Posted by Robert Weed / in Weekly Posts /

Consumer Finance Protection Bureau Announces They Don’t Chase Underground Debt Collectors

“We are unable to send your complaint to the company for a response.” That’s what the Consumer Finance Protection Bureau told Chuck Sterling. “The company is not in our complaint system.”

Chuck, a former client, received an email today, threatening to “take him into custody” and “transfer to prison” unless he paid a non-existent payday loan of $2471.15. Threatening jail for failure to pay an honest debt–much less a fake one–violates federal law.  The Federal Trade Commission has authority to sue debt collection companies who violate the law, ban them from the business and impose steep financial penalties.  The Consumer Finance Protection Bureau has a complaint form on their website and claims to follow up on each one.

The follow up to Chuck was, we’re not doing anything because we don’t know who these people are. Apparently they don’t chase debt collection scammers who are hiding out.

That kind of slack enforcement of consumer protection laws by the CFPB has become more common in the last few years.   

Posted by Robert Weed / in Virginia Bankruptcy, Weekly Posts /

Told a Widow this Week, She’ll Lose her House because of COVID and Business Debts

I had a heart-breaking call this week with a widow, who lost her small shop in the COVID depression.

Widow lost her small shop in the COVID depression. The Virginia homestead exemption is too small to protect her house.

She has about $65,000 in business debts and no way to pay them. 

If she tries to file Chapter 7 bankruptcy here in Virginia, the bankruptcy trustee will sell her house to pay those debts. Virginia law protects real estate that belongs to a married couple–but she’s a widow.

Bankruptcy is set up by the Federal Government, but each state sets its own rule on how much real estate equity you can protect. (That’s called your homestead exemption.) Thanks to the new majority in the Virginia General Assembly, you can protect $30,000.00 in equity. (Up from $5,000.00. The Virginia homestead exemption had been the lowest in the country.)

This widow has a little over $100,000.00 in equity, so the Virginia homestead exemption isn’t enough for her. She may need to sell the house to get cash to survive, because she lost her business, and isn’t social security age yet.

I like to say I can help almost everyone who contacts me; but I can’t help her.

PS Virginia Homestead Exemption is still near the bottom

While Virginia increased our homestead exemption from $5,000.00 to $30,000.00, it’s still near the bottom of the fifty states. You can protect 100 acres of Texas, 160 acres of Florida.  You could own the entire District of Columbia. Just this week California increased their homestead exemption from $75,000 to $300,000, in the rural counties. And up to $600,000 in in the urban areas.

Here’s a slightly outdated breakdown of the homestead exemption of all fifty states.

Posted by Robert Weed / 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 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.

Posted by Robert Weed / in Weekly Posts /

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.

Posted by Robert Weed / 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.

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.

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

Democratic Platform Promises Good News on Bankruptcy and Student Loans

Are you struggling with student loans you can’t pay? The Democratic Platform promises to help.

The platform of the 2020 Democratic National Convention says this: Democrats will restore the prior standard in bankruptcy law to allow borrowers with student loans to be able to discharge their debts in bankruptcy as a measure of last resort.

What’s that “prior standard?” That probably means a bankruptcy discharge can discharge student loans that have been in payment status for several years. (The required payment status was five years beginning 1976; increased to seven years in 1990.)

And I hope it means that private student loans are just regular debt.  Bankruptcy filed any time should discharge those. (That was the law on private student loans until 2005.)

So, if the Democrats have their way, if you are out of school, with no deferments, for seven years (maybe only five), then you can file bankruptcy to discharge your student loans.

What does this promise of future help mean to you now?

Should I Wait and See Election Results?

Suppose you have a credit card problem right now–and impossible student loans also hanging over you. If you file Chapter 7 bankruptcy today, you can’t file Chapter 7 again for eight years. So if there’s a new law, you’d have a very tough time taking advantage of it.

Can you hold on until after the election? November 3, 2020 is election day this year. That will decide if a Democrat is elected President. It will also decide if Democrats take control of the United States Senate. (It might hinge on a Georgia runoff January 5, 2021.) Democrats likely need control of the Senate to deliver on this student loan promise.

