Here’s an article that lists a couple of creative repayment options for lawyers, teachers, primary care medical workers and even veternarians.

In case you haven’t heard the news, Congress is considering a bill that would allow private student loans to be discharged in bankruptcy. We cannot speculate on whether or when this legislation would pass.

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Our advice is if you are looking for employment and a company asks you to pay up front for ANYTHING, be wary.  Call the Better Business Bureau in your area. There seem to be a lot of scammy work-from-home and  online job cons making the rounds, too.

My partner Rick Mitchell and I always warn about so-called debt-relief or debt-settlement companies, and it seems the Better Business Bureau shares our concerns.  I wrote a two-part series on the trouble with these companies.  Individuals or companies who claim they can make your tax problems go away are usually too good to be true.

The video also warns against Advance-Fee Loans, and to that concern we would add falling for a Refund-Anticipation Loan.

We know that people are eager to do ANYTHING to avoid seeking bankruptcy protection. That’s why they so often entertain these schemes. But the hard fact is that when you cannot pay your bills, you should learn the ways in which the laws will protect you from the wolves in sheep clothing as well as your legitimate creditors.

That’s why we advise you to consult with a bankruptcy attorney. At Mitchell and Culp, the initial bankruptcy counseling session is free unless you hire us to represent you.

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Unemployment is the culprit

Until employment improves, the housing situation will not improve.  Most of the people we see cannot afford their mortgages. even with a significant modification, because of a serious reduction of income or no income at all (besides unemployment insurance payments).

HAMP not intended to work?

There is some thought among economists that neither the treasury dept/government nor the mortgage industry intended for HAMP/HARP to actually work; it was just a tactic to buy time in hopes that the housing market would correct itself. That may be why the servicers/mortgage companies didn’t invest in the infrastructure to do a better job and why there is no “stick” built in to force compliance.

Most everyone we talk to who has tried to obtain a modification thinks that their experience of lost paperwork, etc. is unique but it is the norm. Poor administration during trial modification seems to be a vehicle to squeeze money from borrowers all while planning and implementing a foreclosure.

Although  HAMP/HARP litigation is a growth area for law firms, we stick to our knitting — helping clients file for and avoid bankruptcy.

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In the latest development, American Tax Relief of Beverly Hills, CA has been sued by the Federal Trade Commission (FTC) for bilking customers of some $60-100m and siphoning off some $30m for its owners.  While the FTC is pushing for restitution, this provides clients with little immediate relief.

Don’t fall for it!

This  quote from the NYT sums it up:

“Everyone has seen these commercials and wondered, ‘Can I really get away with paying the I.R.S. only a fraction of what I owe?,’ ” C. Steven Baker, the director of the F.T.C.’s Midwest Regional office, said in an interview. “The short answer is no.”

Of the 20,000 clients that the F.T.C. says it believes that American Tax Relief signed up, “we have not been able to find a single one” that the company helped to reduce a tax burden, said David Vladek, the chief of the commission’s division of consumer protection.

From 2002 through 2008, 410 different consumers filed 497 complaints against American Tax Relief with the Better Business bureau, the F.T.C., or various law enforcement agencies. The complaints accused the company of failing to negotiate settlements with the I.R.S., resulting in penalties and additional interest charges for the customers, or making unauthorized charges to credit cards or withdrawals from bank accounts.

When customers complained to American Tax Relief that a debt was not settled, the company often blamed the clients for providing incorrect paperwork, missing deadlines or failing to pay all of the required fees, according to court papers.

How to handle tax debt: pay, negotiate or discharge in bankruptcy?

We’ve written about this issue before. The IRS routinely provides installment agreements for people who can’t pay all their debt at once. In very limited situations, the IRS does allow taxpayers to settle debts for less than what’s owed, but most people don’t qualify and they don’t need a third party’s help.

An experienced bankruptcy attorney can provide guidance on this issue.

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Anatomy of a scam

Sometimes, small business owners come to us with tremendous business debts and and tell us that they hired an “advisor” or “consultant” who promised to manage the business’s money and pay off or negotiate debts downward — only to find that the money is gone but the debt is there, bigger than ever.

Other times, we meet with small business owners who clearly need to either file a Chapter 11 to try to reorganize the business pursuant to the Bankruptcy Code, or close the business and stop the bleeding. Later, the business owners tell us that they no longer require our services, because a “consultant” or “adviser” has ridden in on a white horse, promising to make the debts go away — for a price, of course.

Often, the “advisor” or “consultant” is a friend, relative, or someone met through a religious affiliation, which should be a red flag.

