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How to Manage Your Bills During COVID-19
April, 2020 – The Federal Trade Commission released suggestions on managing your bills during this very difficult time (COVID-19 quarantine).
COVID-19 has disrupted life for everyone on the planet. Each of us is asked to sacrifice for the health of the entire nation and world. Unfortunately, that sacrifice comes at a cost for many. They are unemployed or their income has been reduced, but the bills for their regular living expenses (rent, food, utilities, car payment, and insurance) continue to come, month after month. Yes, there are a few programs that might assist, but most of the programs only delay the inevitable – THEY MUST BE PAID. You don’t get a free place to live. Even if there are mortgages and rental programs, they don’t forgive the debt. Instead, the payments are just postponed to a future date (which may only be 3 months in the future).
Seniors are hit extra hard: not only they are one of the most vulnerable population to COVID-19, but most are on a fixed income, so do not have additional resources if they have unexpected expenses (medical, etc.).
In summary here is what the FTC suggested:
- Know what you owe and will owe for the next year. Make a list of your monthly bills: rent/mortgage, car payment, utilities, student loans, medical bills, and anything else. Look at your bank statements and credit card bills to find occasional expenses (such as annual insurance payment or insurance paid every quarter) and those expenses that only happen occasionally, but are very expensive (such as medical, home and car repairs). By putting this in writing you have something to compare your current spending.
- Don’t be afraid to ask for help, 90 percent of us are in the same situation: Pride can kill you!! If you are not taking care of yourself, then you are more susceptible to the virus. Many companies have special programs to help people right now. Contact the companies you owe money to and try to work out a new payment plan with lower payments or delayed due dates. Make sure to get any changes in writing.
- Find out if your state or local government offers programs that will allow you to hold off on paying some bills right now.
- Trouble paying your mortgage? Here’s some advice on how to manage that. If you have a government-backed mortgage, you may be able to delay the payment by contacting your servicer.
- Need additional help? Check out ftc.gov/creditcounselor for tips on how to choose a counselor who really helps you out.
- Prioritize your expenses: If you still can’t pay everything on time, look at what would happen if you couldn’t pay each bill and decide which to pay first. Is a place to live and food to eat more important than paying credit cards? I would think so. Do not worry about your credit report at this stage – it is, what it is. There is nothing you can do about it today. Instead, focus on having the basic necessities.
- Educate yourself about your options and the legal obligations of the creditors. Don’t assume what a creditor says is accurate (they are in the business to get paid and will lie). Rules govern what a creditor or collection company can do. Some of these rules are brand new (it takes new law at least five years to be interrupted by the courts). Know your rights: what is protected from creditors? Can creditors take my stimulus money? How does bankruptcy work? Check out the FTC’s advice on how to cope with debt in the short term, and how to get out of debt when you are able.
Watch out for scams: In stressful times, scammers are everyone and focus on our seniors, but you too may be vulnerable. Beware of any company that guarantees that creditors will forgive your debts, or makes you pay up front for help. If you are looking for debt relief, make sure to find help you can trust.
MUSINGS FROM DIANE:
This is a very scary time for everyone, but please remember ‘you are not in this alone’. But you are the only person who can take care of you (even if you are in a busy household). Today, even more than in the past, it is important to know your needs (financial and emotional). Eventually we will return to a new ‘norm’, but it may not be the norm we had last year. Please don’t ignore the current situation. Instead, every day take a few minutes to lay out a survival game plan. Of course, no one know how long this situation will continue, so be flexible in your plan. Focus on what you need to survive – food, a place to live. NEVER be bullied by a debt collector to send money that you should use on life necessaries.
NOT SMART: Buying a fancy gift for your young child is not going to help them, if there is no food in the house. It is amazing how resilient children are in emergency situations. Don’t hide the truth from them, but make sure they are involved in some household decisions.
How Can I Help You?
The post How to Manage Your Bills During COVID-19 appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
Updated October 24, 2019
From: creditkarma.com
By: Kim Porter
https://www.creditkarma.com/advice/i/what-happens-when-you-file-for-bankruptcy/
The University of Phoenix, Inc. accused of fraud, to pay $50 million and stop collection on $141 million in loans.
