Legal Tips & Commentary

California’s 90-Day Foreclosure Moratorium Really Isn’t

noreply@blogger.com (Carl Starrett) — Mon, 15 Jun 2009 00:35:00 +0000

In February 2009, Governor Arnold Schwarzenegger approved the California Foreclosure Prevention Act. The news media has portrayed the legislation, which takes effect on June 15 2009, as a 90-day moratorium on foreclosures. The reality is much more complicated and could lull home owners into a false sense of security if they in negotiations with a lender for a loan modification.

What the new law really does is expand the time between when a lender can record a Notice of Default to begin the foreclosure process and when the lender may record a Notice of Sale from 90 days to 180 days. The law only protects owner-occupied homes from foreclosure where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008. For loans outside of the specified time period, the time before the lender may give a Notice of Sale remains at 90 days.

The law also allows lenders to avoid the 90-day “moratorium” if they have a comprehensive loan modification program based, in part, on criteria set forth by the Federal Deposit Insurance Corporation (“FDIC”). There is no requirement that the lenders negotiate in good faith.

Nearly all residential foreclosures utilize what is commonly referred to as nonjudicial foreclosures, which means that the foreclosure sale can occur without court supervision. If a lender does not comply with California’s foreclosure laws, it will still be up to the homeowner to go to court to prevent or set aside an improper foreclosure. If homeowners wait too long before seeing a qualified attorney, they may be so far behind in their payments that even a Chapter 13 repayment plan in bankruptcy might not be able to save them from foreclosure.

For now, I am advising my clients to act as if they do not have the benefit of an additional 90 days to stop a home foreclosure because there simply is no way to tell when a lender might assert that it has a loan modification program that complies with California law. Once the foreclosure sale takes place, it is very difficult and expensive to go to court to undo the transaction.

If you are in Southern California, please feel free to contact us for a free consultation on your bankruptcy options to possibly help save your home from foreclosure.

About the Author: Carl H. Starrett II has been a licensed attorney since 1993 and is a member in good standing with the California State Bar and the San Diego County Bar Association. Mr. Starrett practices in the areas of bankruptcy, business litigation, construction, corporate planning and debt collection.

A Creditor Objected to My Discharge…Now What?

noreply@blogger.com (Carl Starrett) — Sun, 07 Jun 2009 22:14:00 +0000

When a debtor files for Chapter 7 bankruptcy, the court mails the creditors a document entitled "Notice of Chapter 7 Bankruptcy Case, Meeting of Creditors, & Deadlines". One of the deadlines set by the court is when the creditors must take legal action to prevent the debtor from receiving a discharge of some or all of the debts. This objection is accomplished by filing a lawsuit within the bankruptcy case called an adversary proceeding.

Most adversary proceedings that I see are filed by credit card companies alleging that a debtor made purchases or took cash advances without the intention of repaying them. The best way to avoid an adversary proceeding is for the debtor to stop using their credit cards for a minimum of 90 days prior to filing for bankruptcy. Luxury purchases and cash advances in close proximity to the filing date of the bankruptcy might be presumed to be fraudulent, giving the creditor an advantage in the adversary proceeding.

Most credit card companies that regularly threaten to file adversary proceedings are usually looking for "low hanging fruit" (i.e. a quick settlement with the debtor). Perhaps they feel that a debtor will not be able afford more legal fees to defend the new lawsuit or will simply be scared into submission.

In my experience, creditors will often back away very quickly if confronted with a strong defense. In one recent case I handled, Wells Fargo dropped a claim that my client had fraudulently borrowed $10,000 on a credit card less than a month after I had filed an answer to the adversary complaint on behalf of my client. Perhaps it was the fact that the bankruptcy court could have ordered Wells Fargo to pay my client's legal fees if it was found that the lawsuit had been brought without sufficient justification for the fraud allegations.

Don't let a creditor scare you into giving up your rightful discharge. If you are in Southern California and need assistance in defending an adversary proceeding, please feel free to contact us.

Struggling With The Decision to Call a Bankruptcy Attorney

noreply@blogger.com (Lisa Starrett) — Mon, 18 May 2009 04:21:00 +0000

Before joining my husband’s law practice as a bankruptcy paralegal in 2006, I worked at the corporate headquarters for Jack in the Box, Inc. for 11 years in human resources and training, the last year of which was spent as a recruiter for the Quick Stuff division. Interviewing potential job candidates was a very rewarding experience as both the job candidate and I would work through the interview to determine if a job was a good fit for them and for Jack in the Box.

As the senior paralegal in a family-owned bankruptcy law firm now, I am often the client’s first contact in the information gathering process. I view the initial phone call to us as a unique opportunity to show a potential client from the beginning that we care, to talk with them about their situation and to provide general information, in easy to understand terms, of what bankruptcy is and how it works.

Picking up the phone to call a bankruptcy law firm is a big step, especially if someone has been battling stress and depression because of their financial situation, and fear of shame in needing to call. For each person that I talk with and hear this in their voice, my goal is to be a friendly voice that shares information about what bankruptcy is and is not, so that they can begin to explore if bankruptcy is the right solution for their needs.

My experience with client interviews has allowed me to develop my own mental checklist of common client experiences that indicate they have made the right decision by calling us:

If you are routinely taking cash advances on one credit card to pay the minimum balance on another
If you can barely afford to pay the minimum balances on your credit cards
If you are considering using cash advance checks or getting a payday loan to meet basic expenses while trying to pay credit card bills
If you are looking at credit card offers in the mail, and hoping you can qualify for just a small amount to tide you over
If you are afraid to pick up the phone or go to the mailbox
If you lose sleep over not being able to pay your bills
If financial stress is affecting your health
If you cannot enjoy daily activities with friends or family because of worry over your finances
If you find yourself hiding bills from your spouse
If you live paycheck to paycheck with no available credit and no reserve for any emergency
If you park your car different places each day to avoid repossession

Bankruptcy is not a magic pill that will make all of your troubles go away. However, people who seek us out will hear a friendly voice and an open ear. If you are in Southern California and can identify with the warning signs above, let us help. Please contact us for a free consultation.

About the Author: Lisa F. Starrett has been a bankruptcy paralegal since 2006 and uses her human resources background to connect with clients of the Law Offices of Carl H. Starrett. Mrs. Starrett graduated from the University of San Diego in 1989 with a degree in Political Science and a paralegal certificate from a program approved by the American Bar Association.

