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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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