Chicago Bankruptcy Lawyer Blog

You can't believe everything you read - especially when it comes to your bank, say Chicago bankruptcy attorneys.

Many banks are sending out letters urging customers to sign up for overdraft protection, a program that allows your bank to authorize a debit purchase - even if there's not enough money in your account to cover it. Some letters are going so far as to threaten customers, warning that their debit cards won't continue to work unless they contact their bank immediately, according to the New York Times.

With bold font and terms like "emergency" and "contact us immediately," these messages can be unnerving - not to mention confusing - for folks who frequently rely on a debit card to make purchases. But their purpose is actually very simple - they're advertisements. And you shouldn't fall for them. Overdraft protection isn't about saving you the hassle of overdrawing; banks want you to sign up so they can charge a fee each time they authorize money because you don't have enough to cover a purchase. Here's the real story on overdraft protection.

Continue reading "Chicago Bankruptcy Attorneys Warn Consumers About Overdraft Protection Fees" »

Somehow our priorities got switched around during the Great Recession. Homeowners who used to prioritize paying their mortgage above all else are now opting to use that money to pay their credit card bills, Chicago bankruptcy attorneys say.

In a way, it's a strategy that makes sense. One-quarter of American homeowners are underwater - meaning they owe more on their house than it's now worth. Consequently, they're wary of putting money into a home with no equity because doing so feels futile. Credit cards, on the other hand, seem to pay off. We can use plastic to buy necessities like groceries, gas, and clothes. And for those of us who have lost our paycheck or just aren't bringing home enough money, credit cards enable us to cover what we can't afford with cash (while our debt grow in the meantime).

But just because one solution seems easiest doesn't mean it's the smartest - or that there isn't a better strategy out there. There are consequences whether you choose to default on your mortgage or your credit.

Continue reading "Chicago Bankruptcy Attorneys See More Americans Paying Credit Cards Instead of Mortgage" »

If you look hard enough, you can always find some good news to temper the bad.

This week's depressing newsflash informed us that employers cut 20,000 jobs last month - more than economists expected, and enough to threaten a recent dip in unemployment and shake up the stock market, according to Chicago bankruptcy attorneys.

The good news? Getting that loan might not be so difficult. Banks have are finally stopped tightening the standards they've been placing on most loans - a sign that credit woes might finally be easing. And according to the Fed, far fewer banks believe the value of the loans they hold will continue to deteriorate. Of course, this doesn't mean banks are easing up on any of the restrictions already put in place - but you can't win them all.

Economic recovery might not be happening overnight, though it is likely in the works. But you can use this time to your advantage. Why not get your finances back in shape so when the economy does pick up, your luck will, too?

Continue reading "Layoffs Increase While Credit Troubles Improve, Say Chicago Bankruptcy Attorneys" »

What if I told you there's a way to increase your income by adding another payment each month? You'd probably think I was out of my gourd, right?

Fortunately for you, I'm not. See, there's a twist - the extra payment is to yourself. That's right, I'm talking about saving.

On Tuesday, we talked about how easy it is to start achieving your savings goals once you get over the hurdle of all those excuses that have been holding you back. Today, we're going to look at how to make the most of those newfound dollars -- especially when you're in debt.

Continue reading "Put Your Savings Toward Debt First" »

Using cash usually makes more sense than credit. You don't have to deal with interest, you know you can't spend more than what's in your account and the act of physically parting with your money makes you less likely to splurge -- and wind up in debt.

But there's at least one pitfall to paying with paper - ATM fees. Let's say you need to take out some money and you aren't anywhere near your bank. Instead, you go to the nearest ATM. You can expect a fee of at least $3 for using an ATM other than your bank's. And that's not all. Your bank thinks it has to punish you for withdrawing money elsewhere, so you can also expect to get dinged up to $2 on the other side. If you're taking out $20, you've already spent a quarter of your money before you even break the bill.

Fortunately, the situation can be pretty easily avoided.

