5 days 10 hours ago


At Shenwick & Associates, we are receiving many calls and emails these days from clients regarding leases which they would like to terminate and the principals' exposure for guarantees and good guy guarantees associated with those leases.

Most commercial tenants in New York City are organized as either corporations or LLCs and those entities are the tenant on the commercial office lease. Almost all landlords in New York City will require a principal or principal’s of the corporation or LLC to guarantee the lease.

There are two types of lease guarantees in New York. A full or complete guarantee for the payment of rent or a “good guy guarantee (“GGG”)”, which is a specialized type of guarantee, which can limit the payment of the guarantor under the lease, if certain conditions enumerated in the GGG are met.

Under the full or complete guarantee, for example if the tenant fails to make lease payments for 6 months and owes $50,000 for rent and additional rent under the lease, the Landlord can demand that the guarantor pay those monies and if payment is not made, the Landlord can sue the guarantor for $50,000.

The second type of guarantee which is known as a good guy guaranty limits the principal’s exposure under the guarantee if certain conditions are met. To be a “good guy” means that the tenant vacates the space and delivers possession to the Landlord without litigation.

An example of how GGG operates is provided below.

The GGG provides that the principal’s financial exposure under the GGG terminates when: 1. the tenants sends notice to the Landlord that it is vacating the leased space (the usual notice required is 90 to 120 days), 2. the tenant must be current on its payment of rent and additional rent, when it sends the notice to the Landlord or current on rent when it vacates the space, 3.the space must be left “broom clean” and 4. keys for the office must be delivered to the Landlord.

Under this scenario, if all 4 conditions are satisfied, the guarantor is released from liability under the Lease. However, if the 4 conditions are not satisfied the guarantor’s liability continues until the lease expires.

If the tenant is unable to pay the rent due under the lease when it vacates the principal will often pay the rent for the tenant to terminate the GGG.

It should be noted that just because the tenant vacated the space, the lease is not terminated and the tenant remains liable for rent until the lease terminates. If the tenant does not pay the rent, the landlord can sue the tenant but not the guarantor.

Under that scenario, the tenant will either close its business or file for chapter 7 bankruptcy.

As can be seen from the above examples, a GGG is a more limited form of guarantee.

The statute of limitations for a landlord to commence an action under a guaranty under New York State law is 6 years. CPLR 213(2)

Under New York custom and practice, the guarantee whether it is a regular guarantee or a GGG can be incorporated into the lease or it can be a separate document.

Under certain limited circumstances based on a NYC administrative law, certain guarantees are void see New York City Administrative Code §22-1005, which provides for the suspension of certain contractual obligations between March 7 and Sept. 30, 2020. The law is applicable to leases for restaurants, bars, retail establishments and other similar non-essential businesses that were required to cease operations due to various COVID-19-related executive orders issued by the Governor. If a guarantor can avail themselves of that law, then the guarantor may be able to avoid liability even if the tenant does not pay rent under the lease.

From a landlord’s perspective once they obtain possession of their space, they need to determine based on cost benefit analysis if they want to sue the tenant or the guarantor for rent that is due and owing. The landlord will consider the cost of litigation (legal fees and court costs) and the ability to collect on a judgment, if one is obtained.

Due to the covid virus, many Landlords are taking a wait and see attitude and not commencing lawsuits immediately, as they may have in the past.

A tenant that wished to vacate a lease should have the lease and the guarantee reviewed by an experienced attorney and the tenant and guarantor need to develop a strategy to deal with the landlord.

Any clients having questions regarding a terminating a lease or with respect to a guarantee or good guy guarantees should contact Jim Shenwick at 212-541-6224 or email him at Jim Shenwick negotiates commercial leases, practices debtor creditor law and bankruptcy law.

6 days 1 hour ago

Chapter 13 Trustee Thomas Gorman Thomas Gorman is a lawyer. He’s the Chapter 13 Trustee for the Alexandria VA Division of the US Bankruptcy Court. That’s a full time job. He was appointed in 2009. He runs your Chapter 13 bankruptcy hearing, called the “meeting of creditors.” Creditors hardly ever attend the meeting of creditors. […]
The post Chapter 13 Trustee Thomas Gorman by Robert Weed appeared first on Northern VA Bankruptcy Lawyer Robert Weed.

