We ask the CRA’s to re-investigate each of the creditors’ reports that were listed in the bankruptcy, to be sure they are reporting accurately. If they were discharged in bankruptcy, the balance due should be listed as zero, and there should be a notation that the account was “discharged in bankruptcy.”  This is a derogatory item on your credit report, but at least it shows a zero balance. If you don’t do this “re-investigation” or dispute process, it’s possible that the creditors will continue to report a balance due (or just not report anything new), which makes it look like you charged up debt after the bankruptcy, and didn’t pay it. That is worse.

And once it shows discharged in bankruptcy, the item must be removed in 7 years. Not only that, the older that item becomes, the less it hurts your credit score. Not sure how to dispute items on your credit reports? You can go to the web address http://www.myfaircredit.com/s/correcting-your-credit, it tells you exactly how to do it.

Most of the time, it works quite well. If a bankruptcy client pays their bills on time after filing bankruptcy, and uses credit responsibly, their credit scores can recover into the mid 600′s after one year after bankruptcy, and possibly to 700 or so after two years.

We do the credit clean-up for clients, because even though we tell them how to do it, after bankruptcy many of them just either: (1) don’t get around to it; or (2) are just too overwhelmed by going through the bankruptcy, it is just not the most important thing to them at that time. Then when they decide they have to finance a new car, or buy a house, they decide to fix their credit, but unfortunately it can take a long time to work on your credit to get it right.

If you review your credit reports once a year, you can stay on top of the situation. By law, you can obtain free credit reports once per year from https://www.annualcreditreport.com. Review the reports, and follow the instructions to dispute any inaccurate information. Not sure how to raise your credit score? You can purchase your credit scores (they are not free, like your credit reports) at www.myfico.com, and also learn what you need to do to raise your score, and what it holding you back.

If you were turned down for credit, you should receive an “adverse action notice” or similar notice, which may also include your credit score, at no charge to you. Federal law was changed to require this starting in 2011. If you want more information about this, go to http://www.scoreinfo.org.

It takes time to get your credit back, once you have had problems with it, including bankruptcy. Whatever you do, to get your credit score headed in the right direction, make a budget and live on what you make. If you can help it, don’t default on medical bills, cell phones, or other items. But of course you must prioritize your bills, so never put those types of bills ahead of truly important things like housing, transportation, and other necessities of life for your family. There are more important things than a good credit score.

Remember the TV jingle, “Countrywide Is On Your Side” or the other slogans about how great Countrywide was? I liked the one, “NOBODY can do what COUNTRYWIDE CAN!”

Well, it turns out that it was about the truth, but not in a good way. Recently Countrywide (now part of Bank of America) has had to fork over $108 Million in refunds to consumers that it allegedly cheated through fraudulent practices. If you were a customer of Countrywide from 2005 through mid-2008, you may be entitled to a refund.

“It’s astonishing that a single company could be responsible for overcharging more than 450,000 homeowners,” FTC Chairman Jon Leibowitz said. “Countrywide’s unconscionable behavior harmed American consumers on a massive scale and we are proud to be getting every single dollar back to hundreds of thousands of struggling consumers who can least afford to lose the money.”

The FTC’s June 2010 settlement order required Countrywide, which is now owned by Bank of America, to pay $108 million to be used for refunds and barred the company from taking advantage of borrowers who have fallen behind on their payments. The refunds are being distributed to consumers whose loans were serviced by Countrywide between January 1, 2005, and July 1, 2008, and who were subject to the company’s allegedly unlawful practices.

According to the FTC, homeowners who were in default on their loans were charged excessive fees for services such as property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property. Rather than simply hire third-party vendors to perform the services, Countrywide used subsidiaries to hire the vendors. The subsidiaries allegedly marked up the price of the services charged by the vendors – often by 100 percent or more – and Countrywide then charged the homeowners the marked-up fees. The FTC complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times.

Also, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the FTC alleged that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans, and added fees and escrow charges to their mortgage accounts without notice.

Some People Need to Consider Short Sale or Walkaway From Underwater House

Here at my law office in west Houston, we help a lot of people save their homes by filing Chapter 13 bankruptcy. We can stop a foreclosure from taking place, and then set up a plan whereby the client pays a chapter 13 trustee, who pays their regular payments to the mortgage company and also an extra amount to catch them up over a long period of time, usually 5 years. The plan payments are deducted from my clients’ paychecks. For the cases that I handled in 2005 (the last full year for which I have numbers), 66% of my clients that filed a Chapter 13, completed the case and received a discharge (or converted to chapter 7 and received a discharge).

But not all of my clients can afford their house. Particularly during the “real estate boom” if you want to call it that, mortgage lenders were lending money to people to buy more house than the people could afford. In some cases, people were buying houses, when they should not have been allowed to buy any house. Either they just didn’t have the income to do so, or they were just not responsible enough to be ready for home ownership.

