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01

Jul 2010

Watch Out for "Avoid Bankruptcy" Scams

Posted by / in Before Bankruptcy / 9 comments

Bankruptcy should be a last resort.    Most people want to look at all the alternatives before they file bankruptcy.  That makes some people easy victims of “avoid bankruptcy” scams.

I’ve talked to three people in the last ten days who sent ten thousand dollars or more to “debt negotiators.” They stopped when the sheriff brought court papers.  At that point, each one realized they had been scammed.  And they realized it was time to talk to a bankruptcy attorney.

Yesterday, I met Linda–not her real name.  This is her story.

When she signed up with this debt negotiator,  she had $98,000 in credit card debts. They were all current.  She had stayed current by living on the credit cards all month, and then her entire paycheck went to make the minimum payments.  She knew this couldn’t go on.

Ten months later, she got court papers for her$20,000 Bank of American credit card.  She had sent $11,119 over the ten months to the debt negotiator, and they had settled two credit cards for her.  One for $629 and one for $2190.   So, she had paid $8300 in legal fees, to get rid of $2819 in debts.  Not a good deal.

There’s a lot of income in Linda’s family, so she may end up in a Chapter 13 bankruptcy.

She is prepared for the worst case, which is this.  She may have to pay the bankruptcy court $300 per month for five years and have to pay me $3323.  That’s $21,323 to get rid of debts that now (with late fees) are over $110,000.   That’s a good deal.

Best case would be a chapter 7 bankruptcy.  Again about $3400 in legal fees, and the whole $110,000 would be wiped out at once.  That’s really a bargain.  If she had seen a bankruptcy attorney when she first contacted the scammers instead, she would have been an easy chapter 7.  Why is that?  What messes up her income eligibility is the new part time job her husband took on the weekends to try to make the payments.  Without that job, eligibility would have been fine.

I’d like to go after these debt negotiators for false advertising and get that money back.  (At this point it would go to the bankruptcy court to pay a little to the credit cards–but that was what Linda was trying to do with it.)  When I checked, I saw how careful they are to avoid any claim of false advertising.  Look at this:

“Some companies “promise” results and advertise exceptional settlements as commonplace. Legal Helpers Debt Resolution is different; we make no promises and will not guarantee you we can negotiate your debts to a certain percentage. We are experienced attorneys and trained legal advocates and adhere to the following minimum performance standard: If we do not reduce your debt by at least 35% of what you owe, we will refund your fees for settling that particular debt and still resolve the debt on your behalf.”

If you read that carefully–they are bragging that they “make no promises” and “will not guarantee.”  Well, they are telling the truth about that.  So its hard to make a false advertising case against someone who says they promise nothing.

I don’t know what to do.  These outfits have loads of money to spend on advertising, because they charge so much and do so little.   The best I can do is warn you.  If it seems too good to be true, it isn’t true.

My recommendation, if you want to try to avoid bankruptcy and work out lower payments, is Money Management International. They know what the credit card companies will agree to, because basically they were set up by the credit card companies. And they will try to give you an accurate estimate of what they can get your payment, including their fee, down to.

There are a number of other companies that are honest and do the same thing.  The National Foundation for Credit Counselling certifies counselors who a trained and tested on being able to help people, rather than scam them.

People who say they can do better than an NFCC member, in nearly every case, are lying.  What if you talk to Money Management or another reputable credit counselor and they cannot give you the help you need?  Then it’s time to talk to a bankruptcy attorney.

PS.  Just was sent this link to a Government Accounting Office study of these “avoid bankruptcy” outfits.  Thanks to Robert Brandt, a bankruptcy attorney in Alexandria VA, who saw my comments and passed on the study.

PS May 15, 2015

Thomas Macey and Jeffrey Aleman, the two lawyers behind Legal Helpers Debt Resolution, were suspended from the practice of law, by the Illinois Supreme Court, yesterday.   US Justice Department lawyers, who are also chasing Macey and Aleman, said, we’re not done with them, yet.

PPS  March 18, 2016

The Consumer Financial Protection Bureau won $40 million in fines, against Morgan Drexen, one of the biggest debt settlement operations.  They were also ordered to refund $133 million to the consumers they scammed.  You can read about that, here.  It’s not clear how much they will be able to collect.  This shows the CFPB trying to shut down the worst of these scammers.

Also, this week, we collected $1500 from Global Client Solutions.  Global handles the payments for nearly all of the hundreds of debt settlement operations.  They are one of six defendants we are suing on behalf of one of our clients, named Cary.  So far we haven’t heard form the other five.  They are due in court in mid April.  Cary got scammed out of $1133.  We’ve gotten $750 back so far (we got the other $750 for doing the work.)  Virginia law gives her triple damages, so we’re trying to get to $3400.

PPS Federal Trade Commission Shuts Down Some More Scams

The Federal Trade Commission shut down another set of these debt settlement scammers today.  Here are the details.

 


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30

May 2010

Before bankruptcy, does Navy Federal violate Virginia law?

Posted by / in Before Bankruptcy, Virginia Bankruptcy / 3 comments

Before you file bankruptcy, once you have a lawyer, you should tell your creditors when they call, “call my bankruptcy lawyer.”  The law assumes that most companies with a good name will leave you alone at that point.

In my experience that’s true of just about everybody, but not Navy Federal.

Navy Federal’s collection department says they will keep calling you day and night, until the bankruptcy is filed with the court.  And they do.  (Some people told us Navy Federal calls almost hourly until the bankruptcy is filed.)

I think this is a violation of Virginia law.  Code of Virginia § 18.2-429 makes it a class 3 misdemeanor to cause someone’s phone to ring with the “intent to annoy.”  And the law expressly says that it can still be illegal even if there is also an “intent to communicate.”

The punishment in Virignia for a class 3 misdemeanor is a fine of up to $500.

I think its pretty clear that when Navy Federal calls four or five times a day, after being told, “I can’t pay, call my bankruptcy lawyer, I have to file bankruptcy”–that’s calling with the intent to annoy.

This spring, we helped one of our clients sue Navy Federal to get them to stop violating Virginia law.  We didn’t get far.  Just because something is a criminal law violation,  does not mean a private citizen can sue to enforce it.

So, the judge made it clear we would lose, unless we dropped the case.  (Which we did.  We are going after them under Florida law, but that’s for another day.)  But the judge suggested, here on page 13, that we could “bring it back as a criminal offense.”

My before-bankruptcy clients seem to have fewer complaints about Navy Federal than they did this time last year.  Maybe that’s because they have gotten nicer.

Maybe it’s because their lawyers were listening to that judge.  I hope so.

PS October 2016, CFPB slams Navy Fed

Saw in this morning’s Washington Post that the Consumer Finance Protection Bureau went after Navy Fed.  Hit them for $23 million to unfair collection procedures.  I was really glad to see it.  You can read the Post story, here: Navy-Federal-to-pay-23-million.

PPS  January 2018, Navy Fed suddenly polite.

The last week of January brought a nice letter from a now very polite Navy FCU.  

NFCU was writing to tell me that Woodbridge resident “Stevie” asked them to stop calling her, and that they’d do it!  That’s a big change. 

Thank you Navy Federal.  I take back half the bad things I’ve said about you.

 

Here’s the polite letter

Here’s a sample of the polite letter Navy Federal sends now, when you tell them to “call my lawyer.”

 

 

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13

May 2010

Abusive Debt Collectors: The Lies They Tell

Posted by / in After Bankruptcy, Before Bankruptcy / No comments yet

For most people facing the prospect of filing for bankruptcy, it seems that nothing is more stressful than getting behind on your debts. Knowing that you have obligations that you simply cannot meet, bills that you cannot pay—it’s enough to make the average person feel anxious, frustrated, and even helpless. Now imagine a collector calls about one of those debts and threatens you with arrest and imprisonment if you don’t pay. That’s what happened to one of our clients just this past year.

Our client, let’s call her Mary, had gotten behind on a debt with a department store. That debt was later either assigned or sold to a debt collector called Creditors Interchange Receivable Management, LLC.  Creditors Interchange began calling Mary at home. They left several messages on her answering machine telling her that a lawsuit was being “finalized” against her for the department store debt.  In their final message, an employee of Creditors Interchange told Mary “the authorities” were coming to her home and the only thing she would get out of ignoring their messages was a trip to jail.

After weeks of sleepless nights, crying, depression, and fear, Mary’s son convinced her to call our office. She truly believed that Creditors Interchange could have sent her to jail for failing to pay a personal debt. Once we assured her that that was not possible, we started the work of getting her justice under the law.

The law we used to fight on her behalf was the Fair Debt Collection Practices Act (or FDCPA). The FDCPA is the law passed by Congress to protect consumers from abusive debt collectors such as Creditors Interchange Receivable Management, LLC. The FDCPA says generally that a debt collector cannot harass or abuse you, make false, misleading, or deceptive statements to you, or use unfair practices to collect from you.  These protections for consumers apply whether or not you owe the debt about which the debt collector is calling.

In this case, we were able to get Mary an out of court settlement she was more than happy with, and begin the process of making her whole.

No one should have to go through what Mary went through, but if you have, you do have a remedy.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES