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30

Aug 2020

Why You Should (Sometimes) Ask for Arbitration

Posted by / in Before Bankruptcy, Weekly Posts /

Why You Should (Sometimes) Before Bankruptcy Ask for Arbitration

The fine print in your credit card agreement likely gives you–and the credit card company–the right to ask for arbitration.  You can guess that the fine print isn’t in there to help the consumer, but sometimes before bankruptcy you can use arbitration for your benefit.

How Can Arbitration Before Bankruptcy Help You?

Suppose you might need a little more time before you are ready to file bankruptcy. If there’s a warrant-in-debt, and you obviously do NOT want to get garnished. You can ask for a trial and a bill of particulars. Then, for your grounds of defense, you can ask for arbitration. Asking for arbitration can get you another month or more to get ready to file bankruptcy.

Stalling for time is not the idea of arbitration. But since the credit card companies put it in their agreement for their reasons, you have the right to use arbitration before bankruptcy for your reasons.

What should be the Purpose of Arbitration?

The idea of arbitration to to handle things that judges aren’t good at. For example, baseball salaries.

Baseball salary arbitration

Baseball players through their union and the owners have agreed to salary arbitration

Baseball players, through their union, have salary arbitration.  If there’s a pay dispute between the player and the club, a panel of arbitrators decide what the salary should be. There’s no reason for judges to be involved, that’s now what judges do.

A second advantage to both the club, and the players, is that the process is secret. Suppose a baseball club says, “we don’t want to pay what Joe is asking, because he can’t hit the low fastball.” It’s bad enough that the player hears his club bad-mouthing him. It would be even worse to read it in the sports page.

Is Credit Card Arbitration is Anything Like Baseball Arbitration?

The good reasons why arbitration makes sense for baseball salaries does NOT apply to credit card arbitration. If you get sued on a credit card, that’s the kind of thing judges decide all day long. Do you owe the debt? Who do you owe it to? Have they done something wrong trying to collect it? Deciding these things is what judges do.

So why do the credit card companies put arbitration in their fine print agreements? As long as consumers don’t fight back, the credit card companies like judges.  But suppose there’s a problem. Suppose the credit card company–or debt collector–has done something dirty. Then they want to keep it secret.

They put arbitration in their agreements, so they can take your case to a secret place, if they want to. In arbitration, you lose the right to appeal. You have fewer rights to get evidence. And you can’t join with other consumers who have been done dirty in a class action. That’s why the credit card companies are arbitration in their fine print agreements.

Why is Credit Card Arbitration Allowed?

If you had me on the Supreme Court, I’d allow arbitration for baseball players. Because it’s in the union contract. I wouldn’t allow arbitration on credit cards, because you have a constitutional right to a trial by jury. That’s the Seventh Amendment, which gives American the right to a trial by jury in disputes of over $10.00. The actual Supreme Court has said that doesn’t apply to you. Because when you used the credit card, you agreed to the arbitration.

Government can’t take away your constitutional rights, based on some fine print you never even read. But big companies apparently can.

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16

Aug 2020

$45,000 garnishment from a $3,500 29% interest loan

Posted by / in Weekly Posts /

At 29% interest adds up fast

A $3500 loan at 29% grows to a $11,000 judgment and then a $45,000 garnishment.

A $3500 loan at 29% interest grows to a $45,000 garnishment.

How fast does at debt at 29% interest add up? For Wilson a $3500 loan grew to a $45,000 garnishment in ten years.

Wilson borrowed $3500 from a Finance Company in 2004.  He took out that loan to pay off some collections and raise his credit score.  The interest rate, which no one should agree to, was 29%.  With four years of interest and late fees, Wilson owed $11,997.17 when the Finance Company got a judgment against him in May 1, 2008.

Prince William court records show Wilson got hit with twelve garnishments between 2008 and 2013. But they only collected $1134.79.  Wilson figured out he couldn’t be garnished working at a restaurant, because he got paid cash tips. So he was safe working for restaurants.

For five years, the Finance Company gave up. But during those five years, the debt kept growing.  It kept growing at 29% interest. Then, in September 2018, when they tried to hit him again, the Finance Company’s garnishment had grown to $45,582.82. Fifteen years after taking out a $3500 loan (five years after getting a judgment for 11,991.17) Wilson owed $45,582.82!

At long last, Wilson decided enough was enough. Wilson came to see me and filed bankruptcy in January 2020.

It’s now, finally, safe for Wilson to take a job with a steady paycheck–instead of working for cash tips–and not have to worry about getting garnished.

After Bankruptcy: Better Credit on His Next Car

As a bonus, in a couple years, Wilson will be able to get a car loan at a decent interest rate. His last car loan, with the judgment showing on his credit, had been at 22.9%. In a couple years, he’ll be able to get a car loan at 4%.  The difference between 22.9% and 4% on a $20,000 car is $185 a month: $13,200 total over a six year car loan.

What the lesson?

Judgments do NOT go away.  If you are getting a judgment against you for a finance company loan or a credit card, the time to file bankruptcy is now.

 

 

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13

Aug 2020

In Chapter 13, Don’t Bounce Your Checks!

Posted by / in Blog, Virginia Bankruptcy, Weekly Posts /

In Chapter 13, Don’t Bounce Your Checks!

Please don’t bounce your checks, when paying the Chapter 13 Trustee.

At least here in Northern Virginia, after two bounced checks, they require you to start sending money orders.  Money orders are expensive, hard to get during the pandemic, and even harder to trace if they are lost in the mail.

It’s better to be a couple weeks late in your payment than to bounce checks. So please, don’t bounce your payment checks.

bounced check

Do NOT bounce your check to the Chapter 13 Trustee

Reminder: Here’s the Chapter 13 Mailing Address

There’s a bank in Memphis that handles the payments for most of the bankruptcy courts in the country. (They have different PO Boxes for the different Chapter 13 trustees.)

Here’s the payment address for Thomas Gorman, the Chapter 13 Trustee in Alexandria VA.

 

                                               Thomas Gorman, Trustee
                                               P.O. Box 1553 
                                               Memphis, TN 38101-1553

Be sure to put your case number on your check. Otherwise it could go into  the account of another person with a similar name. And don’t bounce your checks.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES