NerdWallet: Do debt management plans work?

Francine Bostick, a Manhattan, Kansas, woman who paid off more than $120,000 in credit card debt in 2012, says she emerged with credit scores good enough to buy her first-ever new car.

#x201c;It was exciting and made me a little nervous when they did the credit check,#x201d; says Bostick, 66. #x201c;We got zero percent interest for the life of the loan.#x201d;

Yet Bostick is also an example of what may be wrong with credit counseling. Some consumer advocates were appalled when the National Foundation for Credit Counseling named Bostick and her husband, Jim, as the agency#x2019;s 2012 #x201c;Clients of the Year#x201d; because of the couple#x2019;s age and the fact that he had Alzheimer#x2019;s disease. Bostick worked 12-hour days to earn the money to make debt payments while caring for her increasingly incapacitated husband, who died in May. Critics say the Bosticks should have been encouraged to file for bankruptcy so Francine could spend more time with her dying husband and use any extra money to shore up her own retirement savings.

Bostick says her credit counselor told her she could file for bankruptcy, but Bostick didn#x2019;t consult a lawyer about that option.

#x201c;I still feel we made the right decision for us,#x201d; says Bostick. #x201c;I believe if we had filed (for) bankruptcy I would probably be in the same boat as a few people I know who filed (for) bankruptcy and are buried in debt again.#x201d;

The lack of disclosure about bankruptcy#x2019;s potential benefits isn#x2019;t the only problem with debt management plans. Other issues include:

#x2022; They aren#x2019;t designed to tackle many other types of debt, such as mortgages, car loans, student loans and most medical bills.

#x2022; Borrowers should expect to live without much access to credit during the repayment period. Their credit card accounts are typically closed and they agree to not apply for new credit, whether it#x2019;s for another card, a new car or a mortgage refinance. A new account appearing on their credit reports may lead creditors to cancel the debt management agreement.

#x2022; There#x2019;s little leeway for missed payments, which can lead to the plan#x2019;s cancellation.

Some people find that they simply can#x2019;t afford the payments on debt management plans, while others drop out because of setbacks such as job loss or unexpected expenses.

That is reflected in newly released data by the NFCC. Of the people who enrolled in its debt management plans in 2010, 42 percent had completed repayment by the end of 2014 and 12 percent were still making payments, says Bruce McClary, the spokesman for NFCC, the largest and oldest nonprofit credit counselor.

The foundation is trying to boost its success rate in two important ways: by making payment plans more flexible and by adding a savings component, says Susan Keating, NFCC#x2019;s president and chief executive.

The Washington, DC-based foundation intends to offer three repayment options based on clients#x2019; ability to pay, rather than the current one-size-fits-few option that critics call too rigid. Each option would allow clients to put money aside for emergencies, Keating says. Traditionally, creditors wanted every possible dollar to go to them, which can impede the ability of debt management clients to save for emergencies or retirement.

NFCC#x2019;s changes, coming later this year or in 2017, make the plans #x2014; especially the savings component #x2014; much more attractive. Having money set aside to deal with emergencies can make it easier for people to stay on the plans. Plus, emerging debt-free but without an emergency cushion may put many people back in the same situation that got them into trouble in the first place.

Yet there#x2019;s one change needed that isn#x2019;t coming: Borrowers need to be told that bankruptcy could be a faster, cheaper solution.

A typical debt management plan requires people to repay thousands of dollars over time. The average debt level of the people who participated in 2013 was nearly $20,000, according to Cambridge Credit Counseling Corp., another large nonprofit. In addition, the counselors levy an average fee of $24 a month, according to the NFCC, or $1,440 over five years.

By contrast, a Chapter 7 liquidation, which erases credit card debt and most other consumer debt, typically takes four months and costs roughly $1,500, depending on the area. Bankruptcy stops collection actions such as lawsuits and wage garnishments, and battered credit scores typically rise after a filing. Bankruptcy can also give people a fresh start.

