Archive for March, 2010
How to fix a false statement on your credit report
In order to determine if you should be granted the use and privilege of a credit card, mortgage, car loan or other source of funding, most creditors rely heavily on your credit report. These credit reports are generated by information provided by your current creditors, that is those who you owe money for goods and services. The score itself is derived by looking at several factors including you new debt, the type of credit used, the total amounts owed, your payment history and how long you have owed a certain debt.
It’s estimated that 3 out of 4 credit reports contain some sort of inaccurate information. If one of your creditors reports something negative, such as a missed payment, or an improper amount of debt owed, your credit score can decline. So what do you do if someone has misrepresented a fact to the major credit boroughs?
The first step that you must take is become informed. More specifically, you must know that there is a misrepresentation on your credit report and in order to do that, you need to get a copy of your credit report and review it. The Federal Trade Commission, (“FTC”) is the government agency that regulates and monitors credit scoring, credit collections and all debt issues. Several years ago, the FTC and other political figures pushed for a law that allows consumers to get a free credit report annually without needing to pay. In order to obtain a free credit report you can go to www.annualcreditreport.com or call 877-322-8228.
Once you have confirmed that your credit report contains inaccurate information, The Fair Credit Reporting Act provides a means for correcting these mistakes by allowing you to challenge any information you believe to be incorrect. If you challenge something and the information isn’t verified within a certain period of time, the Act even requires that it be automatically removed. You can complete this process of challenging the information on your own or you can hire a professional to assist you; it is a very time consuming process oftentimes, so you must decide how much time you are able and willing to devote to the process when deciding whether or not to seek out help.
As you move forward in an effort to repair your credit, it is also helpful to be aware that there are protections available to you from debt collectors as outlined in the FDCPA (Fair Debt Collection Protection Act) that protects you from excessive and inappropriate collection methods. You can set what times collection calls can come and where, especially if you do so in writing. Generally they’re allowed to call any number they have between 8AM and 9PM. However, if you make them aware of a certain time or place that calls would be inappropriate; they are not allowed to call.
Top 5 Reasons Why People Go Bankrupt
by Mark P. Cussen, Source: Yahoo Finance, March 23, 2010
1. Medical Expenses
A study done at Harvard University indicates that this is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies. One of the interesting caveats of this study shows that 78% of filers had some form of health insurance, thus bucking the myth that medical bills affect only the uninsured.
Rare or serious diseases or injuries can easily result in hundreds of thousands of dollars in medical bills – bills that can quickly wipe out savings and retirement accounts, college education funds and home equity. Once these have been exhausted, bankruptcy may be the only shelter left, regardless of whether the patient or his or her family was able to apply health coverage to a portion of the bill or not.
Whether due to layoff, termination or resignation, the loss of income from a job can be equally devastating. Some are lucky enough to receive severance packages, but many find pink slips on their desks or lockers with little or no prior notice. Not having an emergency fund to draw from only worsens this situation, and using credit cards to pay bills can be disastrous.
2. Job Loss
The loss of insurance coverage and the cost of COBRA insurance also drain the job seeker’s already limited resources. Those who are unable to find similar gainful employment for an extended period of time may not be able to recover from the lack of income in time to keep the creditors at bay.
3. Poor/Excess Use of Credit
Some people simply can’t control their spending. Credit card bills, installment debt, car and other loan payments can eventually spiral out of control, until finally the borrower is unable to make even the minimum payment on each type of debt. If the borrower cannot access funds from friends or family or otherwise obtain a debt-consolidation loan, then bankruptcy is usually the inevitable alternative.
Statistics indicate that most debt-consolidation plans fail for various reasons, and usually only delay filing for most participants. Although home-equity loans can be a good remedy for unsecured debt in some cases, once it is exhausted, irresponsible borrowers can face foreclosure on their homes if they are unable to make this payment as well.
4. Divorce/Separation
Marital dissolutions create tremendous financial strain on both partners in several ways. First come the legal fees, which can be astronomical in some cases, followed by a division of marital assets, decree of child support and/or alimony, and finally the ongoing cost of keeping up two separate households after the split. The legal costs alone are enough to force some to file, while wage garnishments to cover back child support or alimony can strip others of the ability to pay the rest of their bills. Spouses who fail to pay the support dictated in the agreement often leave the other completely destitute.
5. Unexpected Expenses
Loss of property due to theft or casualty, such as earthquakes, floods or tornadoes for which the owner is not insured can force some into bankruptcy. Many homeowners are likely unaware that they must take out separate coverage for certain events such as earthquakes. Those who do not have coverage for this type of peril can face the loss of not only their homes but most or all of their possessions as well. Not only must they then pay to replace these items, but they must also find immediate food and shelter in the meantime. Furthermore, those who lose their wardrobes in such a catastrophe may not be able to dress appropriately for their work, which could cost them their jobs.
To read the full article, click here
Mortgage Forgiveness in Massachusetts
Mortgage Forgiveness Debt Relief Act and Debt Cancellation Act is a significant relief of taxable income in the event that you conducted a short sale from 2007 to 2010. In the past, if you sold a home for less then you owed the bank and the bank agreed to forgive the difference, you would have to declare the difference as income, and would be subject to paying taxes as the difference was income. This does not make a lot of sense to those who had to sell for a loss, for if they had the income, they likely would not have sold by way of short sale. However, the Mortgage Forgiveness Debt Relief Act eliminates that requirement.
The rub on this tax relief is that the relief is only relative to your Federal taxes. However, not so much with your state taxes. Each state has its own set of tax regulations. For example, in Massachusetts, their is no such relief, and you still have to declare the loss as taxable income at 5.3%. If you find yourself in this situation, there are still options including, making an offer in compromise with the Department of Revenue, putting your taxes into a chapter 13 bankruptcy, or simply paying it out at a normal interest rate. The bottom line is if you sold your home for less then you owed, you should speak to a tax professional this year
How bankruptcy can affect children
The affects of bankruptcy can have a lasting impact on a person. Once a child is involved the affects can last for a long time. The topic of dealing with the affects of bankruptcy on children is not a topic that has received much attention over the years, but this topic is one that should be addressed.In many cases, parents try to minimize the affect of a bankruptcy on the family. Children in most situations may not even know anything has transpired. Moreover, it may be far less traumatic even if the children know their parents are facing financial distress, then to know your home has been taken away by the bank.
Once a bankruptcy claim is filed the courts will decide which debts require payment. As such, the court can determine that certain expenses are allowed while others are not. Once such expenses is 529 plans or other savings accounts for college. During times like this consulting with an attorney can be beneficial in order to get a good understanding of how your child may be affected once you file for bankruptcy. In addition, there are many other situations that can comingle a parents debt with the financial interest of their kids. To read more about these situations, check out Jonathan Ginsberg an Atlanta bankrutpcy attorney’s blog.
There is no doubt that the stress of bankruptcy can take a toll on a child. A study conducted by the Iowa State University Institute for Social and Behavioral Research states that children who experience socioeconomic adversity at an early age are at an increased risk of experiencing mental health challenges during their teen years. A child may begin to wonder whether or not their family will have a place to live or what will happen to them in the future. A family’s financial status can affect a child because of society’s emphasis on being financial stable and achieving a certain level of success. Once a child realizes the lack of financial resources available for their family that child may be embarrassed and could be subjected to negative treatment amongst his or her peers.
Despite all the negative emotions associated with bankruptcy it is important to keep your children involved in the financial matters of your family. If a parent is laid off from their job of made the decision to file for bankruptcy the financial make up of that family changes. The next step is to explain the financial situation of your family with your children so they are aware of the situation. Parents must remember that children are learning from how their parents are dealing with bankruptcy and other financial matters.
The issue of bankruptcy is not an issue topic to discuss. For parents the issue of bankruptcy can become even harder to explain because their financial outlook can be affected as well. Despite this obstacle, it is important to minimize as much stress as possible and make the right decisions that will benefit your children in the future.
