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30

Aug 2020

Why You Should (Sometimes) Ask for Arbitration

Posted by / in Before Bankruptcy, Weekly Posts /

Why You Should (Sometimes) Before Bankruptcy Ask for Arbitration

The fine print in your credit card agreement likely gives you–and the credit card company–the right to ask for arbitration.  You can guess that the fine print isn’t in there to help the consumer, but sometimes before bankruptcy you can use arbitration for your benefit.

How Can Arbitration Before Bankruptcy Help You?

Suppose you might need a little more time before you are ready to file bankruptcy. If there’s a warrant-in-debt, and you obviously do NOT want to get garnished. You can ask for a trial and a bill of particulars. Then, for your grounds of defense, you can ask for arbitration. Asking for arbitration can get you another month or more to get ready to file bankruptcy.

Stalling for time is not the idea of arbitration. But since the credit card companies put it in their agreement for their reasons, you have the right to use arbitration before bankruptcy for your reasons.

What should be the Purpose of Arbitration?

The idea of arbitration to to handle things that judges aren’t good at. For example, baseball salaries.

Baseball salary arbitration

Baseball players through their union and the owners have agreed to salary arbitration

Baseball players, through their union, have salary arbitration.  If there’s a pay dispute between the player and the club, a panel of arbitrators decide what the salary should be. There’s no reason for judges to be involved, that’s now what judges do.

A second advantage to both the club, and the players, is that the process is secret. Suppose a baseball club says, “we don’t want to pay what Joe is asking, because he can’t hit the low fastball.” It’s bad enough that the player hears his club bad-mouthing him. It would be even worse to read it in the sports page.

Is Credit Card Arbitration is Anything Like Baseball Arbitration?

The good reasons why arbitration makes sense for baseball salaries does NOT apply to credit card arbitration. If you get sued on a credit card, that’s the kind of thing judges decide all day long. Do you owe the debt? Who do you owe it to? Have they done something wrong trying to collect it? Deciding these things is what judges do.

So why do the credit card companies put arbitration in their fine print agreements? As long as consumers don’t fight back, the credit card companies like judges.  But suppose there’s a problem. Suppose the credit card company–or debt collector–has done something dirty. Then they want to keep it secret.

They put arbitration in their agreements, so they can take your case to a secret place, if they want to. In arbitration, you lose the right to appeal. You have fewer rights to get evidence. And you can’t join with other consumers who have been done dirty in a class action. That’s why the credit card companies are arbitration in their fine print agreements.

Why is Credit Card Arbitration Allowed?

If you had me on the Supreme Court, I’d allow arbitration for baseball players. Because it’s in the union contract. I wouldn’t allow arbitration on credit cards, because you have a constitutional right to a trial by jury. That’s the Seventh Amendment, which gives American the right to a trial by jury in disputes of over $10.00. The actual Supreme Court has said that doesn’t apply to you. Because when you used the credit card, you agreed to the arbitration.

Government can’t take away your constitutional rights, based on some fine print you never even read. But big companies apparently can.

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07

Jul 2020

Get Your Money Out of Wells Fargo

Posted by / in Before Bankruptcy, Blog, Weekly Posts / No comments yet

If you are filing bankruptcy, Get Your Money Out of Wells Fargo.

People filing bankruptcy get kicked when they are down, if they bank  at Wells Fargo.

Wells Fargo sees your bankruptcy on your credit report and they freeze your checking and savings account.  At least they do if you have more than five thousand dollars in their bank.  (They have said in court they only do it if you have more than $5000.00.  But they don’t just freeze the amount over $5000.00–they freeze it all.)

Get your money out of Wells Fargo

Why would a bank beat up their own customers?

Why Does Wells Fargo Beat Up Their Own Customers

So, why would Wells Fargo beat up their own customers like this? They claim they are required to ask the bankruptcy trustee if he wants the money. Although they are the only bank that does this, they have adamantly stuck to this policy for years.

It’s hard to make sense as a business proposition. I personally have probably cost them nearly a thousand customers over the years.  (At one of our national meetings of NACBA, a former NACBA president joked maybe they did it to collect bounced check fees.  That seems a small reward for losing lifetime customers.)

Anyway, get your money out of Wells Fargo.  (A couple weeks after the bankruptcy is filed, you can go back there if you want.)

I first wrote about this problem in 2011.

I first wrote about this Wells Fargo problem in 2011

Since then several lawyers have tried to fight this. As far as I can tell, the bank won every time.  

So, get your money out of Wells Fargo.

 

 

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05

Aug 2018

How a cheap car payment can help you on the bankruptcy means test.

Posted by / in Before Bankruptcy, Chapter 13 /

How a cheap car payment can help you on the bankruptcy means test.

The 2005 Bankruptcy law, known BAPCPA or sometimes BARF, was designed to make bankruptcy much more painful for families making over the average income in each state.  For Virginia, in the summer of 2018, that’s $103,549 for a family of 4. Or $111,949 for a family of five. 

Bankruptcy means test applies to families of 5 over $111,949

Bankruptcy means test applies to families of 5 over $111,949

The bankruptcy means test determines whether families making over that average income can be approved for Chapter 7 anyway.  And if not eligible, how much they have to pay for five years in Chapter 13.

The bankruptcy means test formula is arbitrary.  It was designed to be arbitrary. Congress, and the credit card companies, thought that bankruptcy judges were too easy.

Most families around here, making too much to get approved for Chapter 7, end up failing at Chapter 13. Without careful Chapter 13 planning, the bankruptcy means test will put you into a Chapter 13 plan that you are not able to afford for five years.

Here’s one example where careful Chapter 13 planning can make all the difference. 

John and Tanya is live Woodbridge in a house they own with two children.  John is stationed at Joint Base Andrews; Tanya is home with the kids, one child needing special attention.

Trying to handle the debts, they have gotten by as a one car family, and John’s car now has 110,000 file on it.  

If John and Tanya go into Chapter 13 now, they get a budget allowance of $497 for the car payment (regardless of what the payment really is) and $221 for gasoline, car repair and car insurance.  It will be impossible for John to hold his car operating expenses, gas, repairs, insurance, below $221 for five years on a car that already has 110,000 miles.

John and Tonya  talk to me before their credit is totally shot. So I can point out to them that they are much more likley to survive Chapter 13 for five years, if they go out and get a low payment second car now.

Tanya buys a brand new Nissan Versa, sale price $13,500, at 4.5% for five years. Her payment is $227.00 monthly.  That $227 payment counts as $497 on the means test.  That frees up for the family budget $270 a month. (That’s $497 means test ownership allowance, minus the $227 actual payment.) That $270.00 can go to pay things like sports for the kids, which the bankruptcy means test budget does not allow.

And they get a second $221 monthly for operating expenses.  John drives the new Nissan Versa to work, and Tanya takes the older car for errands around town. They can hold their gasoline, repair and insurance below the new total operating allowance of $442.

(I should note here that it would be illegal for me to tell John and Tonya to go out and finance a car.  But it was legal for me to tell them that it’s legal for them to do it.)

People say that bankruptcy should be a last resort. But you don’t want it to be a last minute, last resort.  Careful Chapter 13 planning is very important for getting the best result.

 

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