Debt Relief Secrets and Scams in Raleigh, NC
Debt Relief Scams in Raleigh, NC
Debt Relief Scam #1 – Sub-Prime banks are called equity lenders.
They often offer to “help” keep you from filing bankruptcy by paying off and consolidating your debts. They actually steal your home. They lend at 9, 10, 11% interest or more. Some of these equity loans are at as high as 26% interest. They charge high origination, closing, and broker fees that become part of the loans.
These lenders often use unfair trade practices, like flipping and packing, high appraisal values, and over-insuring to increase their income. They also charge higher points, upfront fees, prepayment penalties, and charges. Predatory lenders normally don’t keep the loan. Instead, predatory lenders sell it to other lenders. They lend to you based only on the equity in your home — not your ability to repay. They intend to repossess your home in order to be repaid. They often inflate appraisals to make the loan. If you borrow from them after you file bankruptcy they will claim to you that since you filed that you have to pay higher rates. They “forget” to tell you that if you will just wait 2 years after your bankruptcy discharge and pay on time that you can save thousands and get lower rates.
If you can’t pay your debts,
getting a high rate second mortgage is not the answer. If you borrow from one of these predatory lenders, and you can’t pay your mortgage and debts after refinancing, you will normally lose your home and still have to file bankruptcy. Never refinance while your credit is poor. You will normally go from owing on a Class A home mortgage rate at 6-7% to owing on your home at 11% and as high as 26% mortgage rates for B and C mortgages. Predatory lenders make thousands off you by promising a “solution to bankruptcy” while the lender steals your home equity.
Generally, a debtor who’s considering bankruptcy
needs to talk to a bankruptcy attorney to see if he would lose his house in bankruptcy, and to seek proper financial advice. The average Class A lender mortgage broker will make 2% of the amount financed from refinancing your home, so a $100,000 home will have about a $2,000 broker fee. The Class B and C lenders will make 4 to 16% or more. Their fees will be from $5,000 to as much as $32,000 for refinancing a $100,000 dollar home. More expensive homes will have even higher broker costs. Refinancing while your credit is poor just makes the mortgage broker money. You must have one year or more of on-time rent or mortgage payments before you apply for a mortgage or you won’t get a prime rate loan. Also your debt to income ratio must be good.
The sub-prime lenders don’t care
whether you make payments or not. Their goal is to steal your home’s equity at loan closing and to collect it in foreclosure when the payments are not made. They target the uneducated and financially troubled borrower. Sub-prime lenders do not advertise to sophisticated borrowers who shop for lower rates. They often advertise that it is a good idea to mortgage while your credit is poor to pay off credit cards or solve problems. One sub-prime broker once made the comment that if God didn’t want sheep sheared he wouldn’t make them sheep. Predatory lenders are an example of pure greed, and what they do is legal.
In congressional hearings,
companies like The Money Store and others have been labeled as predatory lenders. The business has become so profitable that most of the sub-prime lenders are now owned by respectable prime lender banks. For instance, The Money Store was owned by First Union. (First Union refuses to be known as a predatory sub-prime lender, so it simply does its dirty business under another name.) Equicredit was owned by Nations Credit.
Often, home improvement companies
will also use predatory lenders. They promise to repair your home, the bank pays for the repair, and the repairman heads for Miami. These lenders make loans knowing that the bank will eventually repossess the home and take it from you. If you have gone to one of these lenders, and the loan is properly closed, it is difficult to do much about it; you have simply given away your home.
Do not use sub-prime lenders!
Your best strategy is to work only with a prime lender so that you can get a 5-6 percentage rate (or whatever the prime rate is at that time). Remember: If your credit isn’t good and you don’t have at least 12 months of on-time payments you won’t be approved by a prime mortgage lender.
