Terrance was standing outside my door when I unlocked, Friday last week.
Terrance filed Chapter 7 bankruptcy with me, January 2013. I tell people you can get approved for a mortgage as soon as two years after your bankruptcy discharge. Terrance got his mortgage approved two years and four months after his bankruptcy. Or he thought he did. They told him in December, everything was fine. Last Thursday, they turned him down. He was scheduled to close on his new house, Tuesday. He freaked.
There was a problem on Terrance’s After-Bankruptcy Credit Report
In December, the mortgage company said they’d fix the problem on Terrance’s credit report. They didn’t.
When he first applied for the loan, the mortgage company told him there was a problem. One of the debts discharged in his 2013 bankruptcy looked like it was still there. Terrance made an appointment to see me last December; but then he cancelled.
The mortgage company told him they would take care of it. Turned out they didn’t.
Here’s the happy ending.
I’m one of maybe fifty bankruptcy lawyers around the country who fights all the time for my clients to fix their after-bankruptcy credit report. Because of my experience, I knew the compliance officer at the outfit that was causing the problem. I had his phone number and email, and he was in his office that Friday morning. I got him.
By noon, we got the paper the mortgage underwriter needed, showing that debt was taken care of in the bankruptcy. The mortgage got approved Monday. Terrance bought his house on schedule, Tuesday.
I think every bankruptcy lawyer needs to know at least a little about Fair Credit Reporting. You don’t really get your “fresh start” in bankruptcy, if your after-bankruptcy credit report is wrong.
You should really check your credit report, with your lawyer, a couple months after your bankruptcy is over. (And keep checking it.) Don’t wait until you are turned down for your after-bankruptcy mortgage.
I promise to fight for you to make your after-bankruptcy credit report right, for as long as five years. You can read more about that, here.
Most bankruptcy lawyers will have nothing to do with after-bankruptcy credit reports; and sometimes it makes a enormous difference.
Ford Credit Has the Right to Pick Up You Car When you File Bankruptcy, Even If You Are Current.
Actually, under the 2005 bankruptcy reform, any car finance company can pick up your car when you file bankruptcy. But Ford Motor Credit is the only national lender that does that. (A few states have laws that protect you. Virginia, where I am, isn’t one of them.) Most lenders would rather get payments than get the car.
Ford wants to you to reaffirm your debt with them. When you reaffirm, you take the debt complete out of the bankruptcy. After a short waiting period, you can’t change your mind.
As your lawyer, I don’t like reaffirming debts. If you reaffirm and can’t make the payment, you get an after-bankruptcy repossession on your credit. An after bankruptcy repossession pretty much guarantees seven years with bad credit. An after bankruptcy repossession (on a reaffirmed car) probably means an after bankruptcy judgment and an after bankruptcy garnishment. A real mess.
I don’t like reaffirming your car loan with Ford Motor Credit. On the other hand, you may not like walking to work.
On the other hand, you probably don’t want to walk to work.
So before you reaffirm with Ford Motor Credit, I’m going to ask you some questions.
Are you really happy with this car? Has it shown any signs of mechanical trouble?
Do you have some other way to get around? Do you have a junker that will be good for a year or two, until you get good credit?
Could you in fact get around on bus or Metro for a while?
Did Ford give you a really good deal when you bought this car.
After we talk about all that, maybe you’ll decide to let Ford take the car. If you insist, you and I will sign the reaffirmation and Ford will let you keep the car. (As long as you keep up the payments.)
Because reaffirmations are so dangerous, the law requires your lawyer–that’s me–to sign off that I think it’s a good idea. (Usually, I don’t think it’s a good idea. “Let them eat steel,” is what bankruptcy lawyers like to say.) And many people also have to explain it in person to the judge. Because of the long and annoying paperwork, here, and possible court appearance, I charge another $200 to handle car reaffirmations with Ford.
If you give the car back to Ford, it won’t take that long to buy a new one at a good price.
I tell people to wait three years, if possible, after the bankruptcy, in order to get the best deal on new car financing. (And whatever you do, do NOT go out and finance a car at 21% the week your bankruptcy is final.) But even a year and a half after bankruptcy, you can rebuild your credit and get a car loan at a good rate. Alice got a Nissan, from the dealer, at 4.76% barely a year after.
Usually, unless the dealer is having trouble selling cars, you’ll get your best rate on a car from a credit union.
More often than they should, debt collectors contact people after the bankruptcy is over.
I’m Northern Virginia Bankruptcy Lawyer Robert Weed, and I hate it when people do illegal stuff to my customers. When debt collectors pester my clients after bankruptcy, I sue them. That’s why I was glad to see what the Second Circuit decided yesterday in the case of Garfield v Ocwen.
Here’s what they said. If a debt collector bothers you after bankruptcy and a debt discharged by the bankruptcy, you can sue them under the Fair Debt Collection Practices Act. Why is that important? Because the Fair Debt Collection Practices Act gives you the right to sue them for $1000.00 in statutory damages.
Here’s the US District Courthouse in Alexandria, where we’re suing a debt collector under the FDCPA for an after bankruptcy violation.
That right, to sue under the Fair Debt Collection Practices Act, is on top of your right to complain to the bankruptcy judge.
If there’s a violation while the bankruptcy is going on, the bankruptcy court is probably where you want to be. Because the bankruptcy code provides for “punitive damages” for continuation of collection acts while the bankruptcy is still on. (That’s 11 USC 362(k).) That means the judge can slap them as hard as he wants.
(You can read a good example of a judge slapping them hard, in the case of Parker v. Credit Central. Credit Central kept going in court against Marion Parker, even after her bankruptcy was filed. The bankruptcy court awarded Parker $10,000 in punitive damages and $30,000 in legal fees. In December 2015, the 11th Circuit Court of Appeals said the bankrutpcy court was OK to do that. “Because Credit Central committed the type of conduct that the automatic stay was created to prevent, punitive damages were appropriate to serve the dual purposes of punishing Credit Central for its indifference to the law and Parker’s rights and to deter it from committing future similar misconduct.”)
Once the bankruptcy is over, all you can get from the bankruptcy court are actual damages. (For example, if you got garnished, you could get the garnished money back; and if the garnishment caused bounced check fees, you could get those too.) But nothing for your trouble. Nothing to slap their hand, to remind them to respect the law.
Debt collectors understandably don’t like to get $1000.00 slaps on the wrist, under the FDCPA. So they argue that the Bankruptcy Code should be the only law that applies. The Ninth Circuit bought that argument in a decision called Walls v Wells Fargo, back in 2002. Most other courts have ignored it, but this past summer a Federal Judge in Roanoke agreed. Lovegrove v Ocwen.
We’re fighting this issue right now, in the US District Court in Alexandria, VA. We are going after McCabe, Weisberg & Conway for this after bankruptcy letter. On the second page, it says “if you have obtained a bankruptcy discharge, this is not an attempt to collect a debt from you.” But it also says, “THIS IS AN ATTEMPT TO COLLECT A DEBT.” And on the first page it says, “The amount of the debt is $325,547.42.”
We think that violates the FDCPA in two ways. First, it’s a false statement of the “amount or legal status of any debt.” Second, saying that it “not an attempt to collect a debt” and that “THIS IS AN ATTEMPT TO COLLECT A DEBT”–that’s “misleading.” Both of those violate the FDCPA at 15 USC 1692e.
The Judge here will let us know what she’s decided, on January 29, 2016. I’ll keep you posted.
Well, we lost. Judge Brinkema told them that their letter was confusing–it confused her, she said. But she told us that our only complaint was with the Bankruptcy Court. She wasn’t about to bother with it, under the FDCPA.
This issue went to appeal at the Fourth Circuit in a case calledDuBois v Atlas 15-1945. (But the Fourth Circuit ducked it. They ruled against the consumer in a different way, and said they’d take up the issue we’re concerned about another day.) So for now, we are out of luck on this. We have three or four cases, even clearer violations, that are on hold right now.
In a new decision called Owens v. LVNV, the 7th Circuit said that applying to be paid in a bankruptcy on a debt that’s too old, is NOT an FDCPA violation: because it’s not misleading. (The consumer has a chance to figure it out if they look, apparently.) But any false statement during (and presumably after) the bankruptcy would be an FDCPA violation. Judge Brinkema is clearly out of step when she said that the consumer can only complain to the bankruptcy court. We hope the 4th Circuit will tell her that, soon.