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30

Apr 2013

Getting Sued After a Short Sale?

Posted by / in Before Bankruptcy, Chapter 7, The 2005 Bankruptcy Law / No comments yet

Getting Sued After Short Sale?

Getting sued after a short sale is highly probable.  Saw three couples this month who needed to file bankruptcy, because they were getting sued–garnished in one case–by the second mortgage after a short sale.

It was surprising that they were surprised.   At the peak of the crisis, four or five years ago, second mortgages would take what they could get at a short sale and let the rest of it go.  But they don’t often do that anymore.  (At least not without intense negotiation.  I’ve seen it once in the last year.)

And usually they make you sign that you KNOW that you still owe the money.  So, where’s the surprise?

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24

Feb 2013

How to Tell Your Bank to Stop Payday Loan Automatic Withdrawals

Posted by / in Before Bankruptcy, Weekly Posts / 154 comments

How to Tell Your Bank to Stop Loan Automatic Withdrawals

Stop those automatic withdrawals! I usually tell people that when we first talk. Even before we file the bankruptcy.

Internet payday loans usually set up automatic withdrawals when you get the loans. Traditional finance companies, like Mariner and One Main, often do, too.

When you try to stop them, people tell me it’s hard to get their banks to help.  (Today’s  New York Times said the same thing.  The Times says the banks don’t cooperate because the banks love those overdraft fees.)

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26

May 2012

Before bankruptcy: How to put Mom on your car title as lien holder

Posted by / in Before Bankruptcy / 25 comments

Before bankruptcy, sometimes you need to borrow money from Mom.  You might want to borrow that money and put her on your car title.

Now Congress made it illegal for me, a bankruptcy lawyer, to advise you to borrow money.  But the Supreme Court said it’s legal for me to tell you that it’s legal for you to do it.  (You may have to read that twice.)

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27

Jun 2011

Jewelry, my forms and your bankruptcy

Posted by / in Before Bankruptcy / No comments yet

Last fall, Judge Robert Mayer, our bankruptcy judge in Alexandria, tossed out the bankruptcy of a guy for lying on his forms about the value of jewelry.  This was a guy who owed a lot–upwards of $300,000–and he’s now stuck.

This was an extreme case–the guy had spent way over $100,000 on jewelry within two years of the bankruptcy.   (This is one reason I like the specific Experian report I want you to get.  experian.com/reportaccess.  That report gives me your balance history going back two years.  So if you put $100,000 on a jewelry credit cards–I’d know.)

Valuing jewelry at 2 cents on the dollar got this bankruptcy thrown out. About 12 cents on the dollar would not.

He valued it at about $2000.  Now Judge Mayer said the used value of jewelry is certainly not what you paid–but it’s a lot more than two cents on the dollar.

Judge Mayer said the guy knew about what it was worth.  About 12 cents on the dollar.  How did he know?  Because right before he filled in his bankruptcy forms, he had sold some of it.  (That’s one of the many reasons I ask you on my forms what you have given away or sold in the last two years.  And why its a good idea for you to answer that question.)   He lied to the court about selling stuff too.

If this guy had put down the jewelry was worth $10,000, instead of $2000, his bankruptcy probably would have been approved.  (And told the court he had sold some of it.)  That was a mistake that cost him any chance he will ever have of getting out of debt and back to good credit.

How should you value your jewelry?  One way Judge Mayer says, is to take it to a pawn shop or look on Ebay for similar stuff.   Another way would be to take 15% of the retail price.  That should be an amount that Judge Mayer will be happy with.  And unless you spent $100,000 on it, it should be an amount we can protect.

This guy had a very complicated situation; sometimes people with complicated situations want to come in and talk, instead of filling in my forms, and then coming in to talk.   The forms are important.

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14

May 2011

Before bankruptcy: Do debt collectors tell the truth?

Posted by / in Before Bankruptcy / 2 comments

Before I became a bankruptcy lawyer, I thought that successful companies were generally pretty honest.  I would have guessed they were more honest than most people–otherwise why were they so successful.  Or at least, they’d be honest because they had more to lose.

Virginia Bankruptcy lawyer Robert Weed

Before I became a bankruptcy lawyer, I thought big companies were honest.

Now I know better.  I can’t compare the honesty of the average company, with the honesty of the average person.  But I do know that being big and successful does not make a company honest.

Check out this article in the Wall Street Journal about the debt collector, Portfolio Recovery, and a lady named Martha Kunkle.

When a debt buyer sues a consumer on a charged off debt, they have to prove the amount of they debt.  And they have to prove that they now own the debt.

Portfolio Recovery is one of the biggest and most profitable debt buyers in America.  Their website tells you they have been often named one of the best, and fastest growing, small businesses in America.  They sue thousands of people every year.  And up through 2008, they did it thousands of times based on sworn statements by Martha Kunkle.

Sworn statements by Martha Kunkle that she carefully checked the records; sworn statements by Martha Kunkle that she knew the amount of the debt; sworn statements that she knew who had the legal right to collect that debt.  There was a big problem with that.  Martha Kunkle died in 1995!

This problem did not originate with Portfolio.  The people signing Ms Kunkle’s name were employees of Washington Mutual–and one of them was Ms Kunkle’s daughter.

Still multiple people, with very different handwriting, were signing a name that didn’t belong to any of them.  And Portfolio, without any investigation at all, was suing people based on those fraudulent signatures.

Lots of people file bankruptcy because they are being hounded by debt collectors.  (And for most of those people, filing bankruptcy is the smart thing to do. )

But, if you start to feel bad about having to file bankruptcy, remember this.  As long as you put your own name on your bankruptcy court papers, you are more honest than a lot of those debt collectors.

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26

Mar 2011

Before bankruptcy: Can I go to jail if I ignore this summons?

Posted by / in Before Bankruptcy, warrant in debt / 35 comments

Around 100,000 people a year get arrested because they owe unpaid bills and ignore a court paper.  Does this happen in Virginia.  Yes!

I’m a Virginia bankruptcy lawyer.  About one-third of my clients don’t come to see me until the sheriff brings court papers to their door.

Then it’s panic time!  Here are questions people ask.

“What do these papers mean?”

“Is it too late to file bankruptcy? ”

And the big question, “Can I go to jail?”

First the good news.  In case you didn’t learn this in school, debtor’s prison was abolished in America in the 1830’s. You can’t go to jail for not paying your debts.

Arest for ignoring summons to answer interrogatories

You can't get arrested for not paying your bills. You can get arrested for ignoring court papers.

Here’s the bad news.  You can get arrested for not appearing in court to answer questions from your creditor.

The Wall Street Journal found that over 5,000 people were arrested for that last year in just nine big counties.   (If smaller counties did the same thing, and I hope they don’t, that would calculate to 100,000 arrests each year.)  Wow!

Can that happen to you?  Yes.  Here are the steps that could get your arrested for a debt lawsuit in Virginia.

The first paper you get is a warrant in debt.  Warrant makes it sound worse than it is.  (And just ignoring court papers is never a good idea.)  The warrant in debt cannot get you arrested.  It’s the paper when a bank, credit card company, can loan or debt collector says, “hey, you owe us this money.”  People often  call the lawyer for the creditor when they get a warrant in debt and ask, “do I have to go to court.”  The answer you get is, No.  But when you don’t go to court you admit you owe the money.

Once you miss that first court date, the machinery of the law goes to work to collect money from you.  If the creditor knows where you bank, or where you work, they can file papers for a garnishment.   You get notice of the garnishment about the same time you find out your bank account is frozen or your pay is short.  There’s a court date on the garnishment and people think that’s there chance to dispute it.  It’s not.  That’s the day the bank or your payroll is supposed to turn the money in.  When you didn’t show up at the warrant in debt court date, you automatically gave the creditor the right to garnish you.

If the creditor doesn’t know where you bank or work, they can file a “summons to answer interrogatories.”  That paper tells you, come to court and answer our questions so we can garnish you.

Some people think a “summons” sounds less dangerous than a “warrant.”  So if they ignored the warrant in debt, they should be able to ignore the “summon to answer.”  Bad idea.

The summons to answer comes with an “or else.”  If you don’t appear, the judge can order you arrested.  Usually you get one more chance.  Your last chance is called a Rule to Show Cause.  The show cause tells you to come to court to explain why you shouldn’t be arrested.  (If you explain, “Sorry, I didn’t know, I’m here now”–that usually works. )

If you miss the “show cause,” the judge will issue a capias.  Capias is an order to the sheriff to pick you up and bring you in.

That’s where you can end up if you ignore court papers.  So if you get a warrant in debt for a bill you owe and can’t pay, why start down that road at all?

Bankruptcy is a new start in life and a clear field for future effort. That’s usually a lot better than a free ride to the court house courtesy of the sheriff.

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07

Mar 2011

Before bankruptcy: Stopping automatic withdrawals.

Posted by / in Before Bankruptcy / 2 comments

<h2>Before bankruptcy: Stopping automatic withdrawals</h2>

 

While trying to avoid bankruptcy, people sometimes authorize debt collectors to take monthly withdrawals from their bank accounts.   (Or authorize withdrawals by these “debt settlement” scams.  Or credit card companies or bank loans.)

When people face the fact that bankruptcy is the better way to go, they struggle with turning off those automatic withdrawals.

A bank with good customer service should be happy to help, if you explain the problem to them.   So I’m constantly surprised at how often my bankruptcy clients report they won’t won’t help–and act like it’s not their problem.

The law–the Electronic Transfer of Funds Act–places the responsibility squarely on the bank.

Here are the steps the law says you have to take:

First, tell the debt collector (or debt negotiation scam or creditor) that they are no longer authorized to take money out of your account.  (Keep notes.)

Second, tell your bank.  You can do it orally or in writing.  I like taking a letter into the branch.  Show them where on your statement the money came out last month–and say that’s no longer authorized.   You need to talk to the bank at least three days before the next payment is scheduled to come out.

If the money comes out anyway, tell the bank to put it back.  Orally or in writing; obviously writing is smarter.  They have ten days (ten working days–two weeks).

If the money doesn’t come back, you can sue.  You get the money back, plus money to pay your lawyer, plus a penalty of up to $1000 thrown in.  Not bad.

The problem comes up if you agreed to such big payments, you can’t make the car payment if it takes the bank two weeks to get the money back.

In that case, you need to close the account.

Just last week I had a couple see me about bankruptcy.  They had an automatic withdrawal set up an a loan (not a credit card) owed to a Capital One Bank.   They called Capital One and said those withdrawals are no longer authorized.  “Can’t stop this month,” they were told.  “We need 15 days’ notice.”

(Fifteen days notice!  The law says a transfer is “unauthorized” if they don’t have your actual permission.  And taking money from your bank account, unauthorized–well, folks used to call that stealing.)

bank check

Back when I went to law school, your bank wouldn’t let someone take money out of your account, unless they had a signed check.

They then called their own bank–the law says you need to give three days notice to your bank.  The bank said, sorry.  We can put a stop payment, but when Cap One tries a second time, it will go through.

What now?  I told them, go back and close your account.  When they went down there–miracle of miracles.  Now they are told, don’t need to close your account.  We can stop that money from coming out, no problem.  And they did.

What’s the lesson?  The whole idea of banking is this.  Your bank pays people you want paid–and does NOT let other people take your money.  (Not without a court order, anyway.)   The law doesn’t allow your bank to give your money away.  And you shouldn’t allow it either.

This is one area where the law is clearly on your side.

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06

Feb 2011

Before bankruptcy: "Can debt collectors call my neighbors?"

Posted by / in Before Bankruptcy / 7 comments

I’m a Virginia Bankruptcy Lawyer.   I talk to a lot of people in financial trouble.  I talk to a lot who are harassed by debt collectors.

Many people–before they decide to file bankruptcy–don’t know what to tell debt collectors.  Often, they just stop answering the phone.

That can lead to debt collectors calling your neighbors.  That’s probably illegal.

Before bankruptcy, can debt collectors call my neighbors?

Before bankruptcy, can debt collectors call my neighbors?

The Fair Debt Collection Practices Act (FDCPA) says debt collectors can talk to people other than you.  But only “for the purpose of acquiring location information.” They cannot talk to other people for other reasons–like asking you to return their call.

That means it’s OK for them to call your neighbors and ask, “Does Virginia Consumer lives next door?”  But it’s illegal for them to say, “Can you ask Virginia to call me?”  Which is what they  often do.