It may be difficult to tell
if you are dealing with a prime lender or not because most sub-prime lenders try to mislead consumers. They will use names like “Equitable Mortgage” or “Respectable Mortgage” to make them look official, proper, or like other banks. They often promise you a 6% loan, but at closing it turns into 12% at the table. Prime lenders have strict lending rules and they are more likely to follow the legal guidelines. Sub-prime lenders are far more likely to make “Truth in Lending” and other errors. The Truth in Lending Act makes the loan invalid if the fees were not properly reported. Sub-prime lenders often “keep the change” if you overpay fees for credit reports or inspections, and they overcharge items and understate fees and interest.
You do have choices
when it comes to getting a low rate mortgage and filing bankruptcy. First, you may be able to refinance a mortgage to a lower rate before filing bankruptcy. That might save you from having to file bankruptcy at all. If you go from a home mortgage at 10% on a $100,000 dollar home to a 6% mortgage you will reduce your monthly payment from about $1,000 dollars to $600. However you can only do this if your credit history is perfect prior to filing, you have made the last year of payments on time, and you don’t have too high of a debt to income ratio. If you refinance you can use the money for expenses such as home repairs, surgery, or necessities, and then file bankruptcy after you have no excess (non-exempt) equity in your home.
However . . . If you have good
or perfect credit and you want to see if you can get a prime rate mortgage, contact us and we can recommend someone that specializes in this! However, generally paying unsecured debts from your retirement or home equity is a poor idea. You can bankrupt debts like this and often keep your home equity and retirement funds. Never refinance a home to consolidate debt unless you go to a lower interest rate, or you will probably eventually lose your house. There are only a few very weak laws that protect you from these people. Period!
Debt Relief Scam #2 – Erase bad credit scam
The other common scam you hear about in bankruptcy is that you can erase bad credit. Every year someone claims that if you give them $3,000 they can erase your bad credit. There are even laws against these businesses, but like drug dealers, they get busted and then reopen shop making the same false promises in another name over and over again. You can only erase untrue items on your credit report. Anyone who knows anything about credit knows you can’t erase true, negative items from your credit report or invent a new credit history without committing fraud. This is called identity theft, and you can go to prison for doing it. There’s nothing a credit repair clinic can do for you that you can’t do for yourself.
Debt Relief Scam #3 – You can “Protect your credit by settling your debts!”
For every action there is an equal and opposite reaction, and nowhere is that more true than in the world of credit. Pay less than you owe through credit counseling, and your credit rating is trashed. Yet, many debt-settlement companies insist they can pay your debts for you by paying only 50 cents on the dollar, and that you will have good credit — and there are always people who believe it. If you want your credit to be even worse than it would be by filing bankruptcy, go ahead. The downside of this is that you will take more years to repay their 50% repayment plan than you may have taken to repay it with a 10-20% Chapter 13 repayment plan.
- They will charge you high fees.
- The effect on your credit will be just as bad as bankruptcy.
- Some companies won’t take the reduced payments and will sue you anyway.
- 90% of the people never finish these credit counseling plans that are set up.
- These debt settlement companies often only pay themselves. They pay themselves first and sometimes only pay themselves until they go out of business. That’s right. Sometimes, and all too often, they never pay the credit card companies, and then they file bankruptcy themselves after telling you not to. Plus, the creditor you settle with will send you a 1099 and you’ll be taxed on the “forgiven” part of the debt!
Debt Relief Scam #3 – Unknowledgeable Attorney
This is where an attorney takes a bankruptcy case when he is not knowledgeable in the field.
“Generalist” attorneys are great for run of the mill needs, but you want to go to someone who exclusively does bankruptcy. It just makes sense. A “Generalist” will not have an in-depth understanding of bankruptcy, so there is a much higher chance he could miss something — to your detriment! He will also have to spend much more time on each petition and often charge accordingly. He will also rarely have the best software, reference books, or colleagues in the field.
Debt Relief Secrets in Raleigh, NC
Bankruptcy will help your credit. If you are concerned about filing bankruptcy, it may be because you have heard myths that bankruptcy will destroy your credit, prevent you from finding employment, or prevent you from ever owning your own home. That information is entirely wrong and is propagated by the credit card industry and the medical industry to dissuade you from filing bankruptcy. Bankruptcy will hurt your credit if you had good credit before you file. However, it is often a tool to repair credit in the long run if you have bad credit and you have no other choice. Bankruptcy is designed to give people whose debts are driving them (or have already driven them) into serious financial trouble a fresh start. Here are the top secrets you need to know.
