Five universities in the United States recently combined to conduct a study that revealed many college students either misuse their plastic or do not fully understand the terms surrounding their credit cards.
]]> The study was dubbed Financial Literacy and Credit Cards: A Multi Campus Survey, and in it, it showed that 70 percent of college students have credit cards. Of those cardholders, many of them lacked important knowledge that can be used to help consumers stay out of serious credit card debt.For instance, five out of every six cardholders did not know the interest rates tied to their cards. Some credit cards can carry very high interest rates, which can allow small amounts of credit card debt to spiral out of control in a hurry.
Also, 75 percent of cardholders did not know what fees would be tacked on if they made a late payment. Additionally, 70 percent were unaware of their over-balance fees.
It's no surprise that a wide majority of card-carrying college students carry a balance from month to month. The study stated that 90 percent of college students carry a balance, which constantly grows with high interest rates. Average credit card debt for college students moved from $946 in 2004 to $4,100 in 2009.
Students are constantly racking up credit card debt in order to pay for every day living expenses, but also frivolous purchases that they do not need. The study proves that programs to instill a broader knowledge of credit cards and credit card debt is greatly needed among college students. They clearly are not gleaning this information from their normal education. This was shown in the fact that all students involved in the study were business majors.
Source: NextStudent.com, "Study: College students and credit cards don't mix," Shannon Raspberry, April 20, 2012
]]>Ms. Suleman became an international media sensation in 2008 when news of her birthing eight children at once as the result of in-vitro fertilization treatments went public. She already had six children at the time, also through in-vitro fertilization procedures.
]]> Now, the mother of 14 has sought debt relief through filing for Chapter 7 bankruptcy, sometimes called a liquidation type of bankruptcy. Court papers state she is $1 million in debt, including debts to the city's water department, DirecTV, her father and a school where several of her children attend. She is also more than $30,000 behind in rent. This has made it impossible for her landlord to pay the mortgage on the property, which has gone into foreclosure. A foreclosure auction for the property was scheduled for last week however, the auction was reportedly postponed.Under Chapter 7 bankruptcy, a person chooses to liquidate their non-exempt assets and the proceeds are then used to pay creditors. Any remaining debt after liquidation is then discharged and the slate is wiped clean. In Ms. Suleman's case she reportedly has roughly $50,000 in assets, however that is a small amount compared to the $1 million she owes her creditors. Many New Yorkers can probably relate to her financial struggles in today's tough economic environment.
Ms. Suleman has said that she sought Chapter 7 bankruptcy because she wanted a fresh start and it was the best move she could make for the well being of her children. She has struggled with trying to earn enough money through tabloid interviews and photo shoots, however she has been unable to earn enough to support her children and kept getting further behind on her bills.
Source: Forbes, "Octomom is bankrupt, considering porn. So what happens to the kids?" Meghan Casserly, May 1, 2012
]]>But, one crippling form of debt is immune from bankruptcy and it continues to hold down many unfortunate individuals around the country. Debt from private school loans cannot be remedied through bankruptcy due to a law passed by Congress in 2005. With this new law, school loans were classified with the likes of child support and criminal fines as debt that cannot be eliminated through bankruptcy.
]]> The end result is a younger generation growing up under the weight of growing student loan debt and there is literally nothing they can do about it until the laws change.Those on the side of student debtors say that the law allows student loan providers to issue loans to students that cannot afford it, because they know no matter what, that student will have to find a way to pay it off. By allowing student loan debt to be cleared with bankruptcy, it would allow students that simply cannot pay their bill the relief that they need, student advocates said. Those who can manage to make payments would continue to do so.
The issue has not received significant attention from key political leaders. Recently, lawmakers stopped interest rates on many loans from doubling. This, however, only helps new borrowers but keeps old borrowers buried under their debt.
While the Obama Administration was applauded for introducing measures like an income-based repayment program for federally backed loans, a Democratic senator from Illinois has tried to put the real solution into motion. Richard Durbin proposed that the 2005 law that says privately held student loans cannot be expunged by bankruptcy be overturned. Experts have very little faith the bill will pass through Congress.
Source: The Huffington Post, "Americans struggle student debt, even after filing for bankruptcy," Justin Pope, April 25, 2012
]]>With a growing number of so-called companies that have emerged for the sole purpose of preying on debt-strapped individuals, debtors might not know which inquiries they should consider credible and which ones to ignore.
]]> Just recently, the Federal Trade Commission shut down an operation in California that used call centers outside of the country that would place phony calls to debtors and threaten them with extreme action if they did not send payment. A caller from this operation took such an action against an American woman and told her that if she did not send payment, police would be by to arrest her within a half-hour. The woman understandably panicked and quickly sent a payment to the company.The Federal Trade Commission has made an effort to squash these efforts, which most often take place from overseas. The problem for consumers is they likely have no idea how to detect whether it is a scam or a legitimate debt collector requesting payment.
The scammers make themselves sound official and can also evoke strong emotions by issuing insults or threats to the debtor. Members of the recent operation even sent a woman a letter printed on what looked to be official stationary from the Department of Justice, thus making it look even more official.
Misrepresenting and issuing threats are illegal for legitimate debt collectors, too, but many of them still employ those tactics.
As a part of the Fair Debt Collection Act, any legitimate collector must send a debtor a written statement that conveys to them how much they owe. If you have not received this documentation, but are contacted by a collector, there is a chance it could be a fraud.
The Federal Trade Commission has a full list of tips on how to detect whether a debt collector is a fraud on its website.
Source: Huffington Post, "Debt collection scam made threats, extorted money, charges FTC," Catherine New, April 11, 2012
]]>For other, more high profile individuals, like New York rapper Young Buck, they have more valuable assets that they do not necessary need that could be sold off to help settle debt.
]]> We previously wrote about how the New York rapper originally wanted to file for Chapter 11 bankruptcy in order to reorganize his debt and pay it off. A bankruptcy judge said the rapper failed to come up with a viable business plan and now must go through with Chapter 7 liquidation.The assets being liquidated from Young Buck's estate have the attention of music fans around the country. Among those assets is the rapper's intellectual property, which includes things like trademarks, masters, royalties and rights and licenses for the rapper's music.
By giving up masters to his songs, Young Buck will not be able to re-release music later or license it for commercial use. In fact, the new owner will. Whoever buys the royalties will also be able to make money from the distribution and airplay of the songs.
While it might be a dream for fans to actually own some Young Buck songs, experts say a more suitable buyer would be someone in the music business that would know how to capitalize on the assets.
The sale of Young Buck's intellectual property is tentatively slated for May 14 at an auction at a Nashville, Tennessee law firm.
While this might seem like all doom-and-gloom for the rapper, the move gives him a fresh financial start and the ability to get from under an insurmountable amount of debt.
Young Buck has not recorded any new music as of late, but told media that he is negotiating a deal with his former record label G-Unit.
Source: The Wall Street Journal, "Young Buck songs, royalties on the block," Jacqueline Palank, April 6, 2012
]]>Certain levels of debt should be handled in different ways. For instance, lower debt levels, like $1,000 to $5,000, could likely be remedied by something as simple as changing spending habits. For anything higher than this, more radical measures might be in order, like bankruptcy.
]]> A general rule of thumb is that if your debt level equals half of your annual income or more, somewhat extreme measures like declaring bankruptcy might be in order. Other measures like developing a debt-management plan or receiving help from creditor counselors could certainly help out as well.Part of this process could entail getting a hold of your creditors in hopes of negotiating a new, lower interest rate. With a lower interest rate, it could increase your chances of paying off the debt and in a shorter period of time. Many creditors are willing to negotiate interest rates in order to retain your business. It always helps if you've been a loyal customer with a previously sterling credit record.
Men and women who try this will not want to go into the process alone. Having a bankruptcy attorney and/or credit counselor will help hold off negative consequences of such negotiations, like the lowering of your credit limit.
Credit counselors can help consumers get on a debt-management plan that will aim to pay off unsecured debt, like the kind tied with credit cards and medical bills.