5 Signs That It May Be Time to File Bankruptcy

noreply@blogger.com (Carl Starrett) — Sun, 10 May 2009 23:55:00 +0000

Bankruptcy is intended to help honest debtors get a fresh start, but there is no hard and fast rule on who will benefit the most from filing for bankruptcy. These are some of the warning signs that I look for when advising a potential client that it may time to file for bankruptcy:

1. Struggling to make rent or mortgage payments. When someone is faced with mounting bills, some debtors will play a game I call the Credit Card Shuffle, randomly choosing which minimum payment to make based on how nasty the collection call will be. Some debtors will even pay credit card bills before paying their rent or mortgage rather than face those harassing collection calls. This is simply wrong. Food and shelter should take priority over credit card debt.

2. Stress. Are you losing sleeping or constantly arguing with your spouse because of your debt problems? Money problems are a leading cause of divorce. Bankruptcy is not a cure all, but it can help remove your financial problems as a source of difficulties and stress in your marriage.

3. Health. I have seen far too many clients losing sleep and suffer stress-related health problems because of their financial struggles. A willingness to work multiple jobs or crazy overtime hours may be a sign a good character, but it can lead to burnout, exhaustion and anxiety.

4. Changes in your normal behavior. Are you considering doing something illegal to fix your debt problems or something that could put your health or the health of your family at risk? Have you taken up gambling or drinking? Are you doing things that are “out of character” for you? These may be signs of desperation and it may be time to see an attorney.

5. The Balance Transfer Shuffle. Are you constantly applying for new credit cards to take advantage of low balance transfer rates? This may be a sign that you are in over your head in debt.

If you identify with one of these warning signs, schedule a consultation with a bankruptcy attorney and explore your options. Debtors in Southern California may contact us for a free consultation.

Bankruptcy and Professional Licenses

noreply@blogger.com (Carl Starrett) — Sun, 19 Apr 2009 22:44:00 +0000

In a recent article, I discussed the limited protections that debtors have against employment related discrimination set forth in the Bankruptcy Code. In this article, I will discuss the impact that the Bankruptcy Code has on professional licenses.

Section 525(b) of the Bankruptcy code protects present and former debtors and their associates against governmental discrimination, such as the revocation of an employment license. However, section 525 protects only against discrimination "solely because" the person is bankrupt or has been bankrupt.

Debtors with professional licenses are protected to a certain extent by the automatic stay that is immediately triggered upon the filing of a bankruptcy petition. An exception to the automatic stay appears in Section 362(b)(4) of the bankruptcy code "the commencement or continuation of an action or proceedings by the governmental unit to enforce such governmental units' police or regulatory powers." This exception is intended to allow governmental units to sue a debtor to prevent or stop violation of fraud, environmental protection, consumer protection, safety, or similar police or regulatory laws, or attempting to fix damages for violation of such a law.

While the general rule is that bankruptcy alone should not impact a professional license, the protection is not absolute. For example, the California Contractors State License Board (“CSLB”) generally could not force a bankrupt contractor to pay money damages to an owner to fix deficient work. However, the CSLB still would have jurisdiction to fine the contractor or take other necessary steps to protect the public.

Bankruptcy is meant to help protect honest debtors in unfortunate circumstances and this same principle applies to any debtor who is a licensed professional such as doctors, attorneys and accountants. Licensed professionals cannot lose their license “solely” due to filing bankruptcy. Nonetheless, incompetent or dishonest professionals may be at risk and will not be protected by the Bankruptcy Code.

If you are in Southern California and want to know how bankruptcy might impact your professional license, please feel free to contact us for a free consultation.

Bankruptcy and Employment Discrimination

noreply@blogger.com (Carl Starrett) — Mon, 06 Apr 2009 00:18:00 +0000

A common question many debtors ask bankruptcy attorneys is whether an employer can discriminate against an employee or a job applicant due to a bankruptcy on their credit report. At first glance, the Bankruptcy Code seems to provide a broad range of protection against debt-related employment discrimination. Section 525 of the Bankruptcy Code prohibits private employers from terminating employees or discriminating with respect to employment solely because a person: (1) is or has been a debtor in bankruptcy; (2) has been insolvent prior to filing bankruptcy but before receive a grant or denial of a discharge; or (3) has not paid a debt what was dischargeable or was discharged in bankruptcy. However, the courts have limited the effectiveness of this statute.

In 2002, the 9th Circuit Court of Appeal ruled that an employee who threatened to file for bankruptcy was not protected by the Bankruptcy Code. Norbert Majewski became an employee at a hospital where he had incurred a large amount of medical debt from an emergency procedure. After 3 years of being unable to repay his debts, the hospital fired Mr. Majewski when he said he was going to file for bankruptcy. The Court of Appeal ruled that the statute only protected people who had actually filed for bankruptcy.

Other courts have also focused on a literal interpretation of the portion of the statute prohibiting employment discrimination “solely” due to filing bankruptcy. Even the smallest non-bankruptcy related reason for termination could be sufficient grounds for an employer to defeat a discrimination claim brought under Section 525 of the Bankruptcy Code.

In this economy, debtors can expect that employers will be more selective in the hiring process with more extensive background checks. The best thing a debtor can do is to be open and honest if the topic comes up during an interview. There will always be potential employers who say “thanks for being honest” and yet still make you feel like you are being judged. And if you don’t get the job, it probably would not have been a good fit anyway.

If you are in Southern California and want to know how bankruptcy might impact your job, please feel free to contact us for a free consultation.

Removing a Second Mortgage Through Bankruptcy

noreply@blogger.com (Carl Starrett) — Sun, 29 Mar 2009 05:32:00 +0000

In recent weeks, I have observed attorneys offering bankruptcy services, loan modifications and debt management plans. It is often difficult to decide what is the best option, but not many attorneys are talking about a powerful tool to help debtors: the ability to use bankruptcy to remove a second mortgage.

Under a 1992 decision by the U.S. Supreme Court called Dewsnup v. Timm, lien stripping can only be accomplished in a Chapter 13 bankruptcy. Chapter 13 is designed for people with regular income to pay back a portion of their debts over time.

In the Southern District of California, which covers San Diego County and Imperial County, the process begins by filing a petition for Chapter 13 bankruptcy. The debtors or their attorney also file a plan with the court to repay creditors all or part of the money that is owed to them using future earnings. A repayment plan can be three years or five years, depending on factors such as your income and must be approved before the plan can take effect.

Prior to filing a Chapter 13, the debtors or their attorney should obtain a professional appraisal of their home. In order to remove an unsecured second mortgage, the fair market value of the home must be less than the balance owed on the first mortgage. After filing the Chapter 13 bankruptcy, the attorney will contact the court and obtain a hearing date to request an order removing the lien from the property.

