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29

Aug 2010

Before Bankruptcy: Do You Need to Change Banks?

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As a Virginia Bankruptcy lawyer, I often tell my clients to “change banks.” Why?

If you have been hit with and ignored a warrant in debt,  and the return date is past, you may be about to be garnished.  What checking account did you use when you last paid that debt?  Since they know where it is, that’s the one you can expect will be first garnished.  Unless we can file your bankruptcy right away, it’s time to change.

(Changing your account number is not enough.   A garnishment will hit all the accounts you have at that bank.)

You also need to change if have a loan where you bank .   If you are falling behind on your second mortgage–for example–with Bank of America and you save or check with Bank of America, they can dip into your account to pay themselves.   Credit Unions can also pay themselves for credit cards.  Banks can’t.

What do I recommend? I like to say that the universe is full of banks.  You want to go to a bank you never used before.  And one you don’t owe money to.

Some people’s before bankruptcy credit is so bad they cannot open an account at most banks.   I recommend TD Bank, which has a number of locations in Northern Virginia.   I send TD four or five people a months, with no complaints.  Many people  have told me TD is their all-time favorite.

(TD is also right across the street from the bankruptcy court.  They are always very nice when I need change for parking.)

Woodforest Bank, found in some Northern Virginia Walmarts, will also open an account for most people with really bad credit.

Even if they haven’t done it before, your bank, if you owe them money, can freeze your account and help themselves to what you had there the day the bankruptcy was filed.

After bankruptcy, your account is safe.  Being able to keep your money safe from offsets and garnishments is one important reason people file bankruptcy in Virginia.

Here are the steps.  Stop the direct deposit.  Spend down the money you have in your existing account:  pay bills, buy groceries, whatever.  Open a new bank account.  Start the direct deposit going to the new bank.

There’s a very remote danger your bankruptcy could be challenged if you transfer money from the old bank to the new one.  So spend that money on real needs as quick as you can.  Switch the direct deposit to the new bank.

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29

Jul 2010

Before bankruptcy: beating a warrant in debt

Posted by / in Before Bankruptcy, warrant in debt / 66 comments

Bill, not his real name, is filing bankruptcy with me in October.  (He needs a couple more months to finish everything to get his bankruptcy approved.)

Virginia Bankruptcy Lawyer Robert Weed

Virginia Bankruptcy Lawyer Robert Weed

In the meantime, he received a warrant in debt.  Midland Credit Management, a big debt buyer, was suing him on a old Chase card.  He didn’t want to get a judgment and a garnishment while we were waiting for the right time to file the bankruptcy.

Bill knew, from my warrant in debt website, that he had to go to court on his return date, and tell the judge he wanted a trial.  He had an easy basis for saying he wanted a trial.  “I never heard of Midland Credit Management.  I don’t know who they are or what this is about.”

He asked for a bill of particulars, and Midland’s lawyer asked for grounds of defense.

When Midland submitted their bill of particulars, they wrote they had bought the debt from Chase, and Bill owed Chase $4822.

For Bill’s grounds of defense, he wrote to the court and Midland’s lawyer that there were no documents showing that Midland really bought the debt from Chase; and that Midland had no evidence of how much he owed Chase–they would need a witness from Chase to prove that.

Bill was nervous on his warrant in debt trial date, but it was easy.  When they called his name, the lawyer for Midland said, “Your Honor, this is our first dismissal of the day.”  The Judge then turned to Bill and scolded him slightly to be financially responsible.  Then he  said, you won today,  you are free to go.

Bill handled this on his own, but I had given him some tips.  One thing I said, if this is still America, you’ll win.  Nice to know this still is America.

Under Virginia law, Midland would be able to bring the same warrant in debt a second time.  But they won’t be able to move fast enough to beat our October bankruptcy filing.  (And they probably couldn’t prove it then, either.)

When we get to October, his bankruptcy will go fine.

PS  Here’s an update on March 30, 2011.  The Attorney General of Minnesota announced he is going after Midland, and their parent company, Encore.  He says they used robo-signed affidavits to sue people on in Minnesota.  In other words, Midland claimed they reviewed their records and had proof so-and-so owed them money–but nobody actually looked to see whether they really had that proof.  This press release would be something to bring to the attention of the Judge, if you go to court and fight Midland on one of these.

