Massachusetts to move money in dispute over credit card interest rates

By doug | Published: April 14, 2010

The Massachusetts state government will soon start moving its money out of accounts it has on deposit in Citi, Bank of America, and Wells Fargo because those giant banks have refused to cap their interest rates at 18 percent.

Many more people in Massachusetts have been forced to consider bankruptcy recently, because many banks have suddenly raised their interest rates in to the 30% neighborhood.

Massachusetts state law has capped rates at 18 percent, but out of state banks doing business nationally are not mandated to follow that law.

According to the Boston Globe, “many banks chartered in Massachusetts partner with out-of-state institutions that charge interest rates greater than allowed under Massachusetts law. When a customer applies for a Danversbank credit card online, for example, the site takes them to website offering cash advances with a 23.99 percent interest rate. Eastern Bank offers a link to credit card sites offering rates as high as 30 percent.”

The money to be pulled constitutes the Massachusetts rainy day fund, and is held in trust by the state treasury and Fidelity Investments.

Consumers who have no means to make the monthly payments on a credit card with a 30 percent interest rate may find bankruptcy a viable solution; a Chapter 7 bankruptcy case often can eliminate those type of debts in their entirety.

 

By Doug Beaton

Posted in Chapter 7, Credit cards | Comments closed

Bank bosses refuse to consider modifying mortgages

By doug | Published: April 14, 2010

Just in case you were wondering why there has been a rash of bankruptcy filings in the Merrimack Valley and elsewhere, look no further than the stubborn refusals of the major banks to modify underwater mortgage loans.

Just yesterday, the chiefs of Citi, Chase, Wells Fargo and Bank of America testified before Congress, and told lawmakers they are reducing the amount that troubled borrowers owe on their home loans only in limited cases. “Consumers who make mortgage payments on time are likely to see such reductions as unfair,” they said.

According to the Associated Press, David Lowman, chief executive of Chase’s mortgage business, said large-scale mortgage principal reductions “could be harmful to consumers, investors, and future mortgage market conditions.”

Chase estimates that reducing home loan balances so that no homeowners would owe more than the value of their homes would cost up to $900 billion, with $150 billion of that borne by the government.

That attitude did not sit well with consumers; the AP also reported that “dozens of activists from the Boston-based Neighborhood Assistance Corp. of America chased Lowman through the Rayburn House Office Building, pressing him to do more for homeowners. He did not respond to their requests for a meeting and eventually left the building with the assistance of police.”

Actions like that probably won’t accomplish much, but the anger is perhaps understandable; more than 1.9 million more Americans are expected to lose their homes, and a fair number of those will eventually be filing for bankruptcy.

 

By Doug Beaton

Posted in Bankruptcy News, Real estate | Comments closed

Home equity loans are a ticking time bomb in the banking sector

By doug | Published: April 13, 2010

Thinking about filing for bankruptcy? If so, you might want to ponder who has it worse off in our current economy — the debtors or the creditors?

Ridiculous question, you say?

Perhaps, but in law it is always worthwhile to examine cases and situations from your adversary’s point of view.

When debtors get pestered with collection efforts or bang their heads against the wall for months trying to modify an underwater mortgage, it is easy for them to forget what a bind the banks and loan operators are in. And strange as it may sound, their problem is part of your problem, too.

Case in point: it is now probable that banking giants Chase, Bank of America, and Wells Fargo may have to set aside an additional $30 billion — yes that’s $30 BILLION — dollars to cover write downs on home equity loans.

Home equity lines are particularly troublesome to banks because they are the mortgages least likely to be secured in areas like Massachusetts and southern New Hampshire which have suffered rapid declines in housing prices.

According to Bloomberg News, “Second-lien mortgages and most home equity lines of credit rank behind first-lien debt, meaning they get wiped out in a foreclosure if the sale of a home does not raise enough to pay off the first mortgage. Second liens are often closed-end loans in contrast to home equity lines of credit, which can remain open for borrowers to withdraw money, much like a credit card.

In many cases, first mortgages cannot be modified or written down because lien priority dictates that junior loans be erased first. Few lenders have agreed to reduce or extinguish home equity loans when modifying mortgages, even if a property is worth less than what is owed, according to a report by Troubled Asset Relief Program Special Inspector General Neil Barofsky.