1 week 3 days ago

The 9th Circuit Court of Appeals is the first court of appeals to rule on the issue of whether a bankruptcy court must approve a lease assumption.  See Bobka v. Toyota Motor Credit Corp, 968 F.3d 946 (2020).
What happened?
When Melissa Mather Bobka filed a Chapter 7 she was leasing a Toyota Rav4.  She wished to keep her vehicle and called Toyota Motor Credit to let them know of her intention to keep the vehicle.
Toyota Motor Credit sent the debtor a Lease Assumption agreement that was signed and filed with the bankruptcy court.  The next day the bankruptcy discharge was issued.
Payments on the lease went into default and the vehicle was eventually surrendered. Toyota Motor Credit then sought to collect the past-due balance and the debtor objected stating the debt had been discharged since Toyota failed to follow the requirements of a Reaffirmation Agreement outlined in 11 U.S.C.524(c).
Toyota Motor Credit countered that the requirements of 524(c) pertain only to auto purchase agreements and not to auto leases which are regulated under bankruptcy code section 365(p).
The debtor requested that all collection activity stop and that she be awarded $50,000 in damages.
What the court said.
The bankruptcy court and the district court ruled in Toyota Motor Credit’s favor and held that banks do not need to comply with the cumbersome requirements applied to auto purchase reaffirmation agreements.  The debtor then appealed to the Ninth Circuit court of appeals.
In rejecting the debtor’s appeal, the Ninth Circuit Court identified three reasons why a lease assumption agreement does need to follow the stricter rules governing reaffirmation agreements.

  1. To apply the stricter requirements of reaffirmation agreements to lease agreements would render the language of 365(p) superfluous.
  2. Courts should to apply specific statutory construction before more general provisions.  Section 365(p) specifically deals with lease agreements and should be applied before more general rules of reaffirmation agreements apply.
  3. Other parts of the Bankruptcy Code suggest that lease agreements are not governed by reaffirmation agreement requirements.

Why is this opinion important?
A great deal of uncertainty has surrounded lease assumption agreements. Some creditors require that debtors sign reaffirmation agreements to assume a lease while others simply rely on one-page lease assumption agreements.
Reaffirmation agreements require court approval, while lease assumption agreements do not. And sometimes bankruptcy judges rule that it is not in the best interest of a debtor to reaffirm an auto loan that is beyond their ability to pay.
A ruling that court approval is not required makes it easier to keep a leased vehicle, although debtors and their attorneys should give serious thought to whether that is a good idea.
Image courtesy of Flickr and Dennis Elzinga.

1 week 3 days ago appeared on the New York City Comptroller Scott Stronger has backed a proposal that would bail out taxi drivers burdened with exorbitant debt owed on medallions and worsened by the coronavirus pandemic. New York City Comptroller Scott Stronger has backed a proposal that would bail out taxi drivers burdened with exorbitant debt owed on medallions and worsened by the coronavirus pandemic. (Courtesy of Tim Lee)NEW YORK CITY — New York City Comptroller and mayoral hopeful Scott Stringer has put his weight behind a proposal from the New York Taxi Workers Alliance that aims to bail out thousands of taxi drivers drowning in medallion debt amid the coronavirus pandemic. The plan would write down outstanding loans on medallions to $125,000 and offer up funds to ensure drivers in default can sell a medallion and recuperate all or part of its cost, Stringer announced at a news conference on Thursday. The plan would also reduce the interest on outstanding loans for medallions taxi and offer drivers a way out of the industry without landing in a financial sinkhole, he said. "For decades, driving a cab in New York City was a road to the middle class for immigrants from around the world," Stringer said in a news conference. "But today, the medallion that once promised prosperity and stability is now a financial sinkhole." Should a driver default on a medallion, the city would take back the medallion and place a minimum bid equivalent to the amount owed on it before offering it for sale on the free market, guaranteeing purchase of any medallions that borrowers default on. The taxi workers alliance estimates the plan could cost the city up to $75 million, a rather small amount compared to the $810 million lawsuit Attorney General Letita James filed against the city in February for inflating the value of medallions. The proposal also calls for monthly loan payments to be capped at less than $800 and for interest rates to be kept at or below 4 percent.
New York Taxi Workers Alliance executive director Bhairavi Desai said the bailout is the last chance the industry has to weather the pandemic, which has drastically decreased ridership and left cab drivers in a financial lurch for months. "It is the only way drivers, the yellow cab industry is going to survive," Desai said. Ricardo Lopez, who has driven taxis for 40 years in New York City, said he is hopeful the plan goes through. He is facing bankruptcy as he works to continue making payments on his medallion. "I paid $60,000 [for my medallion] 40 years ago and have been paying on and off until today," Lopez said. "We are in bankruptcy, literally. If I don't get any help directly, I'm going to go out of this business soon because I can't afford it anymore. The streets are empty." Taxi drivers in New York City watched their fares dry up as the coronavirus pandemic gave way to stay-at-home orders and business closures earlier this year. Although ridership has been on a steady increase since the city ground to a standstill in March and April, taxi industry revenue remains down some 81 percent from where it was in 2019, the New York Times reports. Ridership was also down by about 70 percent in September compared to the year prior. Stringer said while the proposal cannot increase ridership in the face of a pandemic, it can right a wrong and save New York City families staring down the barrel of financial ruin. "Predatory lenders took drivers for a ride and left families in a wreckage of financial distress and despair," Stringer said. "We have a fiscal and moral obligation to make this right—and embracing this plan is a start."   

2 weeks 10 hours ago

Rambling thoughts on the impact of the 2020 elections on the practice of bankruptcy law.
Unless both Georgia senate runoff races are won by the Democratic Party candidates, it appears that the United States Senate will still be ruled by the Republicans and Mitch McConnell.
Why does this matter? Because if the Democrats take control of the Senate you can expect Senator Elizabeth Warren to lead up a crusade to overturn the Bankruptcy Reform Act of 2005.  Senator Warren has campaigned to make several changes to the bankruptcy laws, including:

  • Making student loans dischargeable through bankruptcy again.
  • Eliminating the bankruptcy “Means Test” that has driven up the cost of filing bankruptcy by imposing tremendous paperwork burdens.
  • Eliminating the requirement of completing a Credit Counseling course prior to file bankruptcy.
  • Reducing the amount a person has to pay to file a case by allowing debtors to pay attorneys after the case is filed.
  • Increasing protection to homes by creating a larger and standardized Homestead Exemption law.
  • Allowing debtors to “cramdown” auto loans to the value of the vehicle.
  • Streamlining the bankruptcy process to make it easier and less expensive to file.

But if Republicans continue to control the Senate by winning one or both runoff elections in Georgia–something that is more likely than not–then it is doubtful any radical changes will be made to the bankruptcy laws.
The election results makes a big difference when advising new clients, especially clients with large student loan debts. “Are you sure you want to file a case now under the current law when student loan debts may become dischargeable if the Democrats take control of the Senate?” That is the question I have been asking clients in recent months, urging them to see if they could delay the process until we knew the results of the election. Well, now we know a lot more, and it doesn’t appear that much if anything is likely to change unless upsets are achieved in the January runoff elections..
Even if the Republicans stay in control of the Senate, it is possible that newly elected President Joseph Biden will spearhead an effort to reform the bankruptcy laws he helped mess up in 2005. Biden has pledged to reverse the bankruptcy amendments he championed in 2005.
Bankruptcy reforms we can all agree on now.
Regardless of who controls Congress in 2021, here are some suggestions that both Democrats and Republicans should agree upon right now:

  • Student Loans.  Student Loans should be dischargeable in bankruptcy after a certain period of time.  Can we all agree that these loans should be dischargeable after 20 years? Gosh, that is a very hard position, but it’s a lot better than the one we have now that they can never be discharged unless an extreme hardship is present.
  • Means Test. Abolish the Means Test. This is a silly requirement that has never achieved its intended purpose other than to make filing bankruptcy more expensive and difficult.
  • Attorney Fees.  Allow attorney fees to be paid after the case is filed. Too many low-income debtors continue to be garnished because they cannot afford all the upfront fees to file bankruptcy.
  • Eliminate Credit Counseling.  The courses debtors must take to file and complete a case are worthless. No real education occurs and the courses do not cause debtors to avoid filing.
  • Communications with Banks. Prohibit banks from canceling online access to borrowers who file bankruptcy and require mortgage lenders to speak to borrowers who call them after filing bankruptcy. Banks often take the unreasonable position that they are not allowed to speak to customers in a bankruptcy case, and I would agree that banks should not hound borrowers in bankruptcy with collection calls, but there is no reason they cannot speak to customers who call them. The refusal to speak to their customers in bankruptcy is shear madness.
  • Standardize Bankruptcy Exemptions.  Standardize bankruptcy exemptions by not allowing states from opting out of the federal exemption scheme.
  • Video/Telephone Court Hearings.  Continue the telephonic and/or video meetings with the Trustees that started during COVID-19.  Ever since COVID-19 hit we have been conducting required meetings with the bankruptcy trustees via telephone conference calls.  Guess what? They work just as well as in person meetings.  Instead of driving hundreds of miles in the Nebraska snow during winter to attend meetings that typically last about two minutes, debtors are able to call in to answer the routine questions asked by trustees over the telephone. I do not notice any decrease in the effectiveness of the trustee’s examinations, and in some cases their effectiveness may be increasing since they have their full computer systems before them.  The US Trustee’s Office should begin work on a video conferencing system similar to Zoom to handle all trustee hearings going forward. The ability to share computer screens and to view debtors over a camera system works great. A system with a Zoom “waiting room” that allows the trustee to interview one debtor at a time without the distraction of a crowd of debtors waiting for their turn at the table would be ideal.
  • Digital Signatures: Make permanent the use of Digital Signatures that began in Nebraska in 2018 and extended all all bankruptcy courts during COVID-19.  The use of Digital Signatures has been a tremendous success that greatly decreases the burdens on debtors and the court without spending a single extra taxpayer dollar.
  • Chapter 13 Debt Limits:   The chapter 13 debt limits were designed to keep complex business cases out of this streamlined repayment program.  However, with student loan and medical debts, the debt limit (currently set at $419,275) frequently prevents debtors with simple cases from filing chapter 13.  This problem could be solved by not counting medical and student loan debts towards the debt limit.

