July 20, 2018

Why Some People Face More Bill Collection Harassment than Others

bill collection harassmentWere you aware that credit reporting agencies (Equifax, Experian and Trans Union) have assigned you a score which reflects the likelihood that you will pay a delinquent bill?  This collection score 1 helps bill collectors decide where to focus their collection efforts.

Credit reporting agencies also offer “bankruptcy risk scores” which offer credit grantors a numerical rating score to determine whether a customer or potential customer is more or less likely to file bankruptcy.

Financial data that may be buried in credit applications or public records can now be analyzed instantly by computer and reduced to a simple score 2 [Read more…]

  1. The collection score product is described in more detail here, in a brochure published by the Fair Isaac Company, the organization that also provides credit scoring algorithms for the credit reporting agencies.
  2. My professional colleague, Long Island, New York bankruptcy lawyer Craig Robins writes more about bill collection and bankruptcy in his excellent Long Island Bankruptcyblog.  Thanks to Craig for his excellent post about automated bill collection systems, which you can read here.

Are Amendments to Bankruptcy Schedules Proof of Perjury?

amendments to bankruptcy paperworkMy Bankruptcy Law Network colleague Andy Miofsky, who practices in southern Illinois, referenced a very cogent “open letter to debtors and their counsel” that was issued in 1997 by a Bankruptcy Judge who sits in a California bankruptcy court.

Judge Jaroslovsky’s open letter points out that every schedule you file is issued under penalty of perjury.  Amending schedules to update information does not change the fact that the original filings were somehow false.  “I have no idea where anyone got the idea that amendments can cure false schedules,” writes the judge.  The debtor has an obligation to correct schedules he or she knows are false, but amendment in no way cures a false filing. Any court may properly disregard subsequent sworn statement at odds with previous sworn statements.

Specifically the judge references emergency, “two page” filings where the debtor lists one or two creditors (such as a mortgage or a vehicle lender) and swears under penalty of perjury that his schedules are accurate.  In truth, the debtor (and his counsel) know that other creditors exist.  The emergency filing, therefore constitutes perjury.

I think that Judge Jaroslovsky makes a valid point that most debtors and their attorneys readily use the amendment process to “fix” schedules that were knowingly inaccurate when filed.  I think it is incumbent upon debtors and their counsel to work with updated and accurate information. Perhaps it would be wise for debtors to indicate “more to come” on their emergency or initial filings.  However, I respectfully disagree with the judge that these amendments ought to be disallowed. [Read more…]

Unemployed Workers Over Age 50 Should Give Bankruptcy a Look

laid off baby boomerThe New York Times recently published a somewhat discouraging article about the difficulty older workers are having finding jobs following the “Great Recession.”  According to the article, it takes workers over 50 almost a full year to find a new job, compared to about 20 weeks for 16 to 24 year olds.

Further, less than half of laid off workers between the ages of 55 and 64 are finding jobs at all, and less than 25% of workers over the age of 65 are finding work.

Those workers who do find jobs often do so for less money and a recent Supreme Court decision [The Supreme Court ruled in 2009 that the Title VII framework does not carry over to age-bias lawsuits.  This case was Gross v. FBL Financial Services, Inc. – you can read more about it here.] which makes it more difficult for an older plaintiff to recover damages for age discrimination.

You may be asking “what do these statistics have to do with filing bankruptcy?” [Read more…]

Co-Signed Loans: An Old Problem that is Making a Comeback

avoid co-signing a debtWhen I first began working in the consumer bankruptcy field, co-signed loans were a common problem that I saw often.  Then credit standards loosened and I rarely saw clients who were co-signers or who had co-signed loans.

Now the personally guaranteed co-signed loan is making a comeback.   I can state without reservation that in both a personal and a business context, agreeing to co-sign a loan for someone with poor credit is never a good idea.

In the current market, standards for consumer credit are tight and securing credit approval can be a challenging feat for someone with mediocre or poor credit.   Because of the tightening credit market and increased regulation by the federal government on lenders, people who may have been approved in years past are now needing others to co-sign in order to take out a loan. [Read more…]

Sinbad Bankruptcy? News Reports Get it Wrong

According to news reportsSinbad does not file Chapter 13 coming from literally hundreds of outlets, comedian Sinbad has filed a Chapter 13 bankruptcy.  The source of this report is the web site TMZ.com – and news outlets from major news networks to gossip web sites are re-writing and re-reporting the TMZ story.

There’s only one problem with the TMZ story – it is not factually correct.  There is no way that Sinbad could qualify for Chapter 13 given the type of debts he owes.

If, as has been reported, Sinbad owes American Express $374,979 and Bank of America, $32,199, his unsecured debt exceeds the jurisdictional limits for Chapter 13.  If you consider IRS debt of more than $8 million, Sinbad far exceeds the jurisdictional limits for Chapter 13.1

I am guessing that Sinbad actually filed Chapter 7, which means that any hard assets or intellectual property he owns could be at risk.  This element of the story could be an interesting read but we may never know. [Read more…]

  1. Section 109(e) of the Bankruptcy Code provides that Chapter 13 debtors may have no more than $383,175 of unsecured debts.  Sinbad’s credit card debt alone totals more than $407,000.

