Beware Debt Elimination Mortgage Fraud

Fay YongFor the past two years, real estate, mortgages and foreclosures have dominated the news. During the first half of the decade, new, and often risky, loan products put more people than ever before into homes. According to the U.S. Census Bureau, the home ownership rate in America grew to 69.2% by the beginning of 2005, the highest in history. However, these new loan products carried a dark side. Lenders were approving loans to borrowers with riskier credit histories than in the past. And borrowers were taking advantage of record low interest rates, adjustable rate loans and lower underwriting standards to qualify for higher amounts than in years past – in many cases more than they could repay when introductory rates reset. Now foreclosures – the process banks take to reclaim money they’ve loaned by reacquiring a house – are higher than ever. RealtyTrac reported that more than 272,000 homes entered into foreclosure filings in July 2008, an increase of 55 percent from the previous year. People stuck in foreclosure are often vulnerable and desperate to keep their home. Con artists are increasingly targeting homeowners facing foreclosure with promises to help erase the debt and keep the home. In reality, they only wish to steal your money, ruin your credit and wipe out your home equity.

Types of Debt Elimination Fraud

Debt elimination fraud – as most of these foreclosure scams are known – take on several guises, but they all share one goal – to separate you from your money or home.

The most common debt elimination fraud scheme is for phony “foreclosure counselors” to offer help in fighting the foreclosure in exchange for outrageous fees. They claim to know the public notary procedures needed to fight a foreclosure, but in reality, these con artists are making phone calls and filing paperwork that the homeowner could do for free. In addition, none of these actions will save the home, leaving the victim with a false sense of security and still in danger of losing their home.

A related scam to foreclosure counselors are credit counselors who promise, for a fee, quick fixes to a homeowner’s credit rating. The promise is that homeowners will be able to refinance into a lower payment once their credit is higher. Unfortunately, just like the foreclosure counselor, the victim is paying a con artist high fees to do paperwork that could be done on their own.

Another common money scam is to offer a “lease/buyback.” In a lease/buyback the con artist convinces the homeowner to sign over the deed for the home, promising to pay the bank back on the loan. In reality, the con artist will never make a payment on the home or find a reason to evict the victim and keeping the equity in the home.

An even more frightening mortgage fraud is the bait-and-switch scam. Con artists claim to be filing paperwork that will bring the mortgage current, but instead the victim is signing over the deed to the house. Instead of eliminating the foreclosure, the victim is now evicted from the home they no longer own.

Red Flags for Debt Elimination Scams

While money scams come under different guises, there are some common red flags to watch for. If you are facing foreclosure and experience any of these warning signs, run as fast as you can from the con artist promising help.

The first warning sign is an offer of foreclosure rescue that is unsolicited. If someone approaches you – by phone, email, or in person – be wary. Since lenders have to publish foreclosure notices, it is very easy for scammers to locate potential victims. Do not trust anyone who claims they can stop foreclosure for a fee. Instead of trusting the stranger who calls, work instead with your lender or bank directly.

Con artists also thrive on victims willing to pay money upfront. Never pay mortgage money to anyone except the bank or lender who services your mortgage.

Never sign documents with blank spaces or with false information. Legally, anything you sign can be upheld, and blank spaces allow con artists to revise the document to their profit. “Mistakes” or false information should be changed in writing before signing anything.

Another warning sign is any deal that is overly complicated or that you do not understand. If the terms of a “deal” are vague or confusing, take the time to have a trusted financial advisor or lawyer review the documents and explain them in clear terms.

Finally, do not believe anyone who promises an overnight fix. Credit scores and financial mistakes take time to repair, and no amount of money can make a credit core shoot up. Likewise, if you are behind on mortgage payments, only the lender can make concessions to past debt. Foreclosure is a scary thing to face. If you find yourself facing the prospect of losing your home, beware con artists selling an easy fix. Instead, contact your lender immediately. All the bank wants is to be repaid money they’ve loaned. They would rather work with you on new payment terms than take on another empty house they can’t sell.

Personal Bankruptcy: All You Need to Know

Fay YongFiling bankruptcy is the cause of a lot of apprehension and confusion. Many people believe they will lose everything they own if they file for bankruptcy, while others think they can keep everything but still get rid of the debt. The truth, however, is not that black and white. It depends on the bankruptcy laws that are applicable to you and your unique situation. Let’s discuss some basics of personal bankruptcy, although you’re advised to seek professional guidance from bankruptcy attorneys.

