I write once again on the subject of rebuilding credit after a bankruptcy because it has recently come to my attention that an old scheme used by lenders to defraud consumers has recently re-emerged and if you are not cautious will result in further damage.

We do recommend that consumers take appropriate steps to rebuild credit after a bankruptcy, however we do not believe that the programs described below are in anyway useful for consumers. There is Danger in these programs.

Recently, consumers from Middlesex and North Plainfield, New Jersey, who have obtained discharges of their credit card debt in Chapter 7 filings have advised us that they have received solicitations which promise to establish a new credit card account if the consumer pays off some or all of an old debt.

The problem is that the consumer owes nothing on this debt because the consumers obligation to pay the debt was discharged in the bankruptcy case. We have also learned that in other circumstances, particularly when there has been no bankruptcy filing, the same solicitation is often sent to consumers whose debt is over 6 years old and collection efforts would be barred by the NJ Statute of Limitations which sets a fixed period of time in which a creditor must bring a legal action to collect a debt. If the creditor does not start the action within the specified time, then the creditor is barred from bringing a suit to collect the debt.

We caution all consumers to review these offers very carefully as there may be seriously bad consequences as a result of accepting any of these offers.

In the paragraphs below we offer a more detailed look at the problems with these offers and companies which make them.

Consumers have no legal obligation to repay any debt which was discharged in bankruptcy. Additionally, any creditor who attempts to collect on a discharged debt is violating the Bankruptcy Court’s Discharge Order and is violating the law. To get around this restriction the companies which offer these programs disguise what they are doing and make an offer of new credit contingent on an agreement to repay some or all of a previously discharged debt. In other cases the debt is so old that the creditor is barred from bringing any legal action by the Statutes of Limitation. Statutes of Limitation have been interpreted to start running, not from the date on which the account was opened but from the date of the last transaction on the account. A current payment by the consumer has been interpreted as sufficient to “revive” a debt under the New Jersey Statute of Limitations. By making a payment on an old debt or a discharged debt the consumer is possibly reviving the debt. Reviving an old debt is an accepted legal principal which would make the consumer liable once again for a debt on which he is not currently liable. Once a payment is made on the new arrangement the creditors also will re-age the account, that is they will reset the last activity date on the account to the date of the recent payment and the date of last activity reported to the credit bureaus to the date of the new payment. In any future legal proceeding the creditor will allege that the consumer made a voluntary payment as of a current date and that the debt is no longer stale thereby depriving the consumer of the benefit of the protection of the Statute of Limitations. Often times the creditor or its collection agents will change the account number so as to confuse the consumer.

Consumers are cautioned to review these types of offers very carefully and make sure that they understand:

The interest rate on any old debt which they agree to repay

The interest rate on any new charges on the new credit account they have been promised

The fees which they will be charged to open the new account(these are usually charged to the new account thereby reducing the amount of credit available to the consumer)

If credit on the new account will be available to them immediately on approval of their application or only after they have paid off the old debt.

The exact amount of the old debt which the consumer is agreeing to take responsibility for.

That all of the terms of the agreement should be reduced to writing and made available to the consumer to review.

The possibility that the consumer is reviving an old uncollectible debt

Consumers should also be aware that these types of scams which are designed to take advantage of individuals in financial distress have been investigated and prosecuted by the Federal Trade Commission, the Federal Deposit Insurance Corporation, and Attorneys General from various states including New York and West Virginia.

Some of the companies who have been involved in these scams include Genesis Financial Solutions, Inc; Jefferson Capital Systems, LLC; CompuCredit Holdings Corp; Monterey County Bank; Tighorn Financial Services, LLC; PrivateBancorp, Inc; Mid America Bank and Trust Co; First Bank of Delaware; First Bank & Trust of Brookings, SD.

The list of companies involved in this activity is not complete and consumers are again warned to heed the old adage,

“If it looks to good to be true ………….”

Rebuilding credit is a great idea, undertake this type of activity with caution and with the help of professionals familiar with the pitfalls.

Consumers who file without the assistance of counsel are at risk of loosing this valuable asset to the case trustee.    As with everything in life, timing is everything.  Competnent professional advice is also useful in preventing disasterous unexpected outcomes.

The Supreme Court adopted revised Court Rules to tighten the procedures to  be followed by the lenders and their attorneys to insure that the banks and their attorneys are truthful in the future, however, due to a loose end, most of the big banks have not resumed foreclosure sales.  The Supreme Court has been asked to decide if the Fair Foreclosure Notice (which must be sent by the banks to the homeowner prior to starting a foreclosure) must name the actual holder of the mortgage(as required by law) or may contain only the name of the Servicing company(as the banks have been doing).  It appears that new foreclosure cases are not being filed and that the clean-up of the existing backlog of pending foreclosure cases will not move forward until this issue is decided.

Persons currently facing foreclosure continue to get a partial reprieve due to the delay.  Sooner or later, the wheels on the foreclosure machine will start turning again.   Homeowners BEWARE!!!!!