Federal law requires people who file for bankruptcy to consult with a credit counselor. But people who sign up with credit counselors aren#x2019;t required to talk to a bankruptcy attorney. While potential NFCC clients may be told bankruptcy is an option, counselors aren#x2019;t lawyers and can#x2019;t give legal advice, Keating says.

That#x2019;s not enough, says attorney Ed Boltz, president of the Washington, DC-based National Association of Consumer Bankruptcy Attorneys .

#x201c;(Credit counselors) should say, #x2018;You should consult with a lawyer before you sign up with us,#x2019;#x201d; Boltz says. #x201c;Otherwise, you could be making some big mistakes.#x201d;

Borrowers also need to know that dropping out of a plan can have serious consequences. Creditors can resume collection efforts, and borrowers also have flushed thousands of dollars down the drain and might not have enough money left to seek legal help or file for bankruptcy.

So, those thinking about a debt management plan should make an appointment with an experienced bankruptcy attorney first. (Consultations are usually free.) That way, they will be able to understand the choice they make.

PNC settles with Justice Department over soured small business …

PNC Bank has agreed to pay $9.5 million to settle Department of Justice claims that it did not properly vet government-backed loans that went bad leading up to the financial crisis.

The Justice Department said the Downtown-based bank failed to adhere to federal lending standards when it approved 74 loans guaranteed by the US Small Business Administration.

The loans were initiated by a third-party broker, and when some of them started defaulting in 2006, PNC submitted claims to the SBA to recover losses.

The Justice Department said PNC did not demand adequate tax records from the borrowers and failed to “apply prudent lending standards” when it approved the loans.

“Banks that are trusted to make loans backed by the SBA have a duty to apply proper lending standards, because the United States is obligated to pay when federally backed loans default,” US Attorney Rod J. Rosenstein said in a statement. “The government will vigorously pursue lenders that fail to enforce reasonable lending standards and stick the taxpayers with the bill for bad loans.”

The broker that initiated the loans was Virginia-based Jade Capital Investments, whose owner, Joon Park, admitted in 2013 to using falsified documents to win $100 million in SBA-backed loans.

PNC spokesman Fred Solomon said the bank denies the allegations and was a victim of the fraud.

“We resolved the matter only to avoid the cost and risk of litigation,” Solomon said.

The Justice Department has cracked down on banks for shoddy lending practices preceding the financial crisis. In 2013, PNC agreed to pay $7.1 million to settle similar claims over SBA-backed loans that went bad.

Chris Fleisher is a Tribune-Review staff writer. Reach him at 412-320-7854 or cfleisher@tribweb .com.

Rilling identifies budget, tax relief and relieving school overcrowding as …

NORWALK — Mayor Harry W. Rilling plans to roll up his sleeves on the city budget, tax relief, school overcrowding and making City Hall more efficient when he starts his second term in office.

Theres the possibility that we might be able to consolidate positions so that we reduce duplication of effort, Rilling said. We want to make sure that we are running the government as efficiently and smoothly as possible.

The Best Small Business Loans To Grow Your Business

One of the biggest challenges faced by any small business is knowing when and how to expand. Expansion requires capital, and not every entrepreneur has the access to the amount of capital needed to grow their business. Unfortunately, without growth, it can be hard to turn a profit.

You can see how this could be a problem.

However, small business owners have been the latest beneficiary of the fintech revolution. A sector of companies that lend to small businesses have harnessed the power of big data and cloud computing to power sophisticated underwriting models. These algorithms allow lenders to inject capital to a wide spectrum of small business customers. For some entrepreneurs, access to capital is less than 24 hours away with these lenders.

You may have heard of companies like LendingClub Corp (NYSE: LC), which has facilitated nearly $2 billion in loans, and On Deck Capital Inc (NYSE: ONDK), but there are even more options available for people looking to give a little jolt to their business. Here are a few:

1. Credibly offers customized funding solutions through their Working Capital Loan with 6-17 month payment terms,and Business Expansion Term Loan with 18 or 24 month terms. Fixed payments are deducted from the business bank account on a daily or weekly basis, giving business owners better control over cash flow. Credibly is a pioneer in data underwriting, having used its model to fund over 7,000 small businesses with over $300m since 2010.

2. Smartbiz advertises loans with a variable rate of Prime Rate plus 2.75 percent to 3.75 percent up to $350,000. A $150,000 loan could be paid back as little as $1,684.20 per month with no pre-payment penalty.

3. Fundbox offers small businesses owners a different type of loan. Business owners create an account, add their unpaid invoices and an advance for the amount of the unpaid invoice is transferred to the business bank account.

4. BlueVine analyze cash flow and customer strength to offer flexible lines of credit.These can be as much as $50,000 with interest rates as low as 6.9%. BlueVine also factors invoices like Fundbox.

Christian Laettner, former Duke basketball player, faces involuntary bankruptcy

Christian Laettner, a former Duke basketball star whose venture into the business world has left a trail of debt and creditors, could be in bankruptcy court soon if he fails to come up with $14.05 million.

Five of his creditors have started involuntary bankruptcy proceedings against Laettner, a Florida resident.

The action comes five months after Phase II of the West Village mixed-use project in downtown Durham sold for $187 million. One of the businesses that received $28.3 million in proceeds from the sale, Fuller Street Development, lists Laettner as a partner, court records show, though it is unclear how much, if any, Laettner personally received from the deal.

Through the bankruptcy filing delivered to one of Laettner’s lawyers last week, the creditors hope to recoup millions in unpaid debt.

The creditors and the amounts they say they are owed are:

?National Servicing amp; Administration, a limited liability corporation based in Minnesota, where Laettner played for the Timberwolves in the NBA: $7,321,230

?Ernest Sims, III, a former Detroit Lions linebacker: $1,482,730

?Jonathan C. Stewart, a Carolina Panthers running back: $3,629,230

?Park Lane, a sports investment firm started by Andrew Kline, who played for the St. Louis Rams.: $236,193; and

?Damp;F DCU LLC: $1,382,545

“We are optimistic that the funds from the sale of the West Village can be used to reach a global resolution with all of Christian’s creditors,” said Hassan Zavareei, a Washington-based lawyer representing Laettner. “As such, the negotiations are ongoing.”

West Village, set amid the new restaurants, homes and shops revitalizing Durham’s downtown, includes 609 apartments and 104,000 square feet of commercial space. The three-phase project was developed by a partnership that was led by Laettner, his former Duke teammate Brian Davis, and Tom Niemann, a Duke business school graduate.

Laettner, 46, earned a total of $61 million as an NBA player, Nonetheless, he has been mired in financial problems related to subsequent real estate projects, including the ambitious West Village.

In 2012, he was sued for $30 million by former Chicago Bulls stalwart Scottie Pippen and others. Shawne Merriman, a former San Diego Charger and Buffalo Bill, also has had to go to court to pursue money he loaned Laettner.

In an unusual twist, Laettner also sued his own real estate company, Blue Devil Ventures, for $10 million.

Laettner has gone before federal judges numerous times asking for extensions and reprieves to settle his debts for real estate projects in Durham, Baltimore and elsewhere.

In April 2015, Laettner was served foreclosure papers on the $3.65 million mansion he owned on the edge of the Atlantic Ocean in Florida.

After 2012 bankruptcy, a sweet comeback for Hostess

How much is a snack-cake maker worth? If its Hostess Brands, which nearly went out of business just four years ago, that would be about $2.3 billion, according to the terms of a takeover deal announced on Tuesday. And it seems the maker of Twinkies, Ho-Hos and Ding Dongs is in far better financial shape ahead of its coming initial public offering than many investors might assume.

Under the deal with Gores Holdings (GRSH), the special-purposed acquisition company established by private equity firm Gores Group will invest $375 million in cash it raised from an IPO in August 2015. Once the deal closes, now set for later this year, Gores Holdings name will change to Hostess Brands, and its stock will trade under a new ticker symbol.

