Alternatives to Bankruptcy: Do Nothing: Just Don’t Pay

Posted by Robert Weed / in Alternatives to bankruptcy /

For People Living on Just Social Security–Alternative to Bankruptcy: Do Nothing: Just Don’t Pay

People file bankruptcy for three reasons.

• So the bill collectors quit calling.
• So they can’t garnish you.
• And to get back to good credit.

Are you living on just social security? If we look at those three reasons, we can see why maybe you do NOT need to file bankruptcy. Your alternative to bankruptcy is: do nothing: just don’t pay.  

Will you need future good credit to buy a car?

We hope you have a lot of good years still ahead of you. We also hope your car has a lot of good years ahead of it. Is there any reason you’ll ever need good credit to finance another car? Filing bankruptcy can good for your credit.  Much better for your credit than: Do Nothing: Just Don’t Pay. But does better credit matter to you?  

If You Do Nothing and Just Don’t Pay, Are Your Worried They’ll Garnish your Social Security?

They can’t garnish your social security. They can’t garnish it from the Social Security Administration. And also–thanks to Obama–they can’t garnish it from your bank.

Can You Handle Bill Collector Calls if You Just Don’t Pay

That leaves the calls. When the bill collectors call you, tell them straight. “I am never gonna pay.” You should add, “All I have is social security; I can’t afford to pay and you can’t garnish my social security.” Finally, “Don’t call. I am never gonna pay.”

I’m Never Gonna Pay: Call My Lawyer

Some people find it hard to leave it at “Don’t call, I’m never gonna pay.” If you want to, you can add, “Call my lawyer.” For me to be your lawyer to take those calls, I’d charge $600.00. For some people, that’s worth it.

Here’s an idea. Try telling them “I’m never gonna pay” for a couple weeks. Then if you think you want to add, “Call my lawyer,” you can make another appointment and we’ll set that up.

This is America and the truth still usually works fine. “All I have is social security. I can’t afford to pay and I am never gonna pay.”

Do you own any real estate?

If you have any real estate or other valuable assets, this advice does NOT apply to you.  Talk to a lawyer right away.

 

Linda Pays through Beyond Finance and Gets Garnished

Posted by Robert Weed / in Alternatives to bankruptcy, Chapter 13, Weekly Posts /

Linda Pays Mariner $6113 through Beyond Finance. Then She Gets Garnished

Linda Cash (not her real name) wanted to clear her debts without filing bankruptcy. As an alternative to bankruptcy, she signed up for Beyond Finance.

Linda needed Beyond Finance to help her with Mariner. (She originally borrowed $5383, got behind, and now owed Mariner $6113.65.) 

Beyond contacted Mariner and then told Linda “Congratulations–we’ve settled Mariner for $6113.65.”  In 29 installments, they told her.

Now, Linda thought $6113 was all she had to pay. She paid $213 per month; $213 was what Mariner told her to pay. At the end of 28 payments, she thought she had only $150.00 to go.

Bad surprise. Mariner wanted $6113.65 at 36% interest. Mariner had agreed to $213 a month until paid in full. It would take 66 months–not the 29 Beyond told her–to pay Mariner with interest.

How bad was it? Linda had paid $5964 and she still owed $4808.  (Of the $5964 she paid, $4681 had gone to interest.)

Linda complained to Beyond. Beyond didn’t explain.

She argued with Mariner. Mariner garnished her. That’s when Linda called me.

Bankruptcy Would Have Been Better

Linda is eligible for two kinds of personal bankruptcy.  Chapter 7 bankruptcy says “sorry I can’t pay this debt.”  Chapter 13 is a court approved payment plan.

Chapter 13 would have done what Linda wanted.

If Linda had signed up for chapter 13, the bankruptcy court would have made Mariner accepts payments at no interest. (The Chapter 13 trustee does charge a handling fee on each payment–so it would have taken 32 payments at $213 to pay off Mariner. Not the 29 payments Beyond promised her.  But way better than the 66 payment settlement from Mariner.)

Chapter 7 is Even Better

As a single person in Virginia making less than $67,815, Linda is eligible to file Chapter 7 bankruptcy. Chapter 7 discharges–clears–her finance company loans, like the one she had with Mariner. If she had filed Chapter 7 in the spring of 2019, instead of going to Beyond, she’d be back to good credit today.  She could get a car loan at a good rate, or even qualify for a mortgage and buy a house.

And she would have saved the $5964 she paid through Beyond to Mariner.

Beyond This Screwup

I don’t think Beyond was intentionally tricking Linda–they just screwed up. But I do say these debt settlement outfits are rarely a good idea.

Why Not Debt Settlement? Actually They Warn You

Here’s what it says in small print on the Beyond website.  “The use of debt consolidation services will likely adversely affect your credit. You may be subject to collections or lawsuits by creditors or collectors.”  In other words, if you sign up for their program, you will wreck your credit; then expect to get sued.  Probably not the best idea.

For people who really, really want to pay their debts, and need only a little help, I often recommend debt managment programs. They can usually get each payment down a little off the regular minimum monthly and still pay everybody off in five years.  Debt management plans have to be licensed in most states, including Virginia. 

Most legit debt managements programs (they are sometimes called credit counselling) won’t BS you. If they can’t make your budget work, they will tell you so, and suggest bankruptcy.

Other alternatives to bankruptcy

For other alternatives to bankruptcy, you can disappear. Or just don’t pay.

