Just because you didn’t get a bill doesn’t mean you don’t owe it and that it cannot be reported on your credit report.

Just because you didn’t get a bill doesn’t mean you don’t owe it and that it cannot be reported on your credit report.

Today, a client sent us a tax bill from the North Carolina Department of Revenue (which can be vicious).  The bill was from 2009 and was a debt incurred after the client filed a Chapter 13 bankruptcy.  The client wanted to know if the debt was still collectible and was particularly surprised because they had received tax refunds for every year after 2009.  Unfortunately for the client, not only is the debt collectible, but the Department of Revenue can also collect interest and penalties on the unpaid amount.  In this case, it seems easy to understand why the Department of Revenue may have been fine with waiting to collect!  Our recommendation is that the client pay the taxes as soon as possible to avoid garnishment and damage to their credit report, that they are just starting to rebuild.

The Department of Revenue is not the only debt collector that will lay in wait to collect a debt.  As discussed in an article on WCNC yesterday, this is a type of practice called “parking” the debt.  Parking is when a creditor reports a debt on a credit report without first taking any proactive steps to collect it.  Instead, the creditor waits to collect until a consumer pulls their credit report, oftentimes when they’re applying for a mortgage.  This benefits the debt collector that needs to expend no other resources to collect the debt.  Simply by reporting on the credit report once, they don’t have to hire people to collect the debt, use any stamps, or take any time.

So, what can you do?  First, never assume that just because you haven’t heard from a debt collector that you don’t owe them money.  Second, watch your credit report and credit scores.  Third, dispute any errors on your credit report.  Finally, if you think you have a problem and something does not seem right to you, contact our office.  We will be happy to help you resolve your creditor issues.

Bank fees are just one way that banks look out for themselves

On June 10, 2015, the Superior Support Judge for Complex Business Cases ruled that an attempted class action over whether a bank could charge an account for transactions in order of largest transaction to smallest transaction would not be allowed to proceed, even though it was clear that the bank’s practices greatly increased bank fees.  In this case, People’s Bank had posted charges from high to low, like in the following:

Time of Transaction Transaction Balance
Starting Balance $50.00
06/26/2015 at 7:00 P.M. Grocery Store $35.00 $15.00
06/26/2015 at 5:00 P.M. Gas station $20.00 -$5.00
Overdraft fee $35.00 -$40.00
06/26/2015 at 1:00 P.M. Vending Machine $1.75 -$41.75
Overdraft fee $35.00 -$76.75
06/26/2015 at 10:00 A.M. Convenience Store $5.00 -$81.75
Overdraft fee $35.00 -$116.75

Notice that the accounting leads to the bank’s charging three bank fees.  However, if the bank had posted the transactions in the order of their occurrence, it would have appeared as followed:

Time of Transaction Balance
Starting Balance $50.00
06/26/2015 at 10:00 A.M. Convenience Store $5.00 $45.00
06/26/2015 at 1:00 P.M. Vending Machine $1.75 $43.25
06/26/2015 at 5:00 P.M. Gas station $20.00 $23.25
06/26/2015 at 7:00 P.M. Grocery Store $35.00 -$11.75
Overdraft fee $35.00 -$46.75

The difference between the two accounting methods is $70!  For the same transactions.  While the difference between three bank fees and one bank fee may not seem like much,

The Court found that People’s Bank’s contract made it clear how transactions would be posted and even going as far to say that it may increase the amount of fees charged.

While this sort of practice has not been permitted since 2010, when the Office of the Comptroller of the Currency enacted the Electronic Fund Transfer Act, known as Reg E, it acts as a reminder that Banks may have friendly commercials featuring horse drawn carriages, use names that seem very patriotic, and even indicate that they are a bank of the people, but they are businesses who want, and like, to make money and their source of money is their customers.  Even after the changes in 2010, bank fees (overdraft fees, non-sufficient funds fees), make up over 60% of consumer checking account revenue!

This is why we have a number of suggestions for our clients:

1. Don’t bank where you borrow;

2. Always have 2 bank accounts, even is one is just a back up;

3. READ the agreement you sign with the bank carefully.  It may be confusing, but you need to understand what it says;

4. Use a bank you trust and one that has as few fees as possible.  We typically recommend BB&T, Blue Harbor (local to Mooresville, NC and Huntersville, NC) and CapitalOne360.

But isn’t Bankruptcy Federal?

It is common that clients search for information about their case online.  They don’t want to “bother” their attorneys, they don’t trust their attorneys, or, sometimes, they do not have a bankruptcy attorney.  As a result, they search for “bankruptcy law” and whatever specific topic they are curious about: losing a house, rebuilding credit, keeping a car, ruining lives, etc.  Even if they enter a specific zip code or location, they still may find results from all over the United States, not just North Carolina or, more specifically, the Statesville or Charlotte division of the Western District of North Carolina.  They then read everything they can without realizing that bankruptcy is different from place to place.

Collum & Perry is located in Mooresville, North Carolina, just north of Charlotte.  For that reason, most of our cases are filed in the Western District of North Carolina, although we can also file cases in the Middle District of North Carolina, but North Carolina has four districts total.  Even within the Western District, we file cases in the Statesville Division, the Shelby Division and the Charlotte Division.  Each division has slightly different ways of doing things, each District has significantly different ways of doing things, and the differences from state to state are even more substantial.

For example, in North Carolina, there is a Bankruptcy Administrator (or BA).  The Western District’s BA is Linda Simpson. The BA oversees all of the Trustees in an effort to maintain the integrity of their work.  She also reviews and approves pre-filing credit counseling course and financial management courses.  In every other state, except Alabama, there is a US Trustee, who is part of the Justice Department.

Within North Carolina, there are differences between districts.  In the Western District of North Carolina, there is no confirmation hearing.  Clients are often comforted to hear that they will not have to attend Court or be in front of a judge.  However, in the other districts of North Carolina, there are confirmation hearings. While neither system is necessarily better, they are different.

Further, within the Western District of North Carolina, there are a number of divisions.  The Statesville Division of the Western District of North Carolina includes certain counties (Iredell, Wilkes, Alexandra, Catawba, Caldwell, Watauga, Ashe, and Allegany), the Charlotte Division has certain counties (Gaston, Mecklenburg, Union and Aneon), the Asheville Division has others (Transylvania, Henderson, Buncombe, Yancy, Mitchell, Avery, Madison and Haywood), and the Bryson City division captures the remaining (Swain, Graham, Cherokee, Clay, Macon and Jackson).  You can see a map here.  So, if a couple lives in zip code 28115, they will file in the Statesville division.  If they file a Chapter 13, Mr. Steven Tate will be their Chapter 13 Trustee.  If they filed a Chapter 7, they would have one of a number of different Trustees.  However, if a couple’s zip code were 28078, they would file in the Charlotte Division.  They would have Mr. Warren Tadlock as their Chapter 13 Trustee.  Someone in the Statesville Division would NEVER have the same Chapter 13 Trustee as someone in the Charlotte Division.  However,if someone files a Chapter 7 Trustee in the Statesville Division, Wayne Sigmon may be the Trustee and he is also the Trustee in Charlotte division cases.

A map of the districts in North Carolina. We are located in the Western District but also have attorneys who practice in the Middle District.

What’s the point?  Essentially, every Trustee has different approaches and requirements.  Every district has different local rules and regulation.  Each state has different laws that apply.  So, even though Bankruptcy law is Federal, the wide variety of differences make it very important to hire an attorney and ask your attorney to help you with any aspect of your bankruptcy case.  Online searching is great, but cannot replace a knowledgeable, experienced attorney who advocates for you and knows the local rules!  Here at Collum & Perry, our office strives to assist all of our clients in achieving the best possible result from what is otherwise an untenable situation.

Disputing Errors on a Credit Report

Have you found an error on your credit report?  If so, follow the following steps to dispute it:

1. Request a free copy of each of your credit reports from www.annualcreditreport.com.

2. Gather information to show the error.  For example, if you filed a Chapter 7 bankruptcy and a discharged debt is being reported as being owed on your credit report, send a copy of the discharge paperwork.

3. Draft a dispute letter  to send to the credit reporting bureaus.  The Federal Trade Commission has a sample letter you can use.

4. Make copies of EVERYTHING.  Send the letter (certified, return receipt requested) to the credit bureaus reporting the error on your credit report, with the supporting documentation.  The addresses for each of the credit bureaus are:

Equifax
P.O. Box 7404256
Atlanta, GA 30374-0256

Experian
Dispute Department
P.O. Box 9701
Allen, TX 75013

TransUnion
Consumer Solutions
P.O. Box 2000
Chester, PA 19022-2000

5. Wait at least 30 days.  Within that time, you should be contacted regarding the outcome of your dispute.  If you hear nothing, send a follow up letter.  If the error is corrected, great.  (Pull a copy of your credit report to be sure.) If you do not receive a response, even after follow up, or if the error is not corrected, you may need to escalate your approach and you may have legal remedies.  Contact Collum & Perry for assistance and we will work diligently to ensure the accuracy of your credit report.

How do I rebuild my credit after filing?

One of the biggest questions our clients ask is “How do I rebuild my credit?” While many clients also swear off ever borrowing money again, we typically suggest that clients re-enter the world of credit cautiously, but confidently. It is often necessary to borrow money (for a car, house, etc.), and using credit wisely in the present allows you to rebuild your credit and have access to loans in the future. To assist you in re-establishing credit, we have compiled the following suggestions:

  • Use the Credit Report Clean-Up Packet we will send you. You’ve just gone through a huge change, and we know it hasn’t been easy. Don’t let that go to waste! Use the packet we are sending you to ensure that your credit report is accurate.  Ensuring the correctness of a credit report is a must if you want to rebuild your credit.
  • Make a budget and stick to it! An online option is mint.com. You can also use YNAB, quickbooks, the envelope method, or any other tool to track your income and expenses.  If you want to rebuild your credit, it’s best to use solid materials and proven strategies.
Everyone struggles, but rebuild ing can create something superior.

Bankruptcy is often a last resort, but it can be a method to tear down a decaying structure and rebuild with confidence.

  • Use credit wisely. The best way to rebuild your credit is to use it. If you reaffirmed a debt in a Chapter 7 or have paid for a house through a Chapter 13, you will have some use of credit being reported. However, if you do not have personal liability on any debts after your bankruptcy, your credit report is blank, just like when you graduated high school. So, start over. You will have TONS of credit card offers. DO NOT take all of them. Take the best of them. One credit card. Use it and pay it off. Never use more than 20% of the available balance and pay it off every month. After 6 months or so, apply for another card. If your first credit card had an annual fee or was a secured credit card, close that account. After another 6 months, apply for another credit card, maybe a gas card or store credit card. Finally, after approximately 2 years, your credit score should be substantially higher than it was immediately after filing and is likely higher than it was before you filed!
  • Be aware of the credit available to you.
    • Getting a secured debt is often easier than an unsecured debt. If you don’t need a car, you may find yourself in need of a secured credit card. For this, you will need to submit a certain amount of money (often $300-$500) and your credit card will be secured by that debt. This can be an expensive option, but can be the starting line of the race to rebuild your credit. Make sure that the creditor reports to the credit bureaus!
    • You could have someone add you as an authorized user to a longstanding credit card account. Typically, you are not held responsible for the outstanding debt, there is no credit check, but the card’s payment history is reported on your credit. Do this carefully! If the person has bad credit, it won’t help you to be an authorized user. Do not use the card unless you intend to pay what you borrow.
    • You can research credit cards at nerdwallet.com.
  • READ and UNDERSTAND your obligations.  When you borrow money, you are agreeing to certain terms.  These will include fees and interest.  The best credit cards tend to charge no fees, have low interest, and offer high rewards and should be available to you after you rebuild your credit.  Ideally, when your credit is strong, you will pay off your balances every month and be able to capitalize on the benefits of credit cards.  It is highly unlikely that you will ever be able to pay off a mortgage or car loan without ever having to pay fees and/or interest.  BEFORE you obtain either type of loan, review and consider carefully how much the debt will cost you. Learn about borrowingmortgage loans, car loans, compounding, and calculate your own amortization table.  Carefully consider your options and the costs!

How to have mortgage payments reported on your credit report post Chapter 7

When you receive a discharge in a Chapter 7, all of your in personem debt is discharged, with few exceptions.  When it comes to mortgages, a debt remains: debt on the house.  What this means is that you personally are not obligated to pay for the house, but if you stop paying, the lender can collect from the house itself, via foreclosure.  This is because the lender has a Deed of Trust, creating a lien on the home.  However, payments, whether they are on time, late, missed or delinquent, should not be reported on your credit report.  This can oftentimes create a stumbling block for rebuilding credit.

One solution the bank will suggest and that you might find online is to sign a reaffirmation agreement on a home.  However, WE NEVER recommend that a client sign a reaffirmation without a compelling reason (i.e., significant reduction in principle/interest) and find that our Judges often do not permit the signing of a reaffirmation agreement.  You can read more about reaffirmation agreements here.

So, what do you do?

  • Request a payment history for the mortgage company.  Your mortgage company is provided to supply this at least once each year pursuant to NCGS 45-94(d).
  • File a dispute, in writing, with each of the three credit bureaus.  You can read more on how to do this here.
  • The credit bureau is required to verify the reported information with the mortgage lender within 30 days.
  • At that point, the mortgage company can either:
    • Do nothing, in which case the credit bureau must accept the information provided by the client OR
    • Accurately report information.  This can be difficult to explain how payments are made but not reported.
  • Repeat this as often as needed.
  • Always keep the payment history so it can be provided when applying for new credit (on a car, another house, a refinance, etc.)