You may recall that back in September, 2015, I reported that federal judge Marvin Shoob had issued a ruling that invalidated on Constitutional grounds bank account levies in Gwinnett County, Georgia. A man named Tony Strickland sued the Gwinnett County clerk of court after his bank account containing workers compensation and Social Security funds was seized by a credit card company that had sued him. Mr. Strickland argued, and Judge Shoob agreed, that the credit card company had an affirmative obligation to notify debtors like Mr. Strickland that certain funds (like workers’ compensation benefits, Social Security benefits, welfare payment and similar benefits) were exempt from garnishment. [Read More…]
This was the issue I faced recently while representing a client whose car was totaled in an accident. My client was in the middle of his Chapter 13 case, having paid into his plan for three years, with two years left to go.
Now, with no car to drive to work, my client was spending $20 per day on a rental car and needed to purchase a replacement. Here’s how we dealt with this problem.
First, my client had to find a replacement vehicle and a lender who would agree to finance a loan despite my client’s status as debtor in an active Chapter 13. Believe it or not, this task was not a problem – my client found a two year old vehicle in the $25,000 range and his dealership was able to arrange financing. [Read More…]
As a practicing consumer bankruptcy attorney in Atlanta, Georgia for over 25 years, I know that out of control credit card debt can force people in to Chapter 7 or Chapter 13 bankruptcy. In many cases credit card debt that was manageable becomes unmanageable because of common mistakes made by individuals in how they handle their credit card debt.
If you can avoid these mistakes you may be able to avoid the stress and financial distress caused by excessive credit card debt.
How Credit Card Debt and Credit Card Interest can Get Out of Control
The first step towards controlling your credit card debt involves your spending. This may seem obvious but many of my bankruptcy clients fail to recognize this reality. If you find yourself carrying a balance (rather than paying off your debt in full at the end of the month) you need o change your usage habits. If you carry a balance you will end up paying unnecessary and expensive credit card interest.
Your credit card is not a substitute for cash – instead your credit cards represent a high interest loan with a 20 days repayment term. Interest on unpaid balances will eat you alive. Most cards obligate you to pay an 18 to 20% annual interest rate on balances carried more than 20 days. To give you some perspective, your interest rate on mortgage debt will end up in the 3 to 4% per year range, and the annual percentage rate on your car note will generally be 5 to 6% per year.
As a rule, if you make only the minimum payment, your balance will stay the same, or actually increase month to month indefinitely. And if you are 1 day late, you will likely get hit with a penalty (often $35 or more) plus your interest rate may be increased to 28% or higher. [Read More…]
If you have never heard the term “debt buyer,” you might be amazed to learn that large companies exist solely for the purpose of buying and selling consumer debt. These companies buy and sell billions of dollars of debt. Some are part of public companies that trade shares of stock on stock exchanges.
In other words, credit card companies, hospitals, personal loan companies, banks and other lenders regularly sell and resell debt – and this may include debt owed by you.
Here’s how it works. Let’s say that you open a Mastercard or Visa account with a local bank. Over the years you may start running a balance – perhaps $2,000 or $3,000. You are able to make the minimum monthly payment but the balance grows slowly. At some point, you find yourself with a problem – you miss one or two monthly payments and your account becomes two or three months past due. The credit card company cancels your account and starts sending you collection letters.
At that point, the credit card company may decide that it would rather sell your delinquent debt for cash before it gets too much older. Depending on how delinquent the debt is, a debt buyer may pay only 4 or 5 cents on the dollar. Your 2 month delinquent debt of $3,000 will be packaged along with other similar debt and sold in bulk to a debt buyer at this discounted rate.
The debt buyer may attempt to collect the debt by dunning you (calling repeatedly) or the buyer may retain a lawyer and sue you. [Read More…]
Every Chapter 7 or Chapter 13 debtor must attend two credit counseling classes. The first, called the pre-bankruptcy credit counseling course, is required before you can file. Your certificate of completion is your ticket in to the bankruptcy process.