What Are the Facts?

Bankruptcy is a process used by federal courts to repay or eliminate the consumer debts that are under the bankruptcy court’s protection. The purpose of filing for bankruptcy is to give you a fresh start and give you a chance to get your financial situation under control. It’s also designed to give fair treatment to creditors. This simply means that all your debts will be included in the bankruptcy process, and you can’t pick and choose.

consolidate-debtIn bankruptcy, a trustee will manage your case throughout the entire process and you’ll have to meet the trustee at least once. There are two main types of personal bankruptcy. These bankruptcies can address your personal consumer debt including medical bills, personal loans, and credit cards as well as the business debts that you took personally.

Chapter 7

Also known as liquidation bankruptcy, chapter 7 can involve the selling of your non-exempt assets to repay creditors. Non-exempt assets are items that are not protected under the bankruptcy laws applicable to you. Typically, you’ll apply for chapter 7 bankruptcy if you don’t own more assets than you can protect. If that’s your situation, then you can pay off or consolidate debt without losing any of your assets. Rules say that you can receive only one chapter 7 discharge every 8 years.

Chapter 13

bankruptcyChapter 13 is known as the reorganization or repayment bankruptcy. In this case, a plan can be filed for the repayment of your debts to the creditors by the bankruptcy court. Some debts are paid full, some are partially paid and some are even dismissed with no payment. Chapter 13 payments can run from 3 to 5 years. Typically, you can keep hold of all the assets when you file for a chapter 13 bankruptcy.

Whether you’re eligible to file for chapter 13 or chapter 7 bankruptcy depends on your means. Your bankruptcy attorney will conduct a means test to determine if your household income exceeds your geographic region’s median income. In that case, you’ll be required to file for chapter 13 bankruptcy.

Not all debts can be fully eliminated and there are some debts that can’t be discharged by filing for bankruptcy. These include spousal and child support, student loans, criminal restitution or debts that you could have removed in any previous bankruptcy. Others include luxury services or goods, cash advances, income tax debts, penalties and fines imposed for the violation of law.

How to Manage Household Finances

Some people find it difficult to manage their household finances, although it isn’t complicated if a disciplined approach is adopted. Only a few people follow the basic rules of financial management in reality, and this is the reason many people suffer from problems with debt. If you possess these five simple skills, you can make sure that you run a stable household budget.

1. Budgeting

The first and foremost thing your house needs is a budget. You are very well aware of how much you earn on a monthly or weekly basis, but do you have any idea how much you spend each week when you go for an outing or to buy lunch or groceries? Certainly not. The key factor to developing a budget is to learn where you spend your money. Then, you must look for ways to cut back on your spending.

2. Saving

debtconsolidationYour budget must accommodate savings. If you do not save money for your future, you may get stuck with loans if you lose a job or run into some other calamity. You may also not have enough amount to spend a comfortable life after your retirement. At all times, it is advised that you have at least three months of your salary saved. It can protect you from losing your automobile, house or any other valuables in case you lose your job. If you think you cannot save money with only one bank account, open up another for your savings, and deposit some amount in it on a weekly or monthly basis. You may consult debt consolidation advisors to guide you on saving money for retirement.

3. Tracking

Once you have planned a budget and savings, you need to ensure that you stick to it. Tracking your expenses is the only way that you can make sure you are abiding by your goals. Nowadays, many banks offer online software programs that assist in tracking money. You can check which one is the best for you. It saves time as inputting figures in a spreadsheet can be tiring and time consuming as compared to an automated program that can track your household expenses.

4. Disputing

consolidate-debtWhen tracking expenses, you will note whether there is any inconsistency between what you think you paid and what you have been charged. The modern way to balance a checkbook is to monitor such items and compare them with their receipts. You might not have to wait for the statement each month, but you need to compare charges with your record. Saving receipts are a great way to make sure you have an authentic proof to dispute a charge if required.

5. Involving All Members of the Household

Your efforts to save money can only be successful when your whole family is with you in the process. You need to ensure that they are aware of the budget planned and are trying their best to stick to it. It is a great learning experience for children, teaching them how budgeting is done and why saving is essential.