January 31, 2015

Statutes of Limitation in Georgia: Credit Card Debts

statute of limitationsIn Georgia, the statute of limitations for filing a lawsuit to collect credit card debt is 6 years. This means that if your account is inactive for six years, you have a winning defense to any credit card collection lawsuit.

The clock on this statute of limitations begins to run when you last use the card or when you last make a payment. There is some authority to suggest that the creditor can restart the statute of limitations clock if you acknowledge that you owe the debt, enter a payment plan, or accept a settlement offer.

If you get a collection call or letter from a creditor or collection agency on a credit card debt that has been dormant for almost 6 years, it would not be wise for you to accept the call or say anything to the caller. Instead you should contact a lawyer to speak on your behalf. [Read More…]

How Soon After Bankruptcy Will You Qualify for a Mortgage?

Approved Real Estate Mortgage Loan Document Ready For SignatureOne of the most difficult decisions for a bankruptcy filer involves surrendering a home. Nobody wants to take this step, but sometimes there is just no choice. Home ownership involves not only a mortgage payment, but it also includes repair expenses, homeowners association dues and utility bills.

Giving up your home will be traumatic – even if you recognize the financial realities. Your family life will be disrupted, the kids may have to change schools, and you will have to sell or store furniture and other personal property that may not fit into a rental.

One of the questions that I get whenever a client has to surrender his home is “when will I be able to qualify for a mortgage so I can buy another house.” Many people are under the misconception that home ownership will be delayed five or ten years or more. The reality is much less harsh. [Read More…]

Free Budgeting Resources to Help You Recover from Bankruptcy

post bankruptcy family budgetOne of the issues that many of my bankruptcy clients have in common has to do with lack of budgeting. Most of us have a general idea about our income and expenses but very few people sit down and write out a formal budget.

When preparing a bankruptcy petition, I use my petition preparation software to create a budget, which, of course, I discuss with my clients. Many of my clients are surprised or even shocked to discover how much they spend each month and how far in the red they are.

In many cases, bankruptcy can help solve this problem by consolidating payments in a Chapter 13, or by eliminating debt (and sometime surrendering property) in a Chapter 7.

Obviously bankruptcy can function to solve an immediate problem but filing a Chapter 7 or Chapter 13 won’t help you if you revert back to the same old bad spending and savings habits after receiving your bankruptcy discharge. [Read More…]

Giant Collection Law Firm Sued by Government for Deceptive Practices

collection lawsuit millThe Consumer Financial Protection Bureau (a federal agency) has filed a lawsuit in federal district court against Frederick J. Hanna & Associates and its three principal partners for operating a “collection lawsuit mill” that uses illegal tactics to intimidate consumers into paying debts they may not owe.

According to the CFPB, Hanna & Associates violated federal law which prohibits deceptive practices in the consumer financial marketplace. The Agency wants compensation for victims, a civil fine and an injunction against the firm and its partners.

The allegations in the complaint include:

  • intimidating consumers with deceptive court filings. Hanna & Associates allegedly used automated processes to generate lawsuits with little or no involvement by attorneys. One of the firm’s lawyers, for example, “signed” more than 130,000 collection lawsuits in a two year period.
  • introducing faulty or unsubstantiated evidence. Lawsuits filed by Hanna & Associates included sworn statements about a particular individual’s debts. These sworn statements were issued by officers of the banks, credit card issuers and debt buyers who had hired the Hanna firm. The CFPB argues that these officers could not possibly have had personal knowledge about the individual cases and that the Hanna firm has dismissed over 40,000 suits in Georgia alone when these sworn statements were challenged by defendants.

In a statement, Hanna & Associates denied any wrongdoing and stated that it has followed all state and federal laws. [Read More…]

Appeals Court Denies Damage Claim for Clear Violation of the Automatic Stay

stay violation distress claimOn May 8, 2014 the 11th Circuit Court of Appeals released an interesting ruling denying a claim for damages filed by Chapter 13 debtors against their mortgage company. The Lodge v. Kondaur Capital Corporation and McCalla Raymer arose when a mortgage company started foreclosure proceedings against Mr. & Mrs. Lodge who were then debtors in an active Chapter 13 case.

Under the automatic stay provision of the Bankruptcy Code, of course, lenders cannot initiate or continue collection activity against a debtor who has filed Chapter 13 unless and until the lender first convinces the bankruptcy judge to lift the automatic stay.

In Georgia, most foreclosures are non-judicial meaning that to start foreclosure a lender needs to notify the debtor and run a written notice of the pending foreclosure in the legal newspaper of the county where the property is located. In the Lodge case, the mortgage company started the foreclosure process and bought the ad.

The day after purchasing the ad, the lawyer for the mortgage company, McCalla, Raymer, recognized the mistake and immediately canceled the foreclosure process. Unfortunately for them, however, it was too late to stop the ad from running. [Read More…]

Bankruptcy Often the Least Desireable Option to Eliminate Student Loan Debt

elimination of debtI recently received this email from a prospective client (“Jane”) seeking to have her student loans discharged in bankruptcy.  Do you see the problems with this case?

I am permanently disabled due to cognitive decline resulting from a craniotomy to repair one of three aneurysms. I also suffer from back pain, anxiety, depression and panic attacks. In addition to my 2012 brain and gallbladder surgeries, I underwent back surgery in 2011 and two foot surgeries in 2010, and due to complications from my back surgery I have not been able to return to work. . I was very recently approved for disability retirement after 25 years as an employee with the federal government.  I also receive SSI.   I filed a chapter 7 in 2008 and am unsure what my options are in regard to having my student loans forgiven. I am seeking a full discharge.

Let’s start with the most immediate problem – currently, Jane’s eligibility to file bankruptcy.  Under Bankruptcy Code Section 727(a)(8), Jane is not eligible to file Chapter 7 for eight years after previously filing a Chapter 7 1.  Depending on when in 2008 she filed, she would have to wait until at least 2016 before filing a second case. [Read More…]

  1. assuming that the previous Chapter 7 resulted in a discharge

How to Stop a Wage Garnishment in Georgia and Get Your Money Back

judgment creditorAlmost without exception my clients who are subject to wage garnishment in Georgia report that they feel “violated” or “horrified” by discovering that 25% of their take home pay 1 has been seized by a creditor.  I can certainly understand this emotion – especially if you depend on every penny of your paycheck to cover monthly expenses like rent, utilities, car payments and insurance costs.

How Wage Garnishment Happens in Georgia

With limited exceptions, you can only be wage garnished in Georgia if your creditor has first filed a lawsuit and obtained a judgment.  More than a few of my garnishment clients claim that they do not remember being sued – this is an issue for another blog post but anytime you find out that a sheriff’s deputy or process server is looking for you, it is time to take action because this means that you have been sued. [Read More…]

  1. Click here to review the details about wage garnishment in Georgia.

Why Must my Chapter 13 Include an Employer Payroll Deduction?

employer deduction order in chapter 13Have you made the decision to file a Chapter 13 bankruptcy?  If so, you should understand that Chapter 13 serves as a bankruptcy court approved and supervised payment plan.  The court approved and supervised part is important because the bankruptcy court will protect you from creditor actions as long as you stay current with your plan.  By contrast, non-court supervised payment plans offer no legal protection – even if you pay every month on time payment plans that are not Chapter 13 will not stop lawsuits, wage garnishments, bank levies, vehicle repossessions or foreclosures. [Read More…]

I Never Want to See You Again….

avoid future debt problemsI enjoy meeting with my clients to discuss solutions to debt problems.  And over the years I have met some really pleasant and interesting people.  That being said, I hope that when your bankruptcy case is over, I will never see you again – at least for another bankruptcy filing.

If you win the lottery and need legal help setting up a charitable foundation or a corporate structure to organize your investments, please call me.   If you know someone who needs to file an injury claim, I can help you there too.  But I really hope that this bankruptcy case will be your last.