If the court grants the motion, the court will issue an order directing the holder of the second deed of trust to take the necessary steps the remove to the lien from the home. The type of loan does not matter. The bankruptcy court can order the removal of a HELOC, a purchase money loan or any other type of mortgage or other type of lien on the property if it is fully unsecured.

The lien strip only becomes effective once the debtors have completed the payments under their plan. In addition to the removal of the second mortgage, their debts are generally discharged except for domestic support obligations, most student loans, certain taxes, most criminal fines and restitution obligations, certain debts which are not, properly listed in your bankruptcy papers, certain debts for acts that caused death or personal injury and certain long term secured obligations.

If you are in Southern California and would like to see if you qualify for Chapter 13 bankruptcy to remove an unsecured mortgage or other lien from your home, please contact us for a free consultation.

Avoiding Loan Modification Scams

noreply@blogger.com (Carl Starrett) — Mon, 23 Mar 2009 04:50:00 +0000

A recent story in the San Diego Union Tribune noted an increase in the number of businesses offering loan modification services, a field that was once dominated by nonprofit organizations. A corresponding increase in complaints to the California Department of Real Estate (“DRE”) and the Better Business Bureau has also taken place.

Homeowners that get behind on their payments will often be contacted by companies offering loan modification services because foreclosures are public record. Consumers should be particularly wary of persons or businesses that ask for payment of services in advance.

California Civil Code § 2945 regulates foreclosure consultants. In most cases, anyone who falls under the definition of a “foreclosure consultant” is prohibited from collecting advance fees if a lender has recorded a Notice of Default to begin foreclosure against a consumer’s property. This prohibition against collecting advanced payments also extends to any real estate licensee. If your lender has recorded a Notice of Default, do not pay an advance fee without fully exploring your options.

If you need loan modification assistance, consider using a non-profit agency that can assist you without charging you a fee or a real estate licensee and an attorney who would be willing to work for a fee paid after their work has been completed. The California Department of Real Estate recommends the following websites for information on non-profit housing counseling services:

Federal Housing Administration

Hope Alliance Web site

Licensed California attorneys are allowed to request a retainer in advance of providing loan modification serves. Licensed real estate brokers may also collect advance fees for loan modification services with special permission from the DRE. However, the broker must have you sign an agreement that tells you what services will be performed, when they will be performed and how much you must pay and the agreement must be submitted to the DRE for review and permission granted to use it. Consumers considering using a real estate broker for loan modification services can call the DRE at (916) 227-0770 for more information.

Many persons offering loan modification services claim to have “inside knowledge” of the lending industry and promise to “cut through the red tape” to convince a lender to change the terms of a loan. The reality is much different. One local attorney I spoke with indicated that many times a lender would only modify a loan after being served with a lawsuit. And while using an attorney may sound expensive, only an attorney can represent a homeowner in court against a lender threatening to foreclose on an unaffordable loan.

If you are in Southern California and require assistance with a loan modification or other debt problems, please contact us for a referral.

Avoiding Foreclosure During a Loan Modification

noreply@blogger.com (Carl Starrett) — Thu, 19 Mar 2009 04:32:00 +0000

Mark Twain supposedly said once that "A verbal contract isn't worth the paper it's printed on." A client recently learned that the same can be said of a lender's promises during negotiations for a loan modification.

These homeowners had hired another law firm to represent them during the loan modification process. The lender had delayed a foreclosure sale several times while negotiations were ongoing. Without notice to the homeowners, the lender decided to cease negotiations on a Friday and conducted the foreclosure auction the following Monday. The home they had occupied for 15 years was sold to a third party bidder and now there is little they can do to save their home.

My colleagues that do loan modification work tell me that it is often necessary to advise homeowners to stop paying their mortgage before a lender will even discuss changes to a loan. When considering a loan modification, lenders look at several factors including (1) the nature of the hardship causing the mortgage problems; (2) the borrower's ability to pay; (3) the amount owed; (4) the equity in the property; and (5) the borrower's future financial situation. Without a delinquency, the lenders or loan servicers often have little incentive to modify a performing loan.

When a borrower defaults on a loan, the risk is that they will get so far behind that the lender will simply choose to foreclose rather than have a bad loan on the books. It is also possible get so far behind that a Chapter 13 bankruptcy repayment plan might not be able to help a borrower save their home. Before starting the loan modification process, consider the following tips:

Hire an experienced mortgage attorney to examine your loan documents for potential violations of laws such as the Truth in Lending Act or the Real Estate Settlement Procedures Act. This may give you leverage in the negotiation process.
Obtain a complete written life of loan history to see if there any inappropriate charges and fees included in their mortgage balance.
Do not spend the money you would have used to make your house payments. Consider setting the money aside in a separate bank account. The lender might require a "good faith" payment at some point in time during the process and you will want to have those funds available if needed.
Get all assurances in writing. If the lender does foreclose, written assurances could be used in legal proceedings to set aside the sale.
Have a bankruptcy attorney on standby. The automatic stay can stop a foreclosure sale before it happens. A debtor can also use a Chapter 13 repayment plan to get caught up on the past due mortgage payments. We offer a free consultation on new bankruptcy matters.

In this economy, negotiating a loan modification can be very risky yet very beneficial given the right circumstances. If you need assistance with debt relief or a referral to a loan modification specialist in Southern California, please contact us.

Support Needed for Bankruptcy Loan Modification Bill

noreply@blogger.com (Carl Starrett) — Thu, 12 Mar 2009 19:06:00 +0000

I recently wrote an article urging my fellow Republicans to support a bill giving bankruptcy judges the authority to modify home mortgages to prevent foreclosures. The battleground has now shifted to the Senate, which is gearing up to vote on the legislation . The bill is now known as S. 61, the “Helping Families Save Their Homes Act of 2009".

The premise for the bill is very simple. Experience has shown that lenders and loan servicers are only giving lip service to lofty promises to cooperate with struggling homeowners who need loan modifications. Unaffordable adjustable rate mortgages are still a major cause of bankruptcy and foreclosures in the United States. This bill would change that dynamic.

Under current bankruptcy law, a judge can modify almost any type of loan except the first mortgage on a debtor's home. This bill would allow judges to make changes such as extending payment terms, setting a fixed rate of interest or reducing payments. While this bill might cause a short term spike in bankruptcy filings, the long effect will be to force lenders to negotiate loan modifications in good faith. That is not happening right now. Some lenders are even foreclosing in the middle of negotiations without warning the home owner.

Please help by telling your Senators to support this bill. You can start at this link to learn more about the bill and then sign an online petition to show your support. Then you can click on this link to find contact information for your Senators. It does not matter whether you call, write, email or fax them, but make your voice heard very soon. As aptly stated by my colleague O. Max Gardner III, "This legislation is mandatory to make the voluntary modifications work."