In a large victory for consumers, The University of Phoenix agreed to pay $50 million in cash and cancel $141 million in debt owed to the school by students harmed by their deceptive ads. Phoenix’s ads touted job opportunities and relationships with top tech companies.
Federal Trade Commission, Plaintiff, v. The University of Phoenix, Inc., an Arizona corporation; and Apollo Education Group, Inc., an Arizona corporation; Defendants.
To cease collection on $141 million in student loans
This judgment consists of:
1. Payment of Fifty Million Dollars ($50,000,000) to the Commission.
a) Defendants are ordered to pay to the Commission Fifty Million Dollars ($50,000,000).
b) Such payment must be made within 7 days of entry of this Order by electronic fund transfer in accordance with instructions previously provided by a representative of the Commission.
2. Ceased collection of a minimum of One Hundred Forty Million Nine Hundred Sixty-Six Thousand Eight-Hundred and Six Dollars ($140,966,806) in Covered Consumer Debt as follows:
a) Defendants, Defendants’ officers, agents, employees, and attorneys, and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, are permanently enjoined from attempting to collect, collecting, or assigning any right to collect any Covered Consumer Debt. Defendants shall not refer, sell, assign, or otherwise transfer any Covered Consumer Debt.
b) Within 10 business days after entry of this Order, Defendants shall cease collecting on all Covered Consumer Debt and notify any collection agency or other third party collecting Covered Consumer Debt to cease such collection efforts. Within 60 business days after entry of this Order, Defendants shall:
(1) recall, purchase, or otherwise obtain any Covered Consumer Debt that Defendants have referred, sold, assigned, or otherwise transferred to any collection agency or other third party, and
(2) clear all Covered Consumer Debt from Defendants’ financial systems.
c) For any Covered Consumer Debt that has been reported to a Consumer Reporting Agency (“CRA”), Defendants shall, within 10 business days of clearing all Covered Consumer Debt as required by subsection A.2.b request that each CRA delete the Covered Consumer Debt from the consumer’s credit reporting file.
d) To the extent Defendants receive any payments for Covered Consumer Debt after September 30, 2019, Defendants shall, within 30 days of receipt or entry of this Order, refund any such payments.
e) Defendants shall, within 10 business days after entry of this Order, provide a signed declaration to the FTC attesting that they have ceased collection of Covered Consumer Debt as required by this Section III.A.2.
Stipulated Order for Permanent Injunction and Monetary Judgment
MUSINGS FROM DIANE:
Those who are willing to commit the time and effort to get an education need to be applauded, not ripped off. I did not start my upper education until I was married and had a wonderful daughter. That meant sacrificing to pay tuition and costs, plus it meant my job options were limited (needed time to take care of family and study). My beautiful and very smart daughter spent her early grade school years studying with me at the same table. I was lucky enough not to need loans in order to pay for under-grad, because I was working two jobs. Law school was another story. Working outside school was not permitted and I now know why (no time if you are going to graduate). Therefore, student loans were the only option. Had my law school been one that failed to live up to its promises (like the University of Phoenix) , I would have been stuck the significant student loans and no degree to show for my time and effort. The next two decades would have been spent paying off a debt for something I never received. This is what The University of Phoenix, and many other “for profit” schools, knowingly do to their students. Shame on them!!
The post University of Phoenix to Pay $50 M and Stop Collection on $141 M in Student Loans appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
COVID-19 FORBEARANCE IN ARIZONA CHAPTER 13 BANKRUPTCIES
The following is a guest post – by Gary R. Stickell, a great Arizona bankruptcy attorney and my friend and mentor for more than 20 years.
COVID-19 and CHAPTER 13 BANKRUPTCIES
Most, if not all, mortgage servicers are offering programs of forbearance to homeowners affected by income loss due to the COVID-19 Pandemic. These seem to be for 90 days or three calendar months, possibly extendable to 180 days. (“COVID-19 Hold”). However, these COVID-19 Holds raise several issues for Debtors in Chapter 13 Bankruptcies. These include the process of notifying the Chapter 13 Trustee of these holds and how to treat the unpaid mortgage payments within the Chapter 13 case. I am concerned that Chapter 13 Debtors are not well served by seeking COVID-19 Holds and might endanger both their Chapter 13 cases and/or loan modifications.
Forbearance versus Deferment
In usual times, a forbearance means that the mortgage servicer will not seek enforcement of missed mortgage payment for some given period. At the end of the forbearance period, the missed payments will need to be repaid by an agreement between the mortgage servicer and the borrower.
In usual times, a deferment means that the missed mortgage payments will be deferred to the end of the loan by extending out the maturity date and/or adding a balloon payment.
These are not usual times
According to mortgage modification lawyer Ellen Lawson, the mortgage servers are not sure how they will treat COVID-19 Holds at the end of the hold period. They may choose to treat them as deferments or require some time of repayment. The crisis is too new for the lenders to formulate uniform treatments so lenders are agreeing to a COVID-19 Hold, but are not explaining right now when or how the missed payments will need to be repaid.
Chapter 13 Bankruptcy
In pending Chapter 13 Bankruptcies, there are three general circumstances as to mortgages. They are cases with conduit payments, cases without conduit payments and cases with loan modifications in process or completed.
Conduit and non-conduit mortgage payments
A conduit payment in an Arizona case requires that the Chapter 13 Plan payment include payment of ongoing mortgage payments as well as payments for mortgage arrears and other debts. If a mortgage server grants a COVID-19 Hold during a conduit plan, the Trustee will need to stop making the ongoing payments to the mortgage lender. The Arizona Chapter 13 Trustees advise that an Amended Plan or Modified Plan must be filed to stop the ongoing payments to the mortgage lender reducing the Plan payment. When the COVID-19 Hold period is over, then whatever arrangement is made as to the missed mortgage payments must be set out in a subsequent Amended Plan or Modified Plan.
In a case without a conduit payment, there appears to be no need to file an Amended Plan or Modified Plan at the outset of the COVID-19 Hold. However, at the end of the hold period, whatever arrangement is made as to the missed mortgage payments will need to be included in an Amended Plan or Modified Plan.
Failure to comply with Chapter 13 plan provisions
Failure to make ongoing mortgage payments may result in the dismissal of a Chapter 13 case without a discharge if arrangements are not made with the mortgage lender. If the mortgage servicer reports a delinquency to the Chapter 13 Trustee, the Trustee will move for dismissal of the case. This not only endangers any provision regarding the mortgage but the other debts, car loans, tax debts and unsecured debts.
Loan Modification in Chapter 13
For those borrowers seeking a loan modification through the Bankruptcy Court’s program or otherwise, the COVID-19 Hold puts everything on hold including any pending loan modification application. This means an active loan modification review under the Bankruptcy Court’s Mortgage Modification Mediation (“MMM”) Program will be put on hold for ninety days and will not proceed forward. All of the documents previously provided to the mortgage servicer will become outdated and a new financial package will need to be uploaded in 90 days. When the loan modification review starts 90 days later, after the COVID-19 Hold expires, the Debtor will be three months more delinquent on their loan making a loan modification review more difficult. If the Debtor has been approved for a trial plan or is in the middle of an active trial plan, and then requests a COVID-19 Hold, the COVID-19 Hold will most likely cause the trial plan to be forever broken.
If a Debtor has been so impacted economically by COVID-19 that they cannot make their Chapter 13 Plan payment, then the COVID-19 Hold is a possible option to consider, but the COVID-19 Hold should only be used by Chapter 13 Debtors as a last resort if they are pursuing loan modification.
As to loan modifications already in place, the COVID-19 Hold could nullify incentives dependent upon the borrower making timely payments under the modification agreement. An example of one such incentive that could be lost is partial forgiveness of the loan balance for timely payments for X number of years after the effective date of a permanent modification.
I thank my friend and mortgage modification guru, Ellen Lawson, Arizona attorney, for much of the information concerning how mortgage servicers are handling forbearances. https://ellenlawsonlaw.com.
