Bankruptcy Questions Answered

Debt after Death: What Happens when a Debtor Dies

What happens to your debt after you die is not a topic that’s likely to come up on its own at the dinner table, but it’s a good idea to talk about this matter anyway. It’s important for you and your loved ones to know when you’re responsible for each other’s debts post-mortem—and when you’re not.

A recent post from WalletPop.com offers an outline of what to expect after the death of a family member who owed money. Here’s a summary.

• Can debt be inherited? In most cases, debt does not automatically pass from one family member to the next, according to sources. That means that, if you receive a letter from a creditor demanding payment on a loved one’s debt after his demise, it’s a good idea to do some research before paying.
• Debt in community property states: One of the exceptions to the above rule has to do with state law. If you live in a community property state (find out here), you can inherit debt from a dead spouse (but not from a sibling or parent).
• The link between debt & inheritance: Another exception involves the relationship between a person’s debts and her legacy. If, for example, a parent dies and leaves you money or a house in addition to consumer debt, you’re legally obligated to pay the debt before collecting the inheritance.
• What about debt from a co-signed loan? If you co-signed a loan for a family member or friend and that person passes away, you are responsible for paying the remainder of the loan.

How to Know if You’re Responsible for a Debt

One unfortunate truth about debt and death is that some creditors might try to collect on a debt whether or not it’s legal for them to do so. Worse, some scam artists may specifically target survivors in an attempt to trick them into paying money they don’t really owe.

If you’re mourning a loved one, the last thing you likely want to deal with is finances, but following these guidelines might help protect you from fraudsters:

• Avoid sending a creditor any money at all until you’re sure that you are actually responsible for repaying a debt.
• To determine your obligations, ask the creditor to send you written documentation of the debt’s original purpose, the terms of the debt and the exact amount currently owed.
• If possible, consult an attorney to help you work through the complexities of covering debt’s after a loved one’s demise.

Posted in Creditors, Financial Literacy, dealing with debt, debt after death | Comments Off

Study: Credit Card Application Disclosures Improving

Here’s some good news from the world of credit: according to a study conducted by the web site CardHub.com, the language on applications for credit cards has improved in clarity in recent years. Specifically, the transparency and completeness of disclosure of a credit card’s terms in the large print has gotten better.

The study looked at several elements of a credit card agreement, including these:

• Clarity on rewards: This category rated how easy it was to interpret and apply rewards points.
• Clarity on annual fee: Here, the study looked at whether issuers displayed the annual fee prominently or hid it among other pricing details.
• Clarity on cost of carrying a balance for new purchases: This section looked at the clarity of introductory interest rates and APRs for new purchases made with the card (i.e. not balance transfers).
• Clarity on cost of making a balance transfer: Here, the study examined the ease of finding how much it would cost to transfer balances from one credit card to another.

The study based its clarity ratings on whether or not the researchers had to click to various pages before finding the information they wanted, whether they had to sift through fine print and whether information was clearly visible on the page.

The Findings

If you’re interested in applying for a new credit card, the study may be worth checking out, as it includes detailed scores for cards put out by the top ten issuers in the U.S. Overall, the study found these trends:

• Transparency is improving on annual fee disclosure: Whether because of new regulations introduced by the Credit CARD Act or other motivations, it seems that most card issuers have improved the clarity with which they explain the annual fees associated with their cards. Annual fees have apparently become more popular since the passage of the CARD Act, which limits overdraft fees.
• Transparency is still poor for balance transfers: One area in which many cards reportedly need improvement is information about transferring balances from one credit card to another. While balance transfers can be used to lower interest rates and thus help pay down debt, they often come with fees and unclear terms, which can make them more trouble than they’re worth.
• Cash-based rewards are easiest to understand: Another area where card issuers fell short of the transparency mark was on disclosing how rewards points and miles work and what exactly they’re worth. Because of this lack of clarity, the researchers recommend cash-back rewards as the most effective kind to use.

What might all of this mean? Hopefully, it will mean people are better informed about using their credit cards and able to manage their finances more effectively—and possibly reverse the trend of unmanageable credit card debt and filing bankruptcy that the country has seen for decades.

Additional Resources

The Credit CARD Act of 2009

Posted in Credit Cards, Credit and Bankruptcy, Financial Literacy, credit card statement | Comments Off

Back to School Doesn’t Have to Break the Bank

Each year, retailers and shoppers alike anticipate back to school sales with the intense focus of a professional athlete. This focus is a result of the high stakes of the event, as reports show the average family of four spends almost $600 getting their children prepared for school.