A bankruptcy attorney will best be able to determine whether or not you qualify for Chapter 7 bankruptcy, which would wipe out most unsecured debt. Occasionally, a filer will lose some of their assets through Chapter 7's liquidation proceedings, but laws vary throughout each state.
If a filer makes too much money to qualify for Chapter 7, a bankruptcy attorney can help them file for Chapter 13 bankruptcy, which aims at paying off debt within three to five years. This also ensures that a mortgage lender will not foreclose your home.
Source: CNBC.com, "Unmanageable debt? How to get help," Scott Gamm, March 16, 2012
]]>Our nation has already witnessed crises over astronomical amounts of credit card and mortgage debt, but another form of debt has reached new heights.
]]> National student loan debt just recently eclipsed the $1 trillion-mark. More and more students are starting off on the wrong financial foot out of school already -- anchored down by huge sums of debt without the guarantee of a job that will offer them enough money to continue making payments. Many of these debts can drain a person dry financially. Declaring bankruptcy is often the most effective way to unchain yourself from such a financial burden.What could be considered even more troubling is that regulators and experts on this type of debt are not alarmed and are telling the general public not to panic. Individuals that belong to this camp argue that student loan debt cannot have a far-reaching effect on the entire economy like the mortgage crises did.
Still, students have plenty to worry about. Over the last few years, some centers for higher education have gone so far as to double the price of their tuition, even as high unemployment rates have hurt the prospect for employment when they graduate. This has forced many high school graduates to either opt not to go to college or drop out early if they are already enrolled.
To compound the problem, borrowers have recently emerged that are ready and willing to extend loans to parents who would like to send their children to private schools, including kindergarten.
If you have racked up student loan debt and have not seen a return on the investment once you have graduated, it would be best to contact a qualified bankruptcy attorney to discuss ways to manage this debt.
Source: Daily Gossip, "Student loan debt tops $1 trillion but experts aren't worried," John Colston, March 30, 3012
]]>There are countless stories out there from Rochester area consumers who have been harassed and threatened by debt collectors.
]]> One individual even recorded a call where a debt collector threatened to kill them if they did not make a payment on their debt. Debt collectors will stop at nothing to get you to act and send them payments. For this reason, financial experts say that men and women need to familiarize themselves with the statutes for their specific states concerning debt collection. These statutes govern what debt collectors can and cannot sue you for. For instance, if debt is old enough, collectors may not be able to collect on it any more.It is often hard for a consumer to know their rights when they are facing a barrage of threats and harassment from debt collectors. These debt collectors will even go as far as blatantly making things up. For instance, a collector might tell a consumer their payment needs to be made by a fictitious deadline. Collectors will tell you everything they can to cloud the truth surrounding your rights.
The Fair Debt Collection Practice Act is a law that is supposed to shelter consumers from some of these underhanded tactics. Under the act, debt collectors are forbidden from calling a debtor at their place of employment if that employer does not permit it.
Collectors will also lie and say a consumer will improve their credit score by paying their debt off. This isn't true. Debt collectors are also not allowed to try to collect on debt of a deceased individual unless they are targeting a co-signer on the loan.
These practices happen so often in the United States that the FTC received a record amount of complaints concerning debt collectors in 2011.
Source: Desert News, "Aggressive debt collection is up: What you need to know to fight it," Joey Ferguson, March 19, 2012
]]>A Statement of Intentions is not set in stone, therefore, does not create ironclad liability on the consumer's behalf. If a man or woman declares that he or she would like to keep certain secured debts open to continue paying them off, that does not mean they can't change their minds later. This comes in handy when a consumer finds out they cannot keep up with payments after the bankruptcy case closes.
]]> Still, the Statement of Intentions form gives consumers options concerning secured debt. Knowing what these options are helps make the process easier. Here are the options and what they mean:These options allow filers to form modifications to some of their loans and retain the property, which is key in retaining assets.