7 Facts That The Average Debt Settlement Company Won’t Tell You

noreply@blogger.com (Carl Starrett) — Sun, 08 Mar 2009 02:40:00 +0000

In a recent article, I debunked a blog entry by J. Carlton Ford, owner of a website called Debt Warriors. Mr. Ford is a sales associate for Pre-Paid Legal, Inc. and sells “coaching videos” that purport to teach debtors how to reduce their debts. The cottage industry of “quick fixes” to debt problems is a sign of growing desperation by debtors who are confused about their options. Whether purchasing a video from someone like Mr. Ford or considering the use of a “debt settlement company”, consumers should be wary of quick fixes and empty promises of easy solutions.

Debt settlement companies offer to negotiate directly with your creditors, often for fees from ranging from 9%-16% of the consumer’s total unsecured debt. But debt settlement plans can harm debtors in ways they never imagined.

1. Debt Cancellation/Forgiveness is Presumed to be Taxable Income. Generally, if you owe a debt to someone else and they cancel or forgive that debt, you are treated for income tax purposes as having income and may have to pay tax on this income. If you owe a credit card company $10,000 and settle the account for $5000, the credit card company will send you and the IRS a 1009 form showing $5000 of income for the forgiven debt. You may be trading a debt that is completely dischargeable in bankruptcy for a nondischargeable tax debt. Debt forgiveness achieved in bankruptcy is not taxable.

2. Debt Settlement Plans Are Not Binding On All Creditors. Creditors do not have to deal with the debt settlement companies. Some creditors like American Express usually refuse to do so. If a creditor does not agree to the proposal, the creditor can sue you to obtain a judgment and garnish your wages and take your assets. A chapter 13 repayment plan is binding on all of your creditors and the automatic stay created by the filing of a bankruptcy prohibits any of your creditors from suing you.

3. A Debt Settlement Company Cannot Represent You In Court. Unless the debt settlement company is also a law firm, it cannot legally represent you in court. If you do not hire any attorney or do not have sufficient legal skills to represent yourself, then you risk have a judgment entered against you.

4. Debt Settlement Plans Are Often More Harmful to Your Credit Than Bankruptcy. Unless your debt settlement company skillfully crafts a settlement agreement the correct way, your creditors can still continue to report you as delinquent. While filing for bankruptcy will impact your credit, the automatic stay prevents creditors from reporting further negative information. In the case of a Chapter 7 discharge, creditors must start reporting zero balances within 30 days of your discharge and you can quickly distance yourself from any bad payment history. You can actually have bad credit longer under a debt settlement program than when filing for bankruptcy.

5. Debt Settlement Plans Are Often More Expensive Than Attorney Fees For Bankruptcy. In the Southern District of California where I practice, most consumer Chapter 13 cases cost approximately $3300 in legal fees plus expenses such as the $274 filing fee. Chapter 7 fees are often less than half of what an attorney might charge for a Chapter 13 bankruptcy. A person with $30,000 in debt will often pay a debt settlement company more than they would pay an attorney to file for bankruptcy.

6. Bankruptcy Can Accomplish More Than Debt Settlement Plans. Debt settlement plans typically only deal with unsecured debts such as credit cards and medical bills. Debt settlement plans usually do not deal with taxes or secured debts such as a home or car loan. Using bankruptcy, debtors can discharge certain income taxes, modify certain types of loans and many debtors are even using Chapter 13 bankruptcy to remove second mortgages from their homes. Debt settlement plans cannot accomplish any of those things.

7. Most Debt Settlement Companies Use the Carrot On a Stick Approach. Debtors rarely have the money to offer lump sum settlements to creditors. Debt settlement companies will often take installment payments and collect their fees first. Once they have a sufficient pot of money, they will offer a token settlement to one or two creditors. While this is happening, creditors may sue the debtor and the debtor’s credit rating will continue to drop.

While debt management plans may have their place, I have yet to see a satisfied customer come through my doors. If you are in financial difficulty, a consultation with a qualified bankruptcy attorney is always a good choice and often free.

California Adopts Moratorium on Many Foreclosures

noreply@blogger.com (Carl Starrett) — Thu, 26 Feb 2009 05:56:00 +0000

On February 25th, Governor Arnold Schwarzenegger signed a bill into law that establishes a 90-day moratorium on many home foreclosures on in California. The bill protects owner-occupied homes from foreclosure where the first loan was recorded between Jan. 1, 2003 and Jan. 1, 2008.

Under existing California law, a lender can initiate a foreclosure by recording a notice of default. After the expiration of 90 days, the lender can record a notice of sale. For first mortgages recorded between January 1, 2003 and January 1, 2008, the lender must now wait 180 days before giving notice of a sale date unless the lender or loan servicer has an approved loan modification program in place. The new legislation expires on January 1, 2011.

In January 2009, lenders commenced more than 2800 foreclosures in San Diego County. Like many other legislative proposals, the intent of this legislation is to force lenders and loan servicers to be more reasonable in offering loan modifications to troubled homeowners. However, it is unclear how many of those 2800 foreclosures will be prevented by this legislation.

With the vast array of options available for struggling homeowners, the most important advice is to seek the assistance of a qualified attorney. For some, the best option might be a Chapter 13 bankruptcy to strip an unsecured second mortgage from their home. For others, the best option might be an experienced attorney who specializes in loan modification services. For now, the California legislature has offered homeowners additional time to negotiate and incentives to lenders to cooperate with reasonable modification requests. Whatever you decide to do, hire a professional and don’t go it alone.

Why Republicans Should Support Judicial Loan Modification

noreply@blogger.com (Carl Starrett) — Wed, 18 Feb 2009 23:35:00 +0000

This is an open letter to all of the Republicans that serve in the United States Senate and the House of Representatives:

I am a Republican and a conservative, so it is a bit unusual for me to be asking you to support a piece of legislation introduced by the Democrats. I am specifically asking you to support House Resolution 200, the Helping Families Save Their Homes in Bankruptcy Act of 2009 ("H.R. 200").

Over the last year, I have watched as our government has flailed around from one failed measure to another in a vain attempt to save the economy. Big lenders such as Citibank have received hundreds of billions of dollars of taxpayer money under the theory that the bailout would free up the credit market, but I have yet to see any benefit to the consumers. It is time to stop bailing out Wall Street and pass legislation to help the "little guy".

As a member of the National Association of Consumer Bankruptcy Attorneys, I am in the trenches every day in an attempt to help my clients save their homes. The biggest obstacles that my clients encounter are adjustable rate mortgages and intransigent lenders who refuse to consider even the most reasonable loan modification requests.

