Don’t Skip Mortgage Payments to Pay Credit Card Debt

Consumers are changing the way they do business on a daily basis by prioritizing credit card payments over mortgage payments. Consumer debt rose in January 2010, but consumers continued to pay off their credit cards that month causing a record 16th straight month of lower credit card debt. A study by TransUnion (one of the three major credit reporting agencies) of 27 million anonymous consumer records pulled randomly from its database found the number of consumers delinquent on their mortgages but current on their credit cards rose to 6.6% in the third quarter of 2009 from 4.3% in the first quarter of 2008. The portion of those who fell behind on credit card payments but paid their mortgage dropped to 3.6% from 4.1%. This is an unprecedented shift for consumers. Paying one’s mortgage has always been a consumer’s top priority.

TransUnion reports first seeing this shift in payment precedence in the fourth quarter of 2007 by consumer’s with the lowest credit scores. Since the trend was first reported experts are seeing it creep into all income levels and those with a range of credit scores.

The reasons for paying credit card debt over the mortgage payment are varied but a few may be:

• Many homeowners owe more on their homes than they are now worth causing them to rethink continuing to pay on a home that is “underwater”.

• An unemployed homeowner may value the continued use of a credit card for food and necessities over holding onto a home which they cannot afford.

• A foreclosure in most states takes over a year whereby one missed payment can cause a credit card limit to be cut, interest rates to rise or a card to be canceled.

• Consumers dread the barrage of collection calls that come from delinquent credit card bills.

Many consumers simply do not know where to turn when there isn’t enough money to go around or do not know the options available to them. Another trend developing in this poor economy is debt negotiation whereby a consumer can settle unsecured debts such as credit card debt (not mortgages or car loans) for pennies on the dollar and eliminate the debt altogether, allowing them to focus on saving assets such as their home and vehicle.

These professional debt negotiation paralegals have a ten year history of haggling with creditors and debt collectors to eradicate late fees, interest, over limit fees and a good portion of the principal allowing a consumer to pay what they can afford to purge them of credit card debt one credit card at a time and breathe a sigh of relief.

www.CreditCardDebtNegotiator.com offers a completely free, no obligation consultation for anyone interested in learning about the option of debt negotiation. Debt negotiation is NOT the same as debt settlement. With debt negotiation the consumer retains complete control of what account is settled, how much it is settled for and when the settlement takes place. Debt negotiators charge a small, one time flat fee to negotiator for the consumer with a database and years of learning the insider secrets of debt collection. A debt negotiator never collects or holds money for the consumer or pays any bills on the consumer’s behalf.

Questions can be directed to Consult@CreditCardDebtNegotiator.com or by calling (614) 453-5963. Visit http://www.creditcarddebtnegotiator.com/ for more information.

Debt Collector Agrees to Pay Over $1 Million in Fines

The Columbus Ohio collection agency “Credit Bureau Collection Services” (CBCS) signed a Consent to Judgment and will pay $1.1 million in civil penalties for failing to follow Federal debt collection laws and for defrauding consumers around the country. According to the Federal Trade Commission’s (FTC) complaint Credit Bureau Collection Services continued collection activities on invalid debts and also reported those invalid debts to credit reporting agencies without conveying that the debts were disputed. Even if CBCS received information that the alleged debt was paid off, did not belong to that individual, or that the alleged debt was otherwise invalid, CBCS continued to attempt to collect the debt from that consumer. These actions are in violation of the Fair Debt Collection Practices Act as well as the Fair Credit Reporting Act.

“Credit Bureau Collection Services has voluntarily entered into a consent decree with the Federal Trade Commission to settle a civil lawsuit, which contained allegations concerning its collection and credit reporting activities that took place several years ago, from 2005 to 2007,” the company said in its statement.” Additionally, CBCS states they have done nothing wrong but that their decision to settle was simply a business decision.

If you believe the law has been violated by CBCS, you may wish to contact an attorney to pursue any claims you may have against them. It hardly seems reasonable that a company that has done nothing wrong would agree to pay over one million dollars in fines to the Federal Trade Commission.

Bankruptcies Rise Again February 2010

More consumers are filing for bankruptcy even though the government states the US is in the recovery phase of the recession. February of 2010 saw an increase in bankruptcy filings of 14% over the February 2009 numbers and 9% higher than January of 2010. The February filings reached 111,693, clearly not indicating Americans are having an easier time surviving financially.  Moreover, the kind of bankruptcy being filed is more often Chapter 7, which allows all unsecured debts to be discharged, including credit cards.
Samuel Gerdano, American Bankruptcy Institute executive director reasons, "The debt-stress overhang from years of consumer spending has a more acute impact now because of troubling economic times.” This very well may be a contributing factor. The loss of jobs or reduced hours and/or pay coupled with rising gas prices certainly isn’t helping the average American in debt, however, what about the huge raises in credit card interest rates, over limit fees and the fact that creditors have reigned in access to available credit even though they have been “bailed out” and have returned to granting huge bonuses to high level executives.
Whether you believe Obama’s administration is or is not taking the necessary steps to implement the changes necessary to bring America into financial recovery, what is the banking industry themselves doing to fix the mistakes they have made and the problems their greed has caused.
In 2005 when more stringent bankruptcy laws went into effect it was supposed to force more families into Chapter 13, or the repayment bankruptcy whereby most debts are repaid at a certain percentage over several years. The American Bankruptcy Institute states the number Chapter 13 bankruptcies decreased by 3% from January 2010 to February 2010. Generally anyone who owned a home had to filed Chapter 13 in order to save their home, however with so many homeowners “under water” or “upside down” on their mortgages whereby they owe more than the value of the property, many do not see any point in a Chapter 13 to save the home. Tossing the property into the bankruptcy and being rid of it is a better option.
Also important to note: bankruptcies were up by 32% from 2008 to 2009 according to the Administrative Office of the U.S. Courts. Chapter 7 filings were up 41% in 2009 while Chapter 7 filings rose just 12%. The bankruptcy rate has risen each year since the law was changed in 2005. "We are already on a faster pace in 2010 than we were a year ago," Gerdano says. "Consumer filings will likely surpass 1.5 million filings this year." From those numbers it is easy to surmise the 2005 bankruptcy overhaul isn’t providing the changes or relief that was hoped for, on a multitude of levels.
Bankruptcy can present a hard blow to not only ones finances and credit score but also to one’s self esteem and outlook on the future. No one wants to see their name in the local paper under “Bankruptcy Filings” or deal with the humiliation of friends and family finding out. When credit card debt gets out of control there are other options and the one which can provide the most relief, quickest and with the least embarrassment is debt negotiation. Negotiating an outstanding balance down to pennies on the dollar, paying it off without the entry of a bankruptcy on one’s credit report (or in the public record) can provide relief and fresh start. For more information from a credit card debt negotiator, get a free consultation from the debt negotiation experts at www.CreditCardDebtNegotiator.com, call (614) 453-5963, or email Consult@CreditCardDebtNegotiator.com.