I paid off my 2nd mortgage, except for a single penny. Clearly it was an accident thanks to our escrow or maybe our Credit Union. Our loan broker did excellent work for us when we refinanced last year. However, there was a miscommunication between the escrow and the Credit Union which held our 2nd mortgage. I have no idea which was culprit, for the size of the error, there should be no culprit at all; except for what happened next.
The Credit Union sent something to me saying there was a balance due, the penny. But I knew the 2nd mortgage and credit card were paid off so I didn’t think there was a need to see a new statement showing that the balance was zero $0.00, so I didn’t even open it. Neither did anyone else for the same reason. Another month later, the Credit Union reported the account was 60 days late with a late balance of one penny $0.01, and my credit score took a 99 point spanking. A 99 point drop.
I was outraged, of course. Who gets their credit score reduced by 99 points for a single penny? Me of course.
We actually, as part of our dispute to the false or misleading information on our credit reports, threatened a lawsuit, and our Credit Union fixed our credit reports right away.
Big News for Disabled Veterans in Bankruptcy. However, first a little background.
In 2005 when biggest bankruptcy reform act in history took place, Congress and our President specifically excluded Social Security Income from the Chapter 7 qualification test also known as the Bankruptcy Means Test. We all drew a deep breath and exhaled a massive collective national sigh of relief that older Americans on fixed incomes and folks on permanent Federal Disability income were given additional protections from creditors. Who didn’t see this as an excellent new thing in the law?
But what didn’t they do? VA Disability or Veterans Administration Disability was not excluded from the Bankruptcy Means Test. What kind of poop was that? Stupid stupid stupid. That was 2005. It took Congress fourteen (14) years to get around to fixing this with the HAVEN Act when the President signed it into law on August 23rd, 2019.
Okay, the Veterans Administration Code does state that no creditor can ever garnish, levy, attach or receive your VA Disability Benefits. So the problem was that in a Chapter 7 Bankruptcy, the disabled veteran’s disability income would sometimes make them not qualify for a Chapter 7 Bankruptcy but then they wouldn’t be forced into Chapter 13 Bankruptcy which is the kind of Bankruptcy that comes with a Bankruptcy Payment Plan because that would be absurd based on what the VA Benefits Code already says.
However, in Chapter 13, if a disabled veteran had filed a Chapter 13 to begin with, then there have been a few trial courts who have ruled that by merely filing a Chapter 13 Bankruptcy which automatically comes with a monthly payment plan usually for five (5) years, then that disabled veteran has automatically “decided” to put his VA Disability Benefits into the mix and must use those VA Disability Benefits to pay his creditors through her monthly payment plan. Nothing could be stupider, nothing could have been a more misguided ruling by the court, but they did it. It took Congress to overrule those cases, and the President just signed it.
However, the HAVEN Act has a specific flaw built into it: Basically, the Chapter 7 Means Test or Chapter 7 Qualification Test and the Chapter 13 Current Income Calculation exclude Social Security from your monthly income or in other words, you don’t have to use your social security to repay your creditors, and VA Benefits and VA Disability Benefits are also excluded by the following language: “any monthly compensation, pension, pay, annuity, or allowance paid under title 10, 37, or 38 in connection with a disability, combat-related injury or disability, or death of a member of the uniformed services,”
Did you see the comma?
Here’s the mistake, as I see it, in the way the law is written. It’s the sentence that comes next after that comma: “except that any retired pay excluded under this subclause shall include retired pay paid under chapter 61 of title 10 only to the extent that such retired pay exceeds the amount of retired pay to which the debtor would otherwise be entitled if retired under any provision of title 10 other than chapter 61 of that title.”
Just for fun, here is 10 USC chapter 61. So, if your retired pay is under Chapter 61, your retired pay is excluded from Bankruptcy, unless you get more under Chapter 61 than you would have gotten under any other Chapter of the VA Code, but the only part that is included in Bankruptcy is the amount that is over what you would have gotten under such other chapter of the VA Code.
Typically if you’re medically retired, then you must at least be 30% disabled or more, and then the VA gives you that percentage of your retirement that you would have gotten if you weren’t medically retired. So if you’re 50% disabled and they give you $2000 per month in medical retirement, then that means that if you could have retired at the usual time and age for retirement then the amount you would have gotten would have been $4000 per month. So, it sounds like it would be hard to ever get more than you would have gotten under Chapter 61. So, I’m confused why this is in here.
My final two cents is this, no matter what the Bankruptcy Means Test says and no matter what the Chapter 13 calculation of income says, 38 USC 5301 still states that creditors cannot take your VA Disability Money ever, and that for me is the bottom line.
Even if you fail the Means Test, you still get a Chapter 7 or Chapter 13 Discharge without ever having to pony up a penny of your hard earned and well deserved VA Disability Benefits. Anything else is contrary to the VA Law.
Yes, once the credit repair of my credit reports was done, they were newly baptized and cleansed of the sins of the past. Yet they were newborn babies with no credit history left on them. Tabula Rasa. I had been right all along. At that point I did what so many lawyers do, I got mad and was done with him as my credit repair guy. I didn’t ask and he didn’t offer any way to quickly somehow fix the situation. I should have. Instead, when I realized that I had been right, without the aid of anyone, it took me another year to rebuild my credit scores and rating using traditional methods, and in the mean time, home prices soared and I was punked by my own actions and inactions.
The solution that my wife and I did use was this: which was both simple and effective, and also slow. Not an overnight solution but it worked like a charm. A long slow charm. I went into my own bank, and bought a credit card. It’s called a secured credit card. Give them $300, $500 or $1,000 and they give you a credit card with a credit limit of $300, $500 or $1,000, however much you give them.
As a married couple, or if you have a long time significant other, (don’t do this with someone hardly know) you each go to your bank and ask for a secured credit card, and after a little while, put each other on each other’s card. Then each has two credit cards with which to build a positive credit history.
Of course, if you don’t have that that special someone, just go to a different bank and get a second secured card.
From there, it’s a matter of creating a favorable credit history. There are several factors that go into that formula but the essential steps are: 1) Never miss a payment 2) Keep Low Balances. 3) Pay more than the minimum payments.
