Saturday, May 23, 2009

The Secret History of the Credit Card

From PBS Frontline: The Secret History of the Credit Card

  • Ever wondered why you send your credit card payments to South Dakota instead of Wall Street?
  • Why credit card companies are able to change the rate of interest on stuff you already bought?
  • Why your credit card can raise its interest rate because you were late on another company's credit card?
These questions and more are answered in a 2004 PBS Frontline Documentary The Secret History of the Credit Card

If you're struggling with credit card debt, give me a call at 918 582-6131 or send me an email ( My vocation is helping people find financial peace of mind in their lives by eliminating debt. Don't let debt destroy your family's peace. FBC

Thursday, May 14, 2009

An Economics Reporter's Personal Financial Crisis

New York Times reporter, Edmund Andrews is about to lose his Silver Springs, MD home to foreclosure.

My Personal Credit Crisis
Published: May 14, 2009

If there was anybody who should have avoided the mortgage catastrophe, it was I. As an economics reporter for The New York Times, I have been the paper’s chief eyes and ears on the Federal Reserve for the past six years. I watched Alan Greenspan and his successor, Ben S. Bernanke, at close range. I wrote several early-warning articles in 2004 about the spike in go-go mortgages. Before that, I had a hand in covering the Asian financial crisis of 1997, the Russia meltdown in 1998 and the dot-com collapse in 2000. I know a lot about the curveballs that the economy can throw at us.

But in 2004, I joined millions of otherwise-sane Americans in what we now know was a catastrophic binge on overpriced real estate and reckless mortgages. Nobody duped or hypnotized me. Like so many others — borrowers, lenders and the Wall Street dealmakers behind them — I just thought I could beat the odds. We all had our reasons. The brokers and dealmakers were scoring huge commissions. Ordinary homebuyers were stretching to get into first houses, or bigger houses, or better neighborhoods. Some were greedy, some were desperate and some were deceived.

As for me, I had two utterly compelling reasons for taking the plunge: the money was there, and I was in love.
You can read the rest of Mr. Andrew's story at
It's an admirable example of courage and a service to those who will tread the same paths after him; he is writing
about his personal crisis and thus serves as a warning bell in our long, collective financial night.

Mr. Andrews is in the same boat as so many Americans today, who are losing or about to lose their homes to foreclosure. Go read the rest of the story. And then ask yourself,

"Am I so different that this couldn't happen to me?"

If you need assistance with a foreclosure or credit crisis, please call or email me. I can't help Mr. and Mrs. Andrews, but I might be able to help you (or a friend or loved one facing the same difficulties.) FBC; 918 582-6131

Wednesday, May 13, 2009

Frugal Living

Here's a local TV News segment on a local couple who have learned to live within their means. How?

Driving older, paid-for cars; eating at home; paying off credit cards, and perhaps most important of all: saving money.

Good for them -- exactly the sort of "pull-yourself-up-by-your-own-bootstraps" recipe I recommend to my clients.

Watch the video for the financial experts -- one of whom cautions that we shouldn't go too far with this sort of thing. (Hah! What nonsense. Take care of your family first; the economy will take care of itself.)

It made me think of a book I listened to a couple years ago entitled, The Millionaire Next Door.

In that book two academics systematically studied the habits of real millionaires around the country and found that by and large, they lived VERY frugal lives -- driving older cars, not borrowing money, saving, and not living ostentatiously. Nelson Bunker Hunt - the silver speculator and billionaire was famous for flying coach (first class was too expensive, he thought). More recently, Warren Buffet is also known for his very frugal lifestyle.

Want to be rich? It's pretty simple. Do as the rich do. Don't borrow money. Don't waste money. Most important of all: save, save, save.

Want to be poor like everyone else? Just keep doing what you're doing.


Kudos to Scott Thompson, the NewsOn6, and of course, the Ball family.

Sunday, May 3, 2009

Real Bankruptcy, Real Life: Are my Social Security benefits safe from garnishment?

I'm introducing a new blog series today that I'm calling "Real Bankruptcy, Real Life." These are going to be blog posts about real-life questions that arise during the course of my practice. If you have a question you'd like me to address, give me a call at 918 582-6131 -- I'd be glad to help! -- Ben Callicoat


Had a client call me the other day whom I'd spoken to previously. As always, I try to help people realize that bankruptcy is not the ONLY option they have -- but instead an emergency tool of last resort to be used in extreme situations only. Bankruptcy is the parachute you pull when the fourth engine of your financial airliner has caught fire and you're going down. And in fact I'd recommended that this particular client avoid filing a bankruptcy case -- not the least of reasons being that his social security benefits were the only source of income and therefore exempt from attachment or execution.

Let me to take half a step back here and explain.

Garnishment and Exempt Property

When you're being sued for indebtedness (because you are not paying some debt that is owed) the plaintiff's purpose is to get a judgment (a court decision and order) to force you to pay them. In order to collect on this judgment, the plaintiff will usually have to find some assets or property to attach. They do this by garnishment -- issuing a court order to someone holding property (such as a bank or an employer) also known as a "garnishee", for the judgment debtor. The court orders the garnishee to turn over the funds in that account to the judgment creditor / plaintiff.

However, among other defenses, each state has a set of exemptions -- laws that make certain property exempt from being taken from you to satisfy a debt. The law recognizes that some things are too basic, too important to being subject to seizure -- usually the basic necessities of life: food, shelter, clothing, for instance.

Oklahoma's excellent exemption statutes -- principally found at Oklahoma Statutes 31 O.S. sec. 1, and following, set forth all of the property interests that the Oklahoma legislature has decided a creditor should NOT be able to get in order to satisfy a judgment. For instance, under Oklahoma law your home and your home furniture are exempt. Also exempt is 75% of your income -- reason being, a person needs income lest they become wards of the state. (See OSCN link above.)

Beware "free" Legal Advice

So back to the story. The client having previously been advised (by yours truly) that his Social Security was safe from attachment, calls me one recent morning and says that his brother is a bank president. And that he, his brother, and another close friend -- by happenstance a retired attorney -- were talking about my advice, and the bank president told my client that I was wrong: his Social Security WAS in fact able to be garnished from his bank account, contrary to what I'd said. And to make matters worse, their mutual friend the retired attorney agreed with the bank president brother.

Whoa! Trouble in River City, Bankruptcy-Man! Had I given this man bad advice? Was I mistaken somehow? Are social security benefits exempt from being attached or not? All of these questions that were raging in someone's mind, if not my own.

Nonetheless, I knew that my previous advice was correct in spite of the fact that two people who should know disagreed with me. (One of them a lawyer!) But I stuck to my guns anyway. "They're wrong" I told the client flatly. "Your brother and the lawyer are just flat wrong." I repeated. "I will look up the exemption statute and call you back," I promised the client.

A quick check of Westlaw (Westlaw search terms "'social security' w/s exempt") pulled up the relevant Oklahoma case law. First case up was a March 2009 Oklahoma Court of Appeals case Ultra Thin, Inc. vs. Lane, 2009 WL 987387 (Okla.Civ.App. Div. 3).

Ultra Thin's fact pattern is substantially similar to my client's query: a judgment creditor had sought a garnishment against a debtor's bank account which had contained social security benefits held for his grandson. On the court's order, the garnishee bank had seized the contents of the account and forwarded them to the judgment creditor. The judgment debtor appealed this seizure on the grounds that the source of the funds was social security benefits which were exempt from attachment by reason of tit. 47 U.S. Code section 407, et seq.

Social Security Benefits Exempt from Garnishment

The Oklahoma Court of Appeals agreed. Social Security benefits are exempt under the federal law cited. In its opinion, the court specifically cites several federal court of appeals cases which held that not only were social security benefits from attachment or execution, they were even exempt after they had been commingled with other non-exempt funds. Case closed.

A quick call back to the client to confirm: "I was right; your brother and lawyer friend are wrong." "Social Security benefits are 100% exempt from attachment or garnishment." A creditor is prevented by federal law from seizing these funds to satisfy a judgment even when a court orders otherwise. Dead bang correct.

Moral of the Story: Don't try this at home

The law is complicated and it changes or evolves with each new opinion or court decision on a given topic. Lay people often mistakenly assume that the law is a simple "cut and dried" matter, when in fact it is not. If the law were that simple, lawsuits could be decided by computer programs. As it is, facts and context matter greatly.

Another lawyer I consulted later -- a creditor's lawyer who had spent years of litigating exactly these sorts of cases -- confided that he had long ago attempted to argue that once the funds were commingled with other non-exempt funds, that they lost their exemption. (He admitted that he had lost those arguments, even back then, however.)

Nonetheless it points out the dangers of relying on other people for your legal advice. Your brother in law who just passed the bar is probably not qualified to answer this relatively simple question unless he has just recently researched this precise question. Even a long-practicing attorney in another field is probably not qualified to say. Similarly, the retired attorney friend of my client in this real-life example, had either not looked at this issue recently, or never looked at this issue and was apparently shooting from the hip when he agreed with their banker friend. And if you're going to rely on non-lawyers -- even if it is your brother (maybe I should say "especially" if it is your brother) for legal advice, I don't know what to tell you -- that's just plain crazy.

It all goes to show, as the ever-wise late, great favorite son of Oklahoma Will Rogers once said, "It's not what folks don't know that's the problem. It's what they know that just ain't so."

Ah yes -- that's it exactly, Will.

Again, if you have a particular debt problem that you need some competent advice about, please call me at 918 582-6131 or send me an email: I'm all about helping people and would love to help you as well. fbc

Weasel Words Disclaimer

Disclaimer (a/k/a "Weasel Words"): This is NOT legal advice. This is a general interest blog post. If you haven't paid me a retainer, I'm not your lawyer. And come to think of it, if you are relying on a blog for legal advice without speaking to a lawyer, you are stupid. Or crazy. Or maybe both. You deserve every bad fate which will almost certainly befall you. In fact, please put this blog post down and back away slowly. Thank you.

Member, National Association of Consumer Bankruptcy Attorneys