The 2020 elections tell us that radical bankruptcy reform is off the table. But practical reforms are very possible if our leaders focus on what they can all agree upon instead of dwelling on what divides us.
Image courtesy of Flickr and Anthony Quintano

2 weeks 1 day ago Originally appeared on  The New York TimesWhile some businesses have adapted to virus restrictions, the yellow cab industry is especially suffering. In September, an average of 3,257 yellow cabs and 575 green cabs operated each day, according to city data. In both cases, that was about 70 percent lower than in September 2019.Credit...Karsten Moran for The New York Times
Before the coronavirus arrived in New York, yellow taxis were an enduring symbol of the city’s hustle, crowding the streets of Midtown Manhattan, ferrying passengers to airports and carrying tourists to boutique hotels. But eight months into the pandemic, the industry lies almost entirely crippled.Revenue for the taxi industry is down 81 percent over the same period a year ago, according to the latest city data. That is better than in the worst days of the pandemic in March and April — but not by much.Even as some parts of city life have returned, reliable sources of taxi passengers have not. Offices, especially in Midtown, are closed. Tourism is virtually nonexistent, and the airports are mostly empty.“I can’t hold on, not like this,” said Vinod Malhotra, who owns his cab and has driven for 27 years through terrorist attacks, natural disasters and economic calamities. He made it through the pandemic’s peak in New York, too, but as the crisis slogs on, he is on the brink of bankruptcy. “I can make it maybe one more month, maybe two.”Ride-hailing companies, such as Uber and Lyft, also took a hit when the city largely shut down in the spring. But they have bounced back more quickly. Revenue is now about a third lower than last year, and the chief executive of Uber, Dara Khosrowshahi, said last week on a call with investors that city ridership outside of commuting hours had returned to normal.Bruce Schaller, a former city transportation official, said customers might be using taxis less because they believed they were more of a health risk, even though that was not the case.“I think taxis feel like more of a public space than an Uber car or Lyft car,” he said.Almost all drivers in every sector stopped working altogether during the peak, city data shows, in part because of the possibility of getting sick on the job, a threat that was magnified by the deaths of dozens of drivers. In a recent survey by the New York Taxi Workers Alliance, nearly half of drivers said either they or someone in their home had contracted the virus.While many drivers were out of work, they relied on the federal government’s enhanced unemployment program, which paid $600 a week in addition to state benefits.But those federal benefits ended over the summer, as did some other programs that kept cabdrivers afloat, including initiatives that paid taxi drivers meals to homes and provide rides for essential workers during overnight subway closures.Aloysee Heredia Jarmoszuk, the head of the city Taxi and Limousine Commission, which oversees yellow cabs and ride-hailing companies, said the industry was steadily recovering, albeit slowly. “The pandemic hit for-hire transportation hard, but every month since March has seen increases in trips across all segments,” she said.Still, drivers of both yellow cabs and the green cabs that operate outside of Manhattan have been reluctant to return to work. In September, an average of 3,257 yellow cabs and 575 green cabs operated each day, according to city data. In both cases, that was about 70 percent lower than in September 2019.Several fleet owners said they had called drivers to beg them to return. Some offered discounts letting drivers rent out cabs for half the normal rate, or less. Recently, they said, drivers have begun returning.Drivers who own their own cabs have returned even more slowly.“My job isn’t safe. I don’t know who has had the Covid, and there are no customers anyway,” said Andrew Chen, 53, an immigrant from Burma, now Myanmar, who has owned his own cab since 2006. “So I just stay home.”Now, a knockout punch may be coming for those drivers, who bought the city permits called medallions that allow them to own and operate a cab.As The New York Times has reported, hundreds of drivers were already squeezed before the pandemic after being channeled into large, exploitative loans they could not afford in order to buy their medallion. Lenders suspended collections for months during the worst of the virus, but some have started to demand payments.“People talk about the state of the taxi industry the same way they talk about the election: ‘This is the existential moment.’ But this time, it really is,” said Bhairavi Desai, who has represented drivers since the 1990s as the head of the Taxi Workers Alliance. “It really is.” Bhairavi Desai, the head of the New York Taxi Workers Alliance, was planning to announce a new proposal to help cabdrivers.Credit...Amr Alfiky/The New York TimesIn January, a city task force proposed a $500 million bailout for drivers in loans. In February, the New York State attorney general, Letitia A. James, said her office would sue the city for $810 million and use the money to compensate drivers.That momentum evaporated as the virus exploded across the city.On Thursday, Ms. Desai plans to unveil a proposal that could eliminate hundreds of millions of dollars owed by medallion owners and would cost the city a maximum of $75 million, much less than in previous plans.Under the proposal, lenders would agree to reduce the amount owed by each borrower to $125,000, repaid over 20 years with a 4 percent interest rate. That structure would lower monthly payments to under $800. In return, lenders would receive a guarantee that the city would pay for any medallion loan that fails because of nonpayment, an assurance that experts say could win over lenders.The plan is supported by Scott M. Stringer, the city comptroller and mayoral candidate. He said in a statement it could actually save taxpayer money by protecting the city from the attorney general’s lawsuit.“This breakthrough proposal offers a responsible and necessary approach to relieve crushing debt for drivers and reduce ballooning costs for taxpayers,” he said.City Council Speaker Corey Johnson, who has previously supported a bailout, said the Council would review the proposal but suggested that the city, whose budget has been decimated by the pandemic, may not be able to pay for a rescue package on its own. A spokesman for Mayor Bill de Blasio pointed out that the mayor has said the federal government should fund any bailout.Several lenders who would have to agree to the deal declined to comment. They have denied wrongdoing, blaming the industry’s problems on Uber and Lyft.The largest holder of loans now is Marblegate Asset Management, a private equity firm that bought thousands of them earlier this year. It has not collected payments during the pandemic, a spokesman said, and has voluntarily forgiven $70 million in debt.Mr. Malhotra, the cabdriver, emigrated to New York from India in the early 1990s and bought his medallion in 2011 for $640,000. He now owes Marblegate about $435,000, he said.He still drives 12 hours a day, six days a week, he said, but lately has had to wait longer and longer between customers. He is barely making enough to support his wife and three children, and he cannot make loan payments. He fears getting a call from his lender.He said he might have to file for bankruptcy and surrender his medallion to a large fleet. Others are in the same situation. If nothing happens soon, he said, the city could lose an entire generation of cabby owner-drivers.“We need help, and nobody is helping,” he said. “So day by day, it will go more down. And then it will just be gone.”

2 weeks 1 day ago

Nebraska voters have chosen to cap payday loan interest rates.  Ballot box Initiative 428 limits the annual percentage rate on payday loans at 36%.
Nebraska Department of Banking report indicates that the average annual percentage rate on payday loans in Nebraska is 405%.
However, according to Thomas Aiello of the National Taxpayer Union, the cap on interest rates would actually hurt low-income Nebraskans by denying them access to credit.

This is an onerous rule that is more likely to decimate credit markets for Nebraskans in desperate need of a small, quick loan.” Thomas Aiello

Indeed, capping payday interest rates at 36% would devastate the industry.  Although loan rates average 405%, the default rate on those loans is also significant and the effective interest rate earned by payday lenders is much lower when those defaults are factored in.
Support for capping the interest rate is receiving support from many sources, including the Catholic Church.

“Payday lending too often exploits the poor and vulnerable by charging exorbitant interest rates and trapping them in endless debt cycles,” said Archbishop Lucas. “It’s time for Nebraska to implement reasonable payday lending interest rates. The Catholic bishops of Nebraska urge Nebraskans to vote ‘for’ Initiative 428.”

The amazing fact of payday lending  is that it is not restricted to low-income neighborhoods. You can find payday lenders in almost every neighborhood, regardless of income level.
Can payday lenders survive with a 36% cap on interest?
My guess is that the business model of payday lenders will have to change. Lending standards will be tightened and the least qualified borrowers will be denied credit. Is that a bad thing as Thomas Aiello suggests? Probably not. Other lending sources still exist, like pawn shops or family loans or selling unnecessary items.
Some commentators have told me that such interest rate caps are ineffective since lenders simply set up shop on the internet and use the National Bank act to argue that interest rates are controlled by the state of incorporation.  In other words, the evade the cap by incorporating in a different state and argue that our Nebraska laws do not apply to lenders that cross state lines.  Time will tell if this approach is followed.
Other attorneys have suggested that lenders will evade the cap by originating more Title Loans secured by vehicle titles.
It will be interesting to watch the payday lending industry going forward. Something tells me that neither the demand for these high-rate loans nor the lenders willing to make them are going away. The rules of the game will change, but somehow lenders will find a way to evade the cap.
Image courtesy of Flickr and HelenCobain

2 weeks 2 days ago

Have you been on the receiving end of collection calls or collection letters due to delinquent debt payments? It is stressful enough to be dealing with debt. However, constantly hearing from your debt collection agency can also be both tiring and intimidating. If you’re a borrower who is guilty of having past-due bills, you don’t have to endure such harassment. There are ways to help you attain debt-relief and consumer protection against such demanding phone calls. 
Northwest Debt Relief Law Firm has compiled a list of how you should respond when creditors collect a debt. Moreover, if you intend to file for bankruptcy, it is best to be aware of any legal action that will prevent collection agents from harassing or calling you for an old debt.
What To Do When Creditors Demand Payment
Keep calm. Constant reminders of your debt and threats of lawsuit or wage garnishment can make any debtor angry. However, even if you want to scream, become hostile, or use profanity, remember that such actions can lead to a court action declaring you as abusive and ruling in favor of your loan collector.
Collection callsReview the details of the debt. Is the debt legitimate? When a lender contacts you by phone or sends a collection letter, you should first check if the debt is truly under your name. There are many collection scams so you should immediately alert any collector if those debts owed are not yours so that they may voluntarily stop asking you for repayment. 
Report suspicious activities. If you believe that there’s something suspicious about the timing of collection, refrain from giving your personal information such as your income, bank account details, Social Security number, or value of the properties you own. This information may be used by scammers, an identity thief, or by a legitimate collector to receive a court judgment against you. If the debt is validated, you should still check if the statute of limitations has passed. Avoid saying anything that might reaffirm the debt. 
Learn your rights. The Fair Debt Collection Practices Act or FDCPA ensures personal and financial protection to consumers by prohibiting debt collectors from harassing borrowers or using abusive tactics. It also creates a limit on when and how your collector can reach you and who they can ask about your debt. If a lender violates any of these, you should seek legal advice.
Be honest about your financial situation. If there was no way for you to repay, tell this to your collectors. Although this does not remove your creditors’ right to collect, it may point them towards other customers or even prevent your case from being escalated to litigation. To prevent being harassed, you should also avoid hiding from collection agents. Hiding your phone number or home address will only make them send more demand letters or even contact your employer or friends just to get to you.
Keep a record of the calls from the collection agencies. This will be useful in your defense in case the lender decides to sue you for unpaid balances. Make sure that you have a written record when bill collectors call you: take note of the date, time, name of the person you spoke to, the message, and even profane language used (if any). A collections log helps in debt management because it can track the frequency of creditor calls and even catch inconsistencies in the collection process.
Request collectors to stop communication. The Debt Collection Act gives you the right to submit a written request for a debt collector to stop calling you. When they receive your request in writing, they are legally obliged to comply, with certain exceptions. But before you send a “cease communication” letter, consider how this may affect you when you negotiate a settlement or if you wish to update your debt status. State law dictates that a collector who receives such a letter is prohibited from doing any collection effort except when filing a complaint or lawsuit against you. A bankruptcy lawyer can help you understand your state law better when you request a free consultation
Avoid small payments showing good faith. It can be tempting to give a small payment just to stop the barrage of calls, avoid the threat of being sued, or risk your credit score. But if there is no settlement agreement, this can make things worse because it extends your status of limitations. Depending on your state, your time limit to pay a debt usually resets on the date you gave your last payment. 
Don’t make empty promises. Refrain from making statements like “I will follow the payment plan beginning next month”, or “I will catch up on my bills by this date” as this will only renew the statute of limitations for your loans.
To avoid legal complications, do a tele consultation with our experienced legal professionals at  Northwest Debt Relief Law Firm. If you need help in dealing with creditor harassment, preparing a written notice to stop harassing phone calls, filing a lawsuit against a collections agency, or uncovering a debt fraud, talking to our bankruptcy attorneys will help you sort things out and regain financial freedom. Call us now!
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2 weeks 3 days ago

We Stop Navy Federal Trying to Pull a Fast One This is a story of Navy Federal trying to take unfair advantage of a disabled vet; and how we were able to stop them. Harry is the disabled vet. He wasn’t able to quite make ends meet when he filed Chapter 7 Bankruptcy in 2015, […]
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2 weeks 3 days ago Originally appeared on The New York Times
 It’s an extremely difficult debt to discharge, and only a few hundred people a year even try. Here are the stories of some who succeeded —mostly.
With two mortgages, three children and $83,000 in student loan debt, the financial strain finally became too much for George A. Johnson and Melanie Raney-Johnson.New bills kept piling up: The couple had to buy another car when Mr. Johnson wrecked one in a snowstorm, but their insurance didn’t fully pay off the totaled vehicle. Old debts never seemed to get any smaller, either: A mortgage modification they spent months working on fell through when the bank lost their paperwork.And their student debt, an albatross born of aspiration, grew heavier each month.Bankruptcy was the only way out.“It was not an easy decision,” Ms. Raney-Johnson said of filing for bankruptcy in 2011. “It was a feeling of despair, for sure.” Bankruptcy gives over 700,000 debtors a fresh start every year. Bills for credit cards and medical expenses can be wiped away by a few strokes of a judge’s pen, and debts that don’t vanish are reduced.But student loan debts don’t go away as easily. For decades, politicians have slowly made them harder to discharge, while differing standards in courts across the country mean a debtor’s chances can depend on where he or she lives.The few debtors who attempt it are subjected to a morality play unlike anything else in the world of personal finance: so-called adversary proceedings, where they must lay themselves bare in court as opposing lawyers question how much they pay for lunch or give to their church.The Johnsons tried anyway. They had borrowed about $45,000 for Mr. Johnson’s degree in sociology at the University of St. Mary in Kansas and Ms. Raney-Johnson’s pursuit of a bachelor’s degree from the University of California, Davis. Unable to pay, they had received permission to put off their payments, but their balance nearly doubled as interest charges continued to pile up.Mr. Johnson lost his job after they filed for bankruptcy and, unable to afford a lawyer, Ms. Raney-Johnson prepared their case. She remembers how she felt when they arrived at the Robert J. Dole Federal Courthouse in Kansas City, Kan., on a sunny September day seven years ago.“My heart was beating, and I was sweating,” said Ms. Raney-Johnson, now in her mid-40s and a billing supervisor for a federal agency.In 2015, the year the Johnsons got their ruling, 884,956 personal bankruptcy cases flowed through the courts. Only 674 sought to discharge student debt, according to a recent analysis by Jason Iuliano, assistant law professor at Villanova University.The New York Times reviewed dozens of cases in which a judge issued a published opinion — the Bankruptcy Class of 2015 — to understand the pains and payoffs five years later. Some debtors are on a better course. But for others, the struggles never went away — or came back after they thought they were free.Rising Costs, Rising DebtsBankruptcy begins with debt, and student loans are the second-biggest form of household debt in the United States. More than 43 million borrowers hold over $1.6 trillion in student loans, a sum that has more than tripled in 13 years. It exceeds what Americans owe on credit cards or auto loans and trails only mortgages.Sixty-two percent of students who graduated from nonprofit colleges in 2019 had student loan debt, according to an Institute for College Access & Success analysis. Their average balance was $28,950 — not including borrowing by their parents.Many struggle mightily to pay: Before the government’s coronavirus relief efforts paused federal student loan payments, 7.7 million borrowers were in default and nearly two million others were seriously behind.The solution has been a public-policy patch job.About eight million additional borrowers use income-driven repayment plans, which can be challenging to enter.  And while the plans lower payments, borrowers accrue interest on the unpaid difference. The debt is eventually forgiven — usually after 20 or 25 years — but the forgiven amount is taxable income. A related program forgives the federal student loan debts of public-service workers, tax free, after 10 years, but it has been deeply troubled. Borrowers have made payments for years only to learn they were in the wrong kind of payment plan. It got so bad that Congress had to create a separate pot of money to try to fix it.The election could give momentum to a change: President-elect Joseph R. Biden Jr. — who supported a 2005 law that made private student loans harder to discharge — has vowed to change the loan rule back if elected. But few Republicans have voiced support for a plan to change bankruptcy rules. A House bill  has one Republican co-sponsor, Representative John Katko of New York, but the Senate's version, led by Senator Richard J. Durbin of Illinois, has only Democratic support.All the student debt poses a problem. Its weight, experts say, has macroeconomic effects, dragging on homeownership and small-business formation. But the fallout goes beyond simple economics.There is also a mental toll.  Noelle DeLaet said she had sent out hundreds of résumés but couldn’t get a better-paying job.Credit...Terry Ratzlaff for The New York Times‘No Way Out’ Noelle DeLaet earned a bachelor of fine arts degree from Nebraska Wesleyan University in 2008 — the teeth of the Great Recession. She tacked on another year for a degree in English to make herself more attractive to employers. Perhaps in publishing, she thought.She left school with $110,000 in debt: roughly $27,000 from the federal government and the rest in private loans co-signed by her mother. The $810 monthly bill, set to climb when the payment plan on one private loan expired, soon overwhelmed her.Ms. DeLaet, now 34, landed in the child welfare field as a foster care review specialist in Lincoln, Neb. — rewarding, but not lucrative. She sent out hundreds of résumés for better-paying jobs and pleaded with her lenders to reduce her payments. Soon, the creditors started in on her mother and put her on the verge of bankruptcy, too. Ms. DeLaet’s breaking point came in May 2012 when she ran up against the $4,000 limit on her credit card while trying to buy a burrito at a Mexican grocery. She felt so helpless at times that she considered suicide.“I looked all over Google for some sort of support group for others going through this,” Ms. DeLaet said. “I felt like there was no way out.” When Ms. DeLaet squared off in court against her student-loan creditors, they quibbled with the $12 she spent each month on recycling. She should have tried harder for a promotion, they argued. Or moved somewhere else for more money.Judge Thomas L. Saladino bristled at that idea. In his opinion, he wrote that she lived in the state’s second-largest city, “as good a place as any to seek a better-paying job.”The judge discharged about $119,000 in private loans, and an additional $23,000 was forgiven by one of her lenders. But her $27,000 in federal loans stuck: She’s paying those back through an income-driven repayment plan costing about $260 a month. Because she works at a nonprofit, her debt should eventually disappear via the Public Service Loan Forgiveness program.For Ms. DeLaet, the process was worth it: She has married her boyfriend, had two children and bought a home. Her mother is an “amazing” grandmother, she said, although they still cannot discuss the past. “It is an untouchable subject,” she said.Rumors and RulesThe transformation in the bankruptcy rules began in 1976, with unfounded rumors.A handful of legislators claimed to have heard about a parade of young doctors and lawyers who were trying to game the system and shed their debts while embarking on lucrative careers. The lawmakers toughened the rules, largely preventing borrowers from seeking a discharge within five years of graduation. The rules only got tougher over the next three decades.Borrowers must show that their student loans are an “undue hardship” — a standard interpreted differently, depending on where you live. Some judicial circuits, including those in Nebraska, where Ms. DeLaet filed, have the judge review a “totality of the circumstances” for the debtor and make a decision.Other jurisdictions employ a less flexible standard, the Brunner test, named for the case that established it. Judges must answer three questions affirmatively to discharge the debt. First, has the debtor made a good-faith effort to repay the loans? Second, is the debtor unable to maintain a minimal standard of living while making the payments? And, finally, is the debtor’s situation likely to persist?But even jurisdictions that use the Brunner test apply it differently. Some require the judge to find that the borrowers have a "certainty of hopelessness" in paying off their debt. Other jurisdictions do not.Here, the Johnsons may have benefited from geographic good fortune.‘Virtual Lifetime Servitude’Lawyers for the Educational Credit Management Corporation — a nonprofit that collects defaulted loans on behalf of the federal government — examined how the Johnsons spent their $2,100 monthly income.Every expense was scrutinized, including Ms. Raney-Johnson’s $35 monthly union dues, her $100 retirement contribution and $215 to repay loans from her retirement plan. None, the nonprofit’s lawyers argued, were necessary to maintain a “minimal standard of living.” In his opinion — written more than a year after hearing arguments — Judge Robert D. Berger disagreed. He wrote that the U.S. Court of Appeals for the 10th Circuit, which covers Kansas, had shifted from the most rigid interpretation of the three-part test, which he described as “an unfortunate relic.”Judge Berger wasn’t sure how the Johnsons were subsisting at all based on their income, and he said courts shouldn’t rely on “unfounded optimism” about a debtor’s future.“It is disconsonant with public policy and bankruptcy’s fresh start to leave debtors in virtual lifetime servitude to student loans,” he wrote.The judge discharged their student loans: $83,000 in debt, wiped away.“I was ecstatic,” Ms. Raney-Johnson said of the moment she received the decision letter. “I probably said some curse words.”Their good fortune didn’t last.  Pam Monroe saw education as a way to obtain independence she hadn’t had before.Credit...Joseph Rushmore for The New York TimesLaughs Over Lunches Opposing lawyers — whether they work for the federal government or for private lenders — are tenacious. Their approach can feel like bullying, if not humiliation.When Pamela Monroe went to an Arkansas bankruptcy court in 2015, she was 57 with a student-loan balance of about $56,000. She was working in the fragrance section of a Dillard’s department store, and her lunch habits — like $6.10 at Taco Bell and $12.72 at Olive Garden — were a focus of intense interest. Eating out, Ms. Monroe testified, was her primary form of recreation and a midday necessity: Co-workers would sometimes steal colleagues’ lunches from the break room.“They laughed about that when I told them,” she said. “I felt at that moment like I was a cornered animal and they were poking sticks at me.”Ms. Monroe said she had spent her life making choices that others seemed to dictate — marrying two years out of high school and becoming a mother, as her parents seemed to want. After two divorces, she reached for higher education in a bid for independence.She graduated from the University of Arkansas-Fort Smith with a communications degree and pursued a master’s in speech language pathology. She didn’t finish that program, leaving her with the debt but not the advanced degree. And she couldn’t seem to break out of low-paying work.“I would have loved to pay them back,” Ms. Monroe said. “But I never could, because nobody ever saw any value in me.” Judge Ben Barry found Ms. Monroe’s restaurant spending excessive, but noted that she had changed jobs frequently seeking higher pay. Her income, he wrote in his opinion, about doubled between 2010 and 2015, to over $26,000.But even a reduced budget he outlined would not leave her enough money to make her student loan payments, so he discharged just over half of her student loans.She would most likely have been paying that off until she was in her 80s. But last year, Ms. Monroe, now 63 and dealing with osteoarthritis and other health problems, received a disability discharge for the rest of her debt.Now all she wants to do is live out her days in her $510-a-month apartment in a retirement community. “It has a sprinkler system and an elevator, very safe,” she said.But she hasn’t stopped thinking about the way the system and its actors — like the lawyer on the opposite side in her case — seemed to render judgment on her life choices.“I didn’t do anything wrong,” she said. “I was just living, but I got in trouble for eating.”Back to Haunt ThemIn 2016, the Johnsons learned their loan discharge was being appealed by lawyers for Educational Credit Management Corporation.Paradoxically, they were worse off because their financial situation had improved: Ms. Raney-Johnson earned a promotion, and Mr. Johnson, now in his mid-40s like his wife, found a stable government job. A year after discharging their loans, Judge Berger concluded that the couple could now “easily” maintain a minimal standard of living and reinstated their debt — which had ballooned even more because of interest charges.Preparing to send their own children to college, the Johnsons requested another forbearance. Their balance continues to grow: It’s roughly $104,000 today.Ms. Raney-Johnson took the final class she needed for her biology degree over the summer. But the debt was already piling up for the next generation. Their oldest, a college sophomore, expects to owe about $45,000 when she graduates. Their middle child, a high school senior, is looking at colleges now. Ms. Raney-Johnson said she and her husband — who are putting about $5,000 a year toward their daughter’s tuition — would try to remain in forbearance for now.In August, they received a notice about an income-driven repayment plan, which would start out costing about $550 a month. From there, the cost depends on many factors, including job changes, raises and eligibility for forgiveness programs. If they’re able to get into the public service program, the debt could go away a decade after they start paying. If not, the bills could continue coming for about 20 years — right around the time the Johnsons will be trying to retire.The experience, Ms. Raney-Johnson said, has been “disheartening.” She and her husband had run up against opposition that could keep going with little regard for time or expense, knowing that they couldn’t.“It feels like getting screwed over by someone with a lot more power and money,” she said.