An excellent method of creating this credit history is to only buy something on the credit card when you have the cash already in your own savings account. So, say you want a new gigantic flat screen TV. If the TV costs, $1500, first put the $1500 in the bank, then use the credit card to buy the TV. Now what you do is to pay off the secured credit card in 3rds over 3 months.
Your good credit’s greatest enemy is in most cases, your own family’s dire needs. If someone in your family is having a rough time and says “hey, I need $800 to pay off a gambling debt,” or “pay my rent” or “pay my dentist” or “pay my car payment before it gets repossessed” or . . . Whatever it is, you must tell them to hide from the bookie, hide the car, brush and floss a lot, and wait a while.
Pay your credit card off in 3rds. If you give away your $800 you have poisoned your credit score!!!
And what’s even worse, he’ll probably just gamble your $800 away too. If the car payment is brought up current status, and they still don’t have a job, then in a couple months they’ll be right back where they are today. If they are behind on rent now, next month they probably will be again.
My favorite example is the dentist, if they pay the dentist and the tooth is fixed but because you helped them, your plan to repair your credit gets derailed, then you have ruined your ability to really help your family when things get truly critical. If you can buy your house at a low interest rate, then you’re either buying more house or doing it at a lower payment. Either way, he can move in with you. Perhaps more importantly, with a low interest rate and a more affordable house payment, you can help more people in more ways. And that can make it possible to truly help your family when times are tough and you’re all struggling.
Don’t be a knave-faced Jackanapes like I was. Exceptional credit can make it possible to help your family in ways that you wouldn’t otherwise be able to do with merely decent or even good credit. Guard it carefully.
Identity Theft is not just someone opening a credit card in your name, though that still happens all the time.
No, it’s more likely to happen when you have to move back in with your dad and while you’re at work, your step-mom puts all the utilities in your name and then doesn’t pay them for several months.
Perhaps your brother or sister gets pulled over for DUI and gives the arresting officer your old Driver’s License, the one that went missing and you thought you lost it, and then guess what, she or he looks so much like you the police are fooled into thinking it really is you. Be careful making those rolling right turns from now on.
When your sibling and her spouse realtor who moved in with you because they were broke, but somehow they and their friend the Notary Public suddenly come into money and you can’t figure out how? Stay home sick from work for a few days near the end or beginning of the month AND make sure that you are the one who gets all the mail from your mail box. You might find out you have a new second mortgage. Surprise!
Perhaps the most important thing you can do to protect yourself is to know how to spot when a person is less than truthful. Most of the time we get into trouble because we know something is wrong and choose not to confront the person who is trying to pull the wool over our eyes because we lovethem, so we decideto trust them. Don’t be complicit in your own demise.
I knew a man who awoke one day to find out that he didn’t own his own home anymore. Turns out there had been a “For Sale” sign hanging on the Zillow.com website over his head for months. I know these sound preposterous in the extreme but guess what, I’ve seen them all. Everything on this page, I’ve seen them all.
It can also be done basically as a con-game. The con-artist induces you to give them money, but since you don’t have enough cash, so you end up using your own good credit to do it. Of course, the con-artist never pays you back. That’s not even the worst part of it, the con-artist may not even know that the con-artist is a con-artist. He probably tells himself he’s going to pay your back, or maybe she is just down on her luck and you’re the only contact they know, so you’re the only mark. You just happen to be the “rich uncle” in the family but unfortunately, you are cash poor, you’re broke. Just not as broke as they are . . . at least not until they get done with you.
When you’re helping family, and suddenly you find your daughter-in-law has a new Camaro, expensive tattoos, long red hair, and a penchant for sushi but only a budget for fish fingers, crayons and a 30 year old Camry, guess what, it’s time to check your own credit.
How did she possibly pay for the make-over when your son tells you that they’re saving up, because they want to buy a home of their own. Yet, somehow she’s got this wonderful make-over? Eventually, you’re going to find out that your good credit also has a wonderful make-over, or perhaps a make-under. . . .
Identity Theft Comes From Friends Too
Cosigning for a new car for a friend or family member is often a mistake. Especially when they then don’t or won’t pay the monthly payment on the car loan and leave you holding the bag.
Again I’ve seen this happen more than a few times. You cosign for the car, (or worse, you just buy one) for your “Bestie” who then doesn’t pay for it and in fact disappears with it.
When your “Bestie’s” bank sues you, they’re going to sue you for the whole balance, you won’t even get the benefit of the repossession reducing the balance that you owe because of course, the car has vanished.
Not only does the bank sue you, they may also report you to the police as having stolen the car or for being an accomplice to the theft. I mean, that probably won’t stick, but you won’t really know until you talk to the Public Defender who gets assigned to your case. You might not even be arrested at all depending on a lot of actors that you have no control over.
If you’re lucky they’ll just garnish your wages until you file a bankruptcy, and even worse, you can’t just claim it was a case of Identity Theft because you signed the loan. Therefore, yes, you do have to file a bankruptcy to get out of it.
Beware of Fake Collection Calls
Sometimes people are just flat out not who they say they are. You think he’s your savior and he turns out to be just another guy who likes meditation, yoga and your credit.
Sometimes your credit might be destroyed by your boyfriend or girlfriend who has memorized your credit card numbers. After you closed the accounts she or he then called the credit card companies posing as your husband or wife and asked that the accounts be reopened. Yes, I’ve seen this happen too.
But nowadays most of the time, it’s a phone call. Someone calls who knows everything about you, your current unlisted number, your current address and you’re not even on the lease, and he knows your addresses for the last fifteen (15) years. He wants you to pay for an account of a credit card he says you still owe from 2004; even though you haven’t paid on it since 2005 and you filed a bankruptcy in 2007 listing that card. For some reason he’s now threatening to sue you, or send a 1099 to the IRS or to blow your security clearance with your command.
Can he do all that? Of course not. The bankruptcy took care of it. If you didn’t file bankruptcy, then the Statute of Limitations took care of it, unless the card in fact sued you. But if he’s not saying the card did sue you and obtain a court judgment, but that what he wants to do is to send a 1099 to the IRS, then there is no judgment.
Because if they had a judgment, you won’t get a phone call, you’ll just pick up your check and find out that a fourth of it is missing. For some reason he won’t give you the company’s address, and the company name is a mashup of two legitimate debt collection agencies you find on the Internet. It’s crap, he’s a liar and he’s trying to commit fraud and you’re the mark. Hang up and block the number.
My second favorite are fake calls from creditors several years after bankruptcy using information from your bankruptcy to make you feel like it’s a real account and who are asking you to pay an account which was included in your bankruptcy and saying that it wasn’t included in your bankruptcy. Call your bankruptcy attorney if you’re not sure. If you signed a reaffirmation agreement they might be right that you owe the money, but if that’s the case, then it will be easy to prove that a legitimate collection agency actually does exist and where they’re located.
Did a creditor sue you in your bankruptcy case and win a judgment against you stating that your debt to that creditor was not going to be included in your bankruptcy discharge order? If that’s the case, then finding out who the collection agency is will be easy and quick or you’ll just wake up and find out your bank account is empty.
Fake calls come from untraceable numbers through Voice Over Internet Protocol (VOIP) phone lines and you’re never going to figure out who called or from where. Tell them to leave you alone and hang up, that particular scammer will probably never call back.
The famous Nairobi email scam and various permutations of it are still going on all the time. I actually had a client who got caught by that one once but at least he got a car out of it, and ruined credit too.
Social Media Hacking is Identity Theft
Have you had it happen to you yet?
This week I received a new friend request from a current friend. I sent him a messenger message and asked why he had sent me a friend request, Did you unfriend me? He said no he hadn’t unfriended me nor had he sent the new friend request.
It’s about the same thing as reaching for the sugar and finding poison. I drew that cartoon as an homage to Orwell’s 1984 in about 1985 . . or 83 or at least I know that Pat Benatar was the greatest woman in Rock ever.
I searched for my friend’s name in the search bar at the top of the Facebook page and found that not only was I still friends with the same guy but also he had this new profile using his same profile picture and his name spelled identically down to the middle initial and the new profile had sent me the other friend request. This new version of my friend was already friends with 18 of his current friends from his original profile!!!
It’s truly horrifying. Those 18 friends will shortly all be victims of some sort of scam, though most will figure it out. But unless he contacts them all directly right away to say it wasn’t him, one of them might get scammed first. Thankfully you can contact Facebook directly and tell them, “hey that’s not me but someone is pretending to be me.” In my case, I contacted them to say that it wasn’t him but someone pretending to be him.
I once received a Messenger message from a scammer who said that he was on vacation in London and had been robbed and lost his passport and all his money and credit cards and could I send him $817 to pay for a new plane ticket home? At first, I was checking my credit cards to see if I had one I could use to buy him a plane ticket, but he wanted the money wired instead.
So, I thought about it and realized that if this person were truly in London and lost his money and passport then why and how was he messaging me? Surely he has friends with more money than I, and closer friends too, (I hadn’t spoken with him in years) and friends who could almost certainly access his accounts at home, but . . .
Hey, why can’t he get into his own accounts anyway? That didn’t make sense. Just telephone your bank and go through all the security questions and then they’ll tell you where to go to get a new debit card even though you’re in London.
Someone Starts a Business in Your Name?
Has this happened to you? I’ve seen it over and over again. Your dad, mom, brother, sister, cousin, uncle, best friend, wants to start a business but can’t do it in their own name because of the IRS, the Mafia, a biker gang, bad credit, an ex-wife, or ex-husband will put a stop to it and take all their money.
So, your name goes on all the paperwork.
If you’re lucky, you’ll actually get the percentage that they promise you for using your good name to operate their nefarious enterprise.
If you’re really lucky they aren’t doing something that lands you in jail but just ruins your credit.
Either, eventually, the business makes a lot of money but for some reason you never get any and then one day they’re gone and so is all the cash and all the easily movable equipment with any value and you’re left holding the bag.
Option two, eventually the business just flounders and sputters out because they weren’t very good at whatever the business was supposed to be doing in the first place, and that was why they put it in your name all along.
Thanks, next time, go ruin your own credit and leave me alone. This one is especially hard because you think you’re helping out someone you love or trust and they take advantage of you while you let them. If the business is so great, tell them to put the business in their own damn name.
You Thought you had Great Credit
Now your house is gone, your car is gone, your woman or your man is gone. And you realize that you hadn’t paid enough attention to your financial circumstances, and your credit.
Basically, as it turns out, because someone else turned out to not be who they said they were, you’re no longer who you thought you were either.
Everyone nowadays, before a first date, has perused all the social media available to make sure that the new person isn’t unemployed, an alcoholic, or has a girlfriend, boyfriend, wife, husband or likes cats but hates dogs or vice versa. Back in the day, before Facebook and all the rest, a nice man asked a wonderful woman to marry him. Well, before she would answer, she drove down to the Family Courthouse and looked up his divorce file. Turns out he had been an abusive husband who was also a deadbeat on his support payments to his little children who live with the ex-wife in Altoona. He had given her a nice TV for Christmas, and when she broke up with him, he took it back while his children sat and cried on the floor in front of him.
Driving to the Family Courthouse is still a good idea of course because most of the stuff in a divorce case file won’t be online. You can look up who sued you and usually find a copy of the summons and complaint but not in a divorce case, so the drive to the court house is still a good idea.
However, before the second or third date you could nowadays just ask to look at Credit Karma on his or her phone. My Wells Fargo account on my phone will give me my credit score.
Pretty much the same way you do from any kind of bad credit, you go to work repairing and fixing your credit reports. The disputes are still required they just have a different message: “It wasn’t me.”
Credit repair requires effort on your part, but it’s not hard, and if you do it right, it’s effective and can shootyour scores right back up to where they are supposed to be.
Is that a make sense way to get out of debt though? Even my fifteen year old son who was in car with me asked, “how is it getting out of debt when you’re getting into more debt?”
