Forbes has compiled a list of cities where credit card spending is highest. My scan of the list suggests that this list is simply another version of the areas of the country where housing is in trouble.  Homeowners with outsized mortgage payments rely on credit cards to make up the difference needed to support the family.

Which leads me to those TV ads for attorneys or other services offering help with mortgage modification.  Assuming the advertiser is successful in negotiating a mortgage modification, the homeowner is still  left with the debt  that piled up while why struggled with the original loan terms.

Even without the ability to modify mortgages on principal residences, Chapter 13 is a superior tool for addressing the homeowner’s entire financial situation. And the fees for the professional involved are subject to court supervision, something missing from those drumming up business on TV.

Logic and reality have been bouncing off my clients’ deflector shields recently on the issue of their houses.  Confronted with the gap between their income and even the payment on a modified loan, I get the refrain, “But keeping the house is the most important thing in my case!”

Yes, and how do you expect to do that?   I get no meaningful answer.

This house business has become so irrational and  embedded that I’m thinking it’s a resistant strain of something. (Is there a strain of “Home Flu”?)   “House” or “home” is like God or motherhood:  a positive one dare not challenge with words about economic reality.

What’s interesting about these reactions is that seldom are we talking about the long standing family home.  We’re talking about houses purchased in the past  five years or so.  Which of course corresponds to the frantic run up in Bay Area home prices.  So these homes were, from the beginning, never likely to be the family seat.

How do I persuade people that a home is simply housing, and what’s really important are the people who live there?

Should you guarantee a student loan, asks my good friend Doug Jacobs.  His is the cool, reasoned analysis.  I want to jump up and down and say DON”T DO IT.

It pains me to say that.  My undergraduate education was funded in part with modest student loans.  I believe education is the key to much that is personally  positive and societally important. I applaud the public policy that is willing to make college more widely affordable.

Student loans have taken on a malevolent quality over the past years.  Loans are made apparently without any counseling about the consequences of getting a four year degree at an expensive private school in art history.  (That was one of my early cases:  $100,000 in loans for a skill set that allowed my client to earn $21,000 a year).    Since student loans aren’t dischargeable, they have the potential to blight the life of a student who borrows too much, never uses the skills acquired, or who finds the economics of the profession changed between school and career.

The new private student loans bear interest rates akin to credit cards, according to a recent story in the New York Times.  The Times  blog   rounded up more on student loans.

Then there’s the issue of timing:  parents guaranteeing the loans of their children face having student loans hanging over them as they approach retirement.  The student defers payment on the loan, keeping the parents exposed to the debt.  It entwines the two generations financially long after the student is an adult.  Retirement budgets seldom have available dollars to pay off student loans.

My advice is to approach parental guarantees of student loans with the same caution you use when confronted with a coiled rattlesnake.

A debt  collector including the creditor itself must not contact a California debtor who it knows is represented by an attorney.  Yet the collector violation de jour seems to be the refrain, “I don’t care if you  have a bankruptcy lawyer, I’ll call you every day until you can provide a bankruptcy case number”.

If this happens to you, and you have told the caller that you are represented by a  lawyer about this debt, make sure to get the name, phone number, and the entity the caller represents.  It makes it easier to sue them for violation of Califorrnia’s Rosenthal Fair Debt Collection Practices Act.

Here’s the authority:  the federal Fair Debt Collection Practices Act prohibits contact by a third party collector with a consumer who is represented by a lawyer.  15 USC 1692c.

California expanded the consumers rights with respect to debt collection by including the original creditor in the class of persons covered by the Rosenthal Act.  Civil Code Section 1788.17 imports the prohibition of contacting a debtor who has a lawyer.

So, don’t get your legal information from a debt collector and don’t shrug off violations of law.  Tell your lawyer, make a record of the facts, and fight back.

Stand by:  I’m going to say something nice about BAPCPA, the bankruptcy “reform” law of 2005.  The debtor education requirement that is a condition of getting a discharge is a good idea.  Just this week, two clients have reported that they learned useful stuff from the required program.

Filing bankruptcy is a teachable moment for many:  they are trying to figure out what happened to them and how not to go through this again.  There is an openness to ideas and skills that may not have existed before.

The prebankruptcy “credit counseling”, the twin of the financial management class, is uniformly  held to be worthless. (Are you reassured that my keyboard hasn’t been hijacked by my evil twin?)  No one is deterred from filing as a result; for nearly everyone who readies themselves to file, there is no non bankruptcy alternative.

April is Financial Literacy Month.  You don’t have to be bankrupt to add to your bag of money skills.

The culture you grow up in shapes your views of truth telling, business ethics and privacy.  I see that day to day as I counsel clients who are immigrants from other parts of the world.  It’s sometimes an uphill battle to convince them that the “price” of bankruptcy relief is full disclosure, and that it is safe to tell all to branches of the government.

I sat with a group of very experienced bankruptcy lawyers and we traded our war stories about clients from other cultures and how differently some approached bankruptcy disclosure.  What blew me away was the United States Trustee sitting with us who seemed surprised by our experiences and blurted out that he’d never thought of cultural issues influencing debtors in bankruptcy.  Duh?

The good folks at the National Consumer Law Center have put together a page of links to various programs and procedures for troubled home loans.

My colleague John Mlnarik has begun a discussion of the Obama Treasury programs announced earlier in  March on www.norcalmortgagemods.com.

Now, we need the Senate to move on S. 61 and judicial mortgage modification.  Speak up at www.nacba.org/TellCongress.

The survivors of someone who dies are not personally responsible for the decedent’s debts.  Yet debt collectors seem to be swarming the survivors to collect on bills the decedent owed, or didn’t owe.

The New York Times reported on debt collectors who focus on collecting debts of the recently departed, by fair means or foul.   Collectors never mention that the survivors are not personally obligated to pay the debt.  Instead, they catch people at a vulnerable moment and suggest that it would be the “right thing” to settle the debt.

Worse, fraudsters are apparently attempting to collect debts that the decedent didn’t owe, according to an article in the AARP Bulletin.

If faced with debts left behind by someone who has died, understand the applicable state law.  The general principle is that the property of the decedent is responsible for the decedent’s debts.  But if the estate is not sufficient to pay the debts, the heirs do not inherit the obligation.

My Bankruptcy Law Network colleague Jonathan Ginsberg points out that Georgia law provides for the exemption of a year’s support from the estate, before funds are available for payment of debt.  Exercise a healthy skepticism  when dealing with debt collectors in such situations.

The UST has posted new median income figures for cases filed on or after March 15, 2009.  This is the source of numbers used in the means test and Form B22 to determine whether the below median, safe harbor rule applies.

The median income for a single person in California is $49,182.  Two person households: $65,097;  three persons:  $70,684; and four person:  $79,971.

Below this income level, a Chapter 7 debtor presumably passes the means test .  A Chapter 13 debtor applies their actual, reasonable living expenses against this income level.

The National Association of Consumer Bankruptcy Attorneys has established a toll free line to connect constituents with Congressional representatives in support of HR 1106, the judicial mortgage modification bill.

1. Phone 1-877-354-4958 (between 9am and 6pm Eastern time.) You’ll be given specific suggestions for the substance of your phone conversation and prompted to enter your zip code.

Your call will be routed to the office of your Senator, House Rep, or the White House.

Tell the Congressman’s staffer that you want him/her to vote for a broad and effective mortgage modification bill. Put homeowners on equal footing with banks and the well to do.  Stop the crash of housing values.

This bill comes up for a vote this week, most likely on  Wednesday.  We are all in this crisis together.  Please call and be heard.