Month: July 2016

 

According to  Consumerist.com, the legally allowed fees for check

cashing services range from 1% to 3% of the check amount, depending on

state law.   Nobody should doubt that some check cashing  business charge

much more than the legal fees.    Millions of Americans do not have a

checking account, so they are eating up their income with fees.

 

Walmart recently went into the check cashing business.  According

to an article on 8/9/2011 in www.dailyfinance.com, Walmarts fees are $3

for a check, less than $1,000.  Walmart may not offer this relatively

inexpensive service in all states.

 

For most people, there is little excuse for not having a checking

account, particularly when many banks offer free checking for customers

who keep a minimum balance, which may be as low as $1,000.

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

 

The Connecticut Bankruptcy Courts looks to the case of Brunner v. New

York State High Education Services Corp.   Brunner is a decision from 1987

by the 2^nd Circuit Court of Appeals in New York.  The citation is 831

F.2d 395.

In simple terms, a debtor must prove that the student loans cause an

“undue hardship.”

There is a three part test to determine if there is an undue hardship.

1. The debtor cannot maintain, based on current income and expenses, a “minimal” standard of living for herself and her dependents if forced to repay the loans
2. That additional circumstances exist indicating that this state of affairs is likely to persist for a significant portion of the repayment period of the student loans and (two requirements)
3. The debtor has made good faith efforts to repay the loans (emphasis added)

A debtor must satisfy all three parts of the test to get a discharge.

In many cases, the first part of the test is relatively easy to satisfy.

There are many situations in which debtors simply do not have any extra

money to pay off a student loan.

With regard to part 3 of the test, unfortunately ,  a debtor may have had

many student loan deferments.  In these cases , a court is likely to find

that there was no good faith effort to repay.

In my view, Part 2 of the test is the most difficult to satisfy.   The key

point is there must be “additional” circumstances  and the circumstance

is likely to persist for a “significant” portion of the repayment period.

I have seen rare but unique situations which satisfy both requirements

of this rule.   The additional situation typically involves health issues.

The health issues are long term problems which prevent a person from

working, and thereby paying back a loan or loans.

The circumstances must be likely to persist for a “significant” portion

of the repayment period.  Therefore, a temporary problem would not

satisfy this rule.   An argument that a person is unemployed or under-

employed should be insufficient, as an employment situation can change

at any time.

Attorney Robert M. Singer

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

I have had clients tell me that they do not have a checking account.  Not only do these clients pay for check cashing, they use money orders to pay bills.  Most often, the clients are using the post office money orders

The cost for a Walmart Money Order is about $.60 each.  For the Post Office, the rate is about $1.15 for an order up to $500, and $1.55 for an order up to $1,000.  These fees can add up quickly.

What I have learned to do is pay bills electronically, through my bank account.  The electronic bill pay avoids the costs of the money order, and the postage fees.  My estimate of savings on 20 checks and 20 stamps is $16 per month.

Attorney Robert M. Singer

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

As the website for Jackson Hewitt states, a “refund anticipation loan” is a loan by a third party, typically a bank, and secured by a tax refund. You get your money immediately, rather than waiting for a refund from the IRS, and/or state tax authority.

As the same website states, the Bank charges a credit investigation fee, and a finance charge may apply.

This is a very expensive short term loan.  For example, if you receive a $1,000 refund for a $75 fee, and the refund takes the IRS 30 days to process, you are paying 7.5% for a 30 day loan.

According to IRS website, Publication 2046, the projected time from electronic filing your tax return to  direct deposit (of the refund money to your  bank account) is normally approximately 10 days.  You can provide your bank information on your return to the IRS.

Although there is no guarantee that you will get the IRS electronic refund in 10 days, in general, it is better to avoid the bank fees.

Attorney Robert M. Singer

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

 

When receiving a credit card, consumers almost never look at the credit card agreement.  It takes a long time to read and understand the fine print; the print is not really fine, but small.  And the wording can be confusing, for everyone, including a lawyer.

In general, credit card companies allow consumers to take a “cash advance” against the card.

Usually, there is a separate borrowing limit for cash advances, as compared to purchases.

The website www.bankrate.com has an article on the “Cost of cash advances.”  Everyone should read the article.

There are four bad reasons to get a cash advance:

1. Immediate processing fee for the advance – normally 2 to 4% of the amount of the advance
2. Typically, the rates are much higher for cash advances than purchases,  commonly over 20% per year
3. There is no grace period as with purchases – interest starts from the day you get the cash advance (with purchases, if you pay off the balance in the first billing cycle, you avoid interest charges)
4. Payments on account are first applied to purchases before cash advances. You need to fully pay off your balance for purchases, before any money is applied to the cash advance balance.  As an example, if you have a $10,000 purchase balance at 10%, and a cash advance balance of $5,000 at 18% interest per year, you need to pay off the $10,000 purchase balance, before you get credit for payments to the cash advance balance.