Here are several suggestions that will absolutely help you avoid the need to file another bankruptcy:

  • set up online access to your credit accounts – you will be able to schedule payment reminders, fraud alerts and other control reminders.
  • set up automatic payments from your checking account to cover minimum payments – most of the time your minimum payment will be $25 or $35.   When this is paid automatically, you avoid late charges and late payment downgrades to your credit score.
  • pay off your entire balance each month – if you find yourself running a balance, this means that you are spending more than you are earning.  This should be a warning sign.   Stop spending until you get your balance down to zero.  Spending more than you earn will lead you back to…..bankruptcy!
  • never, ever, ever, ever (apologies to Taylor Swift) co-sign a loan for someone else – nothing good ever arises from co-signing for someone else – your brother, your sister, your kid, your mom.  Just say “no.”
  • write out a budget – if you can use a spreadsheet, do so.  When you see your income and expenses in black and white on paper, you will have a much clearer idea where your money goes
  • set aside funds for emergencies – you are going to have to replace tires, your kid will break a tooth, you will need to make an emergency plane trip.   Start setting aside $50, $100, or whatever you can in a savings account.  Try to build up 3 or 4 months equivalent to your monthly take home pay.  Forget that this money exists for any purpose other than a true emergency.
  • start planning for retirement.  Create an IRA account.  Contribute to your company’s 401(k) or pension.  Besides bankruptcy I represent people in Social Security disability claims and I will advise you not to rely on Social Security to pay for your retirement

There is an old saying that if you fail to plan, you are planning to fail and this is especially true when it comes to personal finances.  The difference between a comfortable and manageable life and a stressful,  unpleasant life can boil down to $200 or $300 per month.  My hope for all of us as we enter 2014 is to live below our means and to prepare for the unexpected.

Debt Consolidation Not Always a Good Idea

 

exchange secured debt for unsecured debt

The New York Times recently ran an article in its business section entitled The Risk of Transferring a Car Loan to a Credit Card.  The Times reported noted that several credit card issuers now promote programs in which you can transfer the outstanding balance on your car loan to a credit card.

 

At first blush, this seems like an interesting concept.  Car loans are secured debts, while credit cards are unsecured loans.  If you default on a car loan, you run the risk of repossession, whereas a credit card issuer would have to sue you to collect a default, thereby giving you months to refinance or find additional money.

Further, some of the credit card lenders are offering teaser rates such as zero interest for up to 18 months.

Credit card issuers are desperate for new business.  The great credit crunch of 2008 and new federal consumer protection laws have resulted in a significant decline in consumer credit.  Credit card lending is an extremely profitable business but it depends on numbers – specifically, it depends on borrowers who pay, but who sometimes pay late, thereby racking up late fees and interest charges.

And these late fees and interest charges are exactly why trading your car loan for a credit card balance may not be such a good idea.

If you are extremely disciplined and can pay off the transferred balance in full when interest rates are zero or very low, you could save hundreds or thousands of dollars of interest charges.

However, credit card agreements usually contain “gotcha” provisions that jack up interest rates if you are late, along with hefty late fee charges.  A $10,000 loan at zero percent is one thing, but a $10,000 loan with a 25% interest rate is something else entirely.  You could find yourself making minimum payments for years and never see the principal balance go down.

Further, the psychology of credit card debt works against you.  When you have a car loan, you know that if you start missing payments, you car or truck is going to be repossessed.   Repossession is costly and embarrassing and if you are facing a cash flow shortfall you are likely to do what is necessary to protect your transportation.

By contrast, credit card debt does not have the same urgency.  Since you have the option to pay a minimum payment, and you know that losing the vehicle is months away, it is far more likely that you will end up with a large, high interest credit card debt.

I have not seen these debt transfers yet in a bankruptcy context but one of these transfers would be considered recent use of unsecured debt and could be deemed non-dischargeable if you filed bankruptcy within a few months after making the transfer.

My sense is that this type of transfer deal could make sense for a person with excellent credit, steady income and financial discipline.  Such a person could also, presumably, pay off his car loan early anyway, which makes the credit card transfer option less likely anyway.  My gut tells me that there are no free lunches in life and this looks like a “free lunch” proposal.  So I say “stay away.”

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