Source: FOX Business, "What should you say to save house in bankruptcy?" Justin Harelik, March 6, 2012
]]>In light of this recent trend, the Federal Trade Commission issued an alert that consumers should refrain from paying money to or setting up an installment plan with creditors when they do not believe they borrowed money from them. It seems like a no-brainer, but conventional wisdom can often be clouded when a debt collector is on the other end of the phone heaving lies and threats in your direction.
]]> One seemingly widespread issue arriving on this front is a scam that uses call centers based overseas in India, which will call consumers, claiming that they must make payments on non-existent debts. Many of these individuals who were duped into paying money said that they were either afraid that they would get in trouble if they did not or simply wanted the phone calls to stop.People often take out numerous loans, both large and small, and sometimes they cannot keep track of them. Some of these people think these scam calls are legitimate and therefore hand over payment. To make matters worse, some of these scammers have obtained personal information about the consumer, so their requests appear to be more credible. The FTC said that one such operation has raked in around $5 million through these practices and the commission has received an increasing amount of complaints over these scams.
In this case, the harassing phone calls are purely a scam. However, those that legitimately owe debt will receive the same treatment from some creditors. One effective way to buck these annoying calls is by declaring bankruptcy, scrubbing your debts clean and get a fresh start.
Source: Detroit Free Press, "Susan Tompor: Debt isn't real but harassing phone calls are," Susan Tompor, March 1, 2012
]]>Information published by the Federal Reserve revealed that United States consumers owed a combined $90 billion more in credit card debt at the end of 2011 than it did at the end of 2010. Credit card debt also increased slightly between the start of 2011 to the end of the year.
]]> To some, this trend is quite problematic, especially on the heels of a woeful 2008 where this debt came to a head and caused great economic hardship. Some are suggesting that people did not learn their lesson from that rough period and continue to rack up credit card debt at such alarming rates that it will cause absolute economic calamity in the years to come.One analyst pointed out that American charged $2.5 trillion to their credit cards in 2011. Also, in 1980, Americans only carried $54 million in revolving credit balances compared to $794 today.
But, not everyone is buying into this doom-and-gloom scenario. Many analysts have a different take on the current financial shape of America and its people. Some focus on the fact that America has reduced household debt by 11 percent, which is quite impressive compared to similar foreign countries.
Some analysts even see America on the road to economic recovery. Forecasting the state of America's economy is an impossible practice. One economist even points out that while the economy seems to be in shambles at time, it still finds a way to march on. Only time will truly tell what this uptick in credit card debt truly means in the big picture, if anything.
Source: FOXBusiness.com, "Credit card debt: Back to the bad old days?," Peter Andrew, Feb. 23, 2012
]]>Legislators adopted the Fair Debt Collection Practices Act to stop creditor harassment, but it was put in place in 1978, therefore, did not account for new technology like social media. Now, a number of debtors have filed lawsuits against collection agencies that have used social media to bug them for payments.
]]> Debt collectors will sometimes establish fake Facebook accounts and attempt to friend debtors in hopes of opening a line of communication. Others will post messages on Facebook walls for you, a friend or relative. Other collectors do not necessarily use social media as the means of communication, but will take information off accounts like a cell phone number, employer information or even an address.On Twitter, debt collectors are known to sometimes send tweets to friends and relatives questioning the whereabouts of a debtor. While the language of the Fair Debt Collection Practices Act does not outlaw these practices specifically, these maneuvers violate the privacy that is promised to debtors under the act.
Social media users are encouraged to take the following precautions to close off this potential line of communication with a creditor:
If debt reaches insurmountable levels, bankruptcy is also an effective way to erase debt and get rid of relentless debt collectors.
Source: Chicago Tribune, "Can debt collectors contact you via social media?: Strategies to preempt unwanted calls or other communication from collectors," Susan Johnston, Feb. 14, 2012
]]>The total student loan debt currently outstanding is about $1 trillion -- that far surpasses current outstanding credit card debt, which is about $800 billion. And to further complicate matters, bankruptcy attorneys warn that unlike credit card debt, which might be discharged in bankruptcy, most student loan debt is not dischargeable in bankruptcy, under current law. This type of financial burden is currently impacting Rochester area college graduates.
]]> Members of the consumer bankruptcy organization were surveyed about clients and potential clients that came to them seeking some kind of help with personal bankruptcy or other financial issues. About four out of every five consumer bankruptcy attorneys surveyed said that their potential clients who carried debt from college loans, graduate school loans, or other student loan debt had increased "significantly" or "somewhat."But the consumer bankruptcy attorneys warn that unlike the protections offered to homeowners who may be able to keep their homes in bankruptcy, discharge their credit card debt, and have a fresh start; those who carry student loan debt do not have the option of a fresh start after bankruptcy. The consumer bankruptcy advocacy group is urging changes to bankruptcy laws so that those with student loan debt have more options in bankruptcy. They have won the support of some U.S. lawmakers who have proposed bills to change the U.S. bankruptcy code's treatment of student loan debts.
Without changes to the bankruptcy code, the president of the National Association of Consumer Bankruptcy Attorneys warned: "This could very well be the next debt bomb for the U.S. economy."
Source: USAToday.com, "Bankruptcy lawyers: Student debt is looming economic bomb," James Goodman, Feb. 8, 2012
]]>According to a recent report in a local newspaper, the Canisteo-Greenwood School District faces the financial implications of revenue shortfalls this year. It is grappling with possible financial insolvency, projecting a revenue shortfall of $884,000. This lack of funds could ultimately force the school district in filing for bankruptcy.
]]> When faced with a potential liquidation scenario that confronts a public entity such as a school district in dire economic times, the public does not want to hear speculation about bankruptcy.The school district's financial woes come as other cuts have been considered to save money such as not replacing teachers at the end of the year. Even closing a middle school would save less than $400,000 next year.
The trend for school districts to get themselves out of such dismal financial circumstances, such as this district's reductions in state education funding, is not so positive. A school district does not borrow money, but it can project earnings on its investments.
The president of the Canisteo-Greenwood board also noted in the same news report that "the [NY] state made no moves to save a school district that declared bankruptcy last year."
Declaring any form of personal bankruptcy, such as Chapter 7 bankruptcy, is a matter that requires careful review, which is best performed by a licensed law practitioner. A consumer must choose which way to go, such as liquidating all debts or restructuring debt in a settlement with all creditors over a repayment period.
Source: EveningTribune.com, "Canisteo-Greenwood wrestles with expected revenue shortfall," Al Bruce, Feb. 15, 2012
]]>Celebrities are often living proof that it does not matter how much money you make, because unless you manage your finances wisely, you will find yourself buried under insurmountable debt. This is where we have found famed actor Gary Busey, who recently filed for the Chapter 7 bankruptcy protection from his creditors. In recent documents filed into bankruptcy court, the star of the hit movie "Lethal Weapon" revealed that he owes a lot more money than he actually has. Busey listed $50,000 or less in total assets while his liabilities totaled $500,000 to $1 million.
]]> Some of Busey's creditors include lawyers, Wells Fargo Bank, a medical center and even some to the IRS. Busey also listed as a potential creditor a woman that recently filed a lawsuit against him. In the suit, she claimed the star tackled her at an airport.According to Busey's manager, through recent press release, the actor has spent the last several years working to remedy his financial woes. He also attributed to the actor's poor financial standing to a combination of poor choices and associations with the wrong people. Busey's manager also stated that just as the poor economy took its toll one many of the big companies in the United States -- such as American Airlines and General Motors -- it also levied serious damage to Busey.
The press release also stated that Busey is looking forward to having a fresh start with his significant other and his son.
Chapter 7, as utilized by Busey, is also known as liquidation. The filer is ordered to sell their assets and use the money to pay creditors. But, in reality, many filers do not lose any assets and Chapter 7 is effective in erasing insurmountable debt. Chapter 7 also ensures that creditors no longer attempt to contact the debtor, especially with threatening phone calls.
Source: Reuters, "Gary Busey bankruptcy shocker: Actor files for Chapter 7 protection," Tim Kenneally, Feb. 9, 2012
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