Blogs
Here at Shenwick & Associates, one of the most difficult issues for our clients (especially younger ones) is student loan debt, which is now over $1.5 trillion (that’s not a typo), far eclipsing other types of consumer debt. As we’ve discussed many times in our posts, most courts follow the “undue hardship” Brunner test, which makes it almost impossible to discharge student loan debts in bankruptcy.
However, relief may be on the horizon, as more opinion leaders and courts express opposition to the Brunner factors. Earlier this month, members of Congress (including Sens. Elizabeth Warren (D-Mass.) and Dick Durbin (D-Ill.), along with Reps. Jerrold Nadler (D-N.Y.), John Katko (R-N.Y.) and Joe Neguse (D-Colo.)) introduced the Student Borrower Bankruptcy Relief Act of 2019, which would eliminate the section of the bankruptcy code (523(a)(8)) that makes private and federal student loans nondischargeable, allowing these loans to be treated like nearly all other forms of consumer debt.
The bill should easily pass the House. No bill text is available yet, but we’re sure we’ll be writing about this vexing issue again soon. For trusted bankruptcy advice on all types of debt, please contact Jim Shenwick.
The April 2019 New York City Taxi & Limousine Commission (TLC) sales resultshave been released to the public. And as is our practice, provided below are Jim Shenwick’s comments about those sales results.
1. The volume of transfers rose from March. In April, there were 75 unrestricted taxi medallion sales.
2. 57 of the 75 sales were foreclosure sales (76%), which means that the medallion owner defaulted on the bank loan and the banks were foreclosing to obtain possession of the medallion. Four sales were estate sales for no consideration. We disregard these transfers in our analysis of the data, because we believe that they are outliers and not indicative of the true value of the medallion, which is a sale between a buyer and a seller under no pressure to sell (fair market value).
3. The large volume of foreclosure sales (approximately 76%) is in our opinion evidence of the continued weakness in the taxi medallion market.
4. The 14 regular sales for consideration ranged from a low of $125,000 (one medallion) to a high of $230,000 (one medallion), with a median sales value of $170,000.
5. The fact that 76% of all transfers in April 2019 were foreclosure sales shows continued weakness in the taxi medallion market and no sign of a correction.
6. At Shenwick & Associates we believe that the value of a medallion is approximately $160,000 and the value of medallions continues to weaken.
Please continue to read our blog to see what happens to medallion pricing in the future. Any individuals or businesses with questions about taxi medallion valuations or workouts should contact Jim Shenwick at (212) 541-6224 or via email at j[email protected].
Here at Shenwick & Associates, spring is in the air and the A/C isn’t on yet. One of things that we love about the law is that it’s always changing, and we do our best to keep up with new developments in bankruptcy law.
So we were excited to see that the American Bankruptcy Institute(one of the most respected institutions in bankruptcy law) issued the final report of its Commission on Consumer Bankruptcy earlier this month, which contains a plethora of recommendations to amend the Bankruptcy Code and Federal Rules of Bankruptcy Procedure. In this e-mail, we’ll review its key recommendations.
Student loans. As our readers know, it’s extremely difficult to discharge student loans in bankruptcy. The Commission recommends that student loans that are: (a) made by nongovernmental entities; (b) incurred by a person other than the person receiving the education; (c) being paid through a five-year chapter 13 plan; or (d) first payable more than seven years before a chapter 7 bankruptcy is filed be made dischargeable in bankruptcy.
Remedies for Violation of the Discharge Injunction. Currently most violations of the discharge injunction can only be remedied by contempt proceedings. The Commission recommends creating a statutory private right of action for violations of the discharge injunction, like the action for violations of the automatic stay, which would provide the full range of sanctions, including costs, attorney fees, and punitive damages.
Credit Counseling and Financial Management Course. The Commission recommends eliminating prepetition credit counseling and eliminating the requirement for a course in financial management in chapter 7, but retaining it in chapter 13, with further study of its effectiveness.
Means Test Revisions & Interpretation. The Commission recommends amending the means test to require reduced documentation from debtors with below-median income; to exclude from income public assistance, government retirement, and disability benefits, capped by the maximum allowed Social Security benefit; to remove the presumption of abuse if the debtor shows special circumstances, even if the circumstances arose voluntarily; and to allow certain statutory expense deductions from income only to the extent actually incurred by the debtor and necessary for the support of the debtor and debtor’s dependents.
Chapter 13 Debt Limits. To reduce the need for individuals to file under chapter 11, the Commission recommends increasing the chapter 13 debt limit to $3 million, eliminating the distinction between secured and unsecured debts; and for married couples, applying the limit separately to each spouse and not aggregating the spousal debt, even in joint cases.
All of the Commission’s recommendations would dramatically improve access to bankruptcy relief, but Congress would need to introduce bills to enact the Commission’s recommendations for statutory amendments. For information on how bankruptcy relief could help you, please contact Jim Shenwick.
No one looks forward to having to file for bankruptcy. However, if you have filed and also own a home, you may be surprised to learn that you can, in fact, refinance an existing mortgage.
Refinancing comes with plenty of advantages. By lowering the interest rate you pay, it can help reduce your monthly payment. By extending your loan term — from, say, 15 years to 30 years — you may also be able to reduce your current mortgage costs. Refinancing also offers a way to either consolidate other debt, or produce cash for home improvements or other large expenses.
Still, It’s important to know that not every lender approaches post-bankruptcy refinancing the same way, and some have strict criteria, like long wait periods. At the same time, it’s worth noting that bankruptcy filers, as a group, pay considerably more for loans, according to a 2018 LendingTree study. The study found that the average lending terms offered to consumers three years after bankruptcy were $8,887 higher than those offered to consumers who had never had to file.
What to know about refinancing after bankruptcyBankruptcy gets a bad rap, but it’s also a way for consumers who are overwhelmed by debt to receive federal protection while they work to pay off obligations. While filing for bankruptcy is a very serious decision — and the move can stay on your credit report for years — it might be a reasonable move for your financial future if you’ve exhausted every other option.
There are several types of bankruptcy, and each might affect a potential refinancing differently, depending on factors like the discharge date.
A discharge date is the time when a debtor who has filed for bankruptcy is no longer legally liable for — or required to pay back — certain types of debt.
For Chapter 7 bankruptcies, a bankruptcy court will issue a discharge order relatively early — generally, 60 to 90 days after the date first set for creditors to meet. With a Chapter 7 bankruptcy, a debtor’s assets are liquidated, or sold, as a way to pay back creditors.
In Chapter 13 bankruptcies, a debtor who has a regular income is allowed to keep assets but also has to agree to a debt repayment plan, usually over three to five years. The debt is technically discharged only after it’s been paid off under the plan.
Even with a Chapter 7 bankruptcy filing, you may still be able to reaffirm, or pay off, certain debts with specific creditors. If you have a mortgage, this usually means re-entering a contract with your lender to affirm that you intend to repay part or all of your loan. As long as you follow through with mortgage payments, the lender is then legally obligated to refrain from repossessing your home and forcing a foreclosure.
For homeowners, one advantage to reaffirming a debt is that your mortgage payments will keep showing up on your credit report because lenders will be obligated to report them to the credit bureaus. Also, by reaffirming your mortgage, you might be able to renegotiate the terms of the loan, including the total amount and the interest rate.
According to federal court data, bankruptcy filings have been declining in recent years. Still, during the 12-month period that ended on June 30, 2018, 22,245 businesses and 753,333 non-businesses filed for bankruptcy, for a total of 775,578 filings.
If you own a home and absolutely must file for bankruptcy, be sure you understand how bankruptcy conditions differ.
“A Chapter 7 bankruptcy in essence is a liquidation and a fresh start, and people who don’t own highly appreciated assets are better off with this type of bankruptcy,” said James Shenwick, bankruptcy attorney at Shenwick & Associates in New York. “But if that person owns a highly appreciated house, or they want to keep a business, or they have an expensive piece of jewelry, then Chapter 13 is better.”
Here are the ways bankruptcies affect mortgages in particular:
Chapter 7 bankruptcy: Unlike a Chapter 13 bankruptcy, a Chapter 7 bankruptcy doesn’t have a repayment plan. Instead, an appointed trustee gathers and liquidates the debtor’s assets to pay off creditors which, in turn, lets the debtor start with a clean slate. Chapter 7 bankruptcies stay on credit reports for up to 10 years.
With a Chapter 7 bankruptcy, you have to wait two years after the discharge date before you can become eligible for a government-backed residential mortgage like a Federal Housing Administration (FHA) loan. For conventional home loans, the wait period is four years.
Certain types of debts — like child support payments and certain taxes — can’t be discharged, or basically forgiven, with a Chapter 7 bankruptcy filing. Mortgage debt can be discharged, but your lender will still have a lien on your home, which means you may lose it if the loan isn’t eventually repaid.
Chapter 13 bankruptcy: A Chapter 13 bankruptcy requires debtors to restructure their debts in order to pay them off over a period of three to five years. Compared to Chapter 7 bankruptcies, Chapter 13 filings carry the advantage of allowing homeowners to stop foreclosure proceedings, as long as they keep up with all mortgage payments due during the repayment period.
A Chapter 13 bankruptcy is often referred to as a “wage earner bankruptcy” because it offers a repayment plan to people who have regular income. You are eligible one year after the discharge of your bankruptcy for a government-backed home loan. With a conventional home loan, however, you’ll need to wait two years.
Chapter 11 bankruptcy: Chapter 11 bankruptcies are for business owners. They allow a business to follow a plan of rehabilitation or reorganization so it may continue to function while repaying debt.
FHA loans are subject to rules for after-bankruptcy refinancingIt’s entirely possible to get an affordable government-backed FHA loan for a refinance after declaring Chapter 7 bankruptcy, but you’ll need to do three things: Wait two years after your discharge, re-establish good credit during that time and avoid taking on more debt.
It’s also possible to become eligible for an FHA loan after just 12 months. However, you’ll need to prove your bankruptcy occurred due to circumstances beyond your control, and you’ll also need documentation to show you’re now managing your finances responsibly. Your lender will have to vouch for you on paper that the bankruptcy is unlikely to happen again.
To get an FHA loan after filing a Chapter 13 bankruptcy, you’ll need to show you made full, on-time mortgage payments for at least a year under your repayment plan, according to the U.S. Department of Housing and Urban Development. You’ll also need to get written permission from a bankruptcy court.
Conventional loans have stricter terms for after-bankruptcy refinancingConventional loans are not government-insured, so interest rates and credit score requirements tend to be higher than those for a government-backed mortgage like an FHA loan. For example, you can get an FHA loan with a credit score of just 500 (assuming you’re willing to put down a 10% down payment, or 580 if you only want to put down 3.5%. By contrast, conventional mortgages usually require a minimum score of 620.
According to Jeremy Schachter, branch manager at Fairway Independent Mortgage Corporation in Phoenix, Ariz., some lenders offer niche refinance loans that don’t require a waiting period, but these are adjustable-rate mortgages that come with higher fees.
“The majority of people fall in the FHA or VA loan buckets,” he said. “It doesn’t make sense if you’ve been through a bankruptcy to go with a loan with higher rates and fees.”
Tips on repairing credit after bankruptcyA bankruptcy typically takes a huge toll on your credit standing, cautioned Schachter, adding that the first thing any lender will look at is whether your credit has been re-established.
“While most bankruptcies happen not out of laziness but because of personal situations such as high medical bills, the worst thing you can do after a bankruptcy is be late on your debt,” he said. “It’s a red flag for lenders who think you should have learned your lesson.”
It’s usually easier to rehabilitate your credit if you file a Chapter 13 bankruptcy, rather than a Chapter 7 bankruptcy.
“In a Chapter 13, creditors are repaid about 10 or 20 cents on the dollar