That sounds like an express train to Bankruptcyville, and as a bankruptcy attorney, trust me, I know. However, yes Marcus, that’s right, it really does matter how you get out of debt. What counts is that every account that gets paid off with the new loan must also be closed at the same time, whoever you happen to get the new loan from. That’s what counts.
A new loan to refinance your old debt can be a great way to get out of debt if the new loan makes sense in your budget and if you close all of the credit cards as you’re paying them off. I’ve done that before, we took a 2nd mortgage on the house and paid off $40,000 in miscellaneous credit cards and loans. We reduced our $1200 per month credit card payments down to about $450 per month for the 2nd mortgage payment and then continued to pay the $1200 per month on the 2nd mortgage. Most of the time at least.
Consolidation loans are great if you can qualify for the loan or if you have sufficient collateral to qualify for it. Try contacting Marcusand find out if it works for you. Of course it doesn’t hurt to try out several possible lenders. Most of the time it’s going to be a non-starter. It took me about a year to be able to do it myself because my home didn’t have a high enough value to do it when we first applied.
Budgeting When a Consolidation Loan Won’t Work
Budgeting can be very hard, particularly if it is an unfamiliar task such as if a loved one who used to take care of the task is now gone because of a death or divorce in the family or your parents finally told you to move out.
Another challenge might be that a source of income has terminated such as if you were fired from one of your jobs, or there were a death or divorce in the family or your parents finally told you to get a job or move out.
In any case it might feel tricky. Sometimes you may have to take completely drastic measures. I knew a family who would wash laundry when the parents took showers, and they would put the clothes on the floor of the shower and stomp on them as they washed their hair . . . and their feet.
Helping children, brothers, parents, grandchildren, and sometimes even just friends will force you into the poor-house. I’ve seen people lose their homes because of it many many times.
Of course, you can’t be heartless and turn them away, but I’ve seen it happen so many times that they move in with you, and because they’re so familiar with you they don’t respect you, so they think that they don’t have to pay any rent, or that they don’t have to pay a regular rate of rent. So they don’t help you out. But your mortgage is the same or your lease payment on your apartment is the same, car payments, car insurance, day care, home insurance, life insurance, car registrations, and pet food all the stay the same. However, your utilities, groceries, gas for your cars, maintenance for your cars, and credit cards all skyrocket.
Next thing you know you’re co-signed on a new car so that your son-in-law can get to and from work, and your own mortgage is several months in arrears and they still won’t pay the rents so that you can pay your mortgage and you’re about to be foreclosed and on top of that your credit cards are about to sue you if they haven’t already and then your son-in-law leaves your daughter and stops paying on the car note and it gets repossessed.
Or maybe you request, hey, I’m going to lose my home, you know, the one that keeps a roof over your head, and I need you to pay rent and pay that car payment and then for some strange reason, even though your daughter and son in law both have jobs, they don’t pay any rents, don’t pay your wife to babysit, and they won’t leave either.
If you want to help out your kids, then they must agree in writing to pay rent to you at a fixed rate which includes the utilities, and includes the groceries and if they don’t have a job, then they must get one immediately, not just look for one, or they can’t move in. They must sign that agreement before they move in. Or, you can write them a letter that says “You’re a guest in this house and I can throw you out at a moment’s notice because you are not a tenant.” In that case, if they won’t help out, if they won’t even clean up after themselves, then they can come home and find all their stuff on the lawn. You won’t get any rent out of them but you might at least get a clean kitchen or garage.
(It happened to me, so I know how it goes). Of all the things I’ve seen people do to get themselves in financial trouble, this is by far the biggest and most egregious one and it happens all the time. Be wary of helping people whom no one else will help.
Oh and by the way, never cosign anything for anyone if you value your good credit and your good name. Don’t do it. If no one else will give them a loan, why should you?
Moving on to Mundane Matters
Eliminate Things From Your Budget and Save Big-Time
Stop drinking lattes and switch to regular coffee Savings $3/day or $90/mo
Stop buying regular coffees at Starbucks and get them at the doughnut shop, (but don’t eat the donuts because you’ll get fat instead, trust me on this one) Savings $1/day or $30/mo.
Stop buying coffee at the doughnut shops and pick up a big can of coffee at Ralphs or the Piggly Wiggly Savings $20/mo
Only drink water instead of coffee and Save that last $10/mo
Stop drinking sodas every day or when you go out to eat (if that’s what you do) because you’ll lose weight, avoid diabetes and save money on prescription drugs and early death Savings $20 to $50/mo
Stop Drinking alcohol and Stop Smoking, Savings $Your Marriage, $Your Health, $Your Liver, $Your Lungs, $Your Job or Career and probably around about $5 – $20/day or $100-$500/mo
Eat less meat and buy more vegetables Savings about $50/mo
Don’t eat out as often or eliminate it altogether
Stop air-conditioning the whole house by shutting vents, and buy a whole house fan, Savings about $200 – $300/mo during the Summer which will pay for the whole house fan in the first Summer you buy it.
Cancel your cable TV or DirecTV or other TV service because everyone has Internet and abc.com, nbc.com, and a whole lot of others are online Savings $50 to $110/mo
Still have a home phone? Cancel that too because most of the calls will be from your Visas and Mastercards anyway. Savings about $40/mo.
Get Netflix, Hulu or Amazon Prime but not all three because don’t watch so much TV all the time you’ll get a lot more done and that’s good for everyone, especially if you spend some of that time walking or exercising
Cancel the Gym Membership Savings $20/mo and work out at home or go for long walks or jogs with the dog
Ride your bike to work (if you can)
Use a generic brand to wash your dishes Savings $10/mo and use it to wash your clothes too Savings $15/mo and you can use it to wash your hair Savings $8/mo.
Clean your home a lot, Savings indeterminate but the savings in down time from being sick alone will be worth it.