How to separate the sheep from the goats

Be cautious of such services when they are offered. One good starting point is to rely on the advice of an experienced certified financial planner, certified public accountant, or attorney whose license is currently in good standing. Obtain the proposed fee structure in writing, and beware any request to simply hand over your credit card, checking account, etc.

And as always, if the promised result sounds too good to be true, then it probably is.

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Yes, even lawyers can act like debt settlement companies, many of which take fees and settle no debts

I have no opinion on this particular firm or the law suit, since it has just been filed. However, the state attorney general makes a charge that is familiar for operators of debt settlement companies: “She places clients in an endless loop of requests for duplicate documents,” it says, “that increases her fees and, due to further delays in payments to the IRS, increases clients’ IRS fines and penalties.”

Here’s one of the ads for the firm named in the suit.

Beware claims about tax debt

While we’re talking about debt settlement, beware the national and local companies who boast that they can reduce or even eliminate your tax debt. Often, these companies do more harm that good; under certain circumstances, income taxes are dischargeable in a bankruptcy. You probably won’t hear that from these outfits.

If you have unpaid income taxes as well as other debts you cannot pay, seek bankruptcy counseling from a qualified advisor.

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We’ve written extensively about the perils of using debt settlement companies here. Before dealing with one of these organizations, do your research.

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The past few years have showed us that owners of homes in foreclosure may face a variety of potential pitfalls.

So-called real estate investors

One such pitfall is a foreclosure scam. These often take the form of solicitations from so-called real estate investors who would like to purchase the homes before the foreclosure process finalizes.

The solicitations often occur by direct targeted mail, roadside signs, TV ads, and the Internet. They often appeal to distressed homeowners’ hopes of avoiding the blemish of “foreclosure” on their credit reports and may even falsely promise a deal that would keep the homeowner in possession of, or with legal title to, the house.

Usually these letters are scams and could actually bring you more sorrow than help. There are good, free resources available to distressed homeowners on the topic of foreclosure scams:

• The Federal Reserve Board
• The Federal Trade Commission

Avoid foreclosure frauds and scams with these tips

NC Office of the Attorney General tips

Office of Thrift Supervision tips

Office of the Comptroller of the Currency tips

If it sounds too good to be true, it probably is. Get the facts. If in doubt, contact a qualified legal advisor. Part 2 of this series talks about how these scams work.

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Last month federal legislation was proposed to tighten the screws on unsavory practices in this industry.  It pointed out that while costs vary, ”a company might charge up to 20 percent of the total debt. Fees are usually demanded upfront, even though a settlement may never be secured.”

Why pay someone to do what you can do for yourself?

As we have pointed out, along with consumer advocacy groups,  debtors can always negotiate directly with lenders. The marketing employed by for-profit debt settlement companies has been effective in persuading people that they can’t advocate for themselves with creditors — a crying shame. One reason may be that most for-profit debt settlement companies are actually controlled by a credit card company! Further, the arbitration process used to control disputes over debts may be tainted.

Under the proposed law, “consumers would have the right to cancel a debt settlement contract and get a full refund. The legislation would provide for enforcement through state attorneys general and the Federal Trade Commission. The federal agency also would be given authority to regulate the industry’s advertising and marketing practices.”

While you can negotiate with your creditors to settle your debts for less than full value, without representation by either an attorney or a debt settlement agent, considering settlement of any debt for less than value is a signal that a bankruptcy consultation may be appropriate. An experienced bankruptcy attorney can review your assets, income, and liabilties, in light of your particular circumstances, can then lay out options for dealing with your financial concerns.

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2. Expose on Debt Settlement Company We've written extensively about the perils of using debt settlement...
3. Debt Consolidation/Relief Part 1 of 2 Hardly a day goes by without seeing on television, or...
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We’ve written on this topic several times on our blog as well.

If you decide to hire someone to help you settle, consolidate or otherwise manage your debts, then be very wary of companies that are advertising. Most of them draft various fees from your checking account and provide absolutely no services, and most of them are actually owned and operated by credit card companies!

At a minimum, consult an agency that is non-profit, and in good standing with the Better Business Bureau, and a member of the National Foundation for Credit Counseling.  We suggest Consumer Credit Counseling Services which meets each of these criteria.

People want to do the “right thing” by paying their debts to the best of their abilities, but creditors have no incentive to tell them that making partial payments can have a worse effect on a credit score than a bankruptcy.

This is where a credit card debt counseling session with a qualified bankruptcy attorney comes in.

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2. Expose on Debt Settlement Company We've written extensively about the perils of using debt settlement...
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4. Debt Consolidation/Relief Part 2 of 2 In the first part of this series, we covered the...