Debt Relief Secret #1 – Most people can have their debts wiped out in Chapter 7
bankruptcy with little or no long-term bad effects. There are even regulations that allow you to qualify for FHA, HUD, and VA loans at prime interest rates within 2-3 years after filing as long as you have paid debts on time after filing and no foreclosure was involved.
If a government agency foreclosure was involved in the bankruptcy the time is about 3 years (2 years after the agency paid the foreclosure and it normally takes a year for a foreclosure to go through). The rule is that 2 years after discharge or 3 years after a foreclosure sale is paid you will be allowed to apply for a mortgage and bankruptcy will not be held against you.
Within six months to a year,
most people can get a car loan at the same interest rate as anyone else if you repay your debts that remain after bankruptcy on time.
In a Chapter 7 Bankruptcy,
most people keep all their property and only pay the secured debts on property they want to keep. Every year about 2 million people eliminate unnecessary debt with few, if any, problems by filing bankruptcy with a knowledgeable bankruptcy attorney. Even if they file a Chapter 13 they normally pay no interest on their unsecured debts, and in North Carolina, they pay as little as 0% on the dollar for their unsecured debts, and have up to a 5-year repayment plan.
The few problems that regularly occur
are usually due to ignoring Attorney advice or hiring an incompetent Attorney!
Debt Relief Secret #2 – Filing bankruptcy can actually help clean up your credit.
Filing bankruptcy would make borrowing more difficult if you have good credit when you file; however, if you can’t borrow money now because of bad credit, filing bankruptcy will normally actually make it easier to borrow (particularly if you currently owe large debts that are making it impossible for you to repay). Bankruptcy is designed to give you a fresh start and to fairly repay your creditors as much as possible — but not destroy you.
Lending decisions are based largely
on how you repay others and the percentage of your income and debt (your ability to repay). If you owe more than you can pay, lenders will never loan to you unless they are predatory lenders. If you file bankruptcy and suddenly you don’t owe, you will be offered credit.
Debt Relief Secret #3 – Aside from the people you tell, few people will know you filed bankruptcy.
Bankruptcy doesn’t make headline news, and it is against the law to discriminate against you for filing bankruptcy. For example, most employers cannot discriminate against people because you have previously filed bankruptcy. You can’t be denied a law license due to a bankruptcy. It can help in some cases: You are able to get your driver’s license back if you lost it because you were unable to pay for damages in an auto accident. True, lenders may turn down credit applications for prior bad credit. But most large lenders will allow you to borrow and rebuild your credit rating after bankruptcy. Small lenders like town banks and credit unions are more likely to discriminate.
Debt Relief Secret #4 – Bill collectors can’t legally harass you after you file bankruptcy.
When you file a bankruptcy, a Federal Court Order, called a “stay,” goes into effect. The stay orders Creditors not to contact the Debtor to collect the debt. From the moment you file, all your Creditors (anyone to whom you owe money) will automatically be stopped by the Automatic Stay from commencing or continuing any legal proceedings against you. They may not harass you, garnish your wages, or take your property. If a Creditor violates this order, you are allowed to sue it for punitive damages, actual damages, and Attorney fees. (Notice that the bank you sue for violating your rights will be required to pay your Attorney fees if it is proven that they did in fact violate the stay.) Filing a bankruptcy does not mean that a Creditor will never call again, but they will not have the right to call and ask you personally for the payment of the debt. Often, bills may continue to come in the mail to you after you file, due to a computer continuing to mail past due notices or other items. If this happens, mail a copy of your 341 hearing notice to the Creditor.
Co-Debtors and co-signers are only protected
by the stay in a Chapter 13. Co-signers may enjoy some protection while the Chapter 7 case is open, but when it is over and the discharge is ordered, they will become targets again.
