phone_ctc2

Hello world! Please change me in Site Preferences -> This Category/Section -> Lower Description Bar

30

May 2010

Debt Collector Midland buys debt for nickel on a dollar

Posted by / in Weekly Posts / 2 comments

Debt collector and debt buyer Midland Credit Management pays an average of less than five cents for each dollar of debt they buy.

That means if Midland is harassing you for a $7000 old account, they probably paid less than $350 for it.

That’s what I saw when Midland’s parent company, Encore, announced their first quarter results last Thursday.    They paid $82 million to buy $2.1 billion worth of debt.  Actually that’s more like four cents on the dollar.

Many of my bankruptcy clients are people who faced months of harassing calls or even garnishment on debt owned by Midland.   Those people, when they first got into trouble, often asked the credit card companies or banks to work with them.  And got little or no help.

Those same banks then turned around and sold the account for less than five cents on the dollar.

If the banks had been willing to settle for even 25 cents on the dollar, these folks would not be filing bankruptcy.

Please select the social network you want to share this page with:

18

May 2010

Bankruptcy Reform Law Causes Mortgage Default to Rise?

Posted by / in Virginia Bankruptcy, Weekly Posts / No comments yet

A new study by the National Bureau of Economic Research suggests that the 2005 bankruptcy reform law added to the housing crisis 200,000 more mortgage defaults each year.

“Bankruptcy reform squeezed homeowners’ budgets by raising the cost of filing for bankruptcy and reducing the amount of debt discharged in bankruptcy,” according to the report by Wenli Li of the Federal Reserve Bank of Philadelphia, Michelle J. White of the University of California at San Diego and Ning Zhu of the Graduate School of Management at the University of California.

This study was cited on foxnews.com and the American Bankruptcy Institute.

I agree with both their points

Bankruptcy reform added to the housing crisis because it made filing bankruptcy harder and more expensive.   Some people, who could have filed bankruptcy to lose the credit cards and save the house, couldn’t move fast enough.  By the time they got rid of the credit cards, the house was too far gone.

Bankruptcy reform also added to the housing crisis in a second way.  The budget in the 2005 law is unrealistically low for people with big families.  Especially in expensive urban areas.  So, some people who tried to use Chapter 13 to catch up the house could not make the Chapter 13  payment and also feed their children.  The food budget is just too low.  The only way people could feed the kids was to let the house go.

I think there’s a third point.  People were scared by news coverage of bankruptcy reform.  They believed that bankruptcy could no longer help them.  They thought the door of the courthouse was locked.  Many of those people got caught in foreclosure rescue scams and debt settlement scams, and never talked to a competent bankruptcy lawyer.

The country is paying a big price.  The banks got their bailout loans when they needed them, but rising defaults and falling real estate values hurt every homeowner in America.  Bankruptcy reform is a part, only a small part, of what triggered this crisis.

Please select the social network you want to share this page with:

16

May 2010

File bankruptcy? Or pay $1,134,164 for $7,783 credit card

Posted by / in Weekly Posts / No comments yet

Maureen O’Malley, a leading bankruptcy lawyer in Herndon, Va,  sent me this credit card disclosure.  It shows it will take $1.1 million to pay off $7783.37.  And it will take 2670 years to do it.  You can see for yourself here. (The person’s name and account number are deleted, of course, but this is for real!)

This is the worst I’ve ever seen, but I’ve seen plenty disclosures that are shocking.  This one shows the impact of the 27% interest combined with the $39 over limit fee.  Anybody can see why this person has to file bankruptcy.

At the minimum payment, this person can never pay this card off.  Well “never” is not exactly right, but it will take a million dollars and two thousand years.

The banks, who fought for the bankruptcy law of 2005, said that somehow the American people were at fault for the big jump in the number people who file bankruptcy.  Actually, the fault is with the high interest rates charged by the banks.  And by the failure of Congress to do anything about it.

Before 1978, the state governments could set a limit on interest rates charged to each state.  And they did.  (One reason for this regulation is that interest rates are hard for most of us to calculate in our heads.)

In 1978, the Supreme Court threw that out.  In Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp. (439 U.S. 299), the Supreme Court ruled that a law passed back in 1863 blocked the states from protecting their own citizens.

After 1978, if just one state raised its interest rates, banks set up in that state could charge the higher rate anywhere in the country.   South Dakota was the first state to do that.  And they invited Citibank to move there.  Delaware followed.  (That’s why so many of credit card payments are still mailed to South Dakota or Delaware.)  Interest rates skyrocketed everywhere.

That’s why people who file bankruptcy increased from about 300,000 per year in the early 1980’s, to way over a million a year today.

If Congress really wanted fewer people to file bankruptcy, it would be easy.  Cap credit card interest rates at 12%.  In four or five years, bankruptcies would be cut in half.  In five years, I’ll be 67–I’ll be ready to retire.

Please select the social network you want to share this page with:

NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES