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College Students And Overwhelming Credit Card Debt

by Mark Buckley

Bad college credit?

In all but a few isolated cases, student loans are not dischargeable in bankruptcy. However, this is not the case for student credit cards, which can be cleared of debt under Chapter 7 bankruptcy.

Banks and credit card companies are all too eager to cash in on the spending habits of American college students. College students tend to use credit cards indiscriminately, creating a profitable market as far as credit card companies are concerned. Meanwhile, banks use the college years to establish financial relationships with young adults.

The CARD Act, a recently passed motion to limit the marketing reach of lenders to students, established a minimum age at which a person can obtain a credit card. Unfortunately, this did not prevent credit card companies from discovering some very large loopholes in this new law.

For example, the CARD Act specified that people under 18 years old need cosigners in order to acquire cards. While this was intended to refer to parental permission and oversight, college teens twisted the word of the law in some serious ways, having older classmates or fraternity brothers function as cosigners. And all along, this activity was encouraged by those who made their livings selling plastic cards. While the CARD acts was intended to prevent credit card companies from selling their goods on campus, sellers managed to skirt that issue as well.

The evidence is telling: last year, Bank of America spent $62 million for the right to market their credit cards to kids on campus alumni associations. Meanwhile, at the University of Southern California alone, it invested $1.5 million in attracting almost 700 new accounts. Ultimately the total amount invested for all banks to get on college campuses in the past year alone amounted to over $82 million, creating 53,000 new accounts.

If you are a student struggling with credit card debt, bankruptcy can offer you a fresh start. Contact the Law Offices of Mark Buckley to schedule a free initial debt consultation.

Filed Under: Blog, Rhode Island Bankruptcy Articles Tagged With: Bankruptcy, bankruptcy lawyer, Chapter 7 bankruptcy, credit, credit card, credit cards, Mark Buckley, Rhode Island bankruptcy, student loans

Debt Settlement Plans: Part II

by Mark Buckley

You’ve tried calling each credit card company to work out a debt settlement plan, but they aren’t interested.  Interest rates have only skyrocketed in the past year.  The bills keep coming and you are drowning in debt.

What if your “minimum payments” on credit cards add up to $ 1,000 a month?  Few debtors can honestly afford repaying such a high amount without using other cards for their daily living expenses.  It becomes a game of robbing Peter to pay Paul.

It would seem like a miracle for a “credit counseling” company to get your payments down to $750 per month by decreasing your interest rates.  Who wouldn’t want to save $ 250 a month?  Although saving $250 per month may sound good at first, here is the bigger question.  Do you honestly even have the $ 750 available?

If you can only afford $300 a month, a plan that requires you to pay $750 per month will not do you much good. You are still in debt. For this reason, “credit counseling” companies and “debt management” companies focus exclusively on the amount of savings they offer, rather than whether you can actually afford your payments.  Many clients who ended up filing bankruptcy in Rhode Island wasted thousands of dollars on unrealistic repayment plans first.

Added to the misleading nature of “debt management” company claims are hidden fees and fraud. Consumer Reports claims that

” Many [“debt management” companies] advise rolling high-interest debt into a second mortgage. But by using your house as collateral for what was unsecured debt, you risk losing your home. Some firms can persuade creditors to cut your debt. But if you miss payments they can later back out of the deal and demand full payment, potentially landing you in bankruptcy court after you’ve already paid a large portion of your debt.”  Consumer Reports online report, June 2005.

Filing Chapter 7 bankruptcy offers a straightforward, honest, effective alternative to the misinformation propagated by “debt management” and “credit counseling” companies. Federal bankruptcy laws were created by Congress for the purpose of helping hardworking citizens pay off their debts.  Unlike DMPs, bankruptcy actually reduces both interest and debt. In fact, bankruptcy is the only way to completely eliminate a debt.

Bottom line: Before you look into signing up for an unrealistic debt management plan, consider consulting a qualified Rhode Island bankruptcy lawyer.

Filed Under: Blog, Rhode Island Chapter 7 Tagged With: Bankruptcy, bankruptcy lawyer, business, Chapter 7 bankruptcy, credit, credit cards, credit counseling, debt, debt management, debt management companies, debt management plan, debt relief option, debt settlement, debt settlement plan, economics, filing bankruptcy in Rhode Island, filing for bankruptcy in RI, finance, insolvency law, Mark Buckley, part ii, payment plan, Personal Finance, Rhode Island, Rhode Island Bankruptcy lawyer, rhode island bankruptcy lawyers, secured loan, settlement planning, the truth about

The Truth About Debt Settlement Plans: Part I

by Mark Buckley

Is debt settlement a realistic option?  As a Rhode Island Bankruptcy lawyer, I get calls daily from families who are struggling with excessive credit card debt.  If the credit card debt is less than $ 8,000, I rarely suggest bankruptcy as the solution, unless there is additional non-credit card debt that makes debt repayment impossible.

In every debt consultation, however, I ask what other solutions have been attempted to repay debt.  Then the stories of debt settlement attempts and debt management plans begin.  Many have paid large sums of money to finance a debt settlement plan that failed.  Hundreds and thousands of dollars were wasted on unrealistic plans that were doomed from the start.  Why does this happen to so many people?

The term “debt settlement plan” is a misleading one.  Most of the Rhode Island advertisements I have seen for this kind of debt settlement plan—whether on the internet, on television, or in phone books—are placed by “debt management” companies, also known as “credit counseling” companies. Despite their name, most of these companies only aim to get you to sign up for what they call “debt management plans” (DMPs) and do not give actual advice on credit. What you might not know is that credit card companies sponsor DMPs in order to collect money from you. In essence, then, “credit counseling” companies serve as bill-collectors for credit card companies.

The debt settlement advertisements run by these “credit counseling” companies are misleading as well. For example, when ads claim that DMPs will “reduce your debt by 60%,” they may lead you to believe that they will actually reduce the amount of your debt. However, the most a “credit counseling” company can do is reduce the interest on your credit card—and not by much. In reality, you still must pay your entire debt along with most of the interest. Ultimately, “debt settlement” plans do anything but do away with your debt.

Additionally, when setting you up with a “debt settlement plan,” “credit counseling” companies often fail to take all your expenses into account. This is usually because the plan they offer you is far more expensive than what you can afford to pay. Thus, although they promise to eliminate debt, DMPs do not bring you any closer to making ends meet. In fact, almost 90% of DMPs tank before completion. All said and done, the hope offered by DMPs is nothing but a scam—lowering the interest rates on your credit card by a few points is far from a financial fix.

What’s worse, “debt management” plans actually damage your credit. As part of an arrangement called “fair share,” credit card companies are paid a percentage of the amount that the “debt settlement” company collects from you. Thus, the more you pay a “debt settlement” company to get yourself out of debt, the more of your money goes to pay off the credit card companies. And as long as these companies can continue to milk you, they will—regardless of whether you can afford your plan or not.

One Caveat:  For those who only need help with budgeting, and have a modest amount of debt that can be reapaid comfortably in 24 months or less, I am the first to recommend a call to a local office of Money Management International.

Filed Under: Blog Tagged With: Bankruptcy, card debt, Chapter 7 bankruptcy, credit, credit card, credit card debt, credit cards, credit counseling, debt, debt consolidation, debt management, debt management companies, debt management plans, debt settlement, debt settlement plan, economics, filing bankruptcy in Rhode Island, finance, Mark Buckley, money management international, Personal Finance, Rhode Island bankruptcy, RI bankruptcy lawyer, settlement planning, the truth about

RI Bankruptcy Filing: Can’t I Just Keep One Credit Card?

by Mark Buckley

Will the Rhode Island Bankruptcy Court let me keep one Credit Card out of my Chapter 7 case?

The quick answer is no. When a debtor files a RI bankruptcy, she must list ALL of her debts. If there is a balance owed to anyone on the day her case is filed, she must list that creditor in her Rhode Island Chapter 7 bankruptcy petition.

Many filing for bankruptcy relief will ask me, a RI bankruptcy lawyer, for permission to leave just one card out, in case of a future emergency. I understand their fear. Because we live in a society run on credit, how would any of us survive on cash alone? Fortunately, there is good news.

As you may remember, the typical Rhode Island Chapter 7 bankruptcy takes about 90 days from the date of filing to the date of discharge. Once your case comes to completion and your debts are wiped out, your financial picture changes drastically for the better.

Most filing for RI bankruptcy relief see their credit score improve after a bankruptcy filing. The reason for this is because a credit score is based on the consumer’s debt to income ratio. By filing a Chapter 7 bankruptcy and destroying unsecured debt, you are improving this ratio and making yourself more credit-worthy.