Secured Creditors often call for the limited purpose of getting a reaffirmation agreement signed or for arranging to pick up the property.
The collector who calls after receiving notice
knows that what he is doing is illegal. Normally, if he is dragged into Court, he will deny he ever called or at least make up an excuse for the call. You must remember that the employee fears that if he does not collect the account he will be fired. If he collects, he will get a commission, bonus, or a promotion. However, if he is caught committing an illegal act, the employee will deny his acts and he will be fired. Often he is told by his supervisor to violate the law, but once he is caught, the employer will fire him even though his boss told him to call. Often, you can stop harassment just by telling the collector you are recording the call because he knows if the matter goes to Court, he will lose his job.
Debt Relief Secret #5 – There is a special way in which a married couple may hold real property
in the state of North Carolina. This type of ownership is called “tenancy by the entireties.” Technically, this type of ownership means that the marriage owns the property (real estate), instead of the husband and wife owning it as two individuals.
When a married couple owns property by tenancy by the entireties, a creditor to whom only one of the parties owes money will generally not be able to attach a lien to the property. (There are exceptions, though, usually for medical bills.) However, if you are hoping to protect your property by using tenancy by the entireties as a shield, it is crucial that you and your spouse purchased the property AFTER you were married.
If you did not purchase the property after you were married, you do not own it as tenants by the entireties, and therefore creditors of one spouse may attach a lien to that spouse’s interest in the property.
Doctrine of Necessaries – this is important when considering “Tenancy by the Entirety.”
Each spouse has the duty to support the other spouse. Each parent has the duty to support his or her child during the period that the child is a minor, and thereafter as long as the child is fully enrolled in an accredited secondary school in a program leading toward a high school diploma until the end of the school year in which the child graduates. A spouse or a parent who fails to discharge the duty of support is liable to any person who provides necessaries to those to whom support is owed.
What is “necessary” varies from case to case, and is dependent upon one’s station in life. At a minimum, necessaries include food, clothing, shelter, and non-elective medical care. This means debts for these are always “joint” even if they are in only one spouse’s name.
Secret #6 – Under the 1972 Privacy Act, collectors are prohibited
from contacting third parties such as teachers, employers, neighbors, and family about the fact that you owe them a debt.
Debt Relief Secret #7 – Under the Fair Credit Reporting Act,
Credit Reporting Companies must correct incorrect information in a Credit Bureau Report. If you have incorrect credit information you may write a credit reporting agency and that agency must investigate whether or not any information is false. The investigation is done by writing a letter to the company that furnished the information, and if that company does not respond the information is deleted automatically.
Companies that charge you up to $2,000 dollars for “cleaning up your credit file” simply write a letter to every person in your file. Of course, correct and true information cannot be deleted. The way to clean up negative but true information in your credit file is simply to pay on time those debts that you owe. Under the Fair Credit Billing Act, credit card companies must investigate improper billing and overcharges if you complain.
Debt Relief Secret #8 – Under the Truth in Lending Act,
all charges must be accurately stated to you in the lending documents. The penalty for a lender’s violation of the Act is that the debt is wiped out.
Debt Relief Secret #9 – Under the Fair Debt Collection Practices Act,
you may advise a Creditor not to contact you at work or at unreasonable times. Creditors must also make certain disclosures to you. Statements that the particular form of contact being made is an effort to collect a debt are required now. Secret Number Ten . . . Also under the FDCPA, it is improper for a Creditor to:
- call without giving their identity;
- use obscene language;
- threaten arrest, violence, or lawsuits unless it is a legitimate possibility;
- pretend to be Attorneys or law officers;
- misrepresent government affiliation or the character amount or status of the debt;
- use postcards;
- repeatedly call;
- Remain on your property if you ask them to leave.
Debt Relief Secret #10 – If you have recently been denied credit
(within the last 60 days), you may receive a free copy of your credit report. You also have the right to an annual free copy of your report. If your report contains inaccurate information, you may file a written complaint. The report must be investigated and corrected within 30 days.
Debt Relief Secret #11 – Your spouse is not responsible
Is my spouse responsible for my credit cards if he is an authorized user? No, your filing will not affect your spouse’s individual credit if he does not file. BUT if he is a co-signer on any debt that is not paid, that will affect him. The fact that you filed bankruptcy does not appear on a spouse’s credit report unless he also files bankruptcy.
Unless your spouse has signed to be legally responsible, he is not responsible. However, many credit card companies will argue that he is responsible. They may even put a “no pay” on his credit report if the amount is unpaid; however, he may ask any credit reporting service to correct that. If he does so, the credit card company will have to show that he signed for it. If they can’t, it will be removed from his credit report file. In other words, the credit card collectors may try to collect from him by claiming he is liable, but he really is not.
If they damage his credit record, it may be grounds for a lawsuit. Credit is normally granted based on a score from your past payment history, the amount of debt that you owe, the length of time you have been repaying present credit, if you have opened credit recently, and the types of credit accounts you have.
Debt Relief Secret #12 – Buy a home in just 2 years
If you file bankruptcy you often will qualify for a home mortgage 2 years after discharge or 3 years after a foreclosure. If you make your payments on time during a Chapter 13 bankruptcy you can refinance within just 1-2 years. Many people use this as a method to pay off the Chapter 13 plan.
Your bankruptcy can’t be used to deny you a prime mortgage
under FHA VA and other federal and state guidelines after 2 years, but if you have a foreclosure on record this becomes 3 years. The myth that you can’t buy a home after a bankruptcy isn’t true.
If you are surrendering a home in bankruptcy, you can often live there for a long period of time without making payments. During that year or two, while waiting for foreclosure, you can save up the $1000 a month you would have spent on house payments and apply it directly to the principal for a new home. When just a year is over you would have saved up $12,000 dollars as a down payment, or if it takes 2 years to foreclose on the home you would have saved up $24,000 as a down payment on a different home.
Debt Relief Secret #13 – If your house is in your name alone,
and you file bankruptcy in North Carolina (NC) you will have to have $35,000 or less in equity in most cases to keep your home in a Chapter 7 Bankruptcy in NC. If your home is in your name AND your spouse’s name, you can have up to $70,000 in equity. If you and your spouse bought your home together AFTER being married the amount of equity doesn’t matter. If you are:
- NOT filing jointly (as in just you are filing, as opposed to both you and your spouse), and
- Your house is in BOTH your name AND your spouse’s name, and
- The home was purchased during the marriage
Your home will probably be exempt under North Carolina’s (NC) Tenancy by the Entirety Law.
If you own a house you will need to determine its market value. Market Value of real estate is different (and often less) than tax value, but your property tax bill is your starting point.
If you can’t get an estimate of market value from a Realtor, try one of these websites:
For Real Estate Valuations www.homegain.com www.housevalues.com We also need the exact payoff on your mortgage(s), based on what the payoff would be if you paid it off in the next 30 days.
Debt Relief Secret #14 – Who Will Know I Filed Bankruptcy?
- ANYONE YOU TELL, OR ANYONE WHO IS TOLD BY SOMEONE YOU TOLD!
- Your creditors and anyone with whom you co-signed a loan.
- People who work in the court may find out.
- Anyone who attends the 341 meeting the day you have your 341 meeting (i.e., other people going through bankruptcy. 341 Meeting are BORING, and are not attended for the fun of it.)
- Court records are a matter of public record, so anyone could look it up, but WHY would they?
- Chapter 13 Debtors are often required to make payments through wage garnishment, which means the employer will learn about the bankruptcy. In some situations, this may be avoided.
- Anyone who looks at a credit report of yours — like a prospective landlord. Many of the larger apartment complexes are owned by banks, and banks tend to grant leases according to credit bureau reports. This may affect you. Small landlords will call former landlords and may not check credit reports.
- There may be a listing in your local newspaper of bankruptcies filed. Have you ever noticed this in the paper? Others don’t either. Often it is not listed — ask your local paper!