Gores Group CEO Alec Gores and other Gores affiliates, along with Hostess owner C. Dean Metropoulos, will invest an additional $350 million in the deal. Once the transaction is completed, private equity giant Apollo Global Management (APO) and Metropoulos and his family will hold approximately 42 percent of Gores Holdings. Metropoulos will remain Hostess executive chairman and William Toler will continue as chief executive.

Halachic estate planning in a secular world

Proper estate planning ensures that accumulated financial resources continue to provide for loved ones needs without relinquishing control. Caring for family, as one would if alive, is the essence of good planning; it should also provide for potential disability.Thus, proper estate planning involves giving what you have to whom/the way/when you want in accordance with Halacha, while considering disability.

Read More…

Hulk Hogan Objects to Gawker CEO Denton’s Bankruptcy Shield

Hulk Hogan, stymied by the bankruptcy filing of Gawker Media in the midst of a legal battle over a sex tape, is fighting back using the tools of Chapter 11 law.

Hogan, unable to collect a $140 million jury verdict against the media- and celebrity-focused site because of the bankruptcy petition it filed June 10, said in court papers filed Tuesday that the company is improperly trying to protect its chief executive and founder, Nick Denton, who is liable for part of the judgment. He also claims Gawker or an affiliate made a $200,000 loan to Dentonin the week leading up to the bankruptcy.

Gawker’s strategy is to sell itself in a court-supervised auction while it pursues an appeal of the judgment, which Hogan won in a lawsuit over the posting of a tape of him having sex with a friend’s wife. If Gawker loses, sale proceeds would go to pay the claims of creditors including Hogan, a professional wrestler and entertainer whose real name is Terry Bollea.

Veteran Law Firm Bankruptcy Advisor Dies at 85

Arthur Olick, a bankruptcy lawyer who advised other fellow lawyers throughout the dissolution of Finley Kumble and other failed firms, has died at 85.

He passed away on July 2 in Bethesda, Maryland from multiple sclerosis, according to a death notice listed by his family.

Olick worked with the law firm of Anderson Kill for most of his career. He joined the firm in 1974 and retired in 2010, the firm said.

In coverage of the Finley Kumble demise in 1988, Olick told the New York Times: Finley Kumble, like Humpty Dumpty, had a great fall, and the egg is splattered all over the ground Hopefully we can put it all back together again, at least to give it a decent funeral.

At the time, Olick represented a handful of Finley Kumbles 250 former partners who faced a $85 million tab owed to banks in the wake of the law firms demise, according to the Times.

Based in New York, Olick was a longtime chair of Anderson Kills bankruptcy and restructuring group, the firm said. He also advised clients throughout other law firm dissolutions, including Mudge Rose Guthrie Alexander amp; Ferdon, Shea amp; Gould and Lord Day amp; Lord.

He was a lawyers lawyer, said Mark Silverschotz, current co-chair of Anderson Kills bankruptcy and restructuring group who worked with Olick on the Finley Kumble case. He was the guy others would call when they had a problem to solve and needed someone brilliant and relentless.

Silverschotz said the Finley Kumble case created a template for the representation of partners in future law firm bankruptcies.

That case was a harbinger of many other cases to follow, said Silverschotz, who said he and Olick represented a group of 15 non-management committee partners including former New York governor Hugh Carey.

Outside of the law firm bankruptcy practice, Olick was well-known in the legal community for his work in the formation of a number of asbestos bankruptcy trusts. And in various commercial matters, some of his clients included Zsa Zsa Gabor, Don McLean and Meatloaf.

Services will be held Thursday at 11 am at Riverside Chapel in Manhattan. Family will be receiving at the Yale Club at 50 Vanderbilt Avenue on Thursday from 5 to 8 pm Donations may be made to Arthurs name to the Multiple Sclerosis Society.

Click here to read his death notice in the Times.