I saw this news release a few months ago, that makes me wonder if even calling to ask “Does Virginia live next door?” isn’t nearly always illegal.

This news release talks about a service that offers “real-time . . .  enhanced … skip trace service.” It talks about how they check more than four billion records–to find out where you are living right now.

Probably you are living where you’ve lived last month and the month before–and not answering your phone does NOT mean you moved.   So they don’t need to acquire location information.  They already have it.

For our bankruptcy clients,  our law firm sues debt collectors for calling neighbors–but only after you have started answering the phone, again.  I’m wondering if we should start suing every time.  At least if you’ve been living at the same place for six months or more.

Since I’m a bankruptcy lawyer, I want to say one more thing:   If you have debt collectors calling, on a debt you do owe, you should think seriously about filing bankruptcy.

If you need a bankruptcy lawyer in your area, you can find one at the National Association of Consumer Bankruptcy Attorneys.  (NACBA).

If you want to find a lawyer who sues debt collectors, look at the National Association of Consumer Advocates.  (NACA).

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22

Jan 2011

Before bankruptcy: Don't pay off the car!

Posted by / in Before Bankruptcy / 174 comments

“In bankruptcy, everything is upside down.  Bad is good; good is bad.”  I tell people that all the time. What does that mean?

For the bankruptcy court to approve your bankruptcy, we have to show why you can’t afford to pay.  It’s good for your financial situation to be bad. Things you do to cut expenses to keep paying your debts–they usually come back to bite you.  It’s bad to be good.

Early January 2011, the Supreme Court, in a decision called Ransom, added keeping your junker car to the list of things that make it harder to get your bankruptcy approved.

I want to be really clear on what this means to people like you.  Suppose you could have traded in your old car two years ago on a new one.  But you knew you couldn’t afford the car payment and still pay your credit cards.  So, you kept the old car, and kept trying to pay your credit cards.   According to the Supreme Court, that can make you a bankruptcy abuser.   Good is bad.

If you got that new car–and then realized you couldn’t afford the credit card bills–the Supreme Court makes it much easier to get your bankruptcy approved.  Bad is good.

bankruptcy abuser driving older car

Still driving that old car while you try to pay your debts? The Supreme Court says that makes you a bankruptcy abuser.

The Supreme Court decision explains the car ownership expense in the bankruptcy means test.   In the budget you were assigned by Congress in 2005, you are allowed to claim $496 for your car payment–regardless of what the payment is.    You get twice that for two or more cars.

Most judges agreed that you got that $496 even if the car was paid for.  Their theory was even if you didn’t have a payment today you would need one sooner or later–and the means test is about whether the court will make you keep paying for five more years. (Also the IRS  standards referred to in the law say One Car and Two Cars.  Not One Payment and Two Payments.)

The Supremes disagreed.  You get the $496 as long as there’s even one payment left, but if it’s paid for, you don’t get it. That can make a big difference to a lot of people–having to keep paying the credit cards $496 a month for five more years.  That’s twenty nine thousand dollars!

OK.  So if you are in financial trouble, you now know to come to see me before the car is paid for.  And we’ll file your bankruptcy in a hurry.  That’s easy.

But suppose the car is already paid for.  Now what? That brings is to another Supreme Court decision, called Milavetz v United States.

Congress in 2005, when they wrote this complicated means test into the law,  also made it illegal for me to “advise” you to incur more debt in “contemplation of filing a bankruptcy case.”  Since lawyers are supposed to tell the truth to their clients, the Supremes gave me some wiggle room on that.

Some wiggle room.  I’m allowed to “talk fully and candidly” about incurring more debt.  I’m not allowed to “advise” you to abuse the bankruptcy system. But we can talk about the “legal consequences” of different courses of action.   So?

I’m not allowed to tell you to run up the credit cards just to have a bigger bankruptcy.  (That would be bad advice.  You’re not allowed to do that, anyway, and I never advise someone to do something they are not allowed to do.  They do often pick up on it, too.)

I am allowed to tell you it will be three years after bankruptcy before you can get a car loan at a good interest rate.  If your credit is still good now, and you’ll need a car soon, then I can advise you that now would be a good time.   I’m allowed to “advise” that, because you’re not incurring new debt “in contemplation of filing bankruptcy.”  You’re incurring new debt “in contemplation of” needing a car at a good interest rate.