PPS.  Washington Post had a good article on beating Midland in May 2014.

In Northern Virginia, Encore’s Midland unit has filed 16,878 lawsuits from 2003 to March of this year in the district courts of five counties. The company won nearly two-thirds of those cases through judgments against consumers who either failed to appear in court or simply agreed to pay the amount.

Almost 20 percent of those people wound up having their wages garnished, according to a review conducted by The Washington Post. Debts range from as little as $53 to as much as $23,786.

The Post article includes a comment from a guy who calls himself “rogerramjetz.”  He says he used to work as a collection lawyer on exactly those cases.

A guy gets a credit card with an Account Agreement that charges him $137 to open the account the first time he uses the card, and the card has a $250 credit limit. He then buys a $35 iron and a $45 coat at Walmart with the card. He now owes $217 the next month, and when he doesn’t pay the bill, he accrues an interest charge of $5 at 29% interest. When he doesn’t pay the next month, the card accrues a late charge of $35, $5 in interest, and an overdraft fee of $35 a month, totaling $297. The following month, interest is $6, and the late fee is $35 and the overdraft fee is again $35. A year and a half after the initial $80 purchase, the account shows a $1600 balance to Providian Bank. Totally legal.

Providian then sells the debt to Midland for $0.17 on the dollar, or around $200, and gives the last statement the guy received for $1600 as evidence of the debt. Glasser & Glasser in Norfolk is promptly retained to sue the guy for $1600, with interest at 29%, and accrued interest since the default a year before totaling $500, while the Account Agreement is invoked for a “33.3% reasonable attorney’s fee, totaling $533” and court costs of $63.00. An affidavit from Midland and Providian is generated, and a sheriff delivers the Warrant in Debt to the guy.

Total sued for? $2,693, but we will gladly settle for a lump sum of eighty cents on the dollar, or $2,154. For an iron and a coat at Walmart. Or we will take a judgment and garnish 25% of your wages until paid, and in three years the balance will double again at 29% interest.

How do I know this? I worked for Glasser as local counsel.

“Roger’s” example may be extreme but it shows how small debts can lead to fairly big garnishments, with late fees, over limit fees, later over limit fees, legal fees and the rest are added in–the just 29% interest alone doing it’s magic.

What’s the lesson:  Many credit cards in bankruptcy have already been money makers for the credit card companies.   And if you are getting sued by people you never heard of, it’s time to talk to a lawyer.

 

 

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12

Jul 2010

Before bankruptcy: outlaw debt collectors

Posted by / in Before Bankruptcy / 3 comments

People who need  to file bankruptcy are often abused by debt collectors.

CNN Money reported Saturday that complaints against debt collectors to the Federal Trade Commission are up 50% from 2007 to 2009–and up another 15% this year.

“Harassing phone calls, abusive language and physical violence are becoming a bigger part of business as debt collectors struggle to round up money from people who don’t have it,” CNN reported.

People who need  to file bankruptcy sometimes feel too guilty to complain about these illegal threats.  My firm sues five or six debt collectors a month.  Two of three for harassment before bankruptcies are filed.  And another two or three for what they did after bankruptcy.   (There are a handful of lawyers nationally who sue debt collectors a dozen times a month, months after month. )

Most of what we sue on are what the collectors call “technical violations.”  Usually continuing to call after being told to call the bankruptcy lawyer.  Also, sending letters threatening to sue, when they don’t really intend to sue.   (We sometimes see otherwise law-abiding companies make seriously illegal threats when they are talking in Spanish to Spanish-speaking consumers.)

When the consumer is obviously reading from instructions given by his bankruptcy lawyer, most callers know to be careful.

Recently a handful of my bankruptcy clients have gotten threats of immediate arrest.  These are for payday loans that have been sold to outlaw debt collectors.  These outlaws clearly know they are illegal and don’t care.

We sued one of those outfits last falls and got a $10,000 judgment for our client–but there’s no chance to collect it.  (Although they had several US addresses, this outfit may not be in America at all.)

Suing to stop violations only helps when you are suing (mostly) honest people.   Really abusive collectors are just criminals.    Outlaw debt collectors use the telephone to threaten criminal arrest to extort payment.  They violate the Federal extortion statute, 41 USC 875(d).  They can (and should) be imprisoned for two years.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES