The reason the credit card scam letter you received in the mail sounds too good to be true is because it is too good to be true.  The letter falsely states that is is a “Balance Reduction Notification.”  The truth is there is no government funded program that will pay for your credit card debt.

Just this past week, I was helping my bankruptcy client in Rome, GA get prepared for her 341 Meeting of Creditors when she pulled out this scam letter. “Is this real?” she asked. “Should I cancel my Chapter 13 bankruptcy case and pursue this opportunity?”

On its face, the letter looked official. The scam company has a Pennsylvania Avenue address in Washington D.C. The company name makes it sound like they are a division of the United States Government. The letters says it is “Personal and Confidential.”  It states that a case number has been assigned to the recipient.

The scam letter states, “Your Revolving Consumer Debt and Credit Card Payments are eligible for hardship programs benefiting from the enactment of the Economic Stimulus Act of 2009.”  (FTC testifies on efforts to stop fraud).  The scam continues, “this program is not associated with bankruptcy, credit counseling, or debt consolidation; it has been specifically designed to assist consumers eliminate up to 50% of outstanding credit card debt and secure one low monthly payment.  This program is available for a limited time so please call as soon as possible.”

With a quick read of the letter, I immediately knew it was not real but I asked her to let me take it back to my office and do a little investigation.  After I got back to my Rome office, I googled the name of the company.  In the search results, there was story after story about the scam that this company is trying to pull off.

These scam letters really make me angry.  You may hear about the promises of these letters and think to yourself, “Who would ever actually believe this stuff?”  When people are under the stress of debt pressure, they are often easy prey for con artists.  What surprises me is how bold these crooks have become.  Using the United States mail system to perpetrate a crime will eventually land these con artists in jail.

If you receive a similar letter, let your bankruptcy attorney review it with you.  If your bankruptcy attorney agrees that its a scam letter, let him forward it to the United States Trustee.  In Georgia, the U.S. Trustee prosecutes these types of scams.

Other Posts:

1. What is Chapter 13?

2. What is Chapter 7?

3. How much does it cost to file?

4.  Stop Garnishment

5.  Stop Foreclosure

6.  South Carolina Bankruptcy Attorney Blog

In Georgia, a wife cannot be held liable for a husband’s credit cards if she has never signed a contract with the credit card company. This question usually comes up after the husband dies and the wife finds out that the credit cards were never paid. When the bill collectors start calling, people usually panic. It does not matter if the bill collector demands payment from the widow. What does matter is the answer to the following question: Whose signature is on the credit card contract?  While the deceased husband’s estate might be required to pay for the debt, the surviving spouse is not directly liable if she never signed a contract.

Even if the surviving spouse was an authorized signator on the credit card account, she is still not liable for the debt. You don’t have to sign a contract to have a credit card issued to you that is in another person’s name. For example, as an employer, I may decide to have a credit card for the office issued in the name of my office manager so that she can keep the office supplies stocked. If my business goes under, she can’t be forced to pay the debt because she never signed a contract with the credit card company.

When a credit card company demands payment from Mom for Dad’s credit cards, ask the company for a copy of the written contract. Tell them that you want to see where Mom signed it.  In Georgia, marriage by itself does not make you liable for your spouse’s debts.

If it turns out that Mom is liable and she is unable to pay the debt, she should meet with a bankruptcy attorney to go over Chapter 13 and Chapter 7 bankruptcy.

There are exceptions to general rules. For you to truly know the answers for your specific situation, you should meet with a bankruptcy attorney so that they can see the entire picture.

Other Posts:

1. What is Chapter 13?
2. What is Chapter 7?
3. How much does it cost to file?

I recently spoke with a client who was the victim of Debt Management Company Scare Tactics.  After I met with this client and confirmed that the qualifies for Chapter 7, he went home and called his Debt Management Company and asked that they stop deducting money from his checking account because he was filing bankruptcy.  The representative from the debt management company responded that my client could not file bankruptcy.  When my client asked, “Why?”, the debt management company representative lied to my client by saying “that anyone who owns a house can’t file chapter 7.”   The debt management company representative then asked my client, “Do you own a television?”  My client answered, “Yes.”  The debt management company representative then lied to my client again and told him that the could “kiss the television goodbye.”   As you can imagine, my client was upset and disheartened after this conversation with the debt management company liar.  Fortunately, my client called me and I was able to calm his fears and set the record straight.

By telling my client that he could not file for bankruptcy, the representative from the debt management company broke the law by engaging in the unauthorized practice of law.  Some debt management companies will say just about anything to get your money.  Don’t let some debt management company scare you away from exercising your rights.  Meet with a real attorney and find out about your legal options to obtain real debt relief.

Here is the truth about debt management companies.  Credit card companies are not legally stopped from suing you for collection of the debt.  In contrast, Chapter 13 and Chapter 7 prevents credit card companies from suing you for collection.  Debt management companies have no power to force any creditor to accept a lower payment from you.  In contrast, a confirmed Chapter 13 plan payment or a Chapter 7 discharge is binding on all creditors listed in the case.  With Chapter 13 and Chapter 7 we don’t need permission from your creditors.

Taking a second mortgage out on your house to pay off credit card debt is a bad idea in most cases.  In the event you need to file bankruptcy, credit card debt can be wiped out if necessary.  Even in a Chapter 13 /a> plan where you are paying back all of your debt, the interest rate paid on credit card debt is zero.  In contrast, the most common way to get rid of your second mortgage in a Chapter 13 /a> or a Chapter 7 is to surrrender the house to your creditor.  To keep the house, all payments must be made on the second mortgage.  Why would you ever want to exchange a type of debt that can be wiped out or paid back at zero percent interest for a new type of debt that must be paid back with interest and could result in the loss of your house if you ever get into a position where you can’t make the payment?

Borrowing against your 401k is a terrible idea.  With Georgia Bankruptcy Exemptions, your 401k most likely will be 100 percent protected from your creditors.

One of the most common mistakes I see people make is that they will borrow against their 401K to pay off credit card debt or medical debt.  Within a short period of time, they realize that they are not going to be able to make the 401k loan payment.   Trying to get by, they skip other important bills like car payments and house payments.  Then, they come to my office to file Chapter 13 to save the house and car.  The reason I feel so bad for these people is because we could have wiped out the credit card debt and the medical debt in a  Chapter 13 /a> or a  Chapter 7 but now we are stuck with this 401k payment that they cannot afford.

Defaulting on the 401k loan is a bad idea because of the tax penalties. When a person defaults on a 401k loan, they will have to pay the government taxes that they otherwise could have completely avoided if they had never taken out the 401k loan to begin with.

Your 401k is meant for your retirement.  Don’t ever treat it like an emergency fund.