highly increase the consumer’s possibility of success in obtaining a loan modification by assisting consumers through the process of obtaining the modification. These companies typically charge an upfront fee of as much as $7,500.00 to begin the process. Further, these companies normally advise consumers to stop making mortgage payments, because mortgage companies won’t even consider a loan modification until the consumer is at least two months delinquent in his/her mortgage payments. This is not always correct, as shown above in point number five. Further, this is very dangerous advice, as becoming delinquent in mortgage payments can put a consumer at high risk of foreclosure. It is important for consumers to be well-educated on their options and try to avoid following bad advice from loan modification companies, most of which are scams.
Various consumer studies show that up to 80% of loan modification companies are scams. These companies typically take a consumer’s money and don’t perform any services for the consumer, or make promises of success to the consumer that can’t be kept. Although not every loan modification company is a scam, if a consumer is considering hiring one of these companies, the consumer should fully research the company to try to avoid any scams. Consumers can always consider consulting with a licensed attorney in their state, as most licensed consumer attorneys can also walk consumers through the process of obtaining a loan modification.
Also, it is always an option for the consumer to try to obtain a loan modification without outside help or counsel. Most mortgage companies and servicers are happy to deal with the consumer directly, as it saves time and can be more efficient.
Overall, consumers should be as proactive as possible in dealing with mortgage issues. It is often easier to address issues earlier than later, especially since mortgage companies tend to be understaffed in relation to the high demand for workouts and loan modifications. Further, it is important to remember that there is never any guarantee of success in obtaining a loan modification. Consumers facing foreclosure should consult with a licensed attorney in their state to make sure they are aware of their options.
Written by: Lauren Timmerman, Esq.
Choosing a bankruptcy attorney to guide you through the process is a crucial decision. At The Wright firm, we will do our best to show you that choosing The Wright Firm as your legal representative is the right choice. Let us help you begin your journey to a fresh financial future.
Feeling crushed under the weight of:
- Too much credit card debt?
- Late home mortgage and car payments?
- Lawsuits and eviction?
- Tax debts and liens?
- Auto repossession?
- Creditors calling at all hours of the day and night?
Please call us! Call Toll-Free: (877) 353 4600. Our attorneys will work with you to develop a strategy that is right for you. We’ll help you evaluate your options using the Federal legal protection of bankruptcy, as well as discuss with you any non-bankruptcy options, such as debt and credit counseling, that may fit your unique circumstances.
Call The Wright Firm today to book a free consultation!
Tags: bankruptcy attorney > economic recession > loan modification > making home affordable > modifications > mortgage companies > Mortgage Loan Modification > mortgage loan modification companies > Mortgage Loan Modification Scams > mortgage loan modifications > mortgage payments > real estate market > scam artist > Scams > sonsumers > The Wright Firm
Contact Us
Posted on | March 30, 2010 | No Comments
Call The Wright Firm Today at (972) 353 – 4600 and Book Your Free Consultation!
Choosing a bankruptcy attorney to guide you through the process is a crucial decision. At The Wright firm, we will do our best to show you that choosing The Wright Firm as your legal representative is the right choice. Let us help you begin your journey to a fresh financial future.
Please call us! Our attorneys will work with you to develop a strategy that is right for you. We’ll help you evaluate your options using the Federal legal protection of bankruptcy, as well as discuss with you any non-bankruptcy options, such as debt and credit counseling, that may fit your unique circumstances.
You can reach The Wright Firm by calling 972-353-4600 to book a free consultation.
Tags: Bankruptcy > bankruptcy attorney > credit counseling > debt > The Wright Firm