What Is Flipping, And How Can The Practice Increase My Risk of Having To File For Bankruptcy? Part One.
By Kevin Gipson, New Orleans Bankruptcy Attorney on Oct 8, 2007 in General Bankruptcy Information, Louisiana
“Flipping” is an aggressive form of refinancing a debt where the lender, typically a finance company, gets more money from a consumer by, among other things, charging new closing costs and other expenses such as insurances.
The National Consumer Law Center reported in 2005 that two-thirds of finance company loans were written to existing customers.
Flipping can start innocently enough. You get a check in the mail for $500.00 from the ACME Finance Company. Simply deposit it and the money is yours, subject to the terms and conditions of the fine print on the reverse of the check.
You deposit the check and a few weeks later a representative of ACME contacts you and tells you that if you would like to come in, they can give you a loan for a larger amount.
You go in. The loan includes a variable interest rate, origination and discount points and a laundry list of closing fees. They may also insist that you need credit insurance and various other life and disability insurances to get the loan.
Also, before you get the loan, you are asked to give ACME a list of all of your belongings: TV’s, Cars, Furniture, etc.
You take the loan and before you know it, you are having problems making the payments.
No problem! Your friends at ACME are their to help.
They can refinance your loan, extend the payments and reduce your monthly payment, all at a “slightly” higher interest rate. They may even offer you what is know as a Balloon Loan.
All you have to do is pay a new set of origination and discount points as well as more closing fees. And again there is the insurance.
You now have had a loan that was mailed to you and you didn’t even ask for flipped (refinanced) two times with a new set of fees each time.
Plus, whether you realized it or not, you gave ACME a secured interest in your personal belongings when you gave them that list of your property.
Over the next several articles I will discuss in more detail the inner workings of these finance companies.
If you are already having financial problems don’t compound them by dealing with finance companies. It will only make you financial situation worse.
Contact an experienced bankruptcy attorney to discuss your options.
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