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21

Jul 2010

How "Avoid Bankruptcy" plan avoids Virginia consumer protection law

Posted by / in Virginia Bankruptcy / 4 comments

After talking with a lady yesterday, we’ll call her Jerri, I went to the website of Greenshield Financial Services. Here’s what they say they do: “Greenshield Financial Services is a Financial Health Management Company serving individuals seeking debt relief or debt help by offering debt settlement programs as an alternative to bankruptcy.”

Jeri had a set up fee for Greenshield Financial Services of $3500–paid as $900 over four months. And then a monthly management fee of $425. A total of over $7000.00 had been paid to these people as their fee to help Jerri with debt settlement.

As a result of their work, two small credit cards had been settled. Jerri saved less than $1000 total. Spending $7000 to save $1000 is not exactly a good alternative to bankruptcy. She figured that out when the sheriff brought around court papers from some of her bigger credit cards, that had not settled their debts through Greenshield.

At first, I thought it was a violation of Virginia law. Virginia law says a debt management program can’t charge more than $75 set up and $60 per month.

Now $3500 is a whole lot more than $75–and $425 per month is more than $60. But Greenshield is not covered by the law.

Here’s how they avoid the law. To be a debt management program under Virginia law, the debt negotiator needs to collect the money from the consumer and pass it on to the creditor. Greenshield works out the settlement, but the creditor take the money directly from the consumer’s account. As long as Greenshield never touches the money, they aren’t covered by the law. So they can charge as much as they can talk people into paying. Which, in Jeri’s case, was a lot.

(And no, she is not likely to avoid bankruptcy.)

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06

Jul 2010

Before bankruptcy, can I spend down my money?

Posted by / in Virginia Bankruptcy / 1 comment

Suppose, when you are filing bankruptcy in Virginia, you have too much cash.  You can turn it over to the bankruptcy court to divide among the people you owe money to.  Or you can find legal ways to spend it.

(When you file bankruptcy in Virginia, you are only allowed to have $5,000.00 in cash.  That’s about the lowest in the country.  It’s $10,000 if you are over age 65.  Also, your paid for car valued at more than $2,000.00 counts against that limit. )

A lot of people have too much.

Here are some things you can do:

Need to spend down cash? See the dentist

1.   Postponed dental work.  Many people in a tight spot financially haven’t gone back to the dentist to get necessary things taken care of.  You might need three or four thousand dollars worth of dental work.  And they can’t repossess your teeth.

2.  Laser vision correction.  Same as the dentist if you need it.

3. Roth IRA.  Everyone who is working is allowed to fund a Roth IRA–whatever other retirement you have (or don’t have.)   the limit is $5000 per person–$6000 if you are over age 50.  During the January – April 15 (tax deadline) time frame, you can contribute for both the current and the prior year.  Although I cannot give you investment advice, I can saw that I have IRA’s with Fidelity and Vanguard.

4.  Repairs around the house.  If you are planning to keep the house, maybe the gutters need to be replaced, or the a/c unit needs an upgrade.  The court can’t repossess fixtures–things that are attached to the house.

5.  The Virginia College Savings plan.   The 11 USC 541(b)(5) of bankruptcy code protects college saving plan money if it has been in the plan for more two years.  ($5000 one to two years.) But, Virginia law gives an immediate, unlimited exemption for the Virginia College Savings plan.  (The one set up by the state.)  One of the bankruptcy trustees here is challenging that,  so we need to be cautious until the court rules.

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25

Jun 2010

After bankruptcy, how soon can I get approved for a new mortgage?

Posted by / in After Bankruptcy / 3 comments

Yesterday the mortgage giant Fannie Mae, now owned the the federal taxpayers, announced a new policy on qualifying for a new mortage, after you lose your house in bankruptcy, foreclosure, or short sale.

They say they want to discourage people who “just walk away” from their mortgages, particularly in states, like California, where the mortgage company cannot come after you for the money.  (Under Virginia law, they can.)

So Fannie Mae now won’t back a mortgage for someone who gave up a house in foreclosure until seven years have passed from the foreclosure date.   They call this a “Seven-Year Lockout Policy for Strategic Defaulters”

Now, there is an exception that I’m calling the loan mod/extenuating circumstances exception.  The seven year lockout does not apply to people who can show the foreclosure was caused by “extenuating circumstances.”  That’s not defined, but I think it would certainly include unemployment, divorce, and probably reduced hours or loss of bonus or commission during the recession.  If you are giving up your house, and want to buy again soon, keeping proof of that would be important.

The seven year lock out also does not apply  to people who tried to get a loan mod.   “We’re taking these steps to highlight the importance of working with your servicer,” said Terence Edwards, executive vice president.

Only a three year waiting period applies to people who tried to get a loan mod and to people who had extenuating circumstances.  (I’m not totally clear whether that means you have to do both, or if either one is enough.)

If you shortsale the house, or do a deed in lieu, the waiting period is only two years.  (This is one of the very few benefits I see in doing a shortsale. September 7, 2012 Washington Post had a good article on the big damage a shortsale does to your credit score.  You can read that here.)

Lots of people think bankruptcy is the worst thing you can do–those people are wrong.  Fannie Mae regulations require only a two year waiting period after the bankruptcy–again if the bankruptcy was caused by extenuating circumstances.   (Again, it’s important to keep a file documenting loss of income or whatever caused the problem.)

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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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09

Mar 2010

After bankruptcy, what's this from Weltman, Weinberg & Reis? Or Bass and Associates

Posted by / in After Bankruptcy / 1 comment

If you buy furniture, appliances or jewelry on store credit, they have a right to get it back after your bankruptcy is over.  (Unless you keep paying, of course.)

In Virginia, and most states, that right is found in the Uniform Commercial Code. http://www.law.cornell.edu/ucc/9/overview.html.  That law–lawyers call it the UCC–also gives the bank the right to repossess your car if you stop making car payments.  http://www.law.cornell.edu/ucc/9/9-503.html.

The fact is, they are more likely to come after your car, if you stop paying, than to come after your big screen TV.  Two reasons for that.

First, the car is parked out on the street, where they can get to it.  Second, the market for used cars is a lot better than the market for used TV’s.

Still, if they want to, after bankruptcy they can file a legal paper, called a detinue in Virginia law, and ask you to turn over the TV, jewelry or whatever.   I’ve done twelve thousand bankruptcies, and I haven’t seen two dozen detinue.  I’ve seen two or three for jewelry worth more than five thousand dollars.  And the rest were filed mainly by USA Discounters, a furniture and appliance outfit located mainly near military bases.

OK, so who are Weltman, Weinberg & Reis?  This is a law firm that after bankruptcy, will write to you about something you bought at Best Buy or Kay Jewelry and a few other places.   They say they want you to call 800-837-6008 to arrange to turn back in their “collateral.”

You’ll notice they don’t even tell you what the “collateral”–the stuff–is.  That tells you the “collateral” isn’t really what they want.  They want you to call and offer them a payment.

Don’t do it.

My rule is this.  If they contact my clients with a list of what you bought and when you bought it, send that to me.  (Assuming I’m your bankruptcy lawyer.)  I’ll contact them and work something out.  That hardly ever happens.

As for their typical letter.  “We want our stuff back”–without telling you what it is.  Just toss those out.

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NORTHERN VIRGINIA BANKRUPTCY LAW OFFICES