mimo2005

Business Week recently ran a story entitled “Prisoners of Debt” in which they reported that a group of banks, collection agencies and even credit bureaus were working together to undermine bankruptcy law. They found that Capital One, Bank of America, Chase, and Discover were all ignoring existing bankruptcy laws, whether by accident or on purpose, and selling debts illegally to collection agencies so that the collection agencies could go after you and try to collect the bankrupted debt. There was recently a court case in which a Chase lawyer testified to a judge that bankrupted debts are sold all the time in the industry.


http://www.financeispersonal.com/200...ptcy-laws.html

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"Gutta cavat lapidem,
non vi sed saepe cadendo"

EnglishPaul

Perhaps it is time bankruptcy law is changed.
I don't want people to have their lives distroyed by an inescapeable problem, but I wonder whether the consequences of running up debts are too mild.
We can not alow people to think 'be reckless now, get bailed out later'.

Monty Python

The other side of the coin is that credit card companies will give a credit card to virtually anyone, no matter how bad their credit.

If they weren't making money, they wouldn't be doing THAT. Existing laws make it easy enough for these companies to make money, there's no point in relaxing them just to increase credit card companies' profits.

EnglishPaul

I'm all for fighting irresponsibility on both sides. It seems to me that the banks are slowly starting to suffer the cost of lending to people with no hope of paying. Almost at the expense of the world economy! But that does not exonerate the individual.

Chode

Pretty funny, EP! American bankruptcy laws were changed a couple of years ago to require that filers repay more credit card debt than used to be the case. At the same time, nothing was done to reign in the high rates of credit card borrowing (Hint: if the prime rate is 2%, is an interest rate of 25% compounded monthly for a typical credit card perhaps a tad high?), not to mention the fees for late payments, etc.

So, there has been a high incentive for credit card issuers to offer easy approval, deceptive terms, and plans that start out easy and then grow teeth like a great white shark. Certainly, individuals who had no business signing up for these cards were the first to do so. But the issuers could have declined credit. Instead, people who were actually poor credit risks (and poor judges of the credit card terms they signed on for) were right at the head of the line. So, after years of soaking poorly informed borrowers for astronomical interest rates, tons of late fees, annual card fees, etc. I can't really feel any sympathy for these lenders. I'd say that in most cases the returns on these accounts far outweigh the actual losses.

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Sweet!

yustr

Since we're bashing the CC companies, I understand that they have a practice whereby regardless if you always pay your CC on time, if you're late on another debt - repeat you're late on a debt to someone else - the CC company can raise your interest rate.

It wasn't to long ago that these rates would be considered loan sharking which was limited to the mob. Now, thanks to the real crooks, it's done to millions and is perfectly legal.

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I didn't mean to say it. But I meant what I said. J. McMurtry

Monty Python

It's true. The "discount interest rate" is dependant on you having a debt to income ratio below a certain amount. It's a condition of the agreement.

Change the debt ratio, they jack-up your interest rate.

Dave Ramsey (radio show host) rails against things like this. Yesterday a guy called in that said he got into some financial trouble and had to put his mortages (for his several rental properties) onto his credit card.

yustr

He must have read "How to get rich in real estate."*




* Note: the book title is generic - I'm not singling out any particular author; choose any of the get rich quick scams being pushed on late night TV.

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I didn't mean to say it. But I meant what I said. J. McMurtry

Monty Python

One of those late-night "get-rich-quick" schemes/scams actually does
WORK. I've seen it myself.

There's that one scheme that advocates that you go around making low-ball offer on real estate, on the idea that every once in a while, someone accepts the offer. Then you turn around and sell the property at fair market value, and pocket the difference.

Problem is, (here's how the "scam" part comes in) how often do people accept 30 cents on the dollar for property that's worth tens of thousands of dollars ?

But here' how it really DOES work.

Get a big chunk of money. Maybe $75 K.

Advertise on craigslist that you pay cash FAST for "ugly", run-down houses. Set up a web-site, e-mail and a cell phone with a professional-sounding outgoing message.

When people call, make an assessment of how desparate they are for cash, and what the resale potential is for the property. When you get a good one, make the low-ball offer and see if they accept it.

Rather than going around with a Realtor and MLS listings, this method allows you to deal direct with the distressed sellers who do not hire Realtors for various reasons. They have no one to advise them, and frequently will accept offers not based on the value of the property, but rather on the level of their financial distress.

I know of one young couple (both under 25) that have done this "flipping" (they call it) 3 times in the last 2 months. Turnaround time for their three properties has been about 2 weeks from purchase to resale, and each sale has netted them at least $15 K each. The only thing that prevents them from doubling or even tripling the rate at which they "flip" is that the husband works full-time and they have two children under the age of 2. There is some superficial/cosmetic "remodeling" that takes place, but nothing that the average person cannot do or contract out. The quality of the remodeling is terrible, but it does not seem to affect the sale of the property at all, neither in sale price or in how fast it is sold.

yustr

Like all such schemes, all is fine and good until the property you want to flip doesn't sell for some reason. Maybe the siding needs replacement or you discover that the heater doesn't work. Or the market just goes soft. So now instead of getting your money back and pocketing $15K you're out even more $ to make the place saleable which also ties up your cash.

Then these programs typically encourage you to use the "value" in one property to buy another. No problem, you'll have your investment back in 2 weeks and the extra $15K too. So when these other properties need an infusion of cash, the well is dry.

Believe me, the only one assured of making any money is the guy doing the seminars - he gets his up front.

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I didn't mean to say it. But I meant what I said. J. McMurtry