PS  Didn’t get as much change as hoped in the election.

The November election did NOT bring as much change as people hoped in the US Senate. So the chances of getting a quick change is much lower.  This article in the November 7, 2020, New York Times shows it nearly impossible to clear your student loans under current law.  That’s not likely to get better any time soon.

Election day is November 3, 2020

After the Election, Expect More Delay

The new President and new Congress come into office next January. But I doubt they get started on bankruptcy law and student loans right away. The pandemic and economic crisis will keep them busy. My own guess: I’d expect to see changes in the bankruptcy law affecting student loans taking effect by July 2022. That’s more than a year and a half after the election.

Update: Student Loan Bankruptcy Relief May Happen by Summer 2021

A committee vote September 29, 2020 may signal quick action in the new Congress.  The Judiciary committee voted to approve a student loan bankruptcy bill by a vote of 19-5.  Now there are 41 members on the committee: 24 Democrats and 17 Republicans.  So a lot of people weren’t there. But the lopsided vote may mean that the Republicans aren’t willing to oppose student loan bankruptcy relief, if they know it will pass anyway.    

Congress is knocking off for the years shortly, so this won’t become law in 2020.  But it might happen quicker than I expected in 2021.

Can’t Wait that Long? Consider Chapter 13

If you can’t handle, or outrun, your debts until summer of 2022, you can protect yourself with a Chapter 13.

A Chapter 13 bankruptcy is a payment plan through the bankruptcy court. You have to pay “all you can afford” for three years–or sometimes five years. “All you can afford” puts you on a tight budget; but not as tight as a garnishment for 25% of your after-tax pay. (If you have a security clearance, filing Chapter 13 can protect your clearance. Going late on your debts can put your clearance in jeopardy.)

Here’s a big advantage of Chapter 13: You can drop out of Chapter 13 at any time. You’d plan to drop out when a new law allows you to discharge your student loans in a Chapter 7. If the law doesn’t change, you’d likely want to see the Chapter 13 through to the end.

Conclusion

Are your credit cards out of control? Are you in danger of getting garnished now? Do you also have a student loan problem?

Maybe filing Chapter 13 now is a good plan. You can set up small payments on the debts now. And be able to take advantage of a new law on student loans when it’s available.

Now, bankruptcy is almost no help with impossible student loans.

Bankruptcy Law and Student Loans:  When Student Loans Became Special

Student loans now are in a special category that bankruptcy law can hardly touch.

Under the old, 1898 Bankruptcy Act, student loan debt was just another debt. You could clear in in bankruptcy just like credit cards, loans, medical bills. Starting in 1976, clearing student loans got tougher and tougher.

In 1976, a new law said that student loans had to be in repayment status five five years, before they could be discharged.  (Excerpt for undue hardship.) The current bankruptcy code was passed in 1978, kept that five years.  In 1990, it was stretch out to seven years. In 1998, the seven years was gone.  You could only clear student loans based on “undue hardship.” And undue hardship basically means paralyzed, never work again.

In 2005, private student loans received the same special status of government and charitable student loans. That’s where we are today.

During the presidential primary season, Sen. Elizabeth Warren called for the Federal government to just forgive them all. The Democratic platform doesn’t go nearly that far.  Probably a Democratic majority in the Senate won’t do that either.

PS Final Draft is Stronger

The final draft of the platform was stronger.  It has me hoping a Democratic majority could make student loans dischargeable in bankruptcy, without the five year, or seven year requirement.

PPS  Nothing in the Republican Platform.  

The 2020 Republican Platform said nothing about bankruptcy and student loans. Actually, because of the pandemic, they voted to have no platform at all.  

Robert Weed

Posted by Robert Weed / in Before Bankruptcy, Blog, Weekly Posts / No comments yet

If you are filing bankruptcy, Get Your Money Out of Wells Fargo.

People filing bankruptcy get kicked when they are down, if they bank  at Wells Fargo.

Wells Fargo sees your bankruptcy on your credit report and they freeze your checking and savings account.  At least they do if you have more than five thousand dollars in their bank.  (They have said in court they only do it if you have more than $5000.00.  But they don’t just freeze the amount over $5000.00–they freeze it all.)

Why would a bank beat up their own customers?

Why Does Wells Fargo Beat Up Their Own Customers

So, why would Wells Fargo beat up their own customers like this? They claim they are required to ask the bankruptcy trustee if he wants the money. Although they are the only bank that does this, they have adamantly stuck to this policy for years.

It’s hard to make sense as a business proposition. I personally have probably cost them nearly a thousand customers over the years.  (At one of our national meetings of NACBA, a former NACBA president joked maybe they did it to collect bounced check fees.  That seems a small reward for losing lifetime customers.)

Anyway, get your money out of Wells Fargo.  (A couple weeks after the bankruptcy is filed, you can go back there if you want.)

I first wrote about this problem in 2011.

I first wrote about this Wells Fargo problem in 2011

Since then several lawyers have tried to fight this. As far as I can tell, the bank won every time.  

So, get your money out of Wells Fargo.

Posted by Robert Weed / in After Bankruptcy, Blog, Chapter 7 Bankruptcy, Weekly Posts / No comments yet

…But the Car Still Has to Pay.

When you file Chapter 7 bankruptcy, that means you don’t have to make the car payments.

But that does not mean you get a free car. You don’t have to make the car payments, but the car still has to pay.

That’s because the car finance company is attached to the car title. Lawyers call that a lien.  If the debt that’s attached to the car isn’t paid, the lien holder will repossess the car.

Don’t Forget to Make the Car Payment

It’s easy after bankruptcy to forget to make the car payment.  If it slips your mind, the car finance company won’t send you a reminder. Why? Because you don’t have to pay. They also won’t send the car a reminder letter. They know the car doesn’t open its mail.

And if you get a week behind, they won’t call and demand payment. Because you don’t have to pay. And they won’t call the car, because the car doesn’t have a phone. Only one thing happens if you forget to pay. You wake up in the morning and the car is gone.

If you forget to make your after bankruptcy car payment, you won’t see the car. the car still has to pay.

Does Paying the Car Help Your Credit Score?

Suppose you forget to pay and the car gets repossessed. The repossession won’t show up on your credit report.  That’s because the bankruptcy discharges the debt from you. But that also means your car payments won’t show up on your credit report if you do pay. You don’t have to pay.

Only one thing happens if you pay. You keep the car.

Only one things happens if you don’t pay. When you wake up in the morning, the car is gone.

You need to make the car payments if you want to keep the car. 

Posted by Robert Weed / in Virginia Bankruptcy, Weekly Posts /

The Alexandria Bankruptcy Court Trustee Hearings are now by Telephone.

Bankruptcy Trustee hearings are now telephonic. That’s the policy of the Alexandria VA bankruptcy court, effective April 9, 2020. (Richmond and Norfolk, too.)

Instead of a location, your hearing notice will have a phone number to call.

People who file bankruptcy are required by law to “appear” in front of the bankruptcy trustee to answer questions.  (For most people, the questions are, “Did you go over these papers when you signed them, and is everything you put there true?”) Those hearings by law are between four and six weeks after we send your papers to the court.

Starting now, you and I will appear by phone. (Some parts of the bankruptcy court have moved to Zoom, but NOT this. This basic hearing is on a telephone conference call.)  

The trustee does about a dozen hearings per hour; and everybody will call in the same phone number. So you and I will be listening in on the hearings for every other person that hour. (This is the same as it would be if we were all sitting in the hearing room together.)

Mute your phone. When you call in, don’t say “Am I on? Am I on?” You’re on an open mic to the whole room. If you talk when it’s not your turn, you are interrupting the bankruptcy trustee. (You don’t want the trustee to be grumpy when it’s your turn.)

The trustee is supposed to check your ID and social security number. On the phone there’s no way they can match your picture. But having an ID that matches the name on the bankruptcy papers at least proves something. So take a picture, or scan, of your ID and social security card.  [email protected] will send you a link.

We Will Talk Privately Before and After

You and I will have a call-in a Saturday before scheduled time. To go over what’s going to happen. And make sure you are ready to call in.

On the day of, I’ll email you about ten minutes before; to make sure you are there; and cover any last minute jitters.  Afterwards, I send an email wrap-up. And set a time for a call later in the day to handle any follow up questions you have, or action items that came out of the hearing. Those calls will only be between us.

I’ll be looking at my email during the hearing, so if you want to whisper me a question, do it by email.  Use [email protected].  That’s the email I’ll be watching. (It gets to me 45 second quicker than [email protected])

Here are documents you should get 

The Notice of a Bankruptcy case comes to you in the mail about a week after the papers go in.  It tells when when your telephonic “appearance” is. It’s also a notice to the people you owe money to that they are required to leave you alone.  And that anybody who is garnishing you has to stop. 

Your Order to debtor  tells you that you are required to show up for the telephonic appearance.  And that if somebody dies and leave you money in the next six months, the bankruptcy trustee can come and get it. You get this in the mail with the Notice of a Bankruptcy Case.

Here’s stuff you need to look at before your telephonic bankruptcy hearing

The Bankruptcy information sheet is a form I’m required to give you.  Congress really wants you to know you have four choices under the bankruptcy law.  Chapter 12 is only for farmers (and fishermen.) I’ve never done a farmer. Chapter 11 is for people like Donald Trump. I’ve never done Donald Trump. Chapter 13 is a payment plan through the court. Chapter 13 can get you five years to catch up your house or pay off your taxes, You can also be forced into Chapter 13 if you are making too much money to get approved for Chapter 7.

Chapter 7 says ‘sorry I can’t pay these debts.’ For most people that’s what we want.

This Hearing Info is from me. It explains that you need to get us bank statements that cover the date your bankruptcy was filed.  For ALL your bank accounts including the ones “I never use.” It also lists the questions they usually ask.

Finally here’s my 15 minute video

Ignore the parts about where to go and where to park–these are telephonic bankruptcy hearings, remember.  But the other stuff is still right.  PS Actually one other correction. We use Moneysharp.org for the required class.  (The video mentions Hummingbird. They stopped covering Virginia.)

UPDATE Zoom is Coming

Zoom will replace telephone calls for bankruptcy court trustee hearings.  At the end of the pandemic, the government will NOT resume in person bankruptcy trustee hearings.   Instead the system will switch over to using zoom, in place of telephone conference calls.

No word yet how fast this will happen.  

Posted by Robert Weed / in Weekly Posts /

I’m required to give you three legal disclosures

Now that most consultations are by phone and zoom, I’m posting these on my webpage. 

The first disclosure

This first disclosure tell you that you have four choices under the bankruptcy law.

• Chapter 12 is only for farmers, and fisherman. I’ve never done a farmer
• Chapter 11 is for business people like Donald Trump.  I’ve never done Donald Trump
• Chapter 13 is a payment plan through the bankruptcy court.
  • If you are behind on your mortgage, Chapter 13 can give you time to catch up.
  • If you owe taxes, Chapter 13 can give you time to pay without more interest or late fees.
  • If you are making too much money to file Chapter 7, chapter 13 pays your debts over five years.
  • If your house would get sold in Chapter 7 bankruptcy, Chapter 13 can save the house.

Those are my explanations. the required notice explains them somewhat differently.  That notice is here.

That notice also remind me if you lie to the bankruptcy court, you can go to jail.

The Second Disclosure

The second disclosure reminds you again to tell the truth. And it also tells you that you may be subject to audit. (The bankruptcy law calls for an audit of one case out of every hundred. Sometimes there’s no money in the budget, so they skip the audits; sometimes they do them.)

Here’s that second disclosure.

The Third Disclosure

The most important part of the third disclosure is that your lawyer is required to give you a price and tell you what he’ll do.

For Chapter 7 bankruptcy, my work schedule and payment schedule is here.

The third disclosure also includes an unhelpful list of the steps in a bankruptcy case.  Here it is.