MUSINGS FROM DIANE:
This article should help you understand why it is very important to hire an attorney who knows what they are doing (my guess is that you did not understand some of the article above, but certainly you did not understand the implications). Any attorney who writes articles to help educate others is focused on the welfare of the client, not how much money they could get from the client. Education is the basis for a well planned bankruptcy. Today I saw nine new cases filed by an Arizona firm that does not fall into the category that Gary and several other good bankruptcy attorneys fit. Months from now several of those nine will face serious problems because no one educated them BEFORE the bankruptcy was filed. They will lose tax refunds, their family is sued and/or they lose their discharge (which is the entire reason they filed the bankruptcy to start with.
Consumer bankruptcy is complicated and takes work. Any law firm who makes it look simple is misleading their clients. Unfortunately, their clients will not know there is a problem until the ceiling falls in on them. Then it is too late to get out of the bankruptcy.
Be careful and use your common sense. Lastly, remember that you have a right to be treated with respect. IF ANY ATTORNEY TREATS YOU RUDELY – FIRE THEM because it is never going to get better. (Yes, I am thinking about specific attorneys when writing that last sentence.)
How Can I Help You?
The post COVID-19 FORBEARANCE IN ARIZONA CHAPTER 13 BANKRUPTCIES appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
Don’t fall for these five myths about the stimulus payments
Published: April 21, 2020From: MarketWatchBy: Andrew Keshner
https://www.marketwatch.com/story/do-i-have-to-pay-back-my-1200-stimulus-check-dont-fall-for-these-five-myths-about-the-stimulus-payments-2020-04-18
In the middle of an election year where healthcare is already a hotly debated issue, the COVID-19 pandemic has stirred further discussion about whether major changes are necessary. During the Democratic presidential primary, the concept of Medicare for All split the candidates. While the candidate who promoted that concept has since dropped out of the Read More
The CARES Act neglected to protect people from creditors, but some lawmakers are working to correct that.
April 16, 2020
From: The Motley Fool
By: Dan Caplinger
The coronavirus crisis is causing severe financial pain across the U.S., where tens of millions of people have lost their jobs and filed for unemployment benefits in just the past month. For those who have lost income, a federal stimulus check could be vital to their financial well-being right now.
Unfortunately, many people who were already having money troubles before the COVID-19 pandemic hit are now running into a new challenge with their stimulus payments. Debt collectors are rushing in to try to grab up those stimulus checks in order to satisfy people's past debts. Because of the way that lawmakers set up the stimulus check program, what those debt collectors are doing appears to be legal -- but it also threatens to undermine the entire point of the program, which was to rush cash to hard-hit Americans so that they could cover their current expenses during this crisis.
Despite the best of intentionsThe Treasury Department has worked hard to try to get stimulus money to people rapidly. For those who included direct deposit banking information with their 2018 or 2019 tax returns, the Treasury is using that data to send stimulus payments directly into people's bank accounts. For most people, that's the fastest way to get the money where it needs to go.
However, millions of people owe certain kinds of debt for which creditors can garnish bank accounts. That includes just about any type of debt on which collection proceedings have advanced far enough for creditors to get a court judgment. When debt collectors present banks with garnishment orders, banks follow procedures that often include freezing accounts. To regain access to their funds, banks require account holders to provide proof that the money that's come into the account is somehow exempt from garnishment. Most people in debt don't know how to respond effectively to such demands even in the best of times -- let alone when they are stuck in their homes, when bank branches are closed to the public, and when courts aren't functioning at anywhere near normal capacity.
Lawmakers could have specifically designated the stimulus payments as exempt from garnishment or debt collection proceedings. However, they didn't include such clear provisions in the CARES Act, which leaves the matter up to legal interpretation. That ambiguity set the stage for debt collectors to act -- and they're acting quickly.
Fixing the problemNow that they've identified the problem, legislators at the state level are working fast to address it. State laws govern much of the legal framework around debt collection, so in some states, those receiving stimulus checks already had some protection. Other states are moving to pass emergency legislation that exempts the stimulus payments from debt collection proceedings.
Congress could also take action, although it might be difficult for it to do so quickly enough to make a difference. Passing a federal law that reclassifies stimulus money into the same category as other exempt payments would offer everyone across the nation protection.
What you can doIf you're already aware that your bank account might be subject to a garnishment order, there are some things you can do to try to protect yourself. They include:
- Having your stimulus payment sent to a different bank account. Often, garnishment orders will apply to all bank accounts, but if you know that debt collectors have only identified one of your accounts, then having your stimulus money deposited into an account at a different institution might protect it.
- Getting a physical stimulus check. The IRS is seeking banking information for many Americans through its Get My Payment tool, with the goal of expediting those stimulus payments. However, if you anticipate problems, getting a physical check and cashing it will help keep it from getting locked up in a frozen bank account.
With the coronavirus pandemic wreaking havoc on all our lives, the last thing any of us need is for our stimulus checks to get taken away. If you think debt collectors might be looking to take your stimulus payment, don't wait for lawmakers to help you out -- do what you can to protect yourself and your finances.
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If I File Bankruptcy Will I Lose My COVID-19 Stimulus/Rebate Money?
When someone files for bankruptcy they can keep certain things that are “exempt”.
Stay with me as I explain this process.
Every state has a list of items that a creditor cannot seize. Those items are referred to as “exempt property“. This protection is the same for everyone in that state, even if they file for bankruptcy protection. There are also federal exemptions that protect certain property, such as Social Security, VA income, and more.
Congress failed to protect the COVID-19 Stimulus/Rebate money from creditors.
When Congress passed the CARES Act (March 27, 2020), they were smart enough to protect the stimulus/rebate funds from state and federal government debt collection, but they completely forgot about all the other debt collectors (banks, credit cards, personal loans, bank overdrafts, etc.). Congress intended to give those with low to middle income some additional money, to boost our economy. Unfortunately, if you have an overdraft in the same bank where your stimulus funds are deposited, there is a good chance your bank will take the money. Or, if a creditor or collection company has a judgment against you they have the right to garnish bank accounts and wages (depending on the exemption laws of your state).
Bankruptcy and exemption laws.
Earlier, I mentioned that every adult has a right to protect certain “exempt property”, which includes someone filing for bankruptcy protection. In filing for bankruptcy, that person must determine whether they are required to use state or federal exemptions or a combination of both to protect their property (please don’t try to do this on your own – hire a very good bankruptcy attorney). For instance, if someone lived in Arizona for more than two years and files for bankruptcy protection they will use Arizona exemptions. Arizona laws protect income from welfare, unemployment, child support, and alimony, but not income from child care credit or earned income credit. Federal exemptions protect Social Security, SSDI, VA income, and certain other sources.
When Congress passed the CARES Act, they largely protected the funds from state or federal debt collection. But forgot to protect the COVID-19 funds the same way that federal exemption laws protect Social Security or SSDI. Instead, they left open a huge loophole for debt collectors.
Congress failed to protect the COVID-19 Stimulus/Rebate money from seizure by the bankruptcy trustees.
Since Congress failed to protect the funds from creditors, that also means they failed to protect the funds from a bankruptcy trustee. If someone files for bankruptcy protection and is going to receive the stimulus/rebate monies, the bankruptcy trustee may take those funds (the chapter 7 trustee is paid a percentage, pays his/her attorney, then the few remaining bucks go to the creditors).
Still there? Trust me, we are almost to the answer.
In the world of consumer bankruptcy, there are two types of bankruptcy trustees: Chapter 7 and Chapter 13. The Chapter 13 trustee is an employee of the United States Trustee’s Office, a agency of the Department of Justice. The United States Trustee has authority over their employees and can dictate their actions.
Compare that to chapter 7 trustees, who are independent contractors for the United States Trustee’s Office. That means the chapter 7 trustee can use their own discretion whether to go after certain assets. Some of our Arizona trustees will take a tax refund of $500, while others feel that is out of line and set their limit at $1,500. Some of our trustee attorneys earn almost One Million Dollars a year collecting funds from debtors. My point is that all the chapter 7 trustees have the right to take anything that is not exempt. Under Arizona law the stimulus/rebate monies are NOT EXEMPT.
United States Trustees Office Report:
On April 7, 2020 the United States Trustees Office issued a report: Notice to Chapter 7 and 13 Trustees Regarding Recovery Rebates Paid to Consumer Bankruptcy Debtors Under the Cares Act of 2020.
The report states (according to the CARES Act) that the stimulus/rebate funds are not be to included in calculating the debtor’s income for the prior six months (referred to as the means test).
The question that was not addressed in the CARES Act was whether the creditors have a right to the “recovery rebate”.
For the answer we must address chapter 7 and chapter 13 separately.
Chapter 13 (remember the chapter 13 trustees are employees of the US Trustees Office): for cases filed on or after March 27, 2020, the recovery rebate may be relevant (see § 1325(a)(4)). For cases filed before March 27, 2020, the recovery rebate is excluded from that analysis because it would not have been available in analyzing the reconciliation for payment to creditors in a chapter 7 case. Again, remember that the funds are NOT included in the means test analysis.
Chapter 7 (trustees are independent contractors): In chapter 7 cases, the “property of the estate” issue will only arise in cases filed after March 27, 2020. Regardless of whether the rebate is property of the estate, the United States Trustee expects that it is highly unlikely that the trustee would administer the payment after consideration of all relevant circumstances, including: the modest amount of the recovery rebate; the applicability of state and federal exemptions; any interest of a non-debtor spouse in the recovery rebate; the cost to the estate of recovering and administering the recovery rebate, including litigation with debtors who may seek a judicial determination; and the extent to which recovering the recovery rebate will enable creditors to receive a meaningful distribution.
In both Chapter 13 and Chapter 7 cases: Trustees are directed to notify the United States Trustee prior to taking any action to recover recovery rebates or objecting to a chapter 13 plan based on the treatment of recovery rebates.
Now that you have a brief education in the “legalese” world of bankruptcy and exemptions – what does this all mean?
It means that the United States Trustee is not a fan of any bankruptcy trustee taking someone’s CARES Act stimulus/rebate funds. Is this an absolute prohibition? No, but only time will tell how our more aggressive trustees (Arizona has some of the most aggressive trustees in the Nation) will address this issue.
MUSINGS FROM DIANE:
Every day someone calls “I just have a simple question…..”. The caller goes on to ask their question, but normally I have to explain that there is a lot more information I need before that question can be answered correctly. It is like looking at the tiny tip of an iceberg and assuming that is all there is (how did that go for the folks on the Titanic?)
That same person would never think of calling their doctor and asking a question about a medical situation. Instead, they know the doctor will need blood tests and an x-ray before competently diagnosing the problem.
Whenever there is a new law, like the CARES Act, it takes years to analyze each issue in order to anticipate how someone’s situation will be affected by the the new law and existing laws. Just like doctors guessing at the solution for a new virus – lots of guessing.
How Can I Help You?
The post If I File Bankruptcy Will I Lose My COVID-19 Stimulus Money? appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
Can my Bank, Creditor or Collection Company Take My Stimulus Money – COVID-19?
March 27, 2020 a new law (CARES Act) was passed which gave funds to everyone in order to pay basic necessities (such as food, rent, gas). Congress forgot to protect those funds from your creditors or your bank.
When Congress passed the CARES Act, they were smart enough to protect the stimulus funds from state and federal government debt collection, but they completely forgot about all the other debt collectors (credit cards, personal loans, bank overdrafts, etc.). These creditors are the ones that Congress should have been focusing on because they are the great majority of all debt collectors.
Do you owe your bank for overdraft fees or unpaid credit cards?
If so, don’t be surprised that your bank keeps the monies you were supposed to receive as part of the COVID-19 funds. The monies are coming from the IRS, using the same bank account information that you used for your tax refunds (both this year and last). If that account is closed the monies will go back to the IRS. Or if that account is overdrawn, or you are not paying a credit card with that bank, then you may find that your bank keeps the money to “offset” what you owe them.
Is every bank taking the stimulus funds?
Some banks say they will not take the funds (there are differing reports on who will not keep the funds), but only time will tell if they will follow through with their promise to let their customers use those funds as they were intended – to pay rent, food and other absolute necessities.
Several articles:
Some banks are taking coronavirus stimulus checks for overdrawn accounts, New York Post
Your Stimulus Check Could Be Seized By Your Own Bank, Forbes
Some Banks Keep Customers’ Stimulus Checks if Accounts are Overdrawn, the New York Times
Debt collectors can take the stimulus funds
For a debt collector to garnish your bank account they first need to sue you and then get a judgment (this may be different in your state). Once they have the judgment they can serve a writ of execution on any bank that has your funds (or your employer). The bank will freeze your account and carve out any amount that is exempt under your state law exemptions. Exemptions are different in each state so it is important to talk to an experienced bankruptcy attorney licensed in the state where you live.
Twenty state attorneys general and Hawaii’s Office of Consumer Protection asked Treasury Secretary Steven Mnuchin to ensure that debt collectors and creditors cannot take those funds. A. Treasury spokesperson said the department “is looking into the issue”. Meanwhile, people who desperately need the money, are left high and dry (after all, they don’t need food for their family just because they are out of work for the last four weeks).
Debt collectors can garnish coronavirus stimulus checks because of a loophole, USA Today
WHAT CAN YOU DO TO PROTECT YOUR STIMULUS FUNDS?
CHANGE YOUR BANK ACCOUNT INFORMATION WITH THE IRS
Here’s how to change your bank account information with the IRS: The portal on IRS website where you can update your bank account info is up as of 4/15/20, named “Get my payment“.
I did not file tax returns – how do I get my stimulus money?
Those who don’t have to file tax returns can now submit a simple application to get your COVID-19 funds. Check out the IRS website.
But, you don’t need to do this if you receive Social Security, SSDI, survivor benefits or supplemental Social Security, Railroad retirement and survivor benefits – your funds will go to the same bank account where those monies are automatically deposited.
WARNING: bank, creditors or collection companies cannot garnish your Social Security, SSDI, survivor benefits or supplemental Social Security, Railroad retirement and survivor benefits, but, at this time, they can garnish your stimulus funds.
Tax Scams
Be very careful of anyone who contacts you asking for information such as your bank account, social security number, or other information that is none of their business. The IRS has important information about some of these Scams Targeting Taxpayers. Be very careful because this is your financial future and you need to protect it.
MUSINGS FROM DIANE:
Congress passed the CARES Act in record speed, the problem is that they did not think about the needs of the people who really need the stimulus funds. These are the people who are out of work and cannot afford to pay rent or buy food. These are the people who cannot pay their bills (perhaps long before we knew about COVID-19). The stimulus funds were going to be a God-send for these people. They could pay rent and buy food, but now they are finding that no one was smart enough to protect the funds from greedy banks, creditors or collection companies.
Can this be fixed? Yes, by the click of a pen. The Treasury Department could designate the funds as exempt from garnishment by redefining the checks as “benefit payments”. Treasury Secretary Steven Mnuchin is aware of the problem, but has failed to act thus far.
The post Can My Creditors or Bank Take My Stimulus Money? appeared first on Diane L. Drain - Phoenix Arizona Bankruptcy & Foreclosure Attorney.
April 17, 2020
From: twocents.lifehacker.com
By: Kristin Wong and Lisa Rowan
Bankruptcy is a last resort for people and businesses alike. Many companies file for bankruptcy and continue business as usual; the lesser-known reality is that individuals can file for bankruptcy and emerge in one piece, too.
Bankruptcy is poorly understood, so let’s talk about how it affects your finances.The differences between chapter 7, 13, and 11In general, people file for bankruptcy when there’s no way in hell they can meet their debt obligations. Popular assumption is that those people are bad with money and take out too much credit card debt. Sure, that happens, but often, people file bankruptcy after a major financial blow. It might be a lawsuit debacle or an unexpected illness.
A lot of people think bankruptcy wipes out any and all debt obligations, but that’s not the case. You still have to pay up, and how you’ll pay up depends on what kind of bankruptcy you file: chapter 7, chapter 13, or chapter 11. There are other types of specific bankruptcies, too (chapter 12 is for farmers and fishermen, for example), but these three are the most common.
With chapter 7, you may have to liquidate certain assets (like a car or a second home) to pay off at least some of the debt. Most of your assets are probably exempt, but it depends on your state, your financial situation, and whether or not that asset is deemed “essential.” You have to meet certain eligibility requirements to file, and income is perhaps the most important one. As legal site Nolo explains, there’s a whole set of criteria to determine your income eligibility, but generally, you have to have little to no disposable income.
With chapter 13, you get a plan to pay off your debts within the next three to five years, but you get to keep your assets. After it’s all said and done, some of those debts will likely be discharged. You have to qualify, though, and that means your secured debts can’t be more than $1,184,200 and your unsecured debts cannot be more than $394,725. Secured debt is debt that’s backed by collateral, like your house or car.
Chapter 11 bankruptcy works kind of like chapter 13, but it's typically reserved for businesses. Businesses can file for chapter 7 bankruptcy, too, but again, that means a liquidation of assets, so chapter 11 is usually a more attractive option. Companies get to keep their stuff and keep their creditors at bay while they continue their operations, but they have to come up with a plan to pay off at least some of their debt, or get it forgiven.What happens when you fileWhen you file for bankruptcy, you get an automatic stay. Basically, this puts a block on your debt to keep creditors from collecting. While the stay is in place, they can’t garnish your wages, deduct money from your bank account, or go after any secured assets.
Ironically, bankruptcy isn’t free. The filing fee alone is between $300 and $350 for chapters 7 and 13. And then there are the attorney fees. You can file without a lawyer, but it’s not recommended since bankruptcy laws can be tough to navigate. Attorney fees for chapter 7 average around $1,500, while chapter 13 fees tend to be in the $2,000-$3,000 range. With many attorneys, the more complex your situation, the more you’ll pay.
There are ways reduce the legal costs of filing for bankruptcy. Nonprofit Upsolve, for one, helps you generate your bankruptcy filing forms for free if your case is a simple one. Or, your local legal aid society may be able to connect you with low-cost legal services.
You’ll also have to take a class or two. The government requires individuals to get credit counseling 180 days before you file, and you also have to take a debtor education course if you want your debts discharged.
A couple of weeks after filing, you’ll have to attend a “creditors meeting,” which is basically what it sounds like: a court meeting between you, your bankruptcy trustee, and any creditors who want to attend. They’ll all ask you questions about your financial situation and decision to file bankruptcy.Your assets get liquidated with chapter 7 Nolo says that in most cases, chapter 7 debtors don’t have to liquidate their property (unless it’s collateral) because it’s usually exempt or it’s just not worth it. They explain:
If the property isn’t worth very much or would be cumbersome for the trustee to sell, the trustee may “abandon” the property — which means that you get to keep it, even though it is nonexempt...Most property owned by Chapter 7 debtors is either exempt or is essentially worthless for purposes of raising money for the creditors. As a result, few debtors end up having to surrender any property, unless it is collateral for a secured debt…
After the creditors meeting, your trustee will figure out whether or not to liquidate your stuff. If it does get liquidated, that means you’ll have to either surrender it or fork over its equivalent cash value to pay back your debt.You get a payment plan with chapter 13 With chapter 13, you get a plan to pay off your debts, and some of them have to be paid in full. These debts are “priority debts,” and they include alimony, child support, tax obligations, and wages you owe to employees.
Your plan is based on how much you owe and what your income looks like, and it will include how much you have to pay and when you have to pay it.What happens to your creditYour credit score will plummet with a bankruptcy. The higher your score, the more it’ll fall. FICO notes that the more accounts are involved in your bankruptcy filing, the greater an impact you’ll see to your score.
In general, chapter 7 bankruptcy remain on your credit report for 10 years, and chapter 13 stays on for seven.
After bankruptcy is all said and done, most debts are discharged, but not all of them.
In some cases, student loans can be discharged after a bankruptcy, but you have to pass a federal test for hardship.
Other difficult-to-discharge debts include:
- Tax debts
- Alimony and child support
- Divorce-related debts, including property settlement debts
Bankruptcy is usually a desperate remedy to a helpless situation. But knowing how it works and what to expect can help you navigate some of the misconceptions and figure out what the process actually entails.
This post was originally published in 2016 and was updated on 4/17/2020 by Lisa Rowan. Updates include: Checked links for accuracy; updated formatting to reflect current style; revised article to focus on bankruptcy methods for individuals; updated monetary requirements and averages.
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