If  left unregulated, the wizards of Wall Street and the executives of the “too big to fail banks” will come up with more dangerous and harmful products to be foisted onto the American public.

The financial industry has proven by their actions, time and time again, they they do require adult supervision or they will cause additional unmeasurable harm to individuals, families and the economy.

This is an important issue for all American Consumers.  Contact your representatives in Washington and tell them what you think about the efforts to reduce the powers of this new Bureau and the needless delays in getting this new Bureau functional.

While these types of frauds have been around for years, the recent financial crisis and the collapse of the housing market have spawned a whole new generation of unsavory individuals engaged in this type of fraudulent activity.  Thousands of homeowners have been the victims of these frauds by so called “mortgage, foreclosure or home rescue consultants” over the last few years.    These scammers often approached distressed homeowners with promises of miraculous schemes to save their homes from foreclosure.  The scammers often took substantial up-front fees and then performed no work of any value.   In other cases the scammers convinced the homeowners to transfer the title of their home to the scammer on the promise of a “rent back and repurchase” arrangement.  The scammer would then strip any remaining equity out of the property by refinancing and making it impossible for the homeowner to ever regain possession of their property.

The new law which becomes effective in several months regulates not for profit loan modification services, sales of property by “foreclosure consultants” and the sale and leaseback scams.  The law also regulates those consultants who offer mortgage reinstatement services, mortgage modifications and promises of credit repair resulting from mortgage default.

Foreclosure consultants must now obtain a license from the New Jersey Department of Banking and Insurance.

The housing crisis effects all of us. There can be no national economic recovery until there is a recovery in the housing market. Even if you own a home and are paying your mortgage on-time the fact that others in your community are facing foreclosure or have already been forced out of their homes adversely effects the value of every property in the community. We all have a great stake in the health of the housing market.

The current federal efforts to rehabilitate the housing market(TARP and the administrations HAMP program, among others), have been more aimed at saving the big banks than restoring sanity to the residential real estate market. It seems to me that the only solution is to force the mortgage lenders to recognize the losses in their portfolio’s immediately. What better way that to compel them to write down the principal on underwater home mortgages.

I urge everyone who has a stake in restoring sanity to the real estate market(this is, in reality, all of us) to let the White House and Congress know that you support efforts to compel the residential real estate lenders to write-off or write-down mortgage balances which are in excess of the current value of the property. The Republicans are correct that the current Federal efforts to stabilize the residential real estate market(HAMP program) are not working, the solution is not, however, to kill the programs, but rather to review, modify and amend the programs to make them more effective in accomplishing the goal of stabilizing the values of property in the residential real estate market. Write down of underwater mortgage is the key to moving towards a solution.

Please contact the White House and the Republican leaders in Congress and let them know what you think.

Historically we have advised people that if they stay or get employed and continue making any payments which survive the bankruptcy(such as a reaffirmed car loan), that generally speaking, they would be eligible for new credit within the next 12 to 18 months. Payments such as rent and utilities are generally not regularly reported to the credit bureaus. Anecdotally, over the years, clients advised us that they were able to get new credit after bankruptcy.

The recent financial crisis has dramatically changed the credit landscape for consumers. Those of us who help people in financial difficulty can not yet clearly read the lay of the land in the post-crisis financial world. We continue to advise people that employment status is the most important factor in getting new credit. We have also developed strategies for reviewing and updating credit reports, applying for certain types of credit cards and instructing clients as to how to most effectively obtain and build new credit. We continue to advise people to make payments on any surviving accounts in a timely fashion.

We believe that our strategies are working as reported to us by our clients over the last 3 to 4 years. Part of our counseling with each bankruptcy client is how to move forward after the case is over to begin the process of rebuilding credit.

The answer to the question is that for most clients who have steady work we believe that credit can be restored within 12 to 18 months if they follow our instructions. Watch this website for a new feature dealing exclusively with “life after bankruptcy”

Feel free to speak with us about this important question when you meet with us.

21   cases   Edison, NJ

15   cases   Piscataway, NJ

10   cases   Old Bridge, NJ

9   cases Somerset and Sayreville, NJ

7    cases South Amboy, NJ

6   cases   Avenel, Carteret, Parlin, Perth Amboy

5  Cases    Lawrence Harbor , Woodbridge, Bound Brook, South Plainfield

4  cases   North Plainfield,  New Brunswick, Colonia, Somerville

3 cases or less    Watchung, Hillsborough, Branchburg, Warren, Manville, Middlesex, Dunellen, Basking Ridge, Highland Park, Lebanaon,  Green Brook, Colonia, Fords. Iselin, Metuchen

Please remember that I have broken out only those towns where our clients come from, there are hundreds of other cases from other parts of Middlesex, Somerset, Mercer, Monmouth, Hunterdon, Warren, Ocean, and Burlington Counties.

We will provide an analysis of the cases from the Newark Bankruptcy Court which serves Union County and the northern part of the State at a later time.

These statistics are for the Month of January 2011 ONLY!!!!!!