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…]
One 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…]
The 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…]
On 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…]