H.R. 200 would give bankruptcy judges the authority to modify mortgages while still giving the note holders a reasonable return on their investments. The mortgage industry has already received help from the bailout money. The credit card industry received help when Congress passing the bankruptcy reforms in 2005. Isn’t it about time to help out the people who actually need it?

The lawful ability of a consumer to force a mortgage modification will provide the necessary impetus for many of the loan servicers to voluntarily modify the loans without the need for a bankruptcy filing. Without this legal leverage, there will be no bargaining power for the average consumer.

Credit Suisse estimates that passage of this legislation could reduce home foreclosures by as much as 20%. If you want to save the economy, then keeping people in their homes is a good way to start. This legislation would help homeowners get relief under the Bankruptcy Code and help people get back on their feet again.

The enactment of this law will not dramatically increase the number of new bankruptcy cases. The primary benefit of the law will be to give consumers who are already in bankruptcy the equal opportunity to modify their residential loans. The Congressional Budget Office in a study for Senator Durbin has estimated that the law will only result in approximately 2,000 new bankruptcy filings per year. It is time to help level the playing field and help your constituents in this time of need.

Thank you for your consideration.

Debt Warriors Retracts Story

noreply@blogger.com (Carl Starrett) — Thu, 12 Feb 2009 00:29:00 +0000

In a recent article, I posted a blog entry criticizing a website called Debt Warriors for publishing an article entitled "7 Facts That The Average Bankruptcy Lawyer Will Not Tell Debtors". Author J. Carlton Ford also owns the Debt Warriors website, which sells "coaching" videos for nearly $50 that purport to teach consumers how to negotiate settlements with creditors.

I engaged Mr. Ford in direct conversation via his website, where he initially defended his position and proceeded to attack my own motives. However, he has since removed his article without further comment. He never did explain the basis for some of his false claims such as how he arrived at the erroneous conclusion that Congress had eliminated Chapter 11 from the Bankruptcy Code.

When confronted with the facts, Debt Warriors chose to turn and run from the battlefield. Mr. Ford's actions speak loudly regarding the value of his "coaching" services.

If you are experiencing debt problems, don't pay someone to teach you debt settlement techniques that you can learn for free with a simple Google search. If you are in over your head, consult a member of the National Association of Consumer Bankruptcy Attorneys for assistance. If you live in Southern California, please contact us for a free consultation.

Tax Evasion the Latest Trend?

noreply@blogger.com (Carl Starrett) — Sun, 08 Feb 2009 01:41:00 +0000

President Obama has seen two of his cabinet appointees withdraw their names in light of their recent tax problems. Is tax evasion a new trend in these tough economic times? Business and attorney Carl Starrett was asked to appear on KUSI's Good Morning San Diego to talk about this latest issue:

Debt Warriors—Wrong Soldiers Fighting the Wrong War

noreply@blogger.com (Carl Starrett) — Sat, 07 Feb 2009 22:18:00 +0000

As the economy continues to worsen, businesses offering credit counseling, debt management and other "quick fix" plans continue springing up to offer debt relief services to consumers. A colleague forwarded me a blog article from an organization called Debt Warriors entitled "7 Facts That The Average Bankruptcy Lawyer Will Not Tell Debtors". Author J. Carlton Ford describes himself as a "former Legal Assistant in a Bankruptcy Prevention Law Firm". He is also a sales associate for Pre-Paid Legal Services, Inc. It is not clear whether or not Mr. Carlton is in fact a licensed attorney. However, it appears he is not.

Debt Warriors purports to offer to teach consumers how to stop creditor harassment and eliminate their debts without filing for bankruptcy. Based on misinformation contained in the article about "average" bankruptcy attorneys, I would seriously question the value as well as the credibility of the services offered by Debt Warriors. As the old saying goes, "if it sounds to go to be true then in most cases it is simply not true."

Mr. Ford is unclear on what he believes is an "average" bankruptcy attorney. Of course, if Ford is not an attorney himself, so it would be difficult for him to evaluate licensed members of the bar. I have been in practice for more than 15 years, representing both creditors and debtors. I have limited myself to representing consumer debtors since 2005 and I am a member of the National Association of Consumer Bankruptcy Attorneys ("NACBA"). So far this year, I have helped my clients discharge more than $3.7 million of debt in Chapter 7 bankruptcy cases. I have no idea if Mr. Ford would consider me to be an "average" or "typical" bankruptcy attorney, but I offer the following responses to the "facts" about bankruptcy that "average" attorneys allegedly hide from their clients:

1. Ford Claims that Bankruptcy is Not Easy to File. Bankruptcy has never been "easy" to file. It is complex and difficult in many cases, which is exactly why every consumer needs an experienced bankruptcy attorney. Ford then goes on to make the nonsensical statement that Congress eliminated Chapter 11 from the Bankruptcy Code with the 2005 Amendments. Besides being a completely untrue statement, Chapter 11 is meant for large businesses to restructure their debts. It is very rare that a consumer debtor would even file a Chapter 11 case. However, some individuals must file for Chapter 11 relief because of the amount of the debt they owe. Chapter 13 is available for the "average American wage-earner" so the debt limits for Chapter 13 relief do not apply to high-income wage earners and individuals with substantial and significant secured and unsecured debts.

2. Ford Asserts that Consumers seeking Bankruptcy Protection have to take a 'Means Test'. The 2005 Reform Act does include a financial means test for consumers who seek to discharge their debts under Chapter 7 or repay their debts under Chapter 13. Of course a bankruptcy attorney would discuss the means test with a potential client. It is the most highly publicized change from the 2005 Reform Laws and the most burdensome change to debtors. However, it is not a "test" like a true-false exam in high school. It is a historical analysis for the consumer’s average monthly income for the 6 months before the bankruptcy case is filed, not including the month in which the case is filed. It is somewhat like filing out a tax return. The bankruptcy attorney is the one who completes the form based in the payroll and tax records provided by the consumer and income from other sources. A consumer debtor cannot file for bankruptcy without completing the means test analysis form. But, it is a form, and not a test.

3. Form Claims there is a Presumption of Bankruptcy Abuse By The Debtor. The author seems to be discussing the financial criteria of the means test: "Did you know that if a Consumer has income of over $100 per month (after deductions) and they seek Bankruptcy Protection, that Consumer may be ‘Presumed’ guilty of Bankruptcy Abuse? The average Bankruptcy Lawyer will not inform you of this fact."