Continue reading "Watch Out for ATM Fees That Add Up" »

Imagine that you've got a $1,500 debt leftover from the holidays (not that big a stretch for some of us, no?). Now imagine that you receive an offer for an 18% interest rate if you transfer your balance from your current card - which has a 30% rate. Should you go for it?

It might seem counterintuitive, but the answer is often no. Even though less interest means less money in theory, creditors can make you jump through expensive hoops to get that lower rate - so expensive that they may cancel any benefits.

First, many credit cards charge transfer fees of 3 to 5 percent, according to the Associated Press. Are you willing to shell out $75 to transfer a $1,500 debt? Or $500 to transfer a $10,000 debt?

Continue reading "Credit Card Balance Transfers Not Always the Best Solution, Caution Chicago Bankruptcy Lawyers" »

Despite recent credit card reform, credit card companies aren't giving up all their tricks.

If you're anything like most Americans, you've probably been receiving a glut of mail from credit issuers in recent months - most of it notifying you of rather big term changes like higher interest and steeper penalties for exceeding your credit limit. But if you look at these notices carefully, you might notice another seemingly insignificant fee - a $1 or $2 charge for receiving paper statements.

At first glance, it might not seem like much. But if this indicates a new trend, we could end up paying $12-24 - or more - a year for each credit card, just for receiving statements the way we've always done. With many of us still struggling to make ends meet, we'd be better off switching to paperless statements and electronic payment.

Continue reading "Banks Start Charging Fees for Paper Credit Statements" »

Citibank is giving some 4,000 homeowners a very happy holiday.

The banking giant is suspending foreclosures and evictions for people with Citi-owned loans through mid-January. A company spokesman said the aim is to reduce stress during a notoriously hectic time of year, according to MSNBC.com. In the meantime, the bank says it's at work on alternatives to foreclosure.

Unfortunately, helping potentially 4,000 families means only helping a miniscule percent of the millions of Americans that could lose their homes in coming months. For the lucky few, it will certainly provide relief (albeit temporarily), but the rest of us are going to have to take matters into our own hands if we want a home after the holidays.

Continue reading "Some Home Foreclosures on Hold for the Holidays" »

We often hear about how we shouldn't rely so much on credit. But rarely do we hear the other side of the story - the fact that many of us could no longer qualify for more credit if we wanted it.

Just a few years ago, lenders were handing credit out like candy - in the mailbox, at stores, on college campuses and through subprime mortgages. Heck, I even know 5-year-olds who were offered credit cards through the mail. But if banks are at fault for giving out credit consumers couldn't afford, we have to take some blame for spending what we couldn't afford. Many folks (myself included) once used that credit as an excuse to spend more than we earned. The end result? An economic meltdown that's caused consumers to default on their debts - and scared banks to get stingy with future credit.

So if credit is so dangerous, what's the problem if we have less of it? Because our economy needs some credit to get back on track.

Continue reading "Consumers Credit Is Getting Harder to Come By" »

There's a lot of (legal) pick pocketing going around, but that shouldn't mean we have to put up with it.

Remember last month when we discussed the growing cost of credit cards? In response to new legislation meant to protect consumers from unfair fees and term changes, credit card companies are lowering limits, raising rates and adding brand new costs - like an annual fee or a penalty for non-use.

Now, banks are getting in on the action by becoming greedier with their checking accounts. Unlike a credit card - which, believe it or not, you can choose whether or not to use - checking accounts are pretty much a necessity now that we don't hide our cash under the mattress like Grandma did. So it was a little disturbing when I noticed my former bank had started charging a $9 account maintenance fee each month.

Continue reading "Banks Find Ways to Make Checking Accounts More Expensive, Chicago Bankruptcy Lawyers Say" »

Higher interest, a lower credit limit and a larger minimum payment - the new changes credit card companies are throwing our way aren't exactly in the holiday spirit. But at least one of these changes can actually be spun to work in your favor.

In the past, most credit card companies kept minimum payments as low as possible - around 2-3%. They figured the less you paid each month, the longer you'd have to keep paying. But with thousands of consumers defaulting on their credit cards, companies are getting anxious - they'd rather have their money now.