But suppose your credit is bad already, and your junker car won’t get you through five years.   Am I allowed to tell you that you’re looking at a five year payment plan, driving around for five more years in that junker, unless you finance a car now?  Am I allowed to “talk fully and candidly” with you that?

I never advise anyone to get a car loan when they have bad credit–unless there’s no other way at all to get to work.  But, to be fully candid, I have to talk to you about the “consequences.”

Getting a car while your credit is bad may mean a $500 a month payment for five years on a 2002 Pontiac.  Not getting the car may mean making a $500 a month payment for five years to the bankruptcy court to pay your credit cards.   Which is worse?

Of the two choices, getting the car is better for your credit.  Getting the car means you might be able to get a mortgage loan in less than three years.  Otherwise, you’re talking seven years.

And getting the car means you’re driving that 2002 Pontiac with 70,000 miles, which is at least better than the 97 with 120,000 miles that you’ve got now.

“Candidly,” I have to tell you that you can figure that out for yourself.

Maybe I should stop here.

Some lawyers have told me privately that they think their clients should get a title loan on that older car.

I’d never “advise” getting a title loan.  Title loans mean you get $3000 on your car, and you have to pay $500 per month FOREVER.  That’s never a good idea.    But if we discuss it fully, suppose you could use your tax refund to pay off the title loan after one month.  Then it costs you $500 to borrow $3000 for just one month.  And as a bonus, you avoid having to pay the bankruptcy court for five years.

Any better ideas?  Suppose the junker really needs work, which you can’t afford.  And mom has offered to let you borrow her car for a few months, for free.

Free is usually good.  But, talking candidly now, if you offered to lease mom’s car for six months, rather than borrow it, now we can get your bankruptcy approved.  I’m allowed to tell you that in a “robust discussion.”  But I have no advice on the matter.

Just before the Milavetz decision came down, I had some clients ask me if they were “allowed” to buy a car before filing bankruptcy.  I told them I couldn’t tell them to do it, but I could tell them they were allowed to do it. The enforcement people from the Justice Department asked some very pointed questions about that.   With help of the Supreme Court, they finally agreed I was allowed to tell my clients they were allowed to finance a car.

Keep this in mind.  If you decide to trade in the 96 Chevy on the 2002 Pontiac, it’s not because I told you to.   I’d never tell you to do that.

If you do it, it’s because you decided.

Remember, you didn’t read it here.

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17

Oct 2010

Before bankruptcy: Why I like experian.com/reportaccess

Posted by / in Before Bankruptcy / No comments yet

Before bankruptcy, I like to meet with you and go over your credit report.    The credit report I like best is at experian.com/reportaccess.

One reason I like that report is big print.  (I’m 62 and I’ve worn glasses since I was 8.)  But the other reason is that Experian report shows the balance history of your credit cards.

We don’t get that balance history on credit reports from freecreditreport.com.  Even though freecreditreport.com is owned by Experian, the report you get there doesn’t have that detail.  And the print is a lot smaller.

(I hate them for another reason, too.  I don’t think something is “free” if you have to sign up for an annual subscription to get it.)

Knowing your balance history is important in the timing of your bankruptcy.

The bankruptcy code, at 11 USC 523(a), provides that the bank can object to discharging their debt if you made a “false representation.”

The “false representation” they like to bring up is the small print when you sign a charge slip.  The small print that says something like  “I will pay according to my credit card agreement.”

If you haven’t made six payments since your last big charge, there’s a good chance the bank will object to your bankruptcy.  They say your claimed you would pay when you know you couldn’t.  That’s the “false representation.”

If they file objections, we can fight back and win.  Especially if there was a change in your situation–you lost your job, you got sick, your husband split.  If you have something like that, the judge will probably side with you.

But unless there’s something specific you can point to, it’s a good idea to make six payments after your last big charge, before filing bankruptcy.   A credit report with your balance history helps me see when the last big charge was.   That helps us plan a bankruptcy that gets approved without objections.

PS.  In the bankruptcy court here, I see more objections filed by Chase Bank credit cards, than any of the others.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES