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04

Jan 2014

Don’t reaffirm your car loan with Apple FCU

Posted by / in After Bankruptcy, Weekly Posts / 2 comments

Here’s what happened when Jennifer reaffirmed her car loan with Apple Federal Credit Union.

Jennifer filed bankruptcy with another bankruptcy lawyer here in Northern Virginia.  She had a car loan with Apple Federal Credit Union, and she wanted to keep the car.  So she reaffirmed the car loan.

When you “reaffirm” a loan you take it out of the bankruptcy.  Later on, if you can’t pay, they can repossess the car, sue you, and garnish you.  Under the 2005 Bankruptcy Reform, if you don’t reaffirm your car loan, they can repossess your car–even if you are current.  (Although the law allows it, very few lenders do repossess cars that are current–Ford Motor Credit does, at least here in Virginia.  And I’ve seen it from Suncoast Credit Union in Florida, and Alaska Credit Union, from Alaska.)

Jennifer paid off her loan, and asked Apple to send her the title.  Apple FCU refused.

Apple said she could NOT get her car title unless she paid her Apple FCU credit card, too.   What?!  The credit card was wiped out in the bankruptcy.  Well, yes and no.

Virginia bankruptcy lawyer Robert Weed fighting Apple FCU

What Apple FCU did to Jennifer stinks. I’m fighting for her, even though I wasn’t the lawyer who did her bankruptcy. I’m known as a fighter.

The credit union can’t ask Jennifer directly to pay the credit card–that WOULD violate the bankruptcy law.  But “security interests” pass through bankruptcy.  A security interest is the right to repossess your car, or foreclose on your house, if you don’t make your payments.  After bankrutpcy that’s still true.  You still have to pay your mortgage and pay your car.

Credit Unions get you to sign in small print that your credit card counts as part of your car loan.  (I’m sure banks would do that too, unless some regulation told them they can’t.  I don’t know where that regulation is, however.)  The credit card balance, under the small print, is also secured by the car.   Actually, I just down-loaded the Apple FCU credit card agreement and it says that collateral securing other loans with the credit union “may” also secure this loan.  That’s a pretty weak warning.

That brings us to the reaffirmation.  Jennifer thought when she reaffirmed and then paid off the car loan, that she would have a paid for car.  The reaffirmation agreement showed the payments she had to make, and that the collateral was the car.  Shouldn’t that means when she made all the payments the car was paid off?

Jennifer thought so.  This column at bankrate.com thinks so.  I used to think so, too.

But I have to admit that Apple FCU has a point.  The required reaffirmation agreement, which is written in law at 11 USC 524(k)-(m) , doesn’t exactly say that.  It doesn’t say anything about what happens to the collateral.

The required reaffirmation agreement includes all kinds of warnings:  this is serious, you don’t have to do it, here’s what your payments will be; here’s the interest rate: here’s the collateral.  But it doesn’t say, when you get to the end, whether the car is actually paid for.

Admitting that this is a gray area, I still decided to fight for Jennifer.  I’m quick to fight for my own clients.  (I think that’s a lawyer’s job.  I explain what I do here.)  But I also fight to protect the frontiers of the law. ( Jennifer brought her problem to me because she heard I was a fighter.)

I want to know what the judge thinks about what Apple FCU did here.  Certainly it stinks.  And I also want to know if the judge thinks Apple’s credit card agreement really creates an enforceable security agreement.  It looks pretty vague to me.

I think Apple FCU is a decent outfit.  Before this, I’ve never seen them do anything underhanded.  (You can read in my blog about other banks and credit unions that I do NOT like.)   We often recommend them to clients who are looking for a credit union.  I have some hope they’ll decide they don’t want a fight on this issue.

If Apple decides to fight this out, I’ll let you know what the judge says.

  • February 17, 2014, pm28 6:42 PM
    01

    Good news.

    Apple agreed we were right and they were wrong. We CONTINUE to have Apple FCU on our list of financial institutions we think treat people fairly.