After your RI bankruptcy case is over, don’t be surprised by the rush of credit card companies looking to do business with you. You are a good risk in their eyes not only because of your new credit score, but because you are unable to file a Chapter 7 bankruptcy again within the next eight years.

But what about debts owed to friends or family members?

All debts must be listed; even debts owed to friends and family members. It all comes down to whether the money was given to you as a gift, or as a loan. If it is a gift, as is often the case, then there is no debt and the friend or family member does not have to be listed as a creditor.

However, if the money was given as a loan, even if there were no formal promisory note (IOU) signed, the obligation must be listed in your bankruptcy petition. Be careful to think this matter through accurately. If you owe money to mom, she must be listed as your creditor.

One last piece of advice. At the bankruptcy hearing, and on the bankruptcy petition itself, you will be asked under penalties of perjury if you repaid any debts to friends or family members in the past year. Understand that the bankruptcy trustee has the power to request copies of your bank records. If you have repaid debts to friends or family members, you must fully disclose this information.

Filed Under: Blog, Rhode Island, Rhode Island Bankruptcy Articles, Rhode Island Chapter 7 Tagged With: Bankruptcy, bankruptcy filing, bankruptcy lawyer, bankruptcy petition, business, Chapter 13, credit, credit card, credit cards, credit score, debt, file bankruptcy, filing for bankruptcy in RI, finance, Mark Buckley, owe money, Personal Finance, Rhode Island, Rhode Island bankruptcy, Rhode Island Bankruptcy lawyer, Rhode Island Chapter 7, RI, RI bankruptcy, secured loan, title 11, united states bankruptcy law, united states code

Stopping Wage Attachment: Rhode Island Bankruptcy Law

by Mark Buckley

Wage Attachment doesn’t happen over night.  It is, however, one of the most powerful actions a creditor can take to force repayment of a debt.  Other than foreclosure, it is the ultimate “wake-up call” that causes a debtor to explore relief under Rhode Island bankruptcy law.  Fortunately, filing a Chapter 7 bankruptcy will stop a wage attachment.
Debt collection usually escalates.  A creditor may start with a simple collection letter.  But if collection letters won’t work, the next tool is the telephone.  The debtor’s phone will ring morning, noon and night in an effort to coerce repayment.

(As a reminder, you can make the phone stop ringing if you understand the protections available under the Fair Debt Collection Practices Act (FDCPA).  Keep a pen and paper near the phone.  Then write down the name and phone number of each caller after making it clear that you are not to be contacted by telephone anymore.  You should remind the caller that under the FDCPA they will be in violation of Federal law if they continue calling you and that you will take legal action.  While this may quiet your phone, a determined creditor still has one more option left.)
If no progress is made using collection letters and harrassing phone calls, a creditor will ultimately take legal action with the goal of obtaining a wage garnishment or attachment.Keep in mind that a creditor cannot garnish or attach wages without a legal judgment on the underlying debt. In other words, a creditor must first serve the debtor with a court summons and a complaint alledging that money is owed. If the debtor fails to answer the complaint in writing in the time allowed, he will lose by default and the creditor will receive a judgment. Now what?

With judgment in hand, a creditor can petition the court for a wage attachment. Once again, the debtor must be served with a Notice to Attach Wages and be given opportunity to object to the wage garnishment. In Rhode Island, wages cannot be attached if the debtor proves receipt of Social Security benefits or State assistance in the prior 12 months.

If no proper objection is given, the court will order garnishment not to exceed 25% of the employee’s disposable earnings. Once the employer receives a court-order to garnish wages, the only way to stop garnishment is to file bankruptcy.

Filing for bankruptcy will stop all collection activities including wage attachments. Under Rhode Island Bankruptcy law, if the employer is notified of the bankruptcy filing before remitting the garnishment to the creditor, he must refund the money to the employee.

Filed Under: Blog, Rhode Island, Rhode Island Bankruptcy Articles, Rhode Island Chapter 7 Tagged With: attachment, attachments, automatic stay, Bankruptcy, bankruptcy filing, business, collection agency, collection letters, collections, contract law, credit, creditors, debt collections, finance, garnishment, insolvency law, judicial remedies, labor, law, Rhode Island, Rhode Island bankruptcy law, stop, wage, wage garnishment, wages

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