This statement by the author is utter nonsense. Mr. Ford to be referring to the financial criteria of the means test. If a consumer debtor "fails" the means test, then it might be a presumption of abuse for them to file for Chapter 7 bankruptcy. In such cases, the debtor might need to file for a Chapter 13 repayment plan and pay back a small portion of those debts. Or, the debtor may be able to claim "special circumstances" that would negate the presumption of abuse and proceed with the Chapter 7 case. The bottom line is that a bankruptcy attorney cannot "hide" the means test from a debtor and in fact completes the form for the debtor.

4. Ford Claims that Consumers Seeking Bankruptcy Protection Must Wait 180 Days (6 Months) Before Filing. This statement is simply false. Prior to filing for bankruptcy, a consumer debtor must take an approved class in credit counseling and file their certificate of completion with the court when filing their bankruptcy petition. The class must be taken within 180 days before the filing date of the debtor's bankruptcy petition. There is no requirement to delay filing for bankruptcy. The only limitation on the credit counseling is that you cannot take the course and then file for bankruptcy the same day you complete the course. But, the 180 Rule as stated by Ford is simply false.

5. Ford then Claims that Bankruptcy Filers Must Seek Accredited Credit Counseling Before Filing. Of course an attorney would mention this to a potential bankruptcy client. If a consumer debtor does not take the class, the court will dismiss their case. Not only do I mention this class to my clients, I arrange for them to take it! The filing of a certification from the counselor and a sworn statement from the debtor is an essential part of the bankruptcy court filing and as noted the case will be dismissed without these mandatory documents. The class is not an embarrassing or burdensome task. In most cases, debtors may take the class in the privacy of their own home via the Internet or over the phone. The classes generally take up to 90 minutes to complete.

6. Ford Claims Bankruptcy Is Now More Difficult and More Costly To File. Yes, bankruptcy is more difficult and expensive to file than before the changes made by the 2005 Reform Law. That fact is certainly no secret to the public. Before I accept money from a client, we discuss the fees and I provide them with a signed fee agreement that contains all of the disclosures required by the Bankruptcy Code.

7. Ford Claims that Pre-Paid Legal Attorneys Are Way Above Average. Maybe Pre-Paid Legal attorneys are above average. I have nothing neither good nor bad to say about them. I do know that customers of Pre-Paid Legal only have one provider law firm to choose from in the entire state of California. You have very few options if you are unhappy with the provider law firms.

In the final analysis, Mr. Ford's article is nothing more than a biased and inaccurate attempt to promote his Pre-Paid Legal Services Plan and his questionable debt negotiation services while perpetuating blatant and outright false myths about the benefits of bankruptcy. If you are a debtor in need of guidance regarding debt problems, consider using the attorney search function on NACBA's website to find a qualified local bankruptcy attorney. Members of NACBA are far more qualified to advise debtors regarding then debt relief options than a former paralegal promoting service of dubious value. The NACBA website is http://www.nacba.org/. The American Bankruptcy Institute (http://www.abi.org/) also includes a substantial amount of material on consumer bankruptcy law under their "Consumer Bankruptcy Center" link. Finally, the National Association of Chapter 13 Trustees has a website for consumers seeking Chapter 13 information (http://www.nacttacademy.com/).

Update: After engaging Mr. Ford is direct conversation about the problems with his article, he deleted it from his website without further comment.

Bankruptcy and Tax Refunds

noreply@blogger.com (Carl Starrett) — Tue, 03 Feb 2009 13:18:00 +0000

Question: I filed for bankruptcy in 2008 and it was also discharged in 2008. Is this going to change my tax refund?

Answer: A tax refund is essentially an interest free loan that taxpayers make to the government by having too much money withheld from their paychecks. The potential for a tax refund is an asset that debtors must list in their bankruptcy petition. In many cases, the debtors can claim the tax refund as "exempt", which allows them to keep the refund.

Although bankruptcy is a federal law, it is usually state law that determines whether a debtor's property is exempt and beyond the reach of the bankruptcy trustee. Most debtors in California are able to take advantage of California's flexible "wild card" exemption to keep any anticipated tax refund.

The amount of the potential tax refund can impact the timing of a debtor's bankruptcy case. If a refund might exceed the debtor's available "wild card" exemption, it might be wise to delay filing of the bankruptcy to allow the debtor to receive the refund and spend it on necessary living expenses.

In other cases, the size of the refund might not warrant a delay in filing. To help properly plan a bankruptcy filing we recommend that debtors file their tax return as soon as possible, avoiding the temptation to file for an extension.

Exemption laws vary by state, so it is important to consult an experienced bankruptcy attorney to determine what impact a bankruptcy will have on your tax refund. Debtors in Southern California are encouraged to contact us for a free consultation.

Does Credit Repair Really Work?

noreply@blogger.com (Carl Starrett) — Sun, 01 Feb 2009 19:10:00 +0000

In a recent article, I discussed the impact that bankruptcy might have on a debtor's credit score. However, even the slightest bit of negative information can lower your FICO score significantly. In one case, my client saw their credit score drop by more than 100 points to due a $100 small claims judgment that she had already paid.

Regardless of whether you retain the services of and attorney, credit repair organization or do it yourself, you have the right to dispute inaccurate information in your credit report. However, you will not be able to remove any information that is accurate, current and verifiable.

Most negative information must be removed after 7 years and bankruptcy information can remain on your credit report for up to 10 years. You can obtain a free copy of your credit report at http://www.annualcreditreport.com/. Although creditors must use reasonable procedures to maintain an accurate credit report, mistakes are very common. Once the credit bureau has been notified of a dispute, it must reinvestigate and modify or remove inaccurate or incomplete information. The credit bureau may not charge a fee for this service.

Any pertinent information and copies of all documents you have concerning an error should be given to the credit bureau. If the credit bureau's reinvestigation does not resolve the dispute to your satisfaction, you may send a brief statement to the credit bureau to be kept in your file, explaining why you think the record is inaccurate. The credit bureau must include a summary of your statement about disputed information with any report it issues about you, although some commentators have suggested that this may actually do more harm to your credit.

Companies that offer to help you improve your credit score are governed by The Credit Repair Organizations Act. A credit repair organization cannot remove bankruptcies, judgments, liens, and bad loans from your credit file nor can they legally create a new identity or credit profile for you.

If you have had problems with inaccurate information your credit report, please contact us further assistance.

Seven Big Reasons for the Nation’s Financial Mess

noreply@blogger.com (Carl Starrett) — Wed, 28 Jan 2009 17:31:00 +0000

1. The failure of the Federal Reserve Board, the FDIC, the OTS and the DOJ to regulate the subprime mortgage originators and to impose more detailed and informative disclosure statements on the ARMS and Option ARMS. If many of these exotic loans had been classified as consumer products, they would have been banned by the Consumer Products Safety Commission. The failure of the SEC to adequately investigate any of the regulated enterprises under its jurisdiction was also a substantial factor with the Bernard Madoff case being Exhibit Number One.