  • Robert Weed

    Robert Weed

    April 22, 2014, pm30 2:54 PM
    02

    Around Northern Virginia, we see a lot of people who bank with Congressional Federal Credit Union. When they asked for a reaffirmation, we asked what stand they took on whether the reaf nullified any claim for cross-collateralization. We asked for them to put it in writing and they did. Here’s an expert from their email. .https://robertweed.com/wp-content/uploads/2014/04/Congressional-FCU-Reaffs-Nullify-Cross-Collateral.pdf

 

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02

Jan 2014

Stop Foreclosure in Virginia with Chapter 7 Bankruptcy

Posted by / in Weekly Posts / 2 comments

For some people, Chapter 7 bankruptcy is the best way to stop foreclosure in Virginia.

Some people think the only way to stop a foreclosure is a Chapter 13 bankruptcy.

Mark and Tina Allen (not their real names) got a Virginia bankruptcy lawyer who thought that.  When they told him they wanted to stop foreclosure on their house, he put them into a Chapter 13.  Chapter 13 is a payment plan through the bankruptcy court.  Their Chapter 13 plan gave them five years to catch their house up–but the payment was way more than they could afford.

(Mark had been out of work for eighteen months and was now making half of what he had been making.  They couldn’t even afford the mortgage payment–much less a catch-up payment, too.)

So, after spending three thousand dollars on that lawyer, their Chapter 13 was thrown out.  At that point, they came to see me.

Stop foreclosure until junior graduates from high school

Mark and Tina wanted to stop foreclosure–just for a year, so Junior could graduate from high school with his friends.

In our first visit, Mark and Tina spent more time with me than they had with their first lawyer through the entire bankruptcy process.  (That’s what they told me.)  When we talked about it, their goals got clearer.

They really did NOT want to keep their house over the long run.  (They had bought in 2007, and were still over $100,000 upside down.  Unless Mark got hired back in his field, they knew they couldn’t afford it.)   They did want to stop foreclosure.  They wanted their son to graduate from high school with his friends–then they would be ready to move out.  To rent a place that they could afford.

We could do that with Chapter 7.  (We needed two Chapter 7 bankruptcies, actually.  To stop foreclosure twice.)

First, we put Mark in a Chapter 7 bankruptcy to stop foreclosure scheduled for late June.   Chapter 7, around Northern Virginia, gets you at least three months, usually four or five, and sometimes six, seven or eight, before they schedule the next foreclosure sale date.

In Mark’s case, we got six months and two weeks–about what we hoped.

Next week, we’ll do a second Chapter 7–this one for Tina.  That will stop the foreclosure that’s scheduled mid January.  We hope that will get us to July.  Long enough for Junior to graduate with his friends.

When Mark and Tina have to move out, they’ll have a little money saved.  They’ve gone a year without making any mortgage payments.  That’s given them the cushion they need.

(Mark is still hoping to get back to doing the kind of work he did before his layoff.  If their income improves by summer, we can then use a Chapter 13 they could actually afford to catch the house back up–they still want to.  Or, see if they can get a loan mod, now that they can show the mortgage company they have money to afford the house.)

Chapter 13 is a powerful tool.  It’s a complicated, expensive tool, too.  For most things, you want to use the simplest tool that does the job.  More than many lawyers around here, I find that Chapter 7 bankruptcy does the job.

If you need to stop foreclosure, a lot of the time Chapter 7 bankruptcy is the tool for the job.

 

 

 

 

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02

Jan 2014

Virginia Garnishment Law Article in Virginia Bankruptcy Law News

Posted by / in Before Bankruptcy, Weekly Posts / 1 comment

Is it legal to get garnished under Virginia garnishment law in a county that you don’t live in any more?

I’m a Virginia bankruptcy lawyer.  I see people all the time who get garnished with no notice.  (You NEVER get enough notice–I explain that here.  But you SHOULD get a copy of the Virginia garnishment in the mail about the time your paycheck or bank account gets hit.)

If you get no notice at all, maybe you’ve moved from the address where they got the judgment.  Maybe you moved years ago.  The Virginia garnishment notice goes to the old address and never gets to you.

Is that legal?  Is it legal to garnish somebody by sending notice to an address they no longer live at?

Virginia bankruptcy lawyer Kaitlin Vaillancourt

Virginia bankruptcy lawyer Kaitlin Vaillancourt

Many courts around the country, say that’s ok.  I think, under Virginia garnishment law, it’s a violation.  Specifically it’s a violation of the Fair Debt Collection Practices Act.  At least if you’ve moved to a different county.

 Kaitlin Vaillancourt and I had an article about that last week in the Virginia Bankruptcy Law News.  The Virginia Bankruptcy Law News is published by the Virginia State Bar Bankruptcy Law Section.  You can read it here.

The Fair Debt Collection Practices Act says debt collectors can’t bring “any action” against you collect a debt in a judicial district where you don’t live.  (Or where you lived when you signed the contract.)  (In Northern Virginia, each county is usually a different judicial district.)

Some courts have decided that a garnishment is not an legal action “against” you.  It sure feels like it’s against you, if you’re the person whose pay is getting garnished.  The Ninth Circuit says of course it is.  Fox v Citicorp.    A recent case in Ohio said the same thing.  Adkins v Weltman, Weinberg & Reis.  I’m reprinting their explanation in full.

“Thus, resolution of the motion to dismiss hinges on whether a garnishment action is “against” the consumer who is a judgment debtor. Only the judgment creditor and the judgment debtor have any beneficial interest at stake in a garnishment action. The nominal “defendant” in a wage garnishment, the employer-debtor of the employee-judgment debtor, has no claim to the money garnisheed. The employer’s only interest is in not becoming liable to pay the wages to both the employee and the employee’s judgment creditor.[1] That danger is avoided by paying the wages into the court, which then determines who is entitled to those funds. The garnishment is not against the employer, it is against the employee-judgment debtor.”

But many judges have said it’s against your employer (or bank), not against you.  (The First Circuit, in Smith v Solomon & Solomon, held that a garnishment is an act against the employer, because Massachusetts law requires that it be brought in the country where the employer does business.  Bu contrast in Virginia, it has never been thought necessary to send a writ of fieri facias to the county where the garnishee resides.   Burks.  On the other hand, Virginia law does allow the garnishment to issue from the court where the debtor now resides.  Code of Virginia 8.01-511.)

Kate and I looked at Virginia garnishment law, and found something called the fieri facias.   That’s Latin, and it goes back to the time in England when lawyers used Latin a lot.  Even if  the Virginia garnishment is not against you, the fieri facias is.  And they can’t get a garnishment without doing a fieri facias first.  (Fieri facias is is “the ordinary judicial process for enforcing the collection of a money judgment by the sale of the property of the defendant.” Burks Pleading and Practice in Actions at Common Law.)

Next time somebody gets a fieri facias and a Virginia garnishment against one of my clients who’s moved to a different county, we’ll sue.

PS  Here’s a Fourth Circuit opinion, Powell v Palisades, which describes garnishment as a step taken to collect a debt.  That was under Maryland law, but it’s still very helpful.  This was decided December 18, 2014.  It probably means that garnishing you in the wrong county violated 11 USC 1692f–it’s an unfair means to collect a debt.

PPS  We’re going to trial on this issue against the debt collection law firm, Caudle & Caudle in March 2016. I’m gathering up useful information.

Take a look at the Virginia Summons to Answer form.  It also has a fieri facias, and is obviously only against the debtor.  DC-440.  The attorney General of Virginia has ruled that “writs of fieri facias, debtor interrogatories and garnishments are distinct, though related, proceedings.”  To issue a Summons to Answer there must be named in both a judgment and fieri facias. Here’s just a fieri facias form.  cc-1477.

Let’s look at the US Supreme Court decision in Mitchell v St Maxent’s Lease, 71 US 237 (1866).  A fieri facias was issued against St Maxent the day after he died.  The Supreme Court said it was void under the common law.  Even though the property sought to be levied was still there, St Maxent was not.

PPS  Had a bad day today in Fairfax General District Court.  We did not get to whether we were right on our legal theory.  Although she got a garnishment, our client was never actually garnished.  (She was on leave from her job, so the employer didn’t have a paycheck to garnish.)  No harm, no foul said the judge.  There needs to be “actual damage.”

(We thought there was a decision in the U.S. District Court last fall was controlling.  That case is Brown v Transurban.   Federal Judge Cacheris said this:  “The “injury in fact” suffered by Plaintiffs under the FDCPA is not any actual economic loss, but rather being subjected to the allegedly “unfair and abusive practices” of the Collection Defendants.”  That wasn’t enough to persuade the Fairfax General District Court, today.  

Well, that issue is now in front of the U S Supreme Court in a case called Spokeo v Robins.  (That is a Fair Credit Reporting Case; these internet people search companies are covered as credit bureaus.  Was there any evidence that the mistake caused Robins to lose a date, a job, a loan, anything?  Or is just being wrong–and not fixing it–enough.)

We may hear from the Supreme Court sometime this spring.  Until then, we need a case where somebody actually got garnished from the wrong county.

PPS  Another circuit court said the the garnishment is not an action “against the consumer.”  Here. Hageman v Barton   That does not control whether the fi fa is “against” the consumer.  But it doesn’t help.

 

 

 

 

 

 

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26

Dec 2013

Allied Cash Advance is Not Legally a Payday Loan Company

Posted by / in Weekly Posts / 2 comments

Allied Cash Advance does NOT legally do payday loans in Virginia

On Google, Allied Cash Advance does payday loans.  But they tell the State of Virginia that they don’t.

Allied Cash Advance on Google does payday loans.  But they tell Virginia that they don't.

Allied Cash Advance on Google does payday loans. But they tell the State of Virginia that they don’t.

To legally do payday loans in Virginia, you have to have a payday loan license.  Allied dropped their payday loan license in 2009. (Here’s the list.  You can see they are not on it.)

Why would Allied Cash Advance NOT want to legally do payday loans in Virginia?.  For one thing, a payday loan company cannot use “harassment or abuse, false or misleading misrepresentations, and unfair practices in collections.”  That’s from Code of Virginia 6.2-1816.

Since Allied Cash Advance is NOT legally a payday loan company in Virginia, does that mean they CAN use harassment, abuse, false representations and unfair practices?

I’m a Virginia Bankruptcy Lawyer.  I see a lot of people who try almost anything to keep afloat, before they talk to me.  So I’ve talked to people who have borrowed money from Allied Cash Advance as a way to try to stay afloat.

One of those was named Tammy.  (Not her real name.)  When Tammy got behind on her not-legally-a-payday-loan from Allied Cash Advance, Allied had someone, “Josh” go to the place where she works, and create a scene in the hallway.

Obviously that’s harassment and abuse.  We could sue them under the Virginia Payday Loan law–except they are not legally a payday loan company in Virginia.

I’m a Virginia Bankruptcy lawyer.  I didn’t know what to do about Allied Cash Advance, who are not legally a payday loan company in Virginia.

But I checked around and heard about lawyer Jay Speer, at the Virginia Poverty Law Center.  Jay Speer does not like Allied Cash Advance, who gave up their payday loan license in 2009,  so they can make not-legally-payday loans in Virginia, and then, don’t have to follow the law about “harassment or abuse, false or misleading misrepresentations, and unfair practices in collections.”  He’s trying to do something about it.  You can contact him, here.

PS.  Jay reports a bill has been introduced into the General Assembly this year that will regulate these “Not Legally a Payday Loan” companies.  David Yancey is sponsor of this bill.

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03

Dec 2013

Fairfax County bankruptcy lawyer office open in Annandale

Posted by / in Blog, Weekly Posts /

New Annandale bankruptcy lawyer office open near Springfield

To better serve Springfield, Falls Church and central Fairfax County, we’re opening a new Annandale bankruptcy lawyer office at 5019-C Backlick Rd, Annandale VA

Annandale bankruptcy lawyer office

To better serve Falls Church, Springfield and all of Fairfax County, my Annandale bankruptcy office at 5019-C Backlick Rd, Annandale VA is conveniently located in the Springdale Professional Center.