The four biggest US banks by assets — Bank of America, JPMorgan, Citigroup Inc., and Wells Fargo — hold about 42 percent, or $442 billion of the $1.1 trillion in second-lien mortgage loans, according to Amherst Securities Group.

Late payments on home equity loans rose to a record in the fourth quarter, the American Bankers Association said April 7.”

Debtors considering a Chapter 13 bankruptcy case may be able to eliminate or reduce the principal on home equity lines through their Chapter 13 plan. This needs to be evaluated on a case by case basis, though, so your best bet is to discuss it with a bankruptcy attorney.

 

By Doug Beaton

Posted in Bankruptcy News, Foreclosure, Real estate | Comments closed

Bankruptcy exemptions at work — Tools

By doug | Published: April 9, 2010

“It takes money to make money,” goes the old saying.

For many people, making a living requires specialized equipment as well. Can’t imagine a dentist without a drill!

Fortunately laws have recognized for decades that debtors should not be stripped of the very tools they need to make the money needed to survive. As a result, nearly every state as well as the federal government has an allowance for the “tools of the trade” that debtors need to keep to get back on their feet in the money-making working world.

Under current federal law, each debtor may keep (“exempt”) up to $2175 in tools of their trade. The notion of a “tool” is loosely interpreted, and can include say, the law books of a bankrupt lawyer.

New Hampshire state law is even a little bit more generous — the Granite State allowance for tools is $5000 for debtors filing for bankruptcy there.

Typically, Massachusetts state law is the most miserly, with an exemption limit on tools of only $500. This means that most Massachusetts debtors contemplating bankruptcy will probably want to stick with using the federal list of exemptions if it is at all possible to do so.

If you are at all confused about which list of exemptions apply to your situation, a call to a bankruptcy lawyer can probably get you a quick answer.

 

By Doug Beaton

Posted in Exemptions | Comments closed

Getting a tax refund? Great — just don’t put it on a pre-paid credit card!

By doug | Published: April 8, 2010

I confess to being old enough to remember when getting your income tax refund meant being mailed a green check about two months after you filed — so sometime in June — and then walking down to the neighborhood bar, I mean bank, to turn it into cash.

Now tax preparers seem to spend more and more time devising new and more devious ways of getting your refund to you. Fort Worth bankruptcy attorneys Allmand & Lee give five reasons why you should avoid any offer to have your refund go on a pre-paid credit card. These include ATM fees, inactivity fees, fees to speak with customer service — in other words, a fee for everything you can think of, every time you turn around.

You’d be better off just asking for a check in the mail. See ya at the bank!

 

By Doug Beaton

Posted in Taxes | Leave a comment

Massachusetts may be able to keep the unemployment checks coming

By doug | Published: April 8, 2010

Thousands of laid-off Massachusetts workers may be able to keep their unemployment benefits after all, averting — at least for a month — a new wave of bankruptcy filings.

Although the federal benefits were set to expire this week, a Massachusetts state law has been invoked that will keep the checks flowing until May 2nd.

A permanent solution, or at least a solution that would last for the remainder of 2010, requires an act of Congress, which intends to take up the matter next week. Democrats are eager to see the benefits continue, while Republicans want to see exactly where the money to pay for them is coming from.

The Boston Globe described the plight of several Massachusetts residents who are trying to make do on their unemployment checks:

“Among those who could soon lose their unemployment benefits is Erika Trabucco, a 48-year-old single mother of twins from Dorchester, who described the aid as a needed cushion since she left her job as a hospital coordinator two years ago to take care of her ailing mother.

“I just know I can’t survive without it,’’ said Trabucco, who is participating in a job development program at the Crittenton Women’s Union, a private group serving low-income women.

Eyvonne Cottrell, a 50-year-old mother, said she’s been struggling since she lost her job in Georgia two years ago. A Boston native, she recently moved back home and is living with a cousin in Dorchester. She is on her second jobless extension from the federal government, but that is about to end next week, she said.

“I’m worried, and I’m not sure what is going to happen next,’’ the former administrative assistant said as she scanned the Internet for job leads at the Urban League of Eastern Massachusetts in Dudley Square. “I just feel that this is the worst the job industry has been.’’

Jasmine Watson, a 26-year-old from Roxbury, said she’s been trying to find work since she was laid off from her administrative assistant job at a Boston brokerage firm last year.”

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

Bank of America promises speedy mortgage response — can they do it?