Even worse, the weakened state of the American economy has heightened the anxiety with which consumers approach late summer shopping. Fortunately, there are ways ensure that you don’t have to break the bank while shopping for school necessities.

To help frustrated consumers, the Sacramento Bee recently provided some wise strategies to carefully budget your school shopping.

Take Your Time

Don’t feel pressured to buy every single item your child needs before the first day of school. There may be some supplies you can buy later at a reduced price, as stores look to unload their excess inventory. Ask your child’s teacher which supplies can be purchased at a later date.

In addition, you don’t need to buy all your child’s clothes before school starts. According to the article, many fall clothes go on sale in October as stores clear their shelves for the holiday rush. This also gives your kids a chance to make crucial fashion decisions at their own pace.

Coupon, Coupon, Coupon

It sounds simple, but coupons can help you shave substantially costs off your back to school shopping. Many Americans are now reducing their debt by actively seeking coupons to use when they shop for basic necessities.

Today, with the aid of the Internet, finding coupons has never been easier. Some helpful coupon websites include CurrentCodes.com, dealcoupon.com, Becentsable.com, and Retailmenot.com.

Check Your Supplies First

Before rushing headfirst into new purchases, check your closets and cabinets for supplies that may save you the cost and hassle of making new buys. If you have enough old binders and pencils for a small army, recycle those instead of buying new items that will add to the clutter.

This strategy also applies to clothes, but may be less helpful since children grow out of old garb so fast. Fortunately, no one outgrows pencils and pens.

Make a Budget

Set a detailed budget before heading to the mall, and stick to it. Also, don’t be afraid of sharing this budget with your children. By creating a set budget, and meeting its limits, you will be able to protect your wallet while giving your children an important lesson in the benefits of sound financial planning.

Plus, by turning your search for school supplies into an opportunity to improve your children’s financial literacy, you will be giving them a valuable education well before the first school bell rings.

Posted in Financial Literacy, back-to-school, family budget, saving money, school shopping | Comments Off

What Do You Know about Your Credit Card Agreement?

A recent study from CreditCards.com illuminates a worrying issue about credit cards that may not be addressed by the Credit CARD Act (taking full effect later this month).

The study, which examined what it calls the “readability” of various credit card agreements, found some troubling trends, including:

• The average credit card agreement (that long document of fine print you have to sign when you open a new credit card) is written at a 12th grade reading level.
• The average American, it seems, reads at a ninth grade reading level, though as many as 48 percent read at a sixth grade level or below.
• As many as 80 percent of American adults have reading skills that aren’t up to the task of deciphering the language included in credit card agreements.

Taking into consideration from this study, it’s not at all surprising that Americans are getting in over their heads with credit card debt—to the extent that bankruptcy filings are expected to approach two million this year, according to sources.

Encouraging Changes

While the findings of the readability study may be cause for concern, there is some good news out there. For one thing, the study was reportedly made possible because of one requirement of the Credit CARD Act, which requires credit card issuers to submit copies of their card agreements to the Federal Reserve and for the Fed to post those agreements online.

And, as sources indicate, the average American needn’t always be at a loss when trying to understand the fine print in a card agreement:

• The newly mandated Consumer Financial Protection Bureau will have the ability to require credit card issuers to write their agreements in plain English, so that more credit card users can understand what they’re signing up for.
• Some banks apparently already write their agreements at a ninth grade level or below, which is what consumer advocates recommend. For a list of banks that offer more understandable contracts, see the CreditCards.com article.
• New requirements from the Fed mean that credit card agreements must include a one-page summary document of terms (which is a good thing, considering at least one agreement studied included more than 20,000 words!). This should outline the major terms a card requires.

So what does it all mean? The lack of readability in credit card agreements is scary partly because most consumer advocates push consumers to read in full any document before signing it – but reading doesn’t always mean understanding. If you aren’t sure about your card’s terms, consider asking a trusted friend or advisor to guide you or switching to one of the easier-to-fathom cards mentioned in the article.

Posted in Credit Cards, Financial Literacy, credit CARD act, credit card agreements, credit card statements | Comments Off

Personal Finance: What Troubles Us the Most?

A recent study by a consortium of advocacy groups reveals interesting data on what aspects of personal finance cause American consumers the most frustration. According to reports, a large number of consumer complaints were related to problems with car sales, credit issues, and debt, reports the Wall Street Journal.

To tap into the mind of the average consumer, the study polled a variety of state consumer agencies, which are facing record-breaking numbers of complaints while struggling under the weight of lowered budgets. A majority of the agencies polled reported a higher volume of complaints in 2009 than they received in 2008.

The list of the five areas that received the most consumer complaints reads like a “Who’s Who” of American economic ills. They are listed below:

1. Car Sales: Auto dealers earned the dubious distinction of being the focus of the most consumer complaints in 2009. Car buyers complained about misleading advertising tactics, poor repairs, towing disputes, and used cars that turn out to be lemons.
2. Credit and Debt: A large number of consumers experienced problems with predatory lending, harsh debt-collection practices, billing and fee disputes, and fraud related to home mortgages.
3. Home Construction: This represented the second largest source of consumer complaints in 2008, but fell to third last year as the overall amount of home sales plummeted. With so little construction, there was less to complain about, though contractors would likely welcome more complaints if it meant more business was on the horizon.
4. Utilities: The country’s utility services likely rank so high due to their necessity in most American homes. Still, consumers alleged service problems in a wide range of utilities, from phone and cable services to electric and gas.
5. Retail sales: Here, consumers typically complained about deceptive practices in the retail industry, like misleading newspaper advertisements, problems with coupons and gift card, and complications with the delivery of products.

Rounding out the top ten of most frequently cited areas of consumer complaints were general services, Internet sales, common household goods, disputes with landlords, and problems with health-related goods and services.

The Hottest Topic

The fastest growing complaint in 2009 centered on the increasingly popular scams offering to save homeowners from foreclosures. Susan Grant, a leading advocate with the Consumer Federation of America, observes that most consumers "are desperately trying to fend off foreclosure and in many of these offers to help them, [scammers] take their money, and in some cases, their homes, and run."

Additional Resources

To learn more about how to resolve your own consumer complaint, check out this handy guide issued by consumerfed.org.

If you are beyond the complaint stage and are experiencing severe financial distress, personal bankruptcy may prove to be a financial lifesaver.

Posted in Financial Literacy, Fraud, Personal Finance, scams | Comments Off

Long-Term Savings Might Mean Short-Term Spending

Did you know that a common contributing factor to bankruptcy filings is serious illness or injury? In fact, many Americans who file for bankruptcy to escape overwhelming debt do so because of medical bills they can’t afford and didn’t see coming.

It makes sense, then, to review some key ways to spend a little money now to avoid greater expenses in the future. Here’s a look at how you can protect yourself and your family, according to a recent article from U.S. News & World Report.

When to Buy New

• Cribs and children’s furniture: Even items that seem to be in good shape can be a health risk, as safety recalls on baby items are fairly common. Rather than scrambling for an item’s history, opt for a new crib with a proven safety record.
• Car seats: While nobody likes to think about getting in a serious car accident, they do happen and can be devastating if you and your loved ones aren’t prepared. Because safety standards are improved and changed commonly, opt for a new seat for your child. Also: consider that some damaged seats may look okay. Better not to find out the hard way.
• Bike helmets: Did you know that bike helmets are built to protect the head for only one crash? A used helmet may not provide the protection you think you're getting.
• Car tires: Like many of the items on this list, tires don’t come with an accident history and might not show visible signs of serious damage. But remember: the cost of new tires is probably less than the cost of the damage that could be caused by a serious accident. An ounce of prevention here is well worth the price.
• Computer software: While buying secondhand may seem like the cheapest way to go, it could end up being a total waste of money. Many kinds of software come with serial numbers that are registered with the company – after one registration, they can’t be used again and so would be worthless. Better to buy new software for yourself and avoid the risk of throwing away money.
• Mattresses and bedding: The cost (in dollars, hours, health and frustration) of dealing with bed bugs, mold, mites, bacteria or anything else that might linger on a secondhand mattress is rarely worth the savings. And don’t think these concerns are memories of a distant past, either: even mainstream retailers have had trouble with mattress-loving critters in recent weeks.
• Shoes: If you aren’t repelled by the idea of wearing someone else’s shoes, they may seem like an intriguing bargain. But be careful: used shoes tend to be molded to someone’s feet other than your own, and their support structures can be worn out. If you plan to be on your feet a lot, you may avoid serious back problems by buying new.

Posted in Financial Literacy, Personal Finance, medical bankruptcy, saving money | Comments Off

The Worrisome Truth about Debt Collectors

There’s been some clamor in the news recently about some of the abuses in the debt collection industry. A recent article from CNN Money profiles ten people who used to work as debt collectors, and some of the behavior they attribute to their coworkers and companies is appalling:

• Many former debt collectors were reportedly encouraged to belittle or demean the debtors they called, and often ended up yelling and swearing as part of their collection tactics.
• Even when no repossession action was legally allowed, some collectors reportedly threatened to repossess a debtor’s possessions in lieu of payment.
• Some collectors allegedly threatened physical violence to debtors and even contacted family members and friends about their debts.

Significantly, one woman profiled said that she believed the debt collectors got away with the above and other illegal collection techniques because many consumers simply don’t know their rights.

In fact, federal law strictly limits the methods debt collectors can use to get their job done. The following techniques are illegal (see a complete outline here):

• Phone contact outside the 8 am – 9 pm window
• Phone calls intended to harass, annoy or abuse (including repeated phone calls)
• Threat of legal action or arrest when none is legally permissible
• Deceit or misrepresentation in order to collect a debt (e.g. a debt collector claiming to be a law enforcer or lawyer)
• Communication with third parties about a consumer’s debt
• Contact at work after being asked to avoid such contact

Debts You Don’t Even Owe

As if such blatant misbehavior on the part of creditors as that reported by CNN weren’t enough, The New York Times recently reported that some automated court systems have been allowing collectors to collect on debts that consumers do not legally owe (such as debts discharged in bankruptcy)

The problem is complex, but it largely boils down to the fact that most consumers (about 10 percent of those contacted) apparently do nothing in response to court summonses about debts owed. And, according to sources, only about one percent of consumers contact a lawyer about their lawsuits.

In other words, this system reportedly allows collectors to sue consumers for debts and go to court without input from those consumers. This is worrisome, especially considering that as many as 94 percent of cases are allegedly dropped when proof of the debt is requested.

So what can you do to protect yourself from illegal creditor contact and legal action? Consider contacting a bankruptcy lawyer in your area if you think you’ve been wronged by the collection industry. It could save you from paying money you don’t owe.

Additional Resources

Fair Debt Collection Practices Act

Posted in Creditor Harassment, Financial Literacy, debt collection | Comments Off

The Worrisome Truth about Debt Collectors

There’s been some clamor in the news recently about some of the abuses in the debt collection industry. A recent article from CNN Money profiles ten people who used to work as debt collectors, and some of the behavior they attribute to their coworkers and companies is appalling:

• Many former debt collectors were reportedly encouraged to belittle or demean the debtors they called, and often ended up yelling and swearing as part of their collection tactics.
• Even when no repossession action was legally allowed, some collectors reportedly threatened to repossess a debtor’s possessions in lieu of payment.
• Some collectors allegedly threatened physical violence to debtors and even contacted family members and friends about their debts.

Significantly, one woman profiled said that she believed the debt collectors got away with the above and other illegal collection techniques because many consumers simply don’t know their rights.

In fact, federal law strictly limits the methods debt collectors can use to get their job done. The following techniques are illegal (see a complete outline here):

• Phone contact outside the 8 am – 9 pm window
• Phone calls intended to harass, annoy or abuse (including repeated phone calls)
• Threat of legal action or arrest when none is legally permissible
• Deceit or misrepresentation in order to collect a debt (e.g. a debt collector claiming to be a law enforcer or lawyer)
• Communication with third parties about a consumer’s debt
• Contact at work after being asked to avoid such contact

Debts You Don’t Even Owe

As if such blatant misbehavior on the part of creditors as that reported by CNN weren’t enough, The New York Times recently reported that some automated court systems have been allowing collectors to collect on debts that consumers do not legally owe (such as debts discharged in bankruptcy)

The problem is complex, but it largely boils down to the fact that most consumers (about 10 percent of those contacted) apparently do nothing in response to court summonses about debts owed. And, according to sources, only about one percent of consumers contact a lawyer about their lawsuits.

In other words, this system reportedly allows collectors to sue consumers for debts and go to court without input from those consumers. This is worrisome, especially considering that as many as 94 percent of cases are allegedly dropped when proof of the debt is requested.

So what can you do to protect yourself from illegal creditor contact and legal action? Consider contacting a bankruptcy lawyer in your area if you think you’ve been wronged by the collection industry. It could save you from paying money you don’t owe.

Additional Resources

Fair Debt Collection Practices Act

Posted in Creditor Harassment, Financial Literacy, collection calls, debt collection | Comments Off

Tips for Reducing Your Credit Card Bill Now

Anyone struggling with debt or trying to rebuild after a bankruptcy filing probably knows how challenging credit card bills can be: though the plastic rectangles themselves may be highly convenient, the monthly payments we make on them often are not.

And, with the economy tighter than the lid on a pickle jar, posts like this one are useful. It outlines some ways to minimize the amount you owe on your credit card without significantly altering your lifestyle (which, for many of us, may be impossible at this juncture).

Steps Toward Less Credit Card Debt

• Pay earlier than you have to: If you have a revolving balance on your credit card (meaning that you don’t pay the full amount you owe each month), interest is charged to that amount every day, so that the longer you wait to pay your bill, the more interest accrues. If you can pay even a few days before the due date, you can save yourself a little bit each month. And, if you know you have a revolving balance and have online payments set up, you don’t have to wait until you receive a bill to make a payment—if you get unexpected cash in the middle of the month, you can funnel it toward your credit card debt before it disappears into groceries.
• Pay more than you have to: The Credit CARD Act requires credit card bills to indicate how long it will take you to pay off your entire debt by making only minimum payments, which is a nice feature. It reminds us that the minimum payment is not designed to ease our monthly burdens—it’s designed to make money for the credit card companies and stretch our payments out over a long period, over which we’ll pay plenty of interest. Whenever possible, send more than the minimum payment. Ideally, aim for paying your card in full each month.
• Double check your bill: Next time you receive a bill, review all your purchases, especially regular monthly subscriptions and memberships. If you could conceivably do without any of them, cancel and save some money each month. Remember that most libraries carry lots of magazines and a lot of content is available online. Plus, memberships are designed to make companies a profit—so if you aren’t absolutely dependent on yours, snip them out.
• Leave home without it: While it’s easy to justify carrying a credit card in case an “emergency” happens, having the card with you at all times can be dangerous financially. Try keeping it at home for a week and noting how different your buying habits are. If nothing else, this exercise should open your eyes to when and how you tend to use your card—and how you could limit or eliminate unnecessary purchases.
• Rethink outings with groups: Eating out can get expensive—especially if you frequently put the group’s meal on your card and everyone gives you cash. It’s far too easy to use that cash for something other than paying your credit card bill, and meanwhile you could be paying interest for everyone’s dinner. Suggest a night in every once in a while, or arm yourself with cash.

Have other tips for cutting down credit card debt? Leave them in the comments!

Posted in Credit After Bankruptcy, Financial Literacy, Life After Bankruptcy, credit card bankruptcy | Comments Off

What Financial Reform Might Mean for You

There’s been a lot in the news about the financial regulatory overhaul bill currently working itself out in Congress and, with the bill expected to be signed into law by the Fourth of July, it’s a good time to look at how you’re likely to benefit from the bill’s passage. Here’s a look at how various aspects of the legislation are likely to play out when the financial reform hits the books (adapted in part from this article).

Outlook Good for Consumers

One of the major changes the bill will make is the creation of the Consumer Financial Protection Agency, which would be a unit dedicated to regulating financial products with consumer rights in mind. The necessity for such an organization was made clear when millions of Americans fell victim to the terrors of subprime mortgages during the real estate boom.

In addition to the creation of the CFPA, the bill could benefit ordinary Americans for the following reasons.

• Because the CFPA would be part of the Federal Reserve, it will get funding from the Fed and be able to ask Congress for additional funds, if needed.
• The protections introduced to shield consumers from predatory and/or dangerous financial products can be lifted (by bankers’ petitions) only if such protections can be shown to threaten the larger financial system.
• The CFPA would have the ability to create and enforce rules for various consumer financial products, including mortgages and credit cards.
• One potential downside to watch out for is that auto dealerships likely will not be regulated by the CFPA, which means that consumers can probably not expect any amped-up protections for vehicle-related loans.

Credit Rating Agencies Face New Restrictions

Credit rating agencies were partly responsible for deceptively high credit labels on risky investment products like the securitized pools of subprime mortgages that led to the housing market’s crash in 2007 and touched off the Great Recession. The financial regulation bill would attempt to eliminate such deceptive ratings:

• These agencies will have greater liability for the ratings they give and will be subject to lawsuits if it can be proved that they recklessly ignored or failed to review important information when evaluating a product.
• The Securities and Exchange Commission (SEC) will develop a solution for the conflicts of interest that currently exist and are partly responsible for the incorrect and deceptive ratings of the past.

Essentially, the new regulations should make investments safer for investors by eliminating some of the guesswork and conflicted interests that led to past problems. Such improvements could lead to greater stability overall in financial markets and thus the entire economy.

Posted in Financial Literacy, consumer rights, financial reform | Comments Off