My experienced bankruptcy paralegal, Laura Jones, is moving from my Alexandria location to the new Annandale bankruptcy office.

 

While there are many bankruptcy lawyers to chose from, three factors make us at the Bankruptcy Law Office of Robert Weed unique.  You’ll like our friendly service with a smile.

You won’t find these with any other Fairfax County Bankruptcy Lawyer.

First is our Be Happy Consultation form and our 29 point bankruptcy consultation.  In 2005, Congress changed the law to make it much harder to get your bankruptcy approved.  (The goal of the 2005 bankruptcy law was to stop most high income people, meaning most people in Fairfax County, from filing chapter 7 bankruptcy.)   That’s why I have to work extra hard to be sure that I get you approved.

When we meet, you don’t want to hear a lot of “maybe”–and you sure don’t want to be told something that turns out later not to be true.   When you  meet with me, you want answers.   That’s why we get everything we need to know about you at the front end of the bankruptcy process.

Our 37 page form does NOT require anything we don’t need to get your bankruptcy approved.  It also doesn’t leave out anything we need to get your bankruptcy approved.

Our more careful approach shows–our bankruptcy dismissal rate is far lower than others.  In 2013, the last year we checked, it’s been 4%.  Other top bankruptcy lawyers average 20%.  (I should note that sometimes you want a bankruptcy dismissal.  Some dismissals are planned.)  Lower dismissals means higher approvals!  That’s (usually) what you want.

Second is our five year bankruptcy warranty.  The purpose of bankruptcy is to get you a new start in life and a clear field for the future.  Sometimes, debt collectors or credit bureaus get in the way of your new start.  That happens when debts that are discharged in bankruptcy pop up again.  They aren’t allowed to, but sometimes they do anyway.

If discharged debts come back to haunt you, having the law on your side isn’t always enough–you need to have your lawyer on your side, too.  Some lawyers want to charge an extra fee–some won’t help you at all.  (I’m one of only a handful of the bankruptcy lawyers in the country are also members of NACA, the National Association of Consumer Advocates.  Those are the lawyers who do credit report law and fair debt law.)   I stand behind my work–when problems crop up, and they do, I’ll fight to fix them, at no charge to you.  (I do try to make them pay me and you a little, and mostly succeed.)

Third, confidence that you have made the right choice.  More than six hundred people, people like you, have voted us five stars for quality and service.  By far the most five star reviews of any bankruptcy lawyer in Northern Virginia. Barry of Annandale says, “great advice and timely service in time of need.”  Marie of Falls Church writes, “Mr. Weed and staff were very professional, compassionate. and sincerely cared about me personally.”  Said Emmy of Fairfax, “What I love about this firm is how organized and expert they are at doing this.”  Stacia of Springfield wrote, “THANK YOU FOR TAKING CARE OF EVERYTHING.”

Avvo's best rating 10.0 for Virginia Bankruptcy Lawyer Robert Weed

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Avvo, the lawyer rating service, rates me 10.0. I’m a level 15 contributor.

Five hundred people a day read my Virginia  bankruptcy law blog–and more than a thousand have posted comments and questions.  I’m one of fewer than a hundred lawyers nationally to be named Member of the Month by the ten-thousand member National Association of Consumer Bankruptcy Attorneys.

Our after bankruptcy survey showed that 97.6% of our clients were glad they selected Robert Weed to be their bankruptcy lawyer.

When you have a consultation with me, you know you’re with one of Virginia’s most experienced, highly rated bankruptcy lawyers.

Annandale and Fairfax County Bankruptcy Question and Answer

Where are the bankruptcy hearings for Fairfax County?  If you live in Fairfax County, you might expect the bankruptcy hearings at the Fairfax Court House.  They aren’t.

Bankruptcy is a Federal law, and the Federal Court for all of Northern Virginia is in Alexandria. For most people, though, your hearing is NOT in any Court House at all.  It’s in an office building at 1725 Duke Street.  

For the duration of the Covid emergency, all the hearings are by phone. You don’t have to go anywhere.

Call for an appointment. 703-335-7793.

Are your debt problems interfering with your sleep, your health, your marriage or your life?  It’s time to take control of your life today–don’t be afraid, call now!  703-335-7793.

Annandale Fairfax County Bankruptcy Lawyer Office

Springdale Professional Center
5019-C Backlick Rd
Annandale, VA, 22003
703-518-8811

Why Fairfax Bankruptcy Lawyer Robert Weed?

In 2019 Robert Weed Law surveyed 103 past clients. Here’s what they said.

Is your life better because you filed bankruptcy?

“It has made a huge difference in giving me peace of mind. My credit was already ruined, and since I filed I have been able to re-establish my credit. I am living life again, not stressed and feeling hopeless.”

Diana, Woodbridge VA
88%
90%
Have you been able to re-establish credit?

“There are many things to consider and Mr. Weed was not only an obviously experienced attorney but I felt he was compassionate as well. Although each bankruptcy differs, I can honestly tell you that through his guidance I’ve been able to get my credit score to a 690 average and I recently purchased a brand new automobile at 5.9 percent! AMAZING!”

Rodney, Leesburg VA
Are you sleeping better than you did before you filed?

“I’m no longer stressed out all the time, I can sleep at night, and I’m just happier in general.”

Alanna, Manassas VA
94%
99%
Are you glad you selected the Law Office of Robert Weed?

“Do what you have to do to financially protect yourself and your family . . . I wish I had consulted Robert Weed sooner.”

Matthew, Centreville VA

CALL NOW: 703-335-7793

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PS We have a second Fairfax County bankruptcy lawyer office in Herndon.

Regus Building
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23

Nov 2013

Taxes, short sale, and bankruptcy!

Posted by / in General Information About Bankruptcy Law, Weekly Posts / No comments yet

The tax break on short sales is due to expire on December 31, 2013.

Since 2007, Congress has waived the debt forgiveness tax when a homeowner does a short sale. This tax break was put in place at the beginning of the housing crisis and set to expire at the end of 2012.  Congress extended it for one more year, to 2013.  But the Washington Post reports  it looks like it won’t be extended again.

Here’s the background.  The basic tax rule is that debt forgiveness counts as income–and is taxed as income.  If somebody cancels your debt–like in a short sale–you get a debt cancellation 1099-c.  And you have to pay taxes on that “debt cancellation income.”

Short sale can lead to taxes on debt forgiveness income.

Cancellation of debt is “income.” And the income tax is a tax on income. So a short sale can lead to tax on that debt foregiveness income.

You can fight that.  If you show the IRS that the lender never would have gotten the money anyway, then you defeat the tax.  The IRS explains that here.

One way to show that is to file bankruptcy.  Another way is to fill in this form.  A third was is to live in a state where the lender can never come after you for a deficiency after a foreclosure.   That’s the law in California, for example.  But not here in Virginia.

Do you need to get out of a house where you owe way more than it’s worth?  Most people who do would rather do a short sale than a bankruptcy.  And if that’s your only problem, most bankruptcy lawyers would agree.  Until now.

Now you have to worry about being hit for taxes on the amount of money the sale is “short.”  If it’s a little bit, the tax won’t be much.  But if you are short fifty or seventy five thousand dollars–and there are still homes around Northern Virginia that far underwater–the tax could be a big problem.

You should talk to a tax professional (not just listen to a real estate agent) about the tax consequences of doing a short sale.  And if your tax adviser is not real confident you are ok under IRS Form 982, you should consider bankruptcy.

PS  If you have a second mortgage, you also need to worry about whether the second mortgage is forgiving your deficiency–or are they just allowing to short sale to go through, but planning to sue you later.  That happens a lot–I explain why here.

 

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22

Oct 2013

National Lien Processors 561-409-5490 Collecting after Bankruptcy

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

National Lien Processors called “Bill” yesterday.  Bill filed bankruptcy with me and was discharged in June 2013. Bill told them he filed bankruptcy, and National Lien Processors told him that bankruptcy did not apply to them. That of course is B.S. and they know it.  They told Bill his lawyer better be ready to defend him.  That was B.S. too. Lori, one of my top bankruptcy paralegals, called National Lien Processors at the number they left, 561-409-5490.  They hung up on her.  That’s what you get from scam outfits who know they are violating the Fair Debt Collection Practices Act and don’t care.

The bankruptcy judge will fine legitimate outfits that step over the line with after-bankruptcy harassment. But he can’t do much with underground companies that know they are illegal and don’t care. That’s a job for Federal law enforcement.

Debt collection scams threaten to take legal action against people like Bill, but they are not going anywhere near a courthouse–because they are the people who are illegal. Besides just hanging up, there is one thing you can do.  The Dodd-Frank law  in 2010 set up a Consumer Financial Protection Bureau, with a budget they get from the Federal Reserve.  That means they have some money, a little, to actually investigate illegal scammers. Here’s the link where you can complain, if National Lien Processors, or somebody like them, calls you and makes illegal threats. When legitimate outfits step over the line and harass my clients after bankruptcy, I sue them in the bankruptcy court.  But the bankruptcy judge can’t do much with underground companies who know they are illegal and don’t care.  That’s a job for Federal law enforcement.

 

PS  Bill did file a complaint today with the CFPB…if they update him, I’ll update this blog.

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05

Oct 2013

Who Should Not file Bankruptcy?

Posted by / in Weekly Posts /

Who Should Not file Bankruptcy?

Ray came to see me last week, wanting to file bankruptcy.  Right away.  He had his first payment, seven hundred-dollar bills, set down on my desk.

I told him, “no, not yet.  And not with me.”  Why did I tell him he should not file bankruptcy?

Ray’s credit was shot.  He had a car repossession, lots of medical bills, and a couple small credit cards.

So, why did I tell him no?  Ray had $900 in unpaid traffic tickets, and bankruptcy does NOT help with traffic tickets.

robert_weed2

I told Ray he should not file bankruptcy until after he paid his traffic tickets. “If you wait until after you move to South Carolina, you won’t pay Northern Virginia prices, either.”

Ray was planning–right after the bankruptcy, he said–to move to South Carolina.

“The last thing you want to do,” I said, “is move to a new state driving on a suspended license.”  That would set you up for a real mess.  “Take the $700 you were bringing me (get $200 more from somewhere) , and go down to the courthouse and pay those tickets.”    Ray needed to fix his drivers license more than he needed to fix his credit.

I told Ray there’s another advantage to waiting.  “A lawyer in South Carolina is going to charge you maybe half of what I would.”  A South Carolina lawyer isn’t paying the office rent I’m paying here; and he’s not paying his people what I pay mine either.  Compared to Northern Virginia prices, he’ll be a bargain.

Ray’s story is one reason I want people to bring in complete paperwork before they come to talk to me.  My job is to give people the best advice I can–to get them back on the right road, going in the right direction.  Knowing about those traffic tickets was the key to me steering him right.

 

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29

Sep 2013

Can filing bankruptcy can make you smarter?

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Can filing bankruptcy make you smarter?

A new book, Scarcity: Why Having Too Little Means So Much, explains why filing bankruptcy can make you smarter about money.

The book authors, Harvard Professor Sendhil Mullainatha and Princeton Professor Eldar Shafir, don’t talk about filing bankruptcy.  What they do talk about is how smart people get stupid, when things are tight.  When people are rushed, we make bad decisions about time; when people can’t pay their bills, we make bad decisions about money.

When the situation seems impossible, we choke up.

When people come to talk to me about bankruptcy, it’s usually because their debt situation is impossible.  And for a lot of them, it’s been impossible for a long time.  Being an an impossible financial situation–scarcity–often means people make one financial mistake after another.

Research by Prof. Eldar Shafir shows why people should be smarter about money after filing bankruptcy.

Research by Prof. Eldar Shafir shows why people should be smarter about money after filing bankruptcy.

For most people, filing bankruptcy is a smart decision.  And, according to the research in this book, it should make people smarter about money decisions from then on.

That’s what I see.  After bankruptcy, people often do really well.  Not just because “they learned their lesson”–although that’s a common perception.   More importantly, once the pressure is over, people’s good sense kicks back in.

Here’s a quick review of the authors’ findings.

Filing bankruptcy helps you sleep, too.

One other thing jumped out at me when I read about this research.  Being in a tight spot financially can knock 13 points off your IQ, they said–“the equivalent of one night’s sleep.”

Wow–that’s another reason filing bankruptcy makes people smarter.  After filing bankruptcy, people sleep better.  That’s NOT from Professor Mullainatha and Professor Shafir.  That’s from a study I did, with Survey Monkey, of people three years after bankruptcy.  Eighty-eight percent of the people said they sleep better after bankruptcy.  You can read about that here.   Getting enough sleep makes your smarter, too.

 

 

 

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29

Jun 2013

After Bankruptcy Credit Reports–Why You and Your Lawyer Need to Follow Up

Posted by / in After Bankruptcy, Blog, Weekly Posts / 2 comments

Your After Bankruptcy Credit Report 

Your after bankruptcy credit report is a big part of your “fresh start” in bankruptcy.

That’s why it’s my job, as your bankruptcy lawyer, to make sure your after bankruptcy credit report is right. Only a handful of bankruptcy lawyers see it that way, and I’m one of them.

Mistakes on your after bankruptcy credit report can come back to haunt you years later.

Let me tell what happened to Melanie Short.

Melanie Short  (not her real name)  filed Chapter 7 bankruptcy with me in 2008.  She had owned a house in Florida.  The value dropped more than 30%.  She could not sell.  We needed to clean that up.

Melanie  also had some credit cards and other bad debt.  They got out of control when she moved back to Virginia and couldn’t sell the Florida house.

The bankruptcy went fine.  Filed bankruptcy July 2008; approved October 2008.

After bankruptcy credit report

We fixed Melanie’s after bankruptcy credit report in 2009. But Bank of America hit her credit with a foreclosure in 2011. Bank of America almost blocked her from buying a new home in 2013.

We checked her credit report early in 2009.  Lucky we did.

Equifax was showing she still owed Household Finance $3699.  After a dispute letter didn’t work, we sued.  That got Equifax to  fix it.  We also got a few hundred dollars for Melanie for her trouble.

In 2011, Melanie started getting collection calls from Bank of America.  We were getting ready to sue them–but the calls stopped and Melanie dropped it.  (I should have stayed after her.  I’m not the hero of this story.)

Fast forward to June 2013–Melanie has loan approval to buy a house again.  But, Bank of America is showing a $159,000 foreclosure on her Experian Report.  That has to come off or she can’t close the loan.

Melanie needed to get this fixed in two weeks!  With help from her loan officer and a little help from me.

Her first problem was Bank of America was not listed in her bankruptcy.  Why?  She never had a mortgage with Bank of America.

Her Florida mortgage was with an outfit called Home Loan Service, a branch of Merrill Lynch.  Merrill Lynch was taken over by Bank of America in January 2009, at the peak of the crisis.  At some point in 2011 Bank of America transferred the mortgage loan to itself.  That’s what led to those phone calls, which I should have jumped on with both feet.

Because at the time they started calling, Bank of America also hit Melanie’s Experian report with that $159,000 foreclosure.

There’s a happy ending to this story.

Melanie was able to get all this fixed, with cooperation from Experian.  (Bank of America promised they would send a letter, but then didn’t.)

What’s the lesson for you?  Check your after bankruptcy credit report to make sure everything is showing “discharged in bankruptcy” and balance $0.  Then every year or so, keep checking.

Get with your bankruptcy lawyer, or a credit report lawyer, if there’s a problem.

 

 

 

 

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