Wash your laundry as already elaborated above
Cook at home if you can make the time for that
Pack a lunch to work Savings $5/day x 20 = $100/mo
If you can’t make the time to cook at home, then even microwave dinners are still cheaper than drive-through fast food which again helps you lose weight, and avoid diabetes and heart disease and therefore those nasty prescription drugs
Of course going shopping at thrift stores, such as Good Will, Salvation Army and etc. It’s a great idea, particularly if you can get to the ones in nicer neighborhoods because they will have nicer stuff
Have you ever been to a food bank, it’s kind of like second hand food but the food is still good, which is not to say that it will taste good but it won’t have gone bad yet. We picked up a box and they gave us a few little bags of what must have been an experimental flavor of Doritos chips, tequila lime. They were the worst flavor ever, but they also gave us an excellent tasting gallon of milk and an excellent half gallon of chocolate milk and lots of vegetables and big bag of jalapenos which I gave to the Mexican couple in line behind us. The box was $25 but the amount of groceries would have filled an entire basket at the store, Savings about $100
Switch from a name brand phone service to basically a generic such as Boost or Cricket or Metro PCS, Savings $30 to $150/mo depending on family size and plan
Buy a Wahl groomer for your boys and dogs and Save $20/mo each
Grow your own vegetables at home, Savings $50/mo and they’ll also be organic and taste home-grown.
Find a cheaper car insurance (but don’t cancel it or you might wish you hadn’t)
Find a cheaper life insurance (but don’t cancel it or you might wish you hadn’t)
This is not an exhaustive list of things you can change or expenses you can cut. Maybe you’ve cut them all already, and there’s nothing left to cut. If that’s the case, maybe a bankruptcy is a good idea.
Marry a Doctor, Lawyer, Established Actor, or an Oil Tycoon
Just kidding, when the doctor I was interested in all those years ago found out I was going to be a lawyer she was more interested in not being a doctor at all and why couldn’t I be a rich lawyer so she wouldn’t have to work. I said hey that’s my idea, you’re the one in medical school after all. And I was on an airplane headed home shortly after that. Didn’t work out, long distance relationship and even longer apart in philosophy. Not to mention I didn’t speak Mandarin.
How Do I Budget to Pay Off My Credit Cards, Medical Bills, Etc?
Assuming you can in fact adjust your budget, or you demand and in fact receive some extra money as rents from your relatives, or maybe you find an additional job or something, or anything. Somehow you can also afford to pay all the minimums on your credit cards too.
Assuming all that’s true and you can also squeeze an extra $100 per month from your budget and then use that to pay part of your credit card payments, then there is a method to pay off your debts.
If for instance you have ten (10) credit cards, and they range from $500 to $10,000. Let’s say the amounts are $500, $800, $1000, $2000, $2500, $3000, $4000, $5000, $8000, $10,000. If, just for instance, it turns out that the payments are $25, $50, $75, $100, $120, $130, $130, $180, $220 and $240 respectively, you now have a plan to pay your debts.
First take that extra $100 per month that you’ve saved by switching to Folgers and a generic dish washing detergent for everything, and you add that $100 to the payment for the smallest credit card with the payment of only $25 and a balance of only $500. At that point, you also continue to pay the minimum payments on all of the other credit cards at the same time. You pay that little credit card $125 per month for four (4) months until it is paid off.
Then, once that smallest credit card is paid off, you take the payment that you were paying to that smallest credit card and you add that payment of $125 to the regular minimum payment for the credit card up from the $500 card. The next card up has a balance of $800 and a payment of $50. Add that $125 to the $50 giving you a new payment on the $800 credit card of $175 per month. It will take approximately five (5) months to pay off that 2nd credit card.
In the 10th month you start paying on the 3rd smallest credit card, which has a payment of $75 and a balance of $1000. Adding $75 to $175 gives a payment of $250 per month. But the balance is only $1000 so it will take approximately four (4) months to pay off the 3rd credit card.
The next card, the 4th card, has a balance of $2000 and a monthly payment of $100. Add that $250 from the other paid off cards to the minimum payment of $100 for this card and your new monthly payment for the 4th card is $350. It will take approximately six (6) months to pay off the 4th credit card.
Card number five (5) has a balance of $2500 and a payment of $120. Adding $350 to this card’s minimum payment gives a new payment for this card of $470 per month and your fifth card will be paid off in about five (5) months.
Assuming you continue to do the same thing until all the accounts have been paid off, your final payment will be of about $1370 and it will be paid approximately forty-five (45) months from your start date of doing something as simple as switching to Folgers and reading more because you’ve cancelled your cable TV.
Yes, I’ve ignored the interest and minimum payments.
A Chapter 13 bankruptcy payment plan would be for sixty (60) months and the payment would be about $740 per month. It’s a great payment plan if you need to do it. You would pay a total back of about $45000. A Chapter 7 bankruptcy wouldn’t have a plan but you do have to have low enough income to qualify to file a chapter 7. And the chapter 7 qualification test called the Means Test is unforgiving if you have a higher income. And the Chapter 7 bankruptcy trustee‘s job is to take things away from you if they can, sell them off or liquidate them, and pay your creditors with the proceeds. So to file a chapter 7 bankruptcy, you would have to have a low enough income and fewer assets than you can keep if you file a bankruptcy.
The plan to pay your debts without a bankruptcy outlined above requires you pay significantly more than the Chapter 13 bankruptcy payment plan would, but that’s because you’re not bankrupt. Because you’re not filing a bankruptcy, you’re still paying your minimum payments which in the beginning are about $1270 per month. So in the non-bankruptcy payment plan where you pay off the smallest one first and then move up the chain one by one until they’re all paid off, you’re going to pay that same $1270 per month plus that initial $100 per month or $1370 per month for about forty-eight 48 months. So the total paid back is about $65,000 give or take. Of course your credit is perfect, you’re still not bankrupt, you’ve got $35,000 in available credit and probably a lot more, and you did exactly what you originally set out to do, borrow some money in good faith, do some good with it, and then pay it off.
Veteran’s Benefits or VA Benefits, cannot be garnished, seized or levied by general creditors, whether at source or once received by the Veteran.
Because the code section in question 38USC§5301, specifically states that VA Benefits:
“shall be exempt from the claim of creditors”
There are limited exceptions for spousal, child and family support payments that you may owe as a matter of divorce but those are the subject of a different article, not this one.
So guess what? That means that Visa, Mastercard, medical bills, collection agencies, collection attorneys and payday loans, among others, cannot collect from your VA Benefits.
Likewise, if you were to file a bankruptcy, then because a Bankruptcy Trustee steps into the shoes of the creditors then the bankruptcy trustee assigned to administer your case does not have a better claim than the creditors for whom he is collecting, the bankruptcy trustee has only the same rights as the creditors, not better.
Therefore VA Benefits cannot be used by a bankruptcy trustee to pay your creditors either. This is true whether your VA Benefits have already been deposited into your bank account or not. Creditors cannot take your VA Benefits and Bankruptcy Trustees cannot take your VA Benefits.
According to the Bankruptcy Code, the chapter 7 qualification test, also called the Means Test cannot include Social Security as part of the analysis. However, VA Benefits are not excluded by the Bankruptcy Code from the Means Test.
It makes the two codes contradict each other. The VA benefits if calculated into the Means Test cause you to fail the means test, then the bankrupt person, or person who filed the bankruptcy, should sign an affidavit under penalty of perjury stating that the bankrupt person does not want to pay those veterans benefits into a monthly consolidation plan or chapter 13 plan. This will solve the problem.
The chapter 7 Means Test or qualification test determines if you make too much money to file a chapter 7 bankruptcy, and if you do make too much, then the United States Trustee’s Office invites you to file a consolidation plan type bankruptcy called a chapter 13 bankruptcy. But if you don’t want to pay your Veteran’s Benefits into the consolidation plan, you only have to say so. They cannot make you pay your VA Benefits into a chapter 13 bankruptcy payment plan.
So, in practical terms therefore, VA Benefits are not going to affect your eligibility to file a chapter 7 bankruptcy.
However, as stated above, your ex-wife, ex-husband, ex-spouse or children may be able to, but that’s a much more involved article than I’m writing today. I don’t do any divorce work, so if that is a question you need answered, then I recommend you find a competent attorney familiar with divorce / family law and who is also familiar with veteran’s benefits in your area.
Navigating the twisty turns from Millinocket to Norcross can be horrifying late at night when your engine is running on only three cylinders and your flashlight’s batteries are dead in the days before cell phones which don’t work out in the deep woods even today.
Navigating the Fair Credit Reporting Act to the Fair Debt Collections Practices Act can be just as intimidating.
Creating the right letter to send to the right person to settle a debt, without help of any sort, is not so simple as it sounds. I’m an attorney, and I didn’t want to do it either. What if the debt is now with a debt collector, such as Portfolio Recovery or Midland Funding, and the debt collector has sent letters to explain that they are now on the account, can the debt be settled with the original owner, such as Macy’s or Capital One?
If Hunt & Henriques, Attorneys at Law, have already obtained a judgment for their clients, Cavalry Portfolio, what percentage of the debt would one likely have to pay in order to settle it? Or what if the judgement has been turned into a lien on the borrower’s home already, how much then? Will it be ridiculous?
Maybe a bankruptcy would be better, and sometimes it is. But bankruptcy should be the last resort. If you have no resources, no extra car to sell, no 401k to borrow from, no jewelry left over from a previous or unrequited love, or no one in the family who might make you a low interest loan, or if the creditor won’t take a payment plan, (they seldom do) perhaps a bankruptcy is the right next step.
But assuming bankruptcy is not right for you, knowing what to do next to restore credit to its good health is important. Buying a car might have to be put on hold, or buying a house might never happen. Paying for a vacation might have to wait years because all the money that would have been saved for the vacation is going to pay high interest rates on the car and truck so mom and dad can get to work.
On the other hand, credit repair could be as simple as that there are not enough good things on your credit reports. I remember when I realized that once all the bad things were off my credit reports that there was basically nothing left on them. My credit reports looked like I was a high school graduate. I had to open a couple of credit cards in order to make things right.
So I went to my own bank and gave them $1000 and they gave me a credit card with a $1000 credit line. It’s called a secured credit card. For me that was step two in the credit restoration process, adding good trade lines to my credit reports. You can do it with a lot less money than $1000, usually you can start with as low as $300. Then, after using the card, don’t pay it off all at once, pay it off over three (3) months instead. Save up the amount of the credit line, buy the thing for that much money, and then pay it off in thirds.
Credit card companies prefer to see that a customer actually needs the credit card before they increase a customer’s credit line.
Do that a few times and your credit line will increase over a year or two, and so will credit ratings increase over that year or two and if you do it with at least two accounts, there’s a big boost to all credit ratings in not much time at all.
This is not one of the easier things to remove from a credit report.
The first question is: Has the judgment been paid or satisfied?
And the second question is: Has the judgment been vacated?
Third: On which credit report does the judgment appear?
And Fourth: Did the creditor sue the right person to begin with? Or was it Identity Theft or a Case of Mistaken Identity?
I just wanted you to see this up front because it’s important: Just because something is not listed in your credit reports, this has nothing to do with whether or not you still owe the debt. Many things that you do owe, won’t show up in your credit reports. That’s not a bad thing unless you cannot remember whom you owe money to, such as when you want to file a bankruptcy.
An unpaid judgment is the worst thing to have on your credit reports, well second to a foreclosure and about equal to an eviction. An unpaid judgment means that there is a creditor, or the plaintiff, who sued you and won. That creditor/plaintiff can use that judgment to, at any time, garnish your wages if you have a job, levy your bank accounts and take all of your money, (with some exceptions such as with Veteran’s Benefits and Social Security money), and put a judgment lien on your home or other real estate holdings if you own any.
If you need to buy a car, potential new car lenders won’t want to lend to you because if your wages start being garnished then you won’t be able to pay for the car and the lender will have to repossess any car he might sell to you. Property managers won’t want to lease or rent to you because you might miss months of rent, because your bank account was drained by the judgment and then they might have to evict you and that costs extra money they probably will never recoup and might not be able to afford to begin with.
Assuming a couple of things up front, such as that you are the person who owes the money and that you haven’t paid the debt off yet, then you’ve got to do something about the debt.
Pay the judgment or settle it
Have the judgment vacated or set aside (see first bullet point supra)
Fight the judgment’s validity
Do nothing and hope the creditor/plaintiff forgets to renew it after ten (10) years
Paying or settling the debt will mean that a satisfaction of judgment can be filed with the court where the judgment was entered. The creditor usually does this but if they don’t, or forget, or just don’t care, then you can do it yourself. Eventually the satisfaction of judgment will be reported on your credit reports and that’s good for your credit. However, you’ll still have a judgment on your credit reports. Paying it off doesn’t take it off of your credit reports. But still it’s better than being garnished or having your bank accounts levied which is what will happen if you do nothing. (Unless of course you’re self employed or unemployed, because then you can’t be garnished. If you don’t have a bank account or don’t keep money in your bank account then your money won’t be levied when the creditor serves the bank levy on the bank.)
Vacating the judgment or filing a motion to set aside the judgment gives you the best result possible. If you can afford to pay the debt or to settle the debt for close to the full balance, or if necessary, over the balance, then the creditor might be persuaded to file paperwork with the court to vacate the judgment. Vacating the judgment takes some extra paperwork on the creditor’s part and that creditor/plaintiff usually won’t bother for less than a very high percentage of the balance. A vacated judgment if you can get it done has the effect of basically telling the world that the lawsuit never happened. Credit reporting agencies don’t report judgments where there is no judgment. Sometimes however, you have to ask them to remove a vacated judgment and sometimes you have to threaten them with a lawsuit and sometimes you might have to actually sue the credit reporting agencies to get the credit reporting agencies to comply. However, most of the time it won’t come to that.
Fighting the Judgment’s Validity can sometimes work too. Rarely, but sometimes, you might have a viable defense against the judgment such as you were out of the country or out of state when it was “allegedly” served on you at your place of residence or work at time the Creditor/Plaintiff claims you were served. When you can prove that you were in Figi or Cancun passed out on the beach and your friends have the Facebook and Instagram posts to prove it, you might have a good defense to the judgment. There are very few defenses to a judgment once it is entered, but if you weren’t served, that’s a defense that can still work for you. If you don’t mind paying your own attorney some good money to prove it.
Under the Fair Credit Reporting Act (or FCRA) a judgment will remain on your credit reports for seven (7) years but longer if the length of time that the judgment will remain valid is longer than the seven year period. For instance in California, a Judgment is valid for ten (10) years from the entry date of the judgment or from the Renewal Date of the Judgment.
Judgments in California can be renewed every ten (10) years if renewed prior to the expiration date of the previous judgment. This can be done for an unlimited number of times in California. If an Abstract of Judgment or Judgment Lien (in California) which has been recorded in your local County Recorder’s Office, as a judgment lien against your home or other real estate, then the lien is also good for ten (10) years or until the Judgment Fails to be Renewed. When the Judgment is Renewed, then the Creditor/Plaintiff must also record a copy of the Application for Renewal with the County Recorder’s Office in order to preserve the validity of the Judgment Lien or Abstract of Judgment.
If you do nothing about the judgment, in California, then whenever possible, the creditor/plaintiff will garnish your wages, record the Abstract of Judgment at your local County Recorder’s Office thereby creating a judgment lien on your home and other real estate, and on top of that, every few months the creditor/plaintiff can levy your bank accounts. They can also do something embarrassing and potentially devastating which is to have you brought into court for a judgment debtor’s exam. You receive a subpoena ordering you to go to court to explain the nature and location of your assets under oath under penalty of perjury and if you don’t show up, the court issues a warrant to arrest you. You make a rolling right turn, get caught, and go to jail. But if you’re Judgment Proof, in other words, you’re on social security disability, VA Disability, or are otherwise unemployed with no income or a protected income and you don’t have any bank accounts and you don’t own any real estate, then they can tell their tale to the judge but they won’t get anything.
If you file bankruptcy against the judgment creditor/plaintiff, then at least the judgment will be void, but it will still be on the credit reports for the full seven years from the entry date of the judgment. Additionally, the judgment creditor/plaintiff will no longer be able to renew the judgment lien or Abstract of Judgment because a void judgment cannot be renewed. If the creditor attempts to do so, then you can sue him for violating the discharge injunction as provided by the bankruptcy code.
In cases of Identity Theft or Mistaken Identity, you are supposed to be able to get the creditor and credit reporting agencies to vacate the judgment based solely on the mistake. You must of course prove the mistake. If you were a victim of Identity Theft and the identity thief opened several accounts in your name, it may be easier to prove that this judgment was also one of those incidents of malfeasance. With a Mistaken Identity, it may be a little harder. Especially if you have an extremely common name such as Smith, Jones, Nelson, Guerrero or Patel. A friend of mine, an Attorney named Bill Johnson, was contacted by a guy coincidentally named Bill Johnson who was being sued by the Los Angeles County Child Support Enforcement Office. Bill went into court and said: “Good morning your Honor, I’m Bill Johnson representing Bill Johnson and he’s not the father and neither am I.” The account was considered “satisfied” and the case dropped.
In Summary, if the judgment is unpaid, then the creditor can collect from you. If you have no assets nor income that can be collected from, then he can’t collect from you. If you file bankruptcy, then he can’t collect from you unless the bankruptcy code allows it for some reason, which is rare. If you are able to pay then the debt will eventually reflect that the judgment was satisfied and that’s good for your credit scores and also tells future creditors that this judgment is at least benign and can no longer cause trouble. If you can pay in full, close to it, or sometimes over, you could get the creditor to help you to petition the court to set aside the judgment or vacate the judgment. The credit reporting agencies such as Trans Union, Equifax and Experian don’t report vacated judgments. However, you may have to ask them to remove the judgment or even threaten them to get it done.
This Just In: According to an article published by Experianin June of 2018, they no longer routinely report judgments. This article is still important because they apparently haven’t gone back into your credit reports and removed all the judgments which were already reported. Those are still there. However, they are no longer collecting new public records of judgments and reporting them except for bankruptcies. Click Here For More Information.
If you actually had to look up all of the statutes and codes involved as well as knowing the correct case law to reference in the letters, this would be a daunting task.
You can repair your own credit yourself. There are several basic guidelines, and knowing them will help get you started.
First, you’re going to need your credit reports so that you know what is in them that needs to be disputed. You can get all of your credit reports for free at www.AnnualCreditReport.com and there are other places too as long as you have previously gotten them for free within the last twelve months.
Second, you have to write letters to the credit reporting agencies disputing the validity of the information in your credit reports. You write one per credit reporting agency. In each one you dispute the negative information if it is incorrect and you can put multiple disputes on one letter but you must write separate letters to each of the credit reporting agencies.
Third, you have to make sure that you sign and date them.
Third, if at first you don’t succeed, try try again. The code says that the credit reporting agency, such as Experian, Equifax and Trans Union must “re-investigate” the disputes you send in and that means that if they reject it the first time, and if you know that the information in your credit reports is inaccurate, then you can ask them to investigate it again next month. And when you do, they have to re-investigate your dispute as many times as you send it in.
Fourth, don’t forget to dispute all of the inaccurate information. If you used to work at PetKo and your credit reports say that you worked at MedKo, dispute that too. If they say you used to live on Free Street but it was Fred Street, dispute that too. Get rid of extraneous addresses where you were only for very short stints that didn’t really count because they were so short or your credit reports will make you look like a gypsy. Not that there’s anything wrong with that, but do you realize potential employers also run your credit reports during the interview process? Employers want stability not nomadic millennials trying to find themselves by traveling around like Bob Dylan as a boy with a guitar and a harmonica. You’re probably not a poetic genius. Inquiries, if possible, and if disputable, get rid of them, you don’t want employers and potential new lenders to think you’re irresponsible with your finances by trying to run up as much debt as possible because that’s how multiple extraneous inquiries make you look.
Fifth, you can dispute anything that is incorrect. If the credit report indicates you owe $5000 but you know that it’s $5500 then it is incorrect and is supposed to be removed from the credit report. If when you make the dispute, the credit reporting agency makes it’s inquiry into the matter with the creditor, if the creditor doesn’t respond within a prescribed allotment of time required by the Fair Credit Reporting Act, then the credit reporting agency must remove the item from your credit reports.
Sixth, remember that the Federal Fair Credit Reporting Act states that a credit reporting agency must “re-investigate,” a disputed item. So if you dispute an item on the credit report and the credit reporting agency or the creditor instead verifies the incorrect information, you can still dispute it again. You can dispute it over and over again. You can also threaten the creditor directly with the proper kinds of law suits in order to express your legitimate concerns that they aren’t taking you seriously.
I’ve used a credit repair service myself, and I’m an attorney. At that time, I didn’t know what to do, so I just hired someone.
So, why didn’t I just take some time to learn how to do it myself. There’s a simple answer to that. Attorneys are busy people, me included. For me it’s even a little bit worse than for other attorneys because I like to manage my cases from the start to finish and from the ground up. I don’t use paralegals and my wife is my part time receptionist. I even answer the phones. It streamlines the way I do my legal business and my area of practice is bankruptcy. So I know a lot about ruining your credit. That’s easy, don’t pay your bills, get sued, have a car repossessed and voila your credit is toast. Perhaps, I should have added a picture of a toaster instead of my cat.
In my law practice I pretty much only take bankruptcy cases, I don’t have a lot of spare time to learn a new kind of case, or at least I don’t have time that I want to devote to learning new types of cases. Being a bankruptcy attorney is time consuming enough, especially when you’re also a full time paralegal, full time secretary, and sometimes I have to empty the bins and vacuum. I like it, it’s a quiet simple life that I enjoy, I love getting people out of debt.
However, all that said, and especially at that time, if I had had to spend the time to learn how to fix my own credit, I really didn’t have the time to do it. There are dense Federal Codes to study, and then the State of California has plenty of statutes that sometimes add things that aren’t in the Federal codes. Combing through the statutes and codes takes time, figuring out how to write credit repair letters would have taken a lot of time, effort and I knew that I just didn’t have that time. And sure once you’ve got the letter written, you can reuse it, we do that all the time but I hadn’t yet done my first one. And I didn’t want to learn.
So I started researching for a credit repair company or service near me. There were a few, so I asked a couple of attorneys I know and received a couple referrals.
$1500 dollars later I was on my way to clean credit and a new life and a new house.
So, I’m not a complete dork, and I know that the paralegals do most of the real work so I spent a little time letting my wife speak to the attorney while I walked around getting lost on the way to the restrooms and what I learned was that the paralegals were using basic templates to write letters and that those basic templates came from a credit repair guide book which had been printed out, three hole punched and clipped into a binder. You see, I had seen a guide to credit repair on the Internet but I thought it was a scam, because I was an attorney. I ignored it. Yet, here it was, the company charging me $1500 was using the guide that I had ignored.
So I said earlier that what I found out that these companies do, surprised me. And it did surprise me, because while they’re doing proper legal work for you, they’re just doing basic DIY credit repair for you that you can do for yourself. You can repair your own credit.
Yes, there is a big secret to credit repair: you can do it yourself. The guy doing my credit repair so that I could refinance my house and buy a second house was using a guide that he had downloaded from the Internet, three hole punched and shoved into a three ring binder. I guess the binder made it official.
I know that most of the time, in most law practices we use those kinds of things. They just normally come from a seminar costing $500 to $5000 and the books are an extra $500 to $1000 with an annual update costing $250 to $500 and still requiring a lot of expertise to make sure that they are properly implemented. Yet to repair my credit, it cost that firm around $37 or $47 and he was charging me $1500. That’s a good deal.
Of course you can do a lot of kinds of legal work yourself, people do their own divorce work all the time, but it’s complicated, fraught with pitfalls and you can easily make mistakes. And if you make enough mistakes, you can prejudice your judge against you and then you’re in a world of hurt. That’s true with most types of legal work.
But in credit repair work, you’re almost never in front of a judge, and because of the way the laws about disputing things on your credit reports is written, if you do it wrong this month, you can try again next month.
Keep researching, you’ll find that there are lots of excellent sources for exactly what you need to do to repair your own credit. There’s a ton of excellent people educating the public on Youtube and other sources. Good luck.