November 24, 2017

How to Avoid Credit Card Interest, Penalties and Fees

how-to-avoid-credit-card-interestHave you ever opened your credit card statement only to find that despite last month’s payment, your unpaid balance has actually increased because of credit card interest, penalties or fees?

As a practicing consumer bankruptcy attorney in Atlanta, Georgia for over 25 years, I know that out of control credit card debt can force people in to Chapter 7 or Chapter 13 bankruptcy. In many cases credit card debt that was manageable becomes unmanageable because of common mistakes made by individuals in how they handle their credit card debt.

If you can avoid these mistakes you may be able to avoid the stress and financial distress caused by excessive credit card debt.

How Credit Card Debt and Credit Card Interest can Get Out of Control

The first step towards controlling your credit card debt involves your spending. This may seem obvious but many of my bankruptcy clients fail to recognize this reality. If you find yourself carrying a balance (rather than paying off your debt in full at the end of the month) you need o change your usage habits.  If you carry a balance you will end up paying unnecessary and expensive credit card interest.

Your credit card is not a substitute for cash – instead your credit cards represent a high interest loan with a 20 days repayment term. Interest on unpaid balances will eat you alive. Most cards obligate you to pay an 18 to 20% annual interest rate on balances carried more than 20 days. To give you some perspective, your interest rate on mortgage debt will end up in the 3 to 4% per year range, and the annual percentage rate on your car note will generally be 5 to 6% per year.

As a rule, if you make only the minimum payment, your balance will stay the same, or actually increase month to month indefinitely. And if you are 1 day late, you will likely get hit with a penalty (often $35 or more) plus your interest rate may be increased to 28% or higher. [Read more…]

File Bankruptcy if You are not Broke? Maybe Not Such a Crazy Idea

owe too much on mortgageThe Atlanta Journal Constitution ran a front page story on Sunday, April 14 entitled More than 40% of Georgia Homes Underwater.  The AJC reporter notes that “there’s not another metro area in the United States with as many concentrated pockets of mortgage holders who are underwater in their homes.  No place else comes close.”

Your house is considered underwater if it is worth substantially less than what you owe.  From the mid-1990’s through the mid-2000’s, home values in metro Atlanta rose and mortgage lenders offered outrageous deals to encourage residential purchases.  It was common to see interest only loans or 100% financing which required nothing down from the purchaser.

As long as home prices kept rising, you could refinance over and over, and even take cash out.  Rising prices minimized the risk to lenders so loan underwriting standards were lax.  I regularly spoke to potential bankruptcy clients who earned $50,000 to $70,000 annually but were living in $350,000 to $400,000 homes.  They were meeting with me to deal with excess credit card debt – in many cases, these folks kept their expensive homes even while filing bankruptcy.

When the real estate market crashed in 2008, your home value may have plummeted, but the mortgage obligation remains.  Thus, as the AJC points out, there are many areas in metro Atlanta where homeowners are making mortgage payments on homes that may never increase in value to the balance on the loan – the mortgage is kind of a permanent rental. [Read more…]

Never Ignore a Lawsuit that is Served on You

made a mistakeLast week, my secretary left me a message that read as follows:

John Smith called about a possible illegal wage garnishment.  He says that his employer notified him that his wages will be garnished by a credit card company that had never sued him and that he has not heard from in over 10 years.

This sounded interesting.  Was there an FDCPA claim here?  When I called Mr. Smith back, he told me that he moved from the Atlanta area 5 years ago and that he did not remember being sued by the ABC Credit Card Company when he did live in the Atlanta metro area.  His employer, however, was in receipt of a notice of wage garnishment and would be withholding funds from his wages.

Mr. Smith had a copy of the wage garnishment order, which had a case number on it, which meant that a lawsuit had been filed.  The county where the lawsuit was filed has online access and I plugged in the case number.  It turns out that the lawsuit was filed back in 2002 and a judgment issued in 2003.  Under Georgia law judgments expire after 7 years unless renewed and the online record also indicated that this judgment had been renewed prior to the expiration of 7 years. [Read more…]

Can You Rely on a Verbal Promise that Your Foreclosure Will be Delayed?

Notice of ForeclosureLast month, I met several times with a potential Chapter 13 client who was facing a mortgage foreclosure.  Over the course of the past few months he has been juggling his creditors and bills trying to stay afloat and during that time he fell behind to his mortgage company by more than four months, and found himself in the foreclosure process.

This individual earns over $100,000 annually, but, unfortunately he used to earn more than double this amount.  His problem was not the mortgage, but his other bills, including a very high car payment and a mortgage payment arising from a failing real estate investment.

Not surprisingly the foreclosure notice got his attention.  He immediately took action by calling me to discuss Chapter 13 bankruptcy and by contacting his mortgage company to discuss repayment options.   By the Wednesday prior to the pending foreclosure sale scheduled for the following Tuesday, my client had provided me with enough information so that I could prepare a rough draft of a Chapter 13.   In this case, by the way, my client and I entered into an agreement whereby he paid me around $300 to open a file and to start entering information into my petition preparation program.

On the pre-foreclosure Wednesday he called to say that after a lot of discussion he was expecting a decision the next day from his mortgage company but that if he did not hear from them by mid-day on Thursday, we would be proceeding with the Chapter 13.  A few hours later he called back to say that his mortgage company had agreed to postpone the foreclosure until September and that the Chapter 13 was on hold for now. [Read more…]

The “Do It Yourself Bailout” – Part Six of Jonathan’s Interview with Kenny Golde

Have you ever wondered what it takes to settle your debts for pennies on the dollar?  Recently I interviewed Kenny Golde, a self employed filmmaker who found himself almost a quarter of a million dollars in debt when when a business deal fell victim to the economic downturn.   Using negotiation techniques he developed (and has subsequently written about in a book), Kenny has managed to eliminate more than half of this debt through negotiation.  Here is part six of our conversation – it lasts about 4 minutes.  This is the last segment of this interview – parts 1 through 5 may be found in the five posts immediately preceding this one.  In this segment, Kenny and I talk about the tax consequences of debt forgiveness and the insolvency rule that eliminates tax liability for most people.

Link to IRS Form 982 – used to declare forgiven debt as non-taxable

Link to Kenny Golde’s book “The Do It Yourself Bailout.”

The “Do It Yourself Bailout” – Part Five of Jonathan’s Interview with Kenny Golde

Have you ever wondered what it takes to settle your debts for pennies on the dollar?  Recently I interviewed Kenny Golde, a self employed filmmaker who found himself almost a quarter of a million dollars in debt when when a business deal fell victim to the economic downturn.   Using negotiation techniques he developed (and has subsequently written about in a book), Kenny has managed to eliminate more than half of this debt through negotiation.  Here is part five of our conversation – it lasts about 7 minutes.  In this segment, Kenny notes that most lenders will not consider negotiation with you until you are 90 days late.  He also talks about credit scores – and why this number is less important than most people think.  Part 6 – the final segment – will be posted tomorrow.

Link to Kenny Golde’s book “The Do It Yourself Bailout.”

The “Do It Yourself Bailout” – Part Four of Jonathan’s Interview with Kenny Golde

Have you ever wondered what it takes to settle your debts for pennies on the dollar?  Recently I interviewed Kenny Golde, who found himself with $250,000 of credit card debt and no way to pay it all back.  However, with tenacity and focus, Kenny has managed to eliminate more than half of this debt through negotiation.  Here is part four of our conversation – it lasts about 8 minutes.  We discuss the procedure for entering into a written settlement agreement with your creditor and the steps you must take to ensure that your settlement is honored by the creditor or collection agency.  Part 5 will be posted tomorrow.

Link to Kenny Golde’s book “The Do It Yourself Bailout.”

The “Do It Yourself Bailout” – Part Three of Jonathan’s Interview with Kenny Golde

Have you ever wondered what it takes to settle your debts for pennies on the dollar?  Recently I interviewed someone who started with $250,000 of credit card debt and with tenacity and focus, has managed to eliminate more than half of this debt through negotiation.  Here is part three of my conversation – it lasts about 8 minutes.  Kenny points out that there is nothing morally wrong with settling debt.  He explains that the term “charged off debt” means nothing – it usually just means that the creditor has sold its debt to a debt buyer.  He points out that many collection agencies buy debt for 5 to 10 cents on the dollar, which is why they would be willing to settle for 50 cents on the dollar or less.  Finally Kenny notes that any debt settlement should be in writing and that you should never send any money without a written agreement. Part 4 will be posted tomorrow.

Link to Kenny Golde’s book “The Do It Yourself Bailout.”

The Do It Yourself Bailout – Part Two of Jonathan’s Interview with Kenny Golde

Have you ever wondered what it takes to settle your debts for pennies on the dollar?  Recently I interviewed someone who started with $250,000 of credit card debt and with tenacity and focus, has managed to eliminate more than half of this debt through negotiation.  Here is part two of my conversation – it lasts about 8 minutes.  Kenny and I discuss the psychology of debt collection and the importance of seeing debt negotiation as a business transaction free of emotions or guilt.  “You are the CEO of your own corporation,” Kenny advises.  Part 3 will be posted tomorrow.

Link to WalletPop (Now Daily Finance) article discussed by Kenny in this segment

Link to Kenny Golde’s book “The Do It Yourself Bailout.”

The “Do It Yourself Bailout” – Part One of Jonathan’s Interview with Kenny Golde

Have you ever wondered what it takes to settle your debts for pennies on the dollar?  Recently I interviewed someone who started with $250,000 of credit card debt and with tenacity and focus, has managed to eliminate more than half of this debt through negotiation.  Here is part one of my conversation with author and filmmaker Kenny Golde, who discusses with me his remarkable story about how he ended up with hundreds of thousands of dollars of debt and how he came to realize that debt negotiation is a business strategy and that the guilt and emotional efforts of debt collectors are merely tactics.  This first segment lasts about 8 minutes.  Parts 2 will appear tomorrow on this blog, with subsequent installments appearing every day through the February 4th post.

Link to Kenny Golde’s book “The Do It Yourself Bailout.”

Link to Kenny Golde’s web site.

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