The maximum amount of tax “credit” is $7500, based upon 3.7% of the national median home price of $219,000.  However, the Federal Income tax liability for a median-income family of four using only standard deductions ranges from $3000 - $4000.  This puts the credit in perspective as an economic engine for the homebuilding industry.

The Foreclosure Prevention Act of 2008 allows the IRS to recapture the “credit” over 15 years at 6 2/3%, or $500 per year on a $7500 advance. These are favorable terms; however, if the homeowner’s finances deteriorated, he or she would still be committed to paying this amount. The provision for accelerating the remaining principal upon sale of the residence could present additional problems if the home is sold in a declining market.

According to the notice, there was no indication that Spanish speaking individuals are the only ones being targeted, nor that the scheme wasn’t occurring elsewhere. There was nothing that indicated that this scheme was limited to bankruptcy court either, but it makes sense that people who may be less familiar with the US legal system may be targets of a scheme like this.

As with any private information, never give out your credit card number to someone that you don’t know, and always verify facts when contacted regarding payment of unknown debts or suspicious court dates. If you are contacted by anyone with similar facts, have been a victim of this scheme or have any information you should contact the Supervisory Deputy U.S. Marshall Jim Phelphs at Jim.Phelps@usdoj.gov

by Susanne Robicsek, Charlotte NC Bankruptcy Lawyer

For example, a credit card company offers you a 0% interest card but when you read the smaller print, you discover the 0% is only valid for the first six months you have the credit card, then it increases to 19%.

Many of us apply for the teaser rate credit cards so that we can transfer a balance from a higher interest rate credit card and, hopefully, reduce the amount of interest we are paying. However, when the intro period expires on the new card, we find ourselves right back where we started - paying a high interest rate because we couldn’t pay the balance in full. Thus, the never-ending cycle of debt.

Mounting losses as a result of the housing bust and spiraling consumer-credit losses, as well as home equity loans that have no value, will cause this all to occur.

As for the banks that will go bankrupt, they will include community banks that
finance homes, stores, downtown areas, commercial real estate and other
mainstays of U.S. towns and cities, Roubini said.

Of three dozen or so medium-sized regional banks, a good third are in distress,” he told Barron’s, saying half of the group could go bankrupt. Some big banks could wind up insolvent, he added, but said they might be deemed too big to fail.

So will YOUR bank be the next to fail? It’s difficult for the American consumer to be able to tell whether their bank will go down the tubes, but it’s important to remember the words of the late Douglas Adams - don’t panic. Your deposits are insured up to $100,000 by the FDIC. So even if your bank goes belly up, chances are good that you will still walk away with your money.

Can the mortgage company do this? The Fair Credit Reporting Act (Federal Legislation to protect consumers from abuses of the credit reporting agencies) generally governs the actions of the reporting agencies. It is not designed to control creditor abuse of the reporting process.

Nonetheless, there are provisions requiring the reporting agencies to verify information as accurate, particularly after inquiry from the consumer, and other provisions requiring truthful reporting and a requirement to provide accurate information.

But, since the loan was once in bankruptcy, simply indicating that on the credit report and refusing to change it may not fall within the provisions of the act. At least that’s the argument that the mortgage companies are using. I don’t agree – I think it is false reporting and the mortgage companies and reporting agencies need to be taken to task. If this is happening to you, consult a competent consumer attorney in your vicinity that is familiar with the Fair Credit Reporting Act.

• Interest rates as high as 1,500% (that’s One Thousand Five Hundred percent per year, and yes, we’ve seen them this high).
• Wage withholding.
• Repayment terms that lock you into an endless cycle of borrow and pay that you can never get out of.
• Abusive collection practices.

So why do people borrow money from people like this on such outrageous terms? Because, as one blogger put it, “When the landlord is pounding on the door demanding rent, the kids are crying because the kitchen is empty, and the electric company is hauling the meter out of the house for non-payment, what would you do?”

Well, what can you do other than using a payday lender? The answer? Check with a credit union.

When the District of Columbia capped interest rates at 24%, the payday lenders closed up shop. Who stepped in to fill the void? Credit Unions. As The Washington Post reported in the article, “Credit Unions Slowly Fill Void as Payday Lenders Leave D.C.,” and USA Today in, “Breaking the Cycle of Payday Loan ‘Trap’,” credit unions are offering low income people small, short-term loans at interest rates that you don’t think are a misprint.

As Leslie Parrish, a senior researcher for the Center for Responsible Lending noted in The Washington Post article, “Credit unions were created to offer credit to people with modest means. So, historically, it’s very much in keeping with their mission.” Not to mention that a 16% loan is a whole lot better than a 300% loan.

Think about this.  If you are using a medical credit card to pay for your treatment, then you probably do not have medical insurance coverage.  If you do not have coverage, then you probably cannot afford the high cost of medical treatment.  So, you are destined to default on the medical credit card debt.  Putting your medical debt on a high interest rate credit card will only increase the chance of your not being able to pay the bill.

Banks used to be good for giving customers toasters and blenders, but stay away from those credit card offers.

Hogwash, I said. Pay attention, I said. Ford spends good money on a marketing strategy designed to get into your pocket, I said. A new 5 year loan was more expensive than paying off the last two years of my existing loan, I said.

Last week Ford disclosed that sales for its previously most popular vehicle, the F-150 truck, slide down 40%. The market analysts said that was a huge decline and Ford’s stock dropped to the $4 plus level.

So what did Ford do? Ford did what is does best. Ford ramped up the marketing and my July statement offered me another special deal. This time, Ford offered to sell me a brand spanking new F-150 at the special employee discount rate. Yes, the car that no one is buying is now on sale because, again, I am special.

Ford has at least 3 price levels. Sticker, Employee and Friend. The employee and friend rates are no-dicker prices that Ford will sell a particular model without the need to haggle over price. You give the dealer your code and you get the special price at a sizable discount off of the sticker price.

As a matter of fact, I bought my last car as a friend of Ford by using a code supplied by my buddy Bob, who worked for Ford at the time. Now, Ford was offering me a special deal previously reserved only for employees if I bought the flagship model.

The lesson to learn is that no matter how good the deal sounds, it is usually not about you, it is about the seller. Ford wants to make me think I am special by offering a special price on a vehicle that has fallen out of favor with the general public. Send me your tired, your poor is a great slogan for our country, but it is not as effective in marketing when the buyer knows to beware.

That is the trend in some states.  Connecticut recently passed a bill allowing gas stations to give a discount for cash purchases.  That means then when you pay with a credit card, no only are you going to pay interest on that purchase, but you are paying more than a cash customer right from the beginning.

Other states also allow discounts for cash.  A merchant can’t charge more than the regular price for a credit purchase, but he can charge less than the regular price for a cash purchase.  (Even the lawyer in me can’t see that difference!)

Could the economy shrink even further if we wean ourselves from the addiction of credit and start paying for everything in cash?

The Fair Debt Collection Practices Act (FDCPA) defines the term “Debt Collector”  to include ”…any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another…” 

Debt Collectors are prohibited from the following actions:

(1) The use or threat of use of violence or other criminal means to harm the physical person, reputation, or property of any person.

(2) The use of obscene or profane language or language the natural consequence of which is to abuse the hearer or reader.

(3) The publication of a list of consumers who allegedly refuse to pay debts.  This does not include a Credit Reporting Agency.

(4) The advertisement for sale of any debt to coerce payment of the debt.

(5) Causing a telephone to ring or engaging any person in telephone conversation repeatedly or continuously with intent to annoy, abuse, or harass any person at the called number.

(6) Failing to “meaningful disclose” the caller’s identity.