Of course, the downside to a higher minimum payment is that you'll see a jump in your monthly expenses. If you're paying 2% on a $10,000 debt, that's $200 a month. Double that to 4% and now you're paying $400. When you're already struggling to pay the mortgage or buy groceries, a couple hundred more bucks is hard to come by. And it means you're going to have to cut back somewhere else.

But here's where the benefit comes in.

Continue reading "Higher Minimum Payments Can Save Money, According to Chicago Bankruptcy Lawyers" »

Imagine paying for the privilege of spending your money. Sounds a little ridiculous, doesn't it?

But it could become reality for millions of credit card holders once the last part of credit reform legislation goes into effect this February. Don't get me wrong - the regulation changes are much-needed. They'll protect consumers by eliminating things like sudden interest rate hikes, fees undetectable in fine print, double-billing cycles and billing periods that are so short it's nearly impossible to get your check in on time.

So what's the problem? Banks just so happen to make most of their money off credit card fees. In the past, they've made it easy for you to make late payments and exceed your credit limit. But without their old tricks, they're forced to come up with new ones - like annual fees. Creditors are returning to the early days of credit, when they billed charge card customers a certain amount just for holding their cards. Bank of America is one of the first banks to pilot the program, charging a $29 fee on 1 percent of its customers.

Continue reading "Annual Fees Are Back As Credit Card Companies Face Reform" »

It's kind of ironic. It was too much credit that got us into this financial mess - now too little credit might be making it difficult to get out.

A FICO study found that 33 percent of Americans - including those of us who haven't done anything to negatively affect our credit -- saw our credit limits reduced between October 2008 and this April. In the six months before that, an additional 25 percent saw limits slashed.

At first glance, that's bad news. A lower credit limit is not only easier to exceed (and thus get penalized for), but it has the potential to worsen your credit rating even when you follow the rules. How? By affecting your debt-to-limit ratio.

The more debt you have relative to your credit limit, the worse your score is going to be. For instance, let's say you have a $5,000 limit and you typically charge $2,500 a month. That means you're using 50 percent of your credit. But let's say that limit gets dropped to just $3,000. Now you're using more than 80 percent of your limit - launching you into the category of the most high-risk borrowers - even though you're spending no more than before.

Continue reading "Chicago Bankruptcy Lawyers See the Benefit in Lower Credit Card Limits" »

The economy might be recovering, but we're not out of the woods yet - especially when it comes to foreclosures.

Even though a $75 billion government anti-foreclosure program recently reached its goal of helping 500,000 folks get loan modifications, that's only one-eighth of the 4 million homeowners it originally set out to assist. And while some banks have helped more than one-third of eligible homeowners with the program, others like Wells Fargo and Bank of America have helped just 20 and 11 percent, respectively.

Now consider that millions more are facing foreclosure but ineligible for loan modification. Still, as many as half of those who receive a modification end up defaulting anyway. It's depressing stuff. But luckily, there's another government program that can save your house. It's been around for years, has been proven to work again and again and doesn't require your lender's approval - it's bankruptcy.

Continue reading "Loan Modification Program Hits Target, But Is It Enough?" »

When gift cards surpassed traditional presents in popularity, I knew it was only a matter of time before we started just giving cash. And then, just as I predicted, the prepaid debit card arrived.

It's sort of the equivalent of cash, but more convenient than carrying around a wad of bills (and less awkward than gifting said wad of bills). Unlike a gift card, you don't have to guess whether the recipient likes a particular store. Heck, you don't even have to give prepaid debit cards as gifts - more and more folks are buying them for personal use.

As banks like to advertise, you don't even need a bank account or good credit to take advantage a prepaid debit card. Just load the card with your paycheck and spend. Convenient, huh? Unfortunately, it's a little too convenient.

Most of these prepaid cards come with ridiculous hidden fees - take the activation fee, for instance. I mean, why would you buy a card if you weren't going to use it? And that's not all, according to the New York Times.

Continue reading "Why Prepaid Debit Cards Might Not Be Such A Good Deal" »