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27

May 2010

Filing bankruptcy in Virginia to stop garnishment? You have rights.

Posted by / in Virginia Bankruptcy / No comments yet

Many people keep hoping they can avoid filing bankruptcy in Virginia, until they get a garnishment.   If filing bankruptcy is a last resort, garnishment tells you that you’ve arrived.

Garnishment law is one of the few places where Virginia law is better for the consumer than most other places.  (Well, better than most places that allow garnishments.  In North Carolina, for example, they can’t garnish your pay at all.  Except for taxes, child support and that kind of thing. )

Virginia garnishment law

Virginia garnishment law is one of the few areas where people have more rights in Virginia than in many other states.

Virginia garnishment law is better because of the “return date.”  In many states, a garnishment starts and just keeps running until they have squeezed the whole debt out of you.   If your being garnished for say an $8,000 credit card, that could take a long time.  Virginia garnishment law is not like that.

A Virginia garnishment usually runs for six to twelve weeks, and it ends on the return date.  (When you first get the garnishment, you might think the return date is the start date.  It’s not,  it’s the stop date.  For more information on garnishments generally, see my website on Virginia garnishment law.)

If you file bankruptcy in Virginia, before that return date, you can get that money back.  Everything they have taken during that six to twelve week period comes back to you.  (As long as you haven’t used up your $5000 Virginia “homestead exemption.”)

If you need to file bankruptcy in Virginia, but can’t get it done before the return date, here’s what to do.   Your lawyers can give you a homestead deed, to record in the county where you live.  (There’s a $21.00 filing fee.)

Then you can take the recorded homestead deed to the return date on your garnishment, and get your money back yourself.

I help two people a month get back their garnished money that way.  Then they usually use part of what they get back to pay for filing bankruptcy.

Virginia garnishment law is one of the few areas where Virginia gives rights to the consumer, better than a lot of places.

 

PS  I’m attaching some of the leading cases on this area of the law.  My thanks to Linda Jennings, a bankruptcy lawyer in Colonial Heights, for these cases.

In re Wilkinson.  In_re_Wilkinson[1]

In re Banks.  In Re Banks. WDof VA

Wilson v VA Nat. Bank  Wilson vs. VA Nat. Bank

Here’s more info on why filing bankruptcy stops a Virginia garnishment.

 

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18

May 2010

Bankruptcy Reform Law Causes Mortgage Default to Rise?

Posted by / in Virginia Bankruptcy, Weekly Posts / No comments yet

A new study by the National Bureau of Economic Research suggests that the 2005 bankruptcy reform law added to the housing crisis 200,000 more mortgage defaults each year.

“Bankruptcy reform squeezed homeowners’ budgets by raising the cost of filing for bankruptcy and reducing the amount of debt discharged in bankruptcy,” according to the report by Wenli Li of the Federal Reserve Bank of Philadelphia, Michelle J. White of the University of California at San Diego and Ning Zhu of the Graduate School of Management at the University of California.

This study was cited on foxnews.com and the American Bankruptcy Institute.

I agree with both their points

Bankruptcy reform added to the housing crisis because it made filing bankruptcy harder and more expensive.   Some people, who could have filed bankruptcy to lose the credit cards and save the house, couldn’t move fast enough.  By the time they got rid of the credit cards, the house was too far gone.

Bankruptcy reform also added to the housing crisis in a second way.  The budget in the 2005 law is unrealistically low for people with big families.  Especially in expensive urban areas.  So, some people who tried to use Chapter 13 to catch up the house could not make the Chapter 13  payment and also feed their children.  The food budget is just too low.  The only way people could feed the kids was to let the house go.

I think there’s a third point.  People were scared by news coverage of bankruptcy reform.  They believed that bankruptcy could no longer help them.  They thought the door of the courthouse was locked.  Many of those people got caught in foreclosure rescue scams and debt settlement scams, and never talked to a competent bankruptcy lawyer.

The country is paying a big price.  The banks got their bailout loans when they needed them, but rising defaults and falling real estate values hurt every homeowner in America.  Bankruptcy reform is a part, only a small part, of what triggered this crisis.

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16

May 2010

File bankruptcy? Or pay $1,134,164 for $7,783 credit card

Posted by / in Weekly Posts / No comments yet

Maureen O’Malley, a leading bankruptcy lawyer in Herndon, Va,  sent me this credit card disclosure.  It shows it will take $1.1 million to pay off $7783.37.  And it will take 2670 years to do it.  You can see for yourself here. (The person’s name and account number are deleted, of course, but this is for real!)

This is the worst I’ve ever seen, but I’ve seen plenty disclosures that are shocking.  This one shows the impact of the 27% interest combined with the $39 over limit fee.  Anybody can see why this person has to file bankruptcy.

At the minimum payment, this person can never pay this card off.  Well “never” is not exactly right, but it will take a million dollars and two thousand years.

The banks, who fought for the bankruptcy law of 2005, said that somehow the American people were at fault for the big jump in the number people who file bankruptcy.  Actually, the fault is with the high interest rates charged by the banks.  And by the failure of Congress to do anything about it.

Before 1978, the state governments could set a limit on interest rates charged to each state.  And they did.  (One reason for this regulation is that interest rates are hard for most of us to calculate in our heads.)

In 1978, the Supreme Court threw that out.  In Marquette Nat. Bank of Minneapolis v. First of Omaha Service Corp. (439 U.S. 299), the Supreme Court ruled that a law passed back in 1863 blocked the states from protecting their own citizens.

After 1978, if just one state raised its interest rates, banks set up in that state could charge the higher rate anywhere in the country.   South Dakota was the first state to do that.  And they invited Citibank to move there.  Delaware followed.  (That’s why so many of credit card payments are still mailed to South Dakota or Delaware.)  Interest rates skyrocketed everywhere.

That’s why people who file bankruptcy increased from about 300,000 per year in the early 1980’s, to way over a million a year today.

If Congress really wanted fewer people to file bankruptcy, it would be easy.  Cap credit card interest rates at 12%.  In four or five years, bankruptcies would be cut in half.  In five years, I’ll be 67–I’ll be ready to retire.

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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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11

May 2010

One of my bankruptcy clients stopped me in the grocery store

Posted by / in After Bankruptcy / No comments yet

One of my bankruptcy clients from 2007  stopped me in the grocery store just now, as a I was out buying lunch.

He just wanted to tell me that he had bought a house in February, after he had built back to good credit.

So many people believe that filing bankruptcy means ten years of bad credit.  When in fact, once your credit is messed up, it’s often the fastest way to rebuild.

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03

May 2010

At the bankruptcy attorneys convention, what I learned

Posted by / in Chapter 7 Bankruptcy / 1 comment

Attorney Leigh Faugust and I just got back from the annual convention of the National Association of Consumer Bankruptcy Attorneys.  We met in San Francico, along with twenty four other bankruptcy  attorneys from Virginia and 1600 attorneys from across the country.

We attended 14 hours of classes, had dinner with old and new friends, traded ideas and strategies late into the night.

One thing I learned that surprised me.

We heard it from Mark Redmiles,  Deputy Director of the Office of the United States Trustee.  He’s the top guy nationally in charge of enforcing the “means test”.  That’s the formula Congress put in place in 2005, to block chapter 7 bankruptcy for people who supposedly can afford to pay.

Redmiles reported that one only out of every eight chapter 7 bankruptcies approved nationally was filed by bankruptcy attorneys for people who did not have automatic Chapter 7 eligibility.

People have automatic eligibility if they earned less than the median income for their family size.  In Virginia, those median income numbers are:

Family size        one                two               three              four

Virginia         $48,190    $64,890     $73, 887    $85,633

Only one out of eight bankruptcies approved nationally as Chapter 7 are over the numbers for their state.

Five out of eight of my approved Chapter 7’s are over.  That’s five times the national average!

What is going on?  Northern Virginia is a high income and high cost of living area in a low income state.  The automatic eligibility formula that bankruptcy attorneys use to get most bankruptcies approved, usually doesn’t work here.

But experienced bankruptcy attorneys do get people here approved.  They get approved using the long formula means test–taking every time in your budget, compared to the allowances for that item, and using the ones we can to show the court why you can’t afford to pay.

The 2005 bankruptcy law made details very important.  But, they are more important here in Northern Virginia than almost anywhere else.   And it’s more important here than most places to have experienced bankruptcy attorneys on your side.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES