Not surprisingly, bankruptcy lawyers like me often get questions about life post-discharge.  Are there any “best practices” for rebuilding your credit after your bankruptcy (or period of bad credit) is over?

Thoughts about how to re-establish credit after bankruptcy have been written about on this blog.  One of the practices frequently discussed involves obtaining a secured credit card.  A secured card differs from a standard card in that you must deposit money into an account managed by the issuing cardholder equal to your credit limit.  In other words, if you want a card with a $500 limit, you must first deposit $500 into a savings account at the bank that issues the card.  If you fail to make payments, therefore, the bank has the right to seize funds in the savings account.

The Bankrate.com website has an informative article that explains how secured credit cards work and I recommend it to you as part of your research.  I also found a helpful article from the Texas Bankruptcy Lawyer web site that offers tips about what to look for when considering a secured card.

So, there is plenty of information out there concerning the features and pitfalls of secured credit card offers.  Where can you do your research?

A good place to start is the handy search grid feature at Cardtrak.com.  This site allows you to search for secured credit cards and the resulting table will show you the names of the issuers, the annual fee, the APR and other information.

Of course, Cardtrak.com should be the starting place for your research. Read the rest

Congress is considering proposals that would reform the health care system.  Some, like Senator Bernie Sanders of Vermont are citing massive fraud by the health care industry and calling on “real health care reform to prevent major insurance companies, drug companies and hospital chains from perpetrating fraud and abuse on government health care programs and individuals.”  Sanders claims that this abuse is driving up health care costs in American by billions of dollars each year.

Sanders, a member of the Senate Health, Education Labor and Pensions Committee points to a huge increase in the costs connected to health care bureaucrats and bill collectors.  In the last 30 years, “administrative personnel has grown by 25 times the number of physicians.”  He points to systemic fraud perpetrated by private insurance companies, private drug companies and private for-profit hospitals as reasons that our health care is “the most costly, wasteful, complicated and bureaucratic in the world.”  

A review of court records and other public documents, according to Sanders, shows that billions more dollars are lost to fraud and outright corruption.  “This is not the case of ‘one bad player’ acting illegally…but a situation where fraud appears …part of the normal business model”

A credit default swap is a kind of insurance.  It’s also like a ticket for a bet on a horse race — a bet on which horse will lose.

A CDS is a simple idea.  In its most basic, safe form, it’s a way to hedge the risk of a loan failing.   If a bank loans money to you, it can buy a CDS from an insurance company or other financial player.  The CDS will payoff in the event you do not.  It swaps the risk of a credit (the loan) defaulting to another party in exchange for a premium.  In its best form it is no more or less than insurance.  The lender is willing to take slightly greater risks in lending because a third party is willing to, in effect, act as a guarantor of your loan.  That guarantor of course will set the price of its insurance based on how much risk they believe you present.  So in theory a CDS on a very risky loan will be so expensive to buy, that the lender might not want to make the loan in the first place because there’s no way to “hedge” it. Read the rest

Pennsylvania Attorney General Tom Corbett’s office released information regarding credit-related scams.  “Consumers searching for an easy way out of their credit problems are susceptible to a wide range of credit-related scams in addition to credit repair fraud,” the PA Attorney General’s office states.  Some examples provided are as follows:

Checking Account Scams

One of the latest scams making the rounds typically begins with a postcard advertising easy credit approval or low credit card interest rates.  When consumers call, they are asked for their checking account number, supposedly as part of a “certification process.”  This number can be magnetically encoded on a draft, which is forwarded to the consumer’s bank.  Sometimes banks pay out hundreds of dollars from the consumer’s account, not realizing that the consumer never approved the withdrawal.

Credit by Phone

Pay-per-call or “900 number” services have become a popular vehicle for phony credit schemes.  Television or print ads promise that “guaranteed” credit or cash loans are only a phone call away.  Instead, the caller might receive a list of banks offering low-interest credit cards or a booklet on how to establish credit.  Such calls can end up costing $50 or more, but consumers rarely end up getting credit as a result.

“Gold” or “Platinum” Cards

[P]romotions for “gold” or “platinum” cards…promise to get you credit and build your credit rating even if your credit hisotry is poor.  Although they may sound like general purpose credit cards, some of these “gold” or “platinum” cards only permit you to buy merchanidse from special catalogs and will not help you obtain credit from other sources.  [A]ds for these cards [may] direct you to cal “900″ or “976″ exchanges for more information.

(Source:  PA Attorney General, Bureau of Consumer Protection)

Credit card banks have been scrambling to raise capital and cut credit lines for consumers across the country lately.  So imagine my surprise to discover at least one bank still wants me to carry balances?

Here’s the deal that came in the mail last week:  My bank is offering a promotional 4.99% rate until January on new charges.  But only restaurant, bar, travel and entertainment services qualify.  This offer was extended in different formats — for different types of spending — on all the cards I have with this bank (we have three for business).

So here we have a large money center bank offering customers an unusual deal:  They’ll “only” charge 4.99%  for the next six months if I’m willing to run up debt on largely unnecessary entertainment.  And of course they’ll apply any payments to these lower rate charges before any higher rate balances I might be carrying (although fortunately we do not carry balances now).  It’s quite a deal — if I had to get overextended on fun. Read the rest

Remembering and following these important tips, provided by the Pennsylvania Attorney General’s Office (relevant nationwide), will go a long way in protecting your credit by protecting your personal information:

• Don’t give personal informationon the phone, through the mail, or over the Internet, unless you’ve initiated the contact or know with whom you’re dealing.
• Ask your financial institutions for their policies about sharing your information.
• Pay attention to your billing or account statement cycles.  Follow up with your financial institutions if your statements don’t arrive on time.
• Carefully monitor your monthly credit card statements.  Report inaccuracies right away.
• Keep items with personal information in a safe place.  Shred any charge receipts, copies of credit applications, insurance forms, bank checks, and other financial statements that you are discarding, expired charge cards, and credit offers you get in the mail.
• Add passwords to your credit card, bank, and other accounts.  Avoid using easily available information like your mother’s maiden name, your birthdate, the last four digits of your Social Security number or your phone number, or a series of consecutive numbers.
• Be mindful about where you leave personal information in your home, especially if you have roommates or are having work done in your home.

(List source:  PA Attorney General, Bureau of Consumer Protection)

You might think that bill collectors are good for nothing.  After all, they drive many of us crazy with their harassing phone calls and letters.  But bill collectors are not all bad all of the time.

At least not yesterday, when a bill collector saved a Victorville, California woman who was being held hostage in her home by an ex-boyfriend.  According to both the Huffington Post and KTLA news, a local car dealership told a saleswoman that on her way home she should try to pick up a late car payment from a local woman.  When she arrived at the Winona Street address, she knocked on the door.  The 30 year old woman who opened the door had noticeable scratches on her body and scribbled the word “help” along with the name of her ex boyfriend.  When the saleswoman asked if she were OK, she whispered that her ex had a gun and was holding her hostage.

The saleswoman called the police who arrested 28-year-old Miguel Rios, a self-admitted gang member, for false imprisonment and making terrorist threats.

On May 22, 2009, President Obama signed into law the Credit Cardholder’s Bill of Rights Act of 2009.   The provisions of this new law go into effect in February, 2010.  A detailed explanation of the provisions of this new law may be found at Adam Levitin’s informative article on the CreditSlips.com blog.

In reviewing the legislation, it appears that many of the provisions are designed to eliminate many of the tactics used by credit card lenders to tack on fees or increase interest rates quickly and without notice.

I especially like the provision in the bill that allows consumers to opt out of “overlimit” credit.  In other words, if you have a credit limit of $10,000 on a card and you incur charges that bring your balance to $10,500, many credit lenders now will permit the transaction but then charge you an overlimit fee.  If you use the card again, you will get hit with another, then another overlimit fee.  If you were not aware that you had reached your credit limit you could find yourself with hundreds of dollars in overlimit fees but no knowledge about these fees until you received your bill. Read the rest

The concept of interest on a loan pre dates the Birth of Christ to the time period of the Sumerians.  The Sumerians expected loans to give birth to a higher return.  Sumerians often lent cattle instead of money.  This is where the concept of “giving birth” came from.  They expected that the lent herd would give birth to calves.  So when the original loan of calves was repaid it would be the original herd plus some of the calves that were born.

If the Sumerians lent silver, gold or barley these loans were also expected to be paid back with interest. The interest rate for metals was 20% and for barley was 30%.  The concept of interest on loans has been around for a very long time.  This fact makes me wonder why we still have not developed a system to regulate the lending industry to prevent predatory behavior.

Remember that knowledge is power.  Therefore, the more knowledge you gain about the affects of interest the more power you will have in controlling your financial future.

Written by Kansas City, Missouri Bankruptcy Attorney, Rachel Lynn Foley.