Bank Won’t Talk to You Now that You have Filed Bankruptcy – Here’s a Solution

no customer service after bankruptcyMortgage companies and banks often put you on a “no communication” list after you file bankruptcy.  Your on-line access log-in may stop working, you will no longer receive loan statements, and when you call customer service you may be told that because you are in bankruptcy, the lender cannot talk to you anymore.

Lenders are not giving you the silent treatment because they are angry at you for filing bankruptcy, nor are they trying to be rude.  They are not talking to you because the automatic stay protection of the Bankruptcy Code says that once you file, it is a violation of the stay to make any effort to collect a debt.

Arguably, a loan statement could be construed as attempting to collect a debt and customer service reps not knowledgeable about bankruptcy may say something inproper.  Basically your bank or mortgage company does not want to find itself facing a claim for damages arising from violating the stay so many of these companies simply cut off all communication.

The problem for you, of course, is that you may have a need to speak with a representative.  Perhaps you need to confirm receipt of a mortgage payment that was paid directly after filing.  You may need to make an electronic payment directly from your checking account.  You may need a copy of your payment history.

How do you get past the wall of silence? [Read more…]

Georgia Homeowners Should Not Assume that Mortgage Lenders will Negotiate in Good Faith

dual tracking foreclosureThe Atlanta newspaper ran a story this weekend about a Mableton woman who found herself facing an eviction notice following a foreclosure even though her mortgage loan account had been accepted into Georgia’s HomeSafe program.

The HomeSafe program is a federally funded and state run arrangement whereby unemployed or underemployed borrowers can get a 0% interest bridge loan. The bridge loan funds are then paid to the mortgage lender to stop the pending foreclosure.

In the Mableton woman’s case, her lender, Citibank, should not have foreclosed because it agreed to participate in the HomeSafe program.  In this case, after inquiries by the newspaper, Citibank has agreed to cancel the eviction and presumably reverse the foreclosure.  However, Citibank insists that it did nothing wrong because it was acting on behalf of the loan’s actual owner, Freddie Mac.

The AJC notes that the Mableton woman’s case is another example of something called dual tracking, in which a lender prepares to foreclose while at the same time engages in negotiating with the homeowner for a loan modification or forbearance.  The homeowner often believes that a modification is imminent and that the foreclosure will be canceled, only to find out two or three days before the foreclosure that there is no deal.

[Read more…]

When Bankruptcy Makes More Sense than Struggling to Pay Off Debt

I want to challenge the conventional wisdom that filing bankruptcy should be considered a last resort. Does that sound self serving coming from a bankruptcy lawyer? Maybe. But consider this table:

Balance monthly payment time to payoff interest rate total interest total payoff
$10,000 $300 44 months 15% $3,043 $13,043
$50,000 $1,500 44 months 15% $15,217 $65,217


As you can see, under the best of circumstances, it will take you 4 ½ years and $13,043 to pay off that $10,000 credit card debt, assuming that: you are no longer using your credit card for future purchases you have not been late, thereby keeping your interest rate from jumping to a penalty rate you make only the minimum payment of $300 per month Under this best case scenario, $50,000 of credit card debt will require $1,500 per month and you will end up paying interest charges totaling $15,217 for payoff of $65,217.

What happens if you miss a payment? In addition to the late fees, your interest rate rises from 15% to a penalty rate, which is typically 29%. With a 29% interest rate, and a $300 per month minimum payment, your interest charge on that $10,000 balance will total $10,959 (totaling $20,959) and almost 6 years to pay off the debt.  A $50,000 balance, payable at $1,500 per month, will produce interest charges of $54,793 for a total of $104,793 over that 70 month period.

Balance monthly payment time to payoff interest rate total interest total payoff
$10,000 $300 70 months 29% $10,959 $20,959
$50,000 $1,500 70 months 29% $54,793 $104,793


You can run your own numbers at: http://www.cardhub.com/credit-card-calculator/

[Read more…]

Senior Citizens and Bankruptcy: Special Considerations

fixed income bankruptcyOver the past few months, Susan Blum and I have been meeting with an increasing number of senior citizens and others on fixed incomes who are considering bankruptcy because of significant credit card debt.

It is not at all unusual for us to see seniors with over $100,000 in unsecured debt that has accumulated over years – sometimes 10 years or longer.  When fixed income investments and/or Social Security no longer throw off enough monthly income to pay the minimum payments, bankruptcy becomes a legitimate option.

Seniors, in particular, are often conflicted about filing bankruptcy because they came of age in an era when bankruptcy still had a social stigma and it was unthinkable not to pay one’s debts.  As a result, I sometimes see cases where a client has paid two or three times the balance due by making minimum payments but the outstanding balance has not really budged.  When I point this out, the stigma issue often disappears. [Read more…]

Don’t Forget that You have Payment Obligations in Chapter 13

Chapter 13 can transform an upside down budget into one where your income equals your outflow, and it can reduce your total debt, sometimes by thousands of dollars.

Chapter 13 only works, however, if you pay what you are required to pay by your Chapter 13 plan.  Specifically, for cases filed in the Northern District of Georgia, you will have to pay your mortgage(s) directly and you will need to pay your Chapter 13 trustee your plan payment until the payroll deduction kicks in.

You cannot and must not be passive about your payment obligations – if you are not current with your post-filing mortgage payments and your initial trustee payments, your case may be dismissed.  In this brief audio podcast, I discuss what you need to keep in mind about your direct payment obligations in your Chapter 13 case.

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