2. The failure to increase and enhance financial market regulations after LTCM. Long-Term Capital Management was a hedge fund that blew up in 1998 after losing $4 billion investing in complex derivatives, necessitating a federal bailout. A movement quickly began to regulate derivatives like mortgage-backed securities through the Commodity Futures Trading Commission, but then-Fed Chairman Alan Greenspan, then-Treasury Secretary Robert Rubin and others blocked those efforts, which helped set the stage for the 2008 meltdown. And, Greenspan was also a strong advocate for the ARMS and Option ARMS mortgage products.

3. The repeal of the Glass-Steagall Act. In 1999, Congress repealed the Glass-Steagall Act of 1933 after the financial services industry gave more than $80 million in campaign contributions to members of Congress on both sides of the aisle. Former Senator Phil Gramm of Texas led the supporters of the repeal efforts. The repeal eliminated the separation of commercial and investment banking mandated after the Great Depression. This allowed big banks to get even bigger and subjected depositors to the risk of a whole new array of speculative investments, such as MBS and other derivatives.

4. The failure to create any type of regulatory structure to deal with the credit-default swaps and other forms of derivates that created trillions of dollars of contingent liabilities.

5. The failure to rein in Fannie Mae and Freddie Mac. Fannie Mae and Freddie Mac were private companies backed (and now owned) by the federal government that buy and then securitize home mortgages from lenders who originate them, thus providing liquidity to the U.S. mortgage market. These companies also created, sold and invested in billions of dollars of MBS and, more than any other player, fueled the MBS market. In 2005, after an accounting scandal at the companies, Congress sought to more closely regulate Fannie Mae and Freddie Mac and prohibit them from owning MBS. The bill failed to pass. Fannie Mae and Freddie Mac then increased their costly participation in the MBS market, which eventually led to their takeover by the federal government.

6. The SEC let banks pile up new debt. In 2004, the five largest Wall Street investment banks convinced the SEC to exempt their brokerage units from an old regulation (the "net capital rule") that limited the amount of debt they could take on. This unleashed the Wall Street firms to borrow billions of dollars to invest in MBS, credit default swaps and other risky, exotic securities. Bear Stearns, for example, was leveraged 33 to 1 when it melted down — for every $1 in capital it had $33 in debt. Lehman Brothers' $613 billion in debt made its bankruptcy the largest in U.S. history —10 times larger than Enron.

7. The abuses of the Community Reinvestment Act. Congress passed the Community Reinvestment Act in 1977, and revised it in 1995, to encourage banks to make home loans to lower-income customers, in part to expand home ownership. The intentions were good, but abuses led to unsafe lending practices, which led to many defaults and contributed to the 2008 credit market meltdown. Many of the subprime originators used the Act as cover to make hundreds of thousands of loans that they knew the consumers could not pay once the first reset date occurred.

About the Author: O. Max Gardner III has been a licensed attorney in North Carolina 1974 and is a member of of the National Association of Consumer Bankruptcy Attorneys. Mr. Gardner is AV Rated with Martindale Hubbell and is frequently a featured speaker on Consumer Bankruptcy Law at numerous National and Local Bankruptcy Seminars and Conferences.

Circuit City Bankruptcy Could Cause Problems for Bargain Hunters

noreply@blogger.com (Carl Starrett) — Sat, 17 Jan 2009 17:25:00 +0000

On November 10, 2008, Circuit City filed for reorganization under Chapter 11 of the United States Bankruptcy Code. However, Circuit City was unable to find a buyer or obtain a refinancing deal. Instead, Circuit City will convert to a Chapter 7 liquidation. This will result in the closure of its remaining 567 stores and more than 30,000 employees will lose their jobs.

As Circuit City liquidates the remainder of its inventory, consumers will undoubtedly be looking for bargains. However, those bargains will come with a risk. Circuit City will most likely adopt an "all sales are final" policy, so returns and exchanges of damaged or defective merchandise may be difficult.

The risk is particularly great when purchasing a big-ticket time such as a flat-screen TV, which may be difficult or extremely inconvenient to replace or repair. In some cases, the manufacturer's warranty may be sufficient to protect the consumer. In other cases, the buyers may be protected by extended warranties provided and administered by third parties that may be obligated despite the Circuit City bankruptcy.

With enough care and research, consumers will be able to find fantastic bargains due to the misfortune of Circuit City. The following tips may provide some additional protection to buyers:

Make your Circuit City purchases on a credit card. Even with a "no return" policy, you might be able to dispute credit card charges in case you have a problem with the merchandise. Federal law gives consumers broad protections when it comes to credit card purchases.

Investigate the terms of the warranty before you buy. Some manufacturers like HP require you to send in an item to be repaired rather than offering an exchange or replacement. Other manufacturers are more generous with their replacement/repair policies and will promptly send replacements for defective merchandise.

Avoid extended warranties. This informative article includes a list of 5 important reasons to avoid extended warranties or service contracts. If Circuit City is out of business or fails to transmit the money for the warranty to the third party administrator, the extended warranty or service contract may be worthless. Circuit City also offers an in-home repair service, but it can be difficult to schedule an appointment.

With care and proper investigation, the unfortunate demise of Circuit City may allow consumers to find excellent bargains on electronics. However, care should be taken before making a purchase.

Bankruptcy and Loan Modifications: Hype or Help?

noreply@blogger.com (Carl Starrett) — Tue, 13 Jan 2009 18:57:00 +0000

You may have heard commercials from attorneys and loan modification gurus offering loan modification services through bankruptcy. They are probably referring to proposed legislation called the Helping Families Save Their Homes in Bankruptcy Act. Beware of the hype, because this has not become law and may change significantly before it becomes law, assuming it becomes law at all.

How Current Bankruptcy Laws Impact Mortgages

Under current bankruptcy laws, debtors who qualify can file a Chapter 13 repayment plan bankruptcy proposing to strip unsecured liens, other than a first mortgage, from their home. Lien stripping is available if a second mortgage is completely unsecured (i.e. the fair market value of the home is less than the balance on the first mortgage). The following example may illustrate the point better:

Example: In 2000, husband and wife purchase a home for $500,000 with 100% financing, including a $400,000 balance on their first mortgage (30-year fixed rate at 6%) and $100,000 on a second mortgage (adjustable rate mortgage). in 2008, the home value has dropped to $350,000 and the formerly happy homeowners now have $50,000 in credit card debt because their mortgage payments are now beyond their ability to pay. In a Chapter 13 bankruptcy, the debtors have the capability of completely removing the second mortgage and treating it as unsecured. However, current bankruptcy laws do not allow any type of modification to the first mortgage.