 

 

 

PS Why Does it Take So Long to Pay off a loan at 36%.  Here’s the chart:

 

Alternatives to Bankruptcy–Disappear

Posted by Robert Weed / in Alternatives to bankruptcy, Blog, Weekly Posts /

Alternatives to bankruptcy–disappear

One alternative to bankruptcy is to just disappear.  Why am I bringing this up, now?

This week somebody asked Quora (a website I follow) how to legally disappear.  The answer, sign up for a Caribbean cruise. Get off at the Virgin Islands. Don’t get back on.

For most people, bankruptcy works. But when people ask me for alternatives, I share my best ideas.  I’ve added the Caribbean cruise to the list.  

Solving Your Debt Problems By Doing Nothing.

Posted by Robert Weed / in Alternatives to bankruptcy, Weekly Posts /

For some people on Social Security, Doing Nothing About Debt Problems Works Fine

I tell a couple people a month there’s no reason to file bankruptcy. Most often older people who have no income except for social security. For them, there’s often no reason to file bankruptcy.

Here’s why.

People File Bankruptcy for Three Reasons

People file bankruptcy for three reasons. So the creditors can’t call you. So you don’t get garnished. And to get back to good credit. (After bankruptcy, people also sleep better and handle their problems better.)

Many people living on social security won’t ever need good credit.  This is a hard one for some people to take in.  Does your car have more miles ahead of it than you have on you? Then you will probably never need to buy another car. And your social security income is likely not enough to afford a house. So, you don’t need to worry about your credit score or your “good credit.”

They Can’t Garnish Your Social Security

If all you have is social security, they can’t garnish you. They can’t garnish it from the social security administration and they can’t garnish it from your bank.

That leaves the collection calls. When you get collection letters, write them back.  Just write on it.  “All I have is social security. I can’t pay and I refuse to pay.”  The words “I refuse to pay” can give you additional legal rights. Tell them the same thing on the phone. Nearly all the debt collectors will give up after being told once or twice.

That’s it.

Careful

Now do NOT follow this plan if you have other money somewhere.  Or real estate. Or there’s a chance you could end up inheriting something. But for many people who just have social security, this plan of “doing nothing” works fine.

 

 

 

“Just Don’t Pay” as an Alternative to Bankruptcy

Posted by Robert Weed / in Alternatives to bankruptcy, Blog, Weekly Posts /

Bankruptcy Alternative: Just Don’t Pay

Some people want or need an alternative to Chapter 7 bankruptcy. 

Meet Henry Hudson and his wife Beth. They came to see me several years ago. Their alternative to bankruptcy was a two part plan: just don’t pay, and “call my lawyer.” Here’s why.

Henry and Beth were elderly, he was retired, she was working a little. They had credit cards they couldn’t pay, about $40,000.

They could file Chapter 7 bankruptcy and clear those debts. But they didn’t want to. They owned an investment that had lots of sentimental value, and if they filed Chapter 7 bankruptcy, the court would sell it. The creditors would only get 10 cents on the dollar or less, if it was sold, but the emotional loss to the Hudsons was more than they were willing.

“Call my lawyer!”

So I told them, just don’t pay. (They were already about five months behind when they came to see me.)  And start taking the calls!  When they call, tell them “call my lawyer!” We’ll see if that get’s them to leave you alone.

Henry and Beth paid me $700 to rent my fierce reputation, plus $100 a month. We met in person every three or four months. Years went by. I told them, if the bill collectors leave you alone too long, they are too late.  That’s called the statute of limitations.

How Long is the Statute of Limitations?

Original creditors, like the credit card companies, have five years to take you to court. If they wait longer than that, they are too late. (That’s in Virginia; other states can be more or less.) For debt buyers, people like LVNV, Midland, Portfolio, it’s probably only three years, arguably two.  (The three years was based on Opinion of the Attorney General 10-028.  The current Virginia Attorney General appears to have deleted it.)

Finally, years later…

Finally, years later, Henry got court papers from one the biggest credit cards, around $8,000.  We had met just two months before and I told them I thought time had run out and everybody was SOL (Statute of Limitations.) Now there’s court papers.

We File Chapter 13

Chapter 13 is a payment plan through the bankruptcy court.  In Chapter 13, you don’t put your property at risk (unless you want to sell it) because you are paying your debts. Henry and Beth file a plan to pay their debts in full.

Pay in full? Yes, but not $40,000 that would have been payment in full when we first talked. Pay in full all the debts that were not SOL.  Turned out only one $700 recent credit card was not too old under the Statute of Limitations.  Including the one that had filed the warrant in debt. 

So that $700 card got paid in full; and the other debts were just gone.

This Doesn’t Always Work

We were helped that Henry and Beth did NOT owe money to Discover. Discover is very quick to sue. Their cars were paid for. And they were renters, not home owners. That means their credit report did NOT show any debts actually getting paid.

It’s My Job to Suggest the Best Plan for You

As a lawyer, I’m a fiduciary. I’m required by law and legal ethics to give you the best advice I have. Even though I’m a bankruptcy lawyer, sometimes a non-bankruptcy solution works best. And when it does, I tell you.

For most people, bankruptcy works.

But when “just don’t pay” will work better, I’ll tell you so.

PS  More on the statute of limitations

The Washington Post just had this interesting article, about how debt collectors can try to get around the statute of limitaitons.