By doug | Published: April 7, 2010

For thousands of years, the banking business has been built on the idea of people keeping promises. Will Bank of America be able to keep the one they made yesterday?

Bank of America announced a pledge to answer consumer queries about their mortgages wihin three days. According to Bloomberg News, the pledge is in response to complaints of housing activists that lenders take too long to modify loans and prevent foreclosure.

I don’t doubt the sincerity of the bank’s initiative, but it can be mighty difficult for a large institution to change its feathers overnight, regardless of good intentions. Bank of America is indicating it will hire 1000 new employees to deal with mortgage servicing, however.

 

By Doug Beaton

Posted in Bankruptcy News, Foreclosure | Comments closed

Thousands of Massachusetts residents lose jobless benefits

By doug | Published: April 6, 2010

Thousands of Massachusetts residents lost their jobless benefits yesterday.

If the federal benefits are not restored, these people may not get a check this week. Eventually, many may seek bankruptcy protection if they are unable to pay for bills and necessaries.

The Boston Globe said that “one in 10 workers in Massachusetts was unemployed in February, according to the most recent statistics compiled by the state. There were nearly 38,000 new and additional unemployment claims filed, and about 143,000 people who continued their unemployment claims.”

Because the Senate did not pass an extension before leaving last month for a two-week break, benefits were halted, at least temporarily, for more than 212,000 unemployed residents throughout the country this week, according to estimates by the National Employment Law Project. In addition to the Massachusetts residents who lost unemployment benefits, there are about 1,300 others throughout New England.

The Senate may begin debate on a bill to restore the unemployment funds when they reconvene next Monday (April 12).

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed

Is there any way around filling out this damn means test form?

By doug | Published: April 5, 2010

One of the biggest wrinkles — perhaps THE biggest —  in the Bankruptcy Code changed that were passed in 2005 was the introduction of a “means test” to see if debtors qualify for eliminating their debts in a case filed Chapter 7 of the code.

A simplified explanation of the way the test works is that if your income, measured over the past 6 months, is above average for your family size in the state you live in, you “fail” the “test,” and Chapter 7 is probably not an option for you. Many of these debtors end up filing Chapter 13 cases, where they have to make monthly payments that at least partially pay off their creditors.

But the test itself is often not the real evil. Instead, it is montrous nine page goverment form that you have to fill out to even see if you pass or fail.

(Granted, if you hire an attorney, he will fill the form out for you, but you still have to provide him with the information to do so).

So is there any way to get out of filling out this mean, mean form? It turns out there are several, but they may not apply to many debtors.

The most likely way out is if you have a preponderance of business debts, instead of plain ole’ consumer debts. Business debtors just skip over the means test and can go right to Chapter 7. One thing to consider, though, is that even bills you are current on, like a home mortgage, count as debts, so it is possible that a large mortgage that outweighs your business debt means you have to file after all.

The next way out is for disabled veterans. If you went into debt while on active duty, or while working on homeland defense, you are excused. You should always tell your attorney if you are a disabled vet.

Armed forces reservists and national guard members can be excused form means testing as well, but only for a limited time.  If you are called to active duty for at least 90 days, you are excused for the length of that duty and for an additional 540 days after the tour of duty ends.

Finally, you can just file for Chapter 13 and avoid the means test. Problem is, you have to fill out a nearly identical form that is just as long and that asks the same things — so this isn’t really much of a break!

 

By Doug Beaton

Posted in Chapter 7 | Comments closed

Is Citi harrassing you, or refusing to modify your loan?

By doug | Published: April 1, 2010

If you are having problems with trying to modify a Citi  mortgage, or with Citi Bank collectors harassing you for credit card payments, why not try to talk things over with the owners?

Turns out the largest owner of Citi — for now, anyway — is, you guessed it, the American people.

As part of the TARP bailout hastily implemented in the fall of 2008 when the financial markets were crashing, the U.S. government has acquired a whopping 27% interest in the common stock of the troubled banking giant.

But this week, the Treasury Department announced plans to sell its shares during the course of 2010.

That’s good news for taxpayers as a whole; the government could realize as much as a $7 billion profit on the trade, because they bought in at $3.25 per share, and Citi is currently trading at about $4.14 per share.

But what about the considerable portion of those taxpayers who owe some money to Citi or one of its subdivisions? I’m afraid there’s not much help for them in this deal . . . . .

 

By Doug Beaton

Posted in Bankruptcy News | Comments closed
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