What Will The Proposed Legislation Do?

A common frustration that I hear from potential clients is that they cannot get their lender to modify their mortgages to a more reasonable payment or interest rate. With falling home values and spiraling mortgage payments, adjustable rate mortgages are a common cause of home foreclosures. The Helping Families Save Their Homes in Bankruptcy Act makes the following proposals:

Eliminating a provision of the bankruptcy law that prohibits modifications of first mortgages;
Changing the Chapter 13 debt limitations to allow more debtors to qualify for a Chapter 13 repayment and lien stripping plan;
Permitting bankruptcy judges to modify variable interest rates with a new interest rate that will keep the mortgage affordable while allowing creditors to get a fair return on their investment;
Make filing bankruptcy easier by waiving the pre-bankruptcy credit counseling requirement for families facing imminent foreclosure; and
Requiring lenders to give proper notice when assessing fees and allowing judges to waive prepayment penalties.

When Will These Proposals Become Law?

It is too early to tell if the proposals will even become law, let alone what the final law may look like. Supporters and lobbyists are lining up on both sides to have their say and there are 2 different versions pending, one before the Senate and one before House of Representatives. For now, the best advice is to ignore the hype and remain watchful. In the meant time, contact a qualified bankruptcy attorney if you are facing foreclosure or need other debt relief assistance.

Gift Cards and Bankruptcy: Now What?

noreply@blogger.com (Carl Starrett) — Mon, 05 Jan 2009 02:46:00 +0000

Now that the holiday season is over, shoppers are flocking to stores to use their new gift cards. But what happens if the retailer that issued the gift card files for bankruptcy? Unfortunately, a gift card may be worth little or nothing if this occurs.

Consumers in California might have an extra measure of protection. California Civil Code § Section 1749.6(b) requires a retailer to honor gift certificates issued before the bankruptcy filing. However, this law may conflict with federal bankruptcy law and no court has ruled on the effectiveness of this law.

Retailers that file for reorganization under Chapter 11 of the Bankruptcy Code generally intend to stay in business. They will usually ask permission from the bankruptcy court to honor gift certificates in order to maintain good customer relations. However, there is no guarantee that the court will grant permission to accept gift certificates.

If the court will not allow the retailer to honor the gift certificates or if the retailer is going out of business and files for Chapter 7 liquidation, the card holder becomes a creditor of the bankruptcy estate. Gift certificates are considered unsecured debt and would have 7th priority among unsecured creditors. Many other types of creditors would have higher priority, including secured creditors and employees with unpaid wage claims. In fact, the holder of a gift card willlprobably receive only a percentage of the value of the gift card assuming the bankruptcy estate even has enough assets to pay creditor claims.

In the end, the best thing to do with a gift card is to spend it as soon as possible. There is never a guarantee that the business will survive for the recipient to use it.

What Does the New "No Texting" Law in California Really Include?

noreply@blogger.com (Carl Starrett) — Fri, 02 Jan 2009 19:12:00 +0000

Under a new California law effective January 1, 2009. it is now illegal write, send, or read a "text-based communication" while driving. While most media outlets only make reference to the common practice of sending and receiving text messages from a cell phone, the new law also applies to any type of electronic communications such as testing, instant messaging and email.

First time violators will be fined $20 and then $50 for each violation after that. The law does not apply to situations where the driver is using a phone to look up a number to place a phone call. The law does not apply to "emergency service professionals" such as police officers when the electronic communications occur in the scope of their duties and while in an authorized emergency vehicle.

California drivers were previously banned from using their cell phones while driving unless they used a headset or a speaker. Passed in 2006, that law did not cover texting or emails.

Why I Cancelled My Better Business Bureau Membership

noreply@blogger.com (Carl Starrett) — Tue, 09 Dec 2008 04:46:00 +0000

When I first became of a member of the Better Business Bureau, I was under the assumption that it was an organization that I could trust to be fair to both businesses and consumers. My recent experience with a complaint filed against Hewlett-Packard and Staples caused me to rethink my position and cancel my membership.

Complaint Against HP

In a recent blog article, I discussed a problem with a defective HP laptop that I purchased at Staples in October 2008. After 3 weeks, the sound card and network card both failed. Staples refused to exchange the laptop and HP wanted me to send it back for repairs. Their repair and warranty policy was in the box.

It took HP over a week to send me the box to return the laptop and another 3 weeks to make the repairs. While waiting for the return, I filed a complaint with the Better Business Bureau.

When I received the laptop back, HP failed to even address the network card. The BBB closed the file before the repairs were even complete. When I asked to have the complaint reopened so I could add information about HP's failure to provide a complete repair, I was rudely told by San Jose BBB employee Erin McCool that she felt HP had handled the situation "appropriately." When I asked to speak with Ms. McCool's supervisor, she stated that her supervisor was the CEO and that she was out of town. I have yet to hear any further response from Ms. McCool's supervisor.

It appears that local Better Business Bureau's are actually run like franchises and there are no uniform rules for dealing with consumer complaints. I suppose that explains why HP can maintain a satisfactory rating with the BBB while it has over 2000 open consumer complaints. The San Jose BBB swept my complaint under the rug, so I refiled it with the new information to see how HP will address my complaints.

Complaint Against Staples

I also filed a complaint against Staples with the San Diego Better Business Bureau, which is where I purchased the laptop. The San Diego BBB informed me that all complaints involving Staples are sent to the BBB in Natick, MA. The transfer occurred on November 4, 2006. However, the BBB in Natick, MA has no record of receiving the complaint. The complaint was "retransferred" on November 26, 2008. The Natick office still has no record of my complaint and there has been no response whatsoever from Staples.

Most BBB offices do not allow you to search and review the specific complaints against a business. Instead, it gives the business time to respond. A business can maintain a satisfactory BBB rating without regard to the sufficiency of the response to a consumer complaint. Even businesses that routinely victimize customers can maintain a satisfactory rating if they are "responsive" to a consumer's complaint.

My experience has shown that the BBB complaint process is both burdensome and unreliable. If I cannot have faith in how the BBB handles consumer's complaint, I cannot have faith in the ratings system it uses to rate businesses.

Another $600 Billion Bailout?

noreply@blogger.com (Carl Starrett) — Sat, 29 Nov 2008 03:55:00 +0000

A day after announcing a $20 billion bailout for Citigroup, the Treasury Department and the Federal Reserve announced a plan to purchase $600 billion in bad loans. San Diego business and bankruptcy attorney Carl Starrett was asked to appear on KUSI's Good Morning San Diego to talk about what this bailout means to the general public: