Law Blog

Recently, I ran into my old friend Robert from high school.  We caught up over a couple of slices of pizza, or rather I ate and Robert served me.  It’s odd how sometimes the people you think are the most together end up the furthest from it.  Robert began telling me about his life and as I listened, I became more and more shocked how he ended up as my waiter.  Here’s his story:

Robert is 29 years old.  He lives with his parents in a small two-bedroom house located in a quiet California suburb.  After splitting with his partner of six years Robert was forced to move back in with his parents.  His partner got the better end of the deal.

Prior to his decision to move in to his parents’ home, Robert had a mounting pile of debt from his failed business.  Creditors were constantly hounding him and he was having trouble keeping up on not only his bills, but his life in general.  His credit cards were maxed out and his back pain, which was formerly just an occasional annoyance, had grown to intolerable levels.  Having no health insurance, Robert was reluctant to see a doctor and instead tried to live with it, hoping it’d eventually go away on its own.

About the only good thing Robert had in his life was his 2 year-old son Kenny.  However, Robert’s visitation rights only allowed him to see Kenny on weekends.

Not wanting to declare bankruptcy, Robert began pawning off his possessions to make good on some of his bills.  One day after having sold his beloved 1971 Camaro to a buyer who had responded to an ad he placed in the classifieds of his local newspaper, a sharp pinching pain suddenly ran through Robert’s back.  Robert fell to the floor and crawled slowly to a nearby payphone.  The pain was excruciating and after much self-deliberation, Robert picked up the phone and called for an ambulance.  The doctor diagnosed Robert with a herniated slipped disc required immediate surgery.  Now with medical bills added to his debt, Robert works seven nights a week as a pizza delivery man and regularly moonlights as a security guard.

Sounds like a nightmare of divorce, huh?  Just another reason why marriages are bad and can leave a person destitute and working at some menial job.  Well that maybe true, but Robert’s divorce ended quite amicably.  In fact his ex-wife never sought child support from him and they are still on good terms.

The split referred to in Robert’s story that started this all was that between Robert and his former business partner.  They owned a pizzeria together and after six years, their differing views on how the business should be run ended with them dissolving their business partnership.

According to Robert, he made a number of mistakes.  First, he believed his partner to be his best friend and thus relinquished a majority stake in the business to his partner.  Second, and possibly worst, Robert allowed his partner to draw up the contract which he signed without reading.  According to Robert, this resulted in him incurring much of the debt for the business.  Third, dissolving his partnership was an expensive process because the tension between both parties required him to contract an attorney.

Robert isn’t alone.  According to the LegalMatch statistics, business dissolutions make up a large majority of the cases received.

Robert, like many people, forgot that a business partnership is much like a marriage.  You have to make sure you end up with the right person or you might get taken for everything when it all falls apart.

Nearly 80% of Americans carry credit cards and about 44% of those individuals with credit cards carry credit balances.  On an annual basis, credit card companies have earned $15 billion in penalties for late fees alone!  (A New Era for Credit Cards)

President Obama attributes the practices of credit card companies to contributing to the down market economy.  While Obama expects American consumers to be responsible in paying their debt, he also expects credit card companies not to saddle already debt laden consumers with retroactive interest rate increases and other unfair credit practices.  Some of Obama’s sweeping legislation requires credit card companies: 1) to post their credit agreements online, 2) to provide 45-days advance notice if the credit card company plans to change its terms and conditions, 3) to standardize payment due dates rather than to shift payment dates to different dates each month, and 4) to apply excess payments to the highest interest rate balance first.  (White House Fact Sheet)

But, to keep the credit card companies in check, U.S. consumers will still need to proactively review their credit card records for accuracy and to (politely) challenge the credit card companies if there is a reporting error or a violation of the new White House reforms.

Americans are entitled, by law, to one free credit report per year from each of the three major credit reporting agencies: Equifax, TransUnion and Experion.  (Credit Reporting Rights)  After reviewing these reports, if there are inaccuracies, consumers have the legal right under the Fair Credit Reporting Act to dispute this information and to have it corrected, usually within 30-days. (A Summary of Your Credit Reporting Rights) Keeping your credit record accurate is important not just to obtain a mortgage or a short-term loan, but employers are also increasingly checking consumer records as part of their background screening process.  (Employers and Consumer Reports)

Even though U.S. consumers have these rights, some credit reporting agencies may be less than compliant. Always put your request for correcting reporting inaccuracies in writing, specifically identify the inaccuracy and provide verification of the reporting inaccuracy in your request for a reporting correction.  As a first step, write a demand letter.  Examples of demand letters can be found through Nolo press or through other on-line resources. (Credit Repair) When mailing a demand letter, send the letter by certified mail and keep a record of the delivery receipt so that there can be no denying that you’ve made an attempt to notify the credit reporting agency.  (7 Steps to Fixing Your Credit Report)

If these measures are ineffective, LegalMatch can help. Sometimes it is only with an attorney as your advocate that credit reporting inaccuracies can be more quickly resolved.  During the past five years, we’ve assisted nearly 2,000 consumers who have required the assistance of an attorney to correct inaccuracies in the credit reports and another 2,100 who have requested an attorney to assist them with other credit reporting issues.  It is obvious not just to our President, but to LegalMatch, that credit card companies and their reporting agencies need to be kept in check.

As more and more people wind up in a credit crunch, more and more people are turning to debt consolidation as a possible way out. In the past 5 years thousands of customers have come to LegalMatch.com seeking debt consolidation attorneys.

Where are most of these cases happening? Not surprisingly, states with the highest populations have the highest numbers of cases: 

Only one state, New Jersey, managed to nudge its way past its rank of 11^th in population to 9^th place on the list. It beat out North Carolina, who does not appear on the list despite having almost 1 million more people.

California and Florida, however, seem to top other lists that are not so dependent on population. California and Florida are ranked 2^nd and 4^th  in the Nation in foreclosure rates, and also top LegalMatch’s list of states with the most disproportionate percentage of total national foreclosures to total national households. California and Florida are not alone in sharing some dubious distinctions, however: Ohio and Georgia make an appearance in another unfortunate top-ten list: top-ten highest bankruptcy rates.

All too often, one financial dilemma leads to another. Although debt consolidation does not consolidate mortgage debt, many debt consolidation programs require the debtor to take out a mortgage on their home. Although lowering monthly payments on credit card debt is important, putting up your home for a mortgage should always be considered a last resort. There is the possibility that the inordinately large number of foreclosures in California and Florida has something to do with their similarly high numbers of debt consolidation clients.

More analysis would be needed to see if a true correlation between foreclosure rates and debt consolidation statistics exist. Generally, where there is one financial dilemma, there are probably others, either in the past or looming on the horizon. The states hit hardest by this financial crisis will show high numbers of bankruptcy rates, foreclosure rates, and people with debt problems. Stay tuned for more information on where these numbers are coming from, and where they may be headed.