Once you have an active case, however, you must attend a second course called a financial management course, obtain a certificate of completion and have your lawyer file that certificate with the clerk of bankruptcy court.
This financial management course offers tips about how to set up a household budget and how to avoid financial mistakes that resulted in your need to file for bankruptcy in the first place.
If your lawyer does not file this financial management course certificate of completion you will not be eligible for a bankruptcy discharge. Instead, your case will be closed without discharge.
Why is a discharge order so important? It represents a formal order from the bankruptcy judge that all debts which can be eliminated or adjusted have been so modified. This order is binding on all state and federal courts and if a creditor attempts to collect on a discharged debt, you can sue that creditor for damages in a contempt proceeding. [Read More…]
A recent study by economists suggests that Chapter 13 debtors whose cases were confirmed and completed through discharge derive significant economic and health benefits from their filings as compared to Chapter 13 debtors whose cases were dismissed.
This report, published on the National Bureau of Economic Research – a professional organization for economists – compared 500,000 bankruptcy records with tax records and foreclosure records.
The study compared Chapter 13 debtors whose cases were approved and completed successfully to discharge to Chapter 13 debtors whose cases were dismissed. Successful Chapter 13 debtors:
- saw annual earnings 25% higher after bankruptcy – compared to their pre-bankruptcy earnings. Dismissed filers saw no increase in earnings
- had a higher employment rate
- had a 30% lower mortality rate compared to filers whose cases were dismissed
- were 19% less likely than dismissed filers to lose a home to foreclosure
The study authors suggest that successful Chapter 13 filers have an increased incentive to work and increased economic stability following receipt of bankruptcy protection. [Read More…]
There are many reasons why a married couple may decide that only one spouse needs to file bankruptcy. The bankruptcy law allows a married person to file an individual bankruptcy but there will be some impact on the non-filing spouse. If you are a non-filing spouse, here are some concerns that you should keep in mind:
1. Your credit score may be negatively impacted. You are most likely to face this problem when you have joint debts with a bankruptcy filing spouse and your spouse does not pay a joint debt on time.
For example, Chapter 13 allows a bankruptcy debtor to restructure payment obligations, which may include reducing the monthly installment, or extending the term of the loan. As a non-filing spouse you will likely be in violation of the contractual terms of your loan, which will appear as a late payment on your credit report.
2 Your joint bank accounts may be at risk. The bankruptcy law does allow a Chapter 7 or Chapter 13 debtor to declare a set amount of cash as exempt (sheltered) property. Depending on the particulars of the case the amount of this exemption can range from zero to around $10,000. [Read More…]
Do you know what it means to have a judgment entered against you? Judgments arise from lawsuits – often collection lawsuits – and they happen when a state court judge decides in favor of the other party.
In collection lawsuits, this means that the judge has ruled in favor of the plaintiff – usually a credit card company, finance company or other person or company who is suing you for money damages. Sometimes a judgment is entered after trial but most of the time, a default judgment is issued when the defendant (i.e., you) does not answer the lawsuit.
In Georgia, if you are sued, you must file a written “answer” with the clerk of court, within 30 days after you are served with a lawsuit. If you do not file an answer in a timely manner, the plaintiff can go to court and ask the judge to issue a default judgment.
Unfortunately you will not know when or if this default judgment is entered. If you choose not to participate in the litigation, you may not receive notice about the status of that litigation.
Here at Ginsberg Law Offices we often speak to clients who only found out about a judgment when they opened their pay stub only to discover that 25% of their take home pay was seized, or when their savings or checking accounts were seized by the judgment creditor.
The take away from all this is clear – if a sheriff’s deputy or process server knocks on your door and hands you a lawsuit, your next move should be to call a lawyer for guidance. If you hear a rumor that someone has sued you (perhaps out of state or in the county where you used to live), don’t ignore the problem hoping it will go away. Instead, call a lawyer. Lawsuits usually do not go away, and, as discussed above, bad things can happen if a judgment is issued.
In 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…]
One 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…]