Or in other cases, people bought a house that they could afford at the time, but something happened. Perhaps they were in the real estate business, or some other business that has become depressed, and they just cannot now afford to keep the house. Or they became ill, disable, or divorced, or their business failed, the reasons are infinite, but some people can just no longer afford a house, if they ever could.

Anyway, for some of our clients, we counsel them that in their particular case, it is not worth it, and to give it up. If you can’t sell your house in the usual way because it is “underwater,” i.e. you owe more than it is worth, it may be possible to do a “short sale” whereby you sell the house for the best price you can, and negotiate with the mortgage company to accept that amount in full satisfaction of the debt. You will probably need help doing that, many real estate professionals can help you with that.

For other people, just walking away from the house and letting it foreclose can be the best thing.  There is even a website devoted just to that, www.youwalkaway.com, that seems to have good information about it. There is a calculator on the site where you can see how much money you can save (or lose) by giving up the house. And I hate to counsel people to break their contract, their promise that they made when they signed the mortgage to buy their house.

But in some cases, there is just no way. I had an older lady that had just bought a house before she retired (does that make a lot of sense?). In her case, some family members were going to stay with her and help her pay the mortgage. Well they had a falling out, and the family members left. So here she is, with a total of only $2600 per month or so in retirement income, and the house payment alone is $2000 per month! But a house is not just a payment, there are taxes, insurance, maintenance, mowing the lawn, etc., etc. And as we get older, it is harder to keep a house up.

Anyway, we finally talked her into letting the house go, and moving into a subsidized rent apartment, that is set up for senior citizens. She is much happier, has friends and activities, and her stress level is way down. She has much more disposable income each month, and can actually afford to eat a good diet, buy clothes and have recreational activities.

So while I encourage clients to try to save their house if is practicable, income some cases it just doesn’t make sense. If it doesn’t in you case, make the decision and let the bank have the place. Of course talk to an experienced consumer lawyer or consumer bankruptcy lawyer first, to be sure you know what consequences that you face if you give it up. My clients are typically already in bankruptcy, so they will face little or no further consequences by walking away. If you live in the Houston Texas area or surrounding counties, contact my law office at 713-772-8037 or online at www.jthomasblack.com.

In fact, he said he had just refinanced his truck, the one that we reaffirmed in the bankruptcy, at a 4.3% interest rate. He said the banker offered to do it, and he told the banker that he must not have looked at his credit score. The banker looked at his credit score, and it was 680, not too shabby for someone less than a year after a bankruptcy case.

I’m sure it helps that we do a “credit clean-up” for clients at no additional charge after their bankruptcy. We write to the major credit bureaus and ask them to “reinvestigate” or update their records, to properly show that the discharged debts have a zero balance, and show that they were discharged in bankruptcy.

And so long as the client does their part, by paying any reaffirmed or new debts on time, it is not unusual for a client to have a credit score in the mid-600′s after one year, and 700+ after two years.

Now if you are one of those people who are always paying their debts late, or if you default on cell phone contracts or medical bills or something else AFTER the bankruptcy, then your credit will go right straight down again, and all bets or off.

But if you find yourself having to file bankruptcy, and you can keep your bills paid on time on a “going forward” basis, you can rebuild your credit rather quickly. And that’s good news, if you’re looking to buy something on credit, or try to refinance something, like my former client refinanced his truck.

Beautiful Surf off Puerto Rico October 2010

While most of my law practice is handling consumer bankruptcy cases here at my law office in Houston, occasionally I have a client that either can’t file bankruptcy for some reason, or doesn’t want to, and has some money with which to settle their debts.

For example, I finished a lady’s debt settlement case recently who would not have passed the “means test” to qualify to file Chapter 7 bankruptcy. And she would have had to pay a lot of money each month to a Trustee through a 5 year Chapter 13 plan. And she had about $88,000 in unsecured credit card debt that was delinquent, and the bill collectors were calling her night and day.

I was able to contact her bill collectors to make them stop calling her right away. Then over 6 months or so, we were able to arrange settlements of her debt for 26 cents on the dollar, or about $23,000 to settle $88,000. She was able to pull the money from a retirement plan. And it cost her less than $2500 in attorney fees.

I’m not saying all debt can be settled for that, but I thought this case turned out well for her, and she won’t have a bankruptcy on her record. But not all of my clients have access to that much money to settle. Another down side, the creditors can send 1099′s to the IRS, and you may have to pay income tax on the amount of debt that is forgiven.

It sounds kind of crazy at first, but the IRS figures, if you don’t have to pay a debt, it is just like you made that much money, and they tax you on it. There are exceptions to this tax problem, and a taxpayer can attach Form 982 to their tax return and avoid this result, if one of the exceptions applies.

But I do not recommend that people use the “debt settlement” firms that you see advertising heavily on TV or the internet. There have been cases where these firms have gone bankrupt themselves, and their clients have lost all the settlement money. At least one that I heard about, just absconded with all the money and the principals left town. And they are way too expensive. Most of them charge a percentage of what they save you, application fees, monthly fees, etc., it’s just way too much.

And, under the Fair Debt Collection Practices Act (FDCPA), if a debt collector knows that you are represented by an attorney, they are not permitted to contact you anymore; they must go through the attorney.

If you need help managing your bills or need to file a bankruptcy case, and you live in the Houston Texas area or surrounding counties, call my office at 713-772-8037, or visit my main website at www.jthomasblack.com to make an appointment.

MMI provides financial guidance and counseling, and if you qualify can put you on a debt management plan (DMP) to repay your debts over time. DMP’s don’t generally reduce your debt; they are “consolidation” plans, where you make one payment a month to MMI, and MMI pays your creditors for you.

For the people that can afford these DMP plans, they are fine. It can help you avoid bankruptcy. Many of my clients have consulted with credit counselors before they come see me, and legitimate ones like MMI will just tell them whether or not they can help them, or if they should consult an attorney about their debt problems, and possibly consider filing bankruptcy.

Most if not all of the “shady” debt settlement companies, are not even legally operating in Texas. To operate legally, they have to be registered with the Texas Consumer Credit Commissioner, and comply with the Texas Debtor Assistance Law, which almost none of them do.

To see if your debt settlement company complies, go to http://www.occc.state.tx.us/pages/searches.htm and click on “List of Debt Management Service Providers. If your company is not on that list, they are not operating legally in the State of Texas.

I just had a couple come in to the office this morning, that had paid a debt settlement company $9000 in fees, and the company had only settled one debt for them. Then they were sued for $19,000 by a creditor, and the debt settlement company told them they needed to file bankruptcy.

So the debt settlement company basically did them no good at all. We will likely put them into a Chapter 13 bankruptcy, paying $450 per month for 5 years. That will repay 30% of their $75,000 in unsecured debt, with the rest being discharged or cancelled. And no one can sue them or call them at work trying to collect, once they file Chapter 13.

If you are interested in consulting with me about your options, including filing a bankruptcy case, and you live in the Houston Texas area or surrounding counties, give my office a call at 713-772-8037 and make an appointment to meet with me. Or you can make an appointment on my website at http://www.jthomasblack.com. There is no charge for your first visit.

Anyway, welcome to Sugar Land, MMI. I’m sure you will be a good neighbor!

If you have been a victim of violent crime in Texas, you may be entitled to a cash award from the Texas Crime Victim’s Compensation Fund. And it is flush! The total amount that it has for victimized Texans is now $1,000,000,000! That’s billion with a “B.”

You can be eligible for up to $50,000 if you are a violent crime victim in Texas, and another $75,000 if you are totally and permanently disabled.

An excerpt from the Texas Attorney General’s website reads as follows:

The Crime Victims’Compensation Program is administered by the Office of the Attorney General and is dedicated to ensuring that victims of violent crime are provided financial assistance for crime-related expenses that cannot be reimbursed by insurance or other sources.

State law requires that reimbursement first be sought from other sources, such as health insurance, Medicaid, Medicare, auto insurance, or Texas Workers Compensation. CVC program staff assists applicants in coordinating the use of all available resources.

Claims may be approved for benefits up to a total of $50,000. Individuals who suffer total and permanent disability as a result of the crime may qualify for an additional $75,000, which may be used for specific and limited expenses, such as lost wages, prosthetics, rehabilitation or making a home accessible, depending upon the law in effect on the crime date.

The financial assistance may be limited or unavailable depending on laws in effect when the crime occurred and is dependent upon the applicant providing necessary and required documentation.

For More Information

In your community, contact your local law enforcement agency’s Crime Victim Liaison or your prosecutor’s Victim Assistance Coordinator.

Or e-mail:crimevictims@oag.state.tx.us or Call (800) 983-9933 or (512) 936-1200 (in Austin) or Fax: (512) 320-8270.

What the heck is a “strip off”? Well, let’s say that you have two mortgages on your house. When you bought the house, you used “80-20″ financing that has been so prevalent in recent years.

Let’s also say that the first mortgage is $80,000, and the second is $20,000. When you bought the house, it was $100,000 purchase price, so you financed 100% of the purchase price.

After buying the house, the value of your house fell. And fell a lot, to where it was only worth $75,000. If you file Chapter 13 bankruptcy, it is possible to “strip off” the second mortgage, but having the Bankruptcy Judge declare that there is “absolutely no” equity to support it.

This turns the second mortgage into an “unsecured debt” which is usually paid very little and discharged or cancelled, when you complete your Chapter 13 plan.

So now, instead of owing $100,000 on a $75,000 house, and being tempted to walk away (hurting home prices even more), you owe only $80,000 on it, and will more likely stay. Your other creditors would also likely receive a larger distribution during your Chapter 13 case because of the strip off; that is the real reason it is permitted.

If you live in the Houston metropolitan area or surrounding counties, are having financial troubles, and think you may qualify for a strip off, make an appointment to see me by calling 713-772-8037.