Cash advances are to be avoided, at all times.

Attorney Robert M. Singer

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

 

Smoking destroys your health and your budget.  Due to the massive increase in the cost of cigarettes, smoking is a budget buster.  According to theawl.com, the cost of a pack of cigarettes ranges from a high of about $14 in New York to about $4.96 in Kentucky.  This is just an incredible difference.

Cigarette taxes can cost you over $1,200 more per year, if you smoke in New York, rather than Kentucky.   Smokers need to live in a low tax state.   Living in Connecticut, I am somewhat used to seeing the high prices of cigarettes (over $9 per pack), as the Connecticut politicians have continued to raise cigarette taxes to incredible highs.

For one person with a pack a day habit, in a state such as New Hampshire, the cost of your habit is over $1,825 per year.  Double this amount, if you have two people smoking in the house, or you smoke two packs of cigarettes a day.  Also, if you are in a high sin tax state such as Connecticut, your costs can exceed $3,600 per year.

Personal finance experts don’t seem to like to get involved in personal issues.  However, I will be candid.  Smoking has become both a personal health issue and a personal finance issue.    I understand the difficulty associated with quitting.  But for your overall health, you need to stop.  Don’t let the tobacco companies and sin taxes steal your retirement, by smoking up your retirement funds.

Attorney Robert M. Singer

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

I have seen payday loans used by clients, on several occasions, all with disastrous results.

Connecticut has a usury law which limits the interest rate on money loans.  Therefore, the loans are illegal in Connecticut.

Unfortunately, not all states have usury laws; therefore, there are the states where the payday lenders are located.  In addition, with the internet, the payday lenders can be located outside of the United States.

The payday lenders provide a service, which should be illegal.  The lender will provide a very short term loan (often under 30 days) for a low amount of money, normally no more than $1,500.  The problem with the payday loans is the fees and interest rate- the effective interest rate (APR) can be over 600% a year.  According to one web site, the cost of credit can average $25, per $100 borrowed.  For a 30 day loan, you are paying 25% interest for a one month loan.

The situation gets worse if the borrower fails to pay back the payday loan, within the normal payment period, as additional charges apply.

There is simply no excuse to take out a payday loan.  Consumers need to plan ahead, to avoid the need for payday loans.  Consumers need to have at least one month’s savings in the bank, for emergencies.

It is time that the politicians act, to establish a national usury law, and interest rate cap on loans.  Senator Bernie Sanders attempted to pass such a law.  However there is little, if any, support for this legislation.  Let’s send a letter to our Senators and Representatives to support Sander’s Bill.

Attorney Robert M. Singer

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

Bank fees should be the topic of a book. Your job is to avoid all the bank fees, andwatch your savings grow, not the banks.
Understand the terms of no fee checking. Follow the terms to the letter, and avoid checking account fees.
The banks made an estimated $39 billion dollars in fees for overdrafts and insufficient funds per year. The average overdraft fee is $30. If you have multiple overdrafts in one day, your fees can be over $100. Use all options to avoid the overdraft charges – have an overdraft protection. In addition, you can often link a savings account to your checking account.          Finally, you may even be able to link your credit card to the checking account (but this is a last option).
My bank has an alert which provides me a warning when the balance gets below a preset amount, set by me. Check if your bank has this alert.
Overdraft Protection (“OD”) is nothing but an expensive credit line, just like a credit card. It is cheaper to use the overdraft protection, than have bounced checks. You need to look at the interest rate on the OD. The rates on OD are typically approximately 18% per year. On a $2,000 line of credit, this adds $360 a year to your budget, similar to 10 bounced checks.

Attorney Robert M. Singer

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

 

Most people should not bother with prepaid cards, because of the costs.  The issuer makes money by processing the transactions, typically in a monthly fee.  The card is a fee for service.   Each transaction has a cost.

There are situations in which someone will need to have a prepaid card.  Typically, the person cannot get a credit card because of bad credit, and the person cannot open a bank account ( because he or she is in ChexSystems as a  bad risk).

Many people do not understand ChexSystems.   According to the ChexSystems website:  “ The Chex Systems, Inc.  network is comprised of member Financial Institutions that regularly contribute information on mishandled checking and savings accounts to a central location.   ChexSystems  shares this information among member institutions to help them assess the risk of opening new accounts.  ChexSystems only shares information with the member institutions and does not decide on new account openings.”

ChexSystems shares your banking account (history) information, with members of the system.  The typical information report includes items such as bad checks history.   Therefore, if you have many unpaid bad checks at one  bank, such as Citibank, Citibank can report your activity to ChexSystems.  And if you try to open up an account at Chase  Bank, Chase can get your ChexSystems report and refuse to open up a new checking  account.

For your financial health, you need to stay away from ChexSystems.  With a bad ChexSystems report, you may not be able to open a bank account (to get checking services and a debit card).

You can order a copy of your ChexSystems report at:               https://www.consumerdebit.com/consumerinfo/us/es/chexsystems/report/index.htm

Filing for bankruptcy does not automatically mean that you will have a bad report in ChexSystems.  I have seen clients want to file bankruptcy and include, in the filing, amounts due to a bank for overdraft checks.  In these instances, I always tell the client to pay off the overdraft balance, to avoid a ChexSystems bad checking account report.

The only people who should be using a prepaid (secured) card is someone who has a bad credit file, who cannot open a credit card account, and a bad CheckSystems file, who cannot open a checking account and get a regular debit card as part of a checking account.

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com

 

Unless you are professional gambler, playing any type gambling is a simple way to lose money.

There are so many ways to bet.  I cannot even describe all of the ways.  In fact, I am sure I don’t know all of the ways to make a bet.  I have seen many financial planning books.  However, I have never seen a financial planning book discuss the effect of gambling on a household’s ability to save for retirement.   With the massive availability of places to gamble, this approach is incredible.   Everyone in the world needs to understand that gambling can ruin your financial life and retirement.

In Connecticut, I remember when, many years ago, the lottery was the only “place to go.”   Then we had a Jai Alai fronton, where people could go to watch games, and bet.  Now, Connecticut has two huge casinos, Foxwoods Resort & Casino and Mohican Sun.  Just to give you an idea, slot revenue at Foxwoods was $707 million for 2008-09 fiscal year.

According to the Nelson A Rockefeller Institute of Government Fiscal Studies dated June 23, 2011, 43 states operate lotteries, 15 allow commercial casinos, 12 have racinos, and over 40 states allow pari-mutuel wagering.  In addition, according to an article of the Christian Science Monitor, dated December 26, 2011, the Department of Justice is changing its interpretation of the federal 1961 wire act, which should allow for online gambling.  Instead of restricting gambling sites, we are getting more betting.

Since the states get a cut of the take at casinos, we can expect an expansion of legalized gambling.  Connecticut gets a portion of the casino revenue from slot machines.  Although the revenue has been declining, Connecticut, like many states, rely on this money for its operations.

In order to get control of your gambling spending, you need to treat this like any other expense.  Track each dollar you spend for any and all gambling, including online gambling, poker and lottery tickets.

For many people, gambling is an addition.  If you find that your gambling is out of control, you need to get help.  The information for gamblers anonymous is below

Gamblers Annonymous

PO Box 17173

Los Angelos, CA  90017

626-960-3500

www.gamblersanonymous.org

For people who are thinking about going to the casino, remember that the casino is set up so that people gamble and forget about their time and money.  Notice that there is no outside windows and clocks inside the casino (somebody else made me aware of this).  To combat these two tricks

1. Limit the amount of money you can spend inside the casino – by only bringing cash on the trip. Never bring a credit card or debt card.  The casinos want you to believe that they will conveniently take your debit card or credit card.
2. Bring a watch with a time alarm, so you are prepared to leave at a set time.  If you are losing, you limit your loss.  If you are winning, you can cash out and take your winnings with you.

If one wants to look at an interesting study about the relationship between gambling and bankruptcy, go read Casino Gambling and Bankruptcy in New United States Casino Jurisdictions.  (Journal of Socio-Economics 29 (2000) 247-261).  The article argues that there seems to be a relationship between the location of gambling establishments and the level of bankruptcy filings.  The article was written in 2000; since 2000, there are ever more outlets for gambling.

For anyone convinced that they can win at slots, go to “The Wizard of Odds” web page, which shows the slot machine odds in Vegas. The odds range from about 85% to 93%.   Over the long term, the house wins 100%.

I have seen tax information from casinos showing a gambler’s winning at the casino, which need to be reported on a Form 1040 personal income tax return. In all of these cases, the gambler admitted that the winnings are gross, the losses are net.   The losses exceed any winnings, and the losses are often $3, for every $1 won.

Nothing is worse than a family going together to the casino. What I will call this is the “family addiction.”   The husband and wife go together, for a day out of fun.  This is a fast way to home loss and bankruptcy.

Law Offices of Robert M. Singer, LLC

2572 Whitney Avenue

Hamden, CT  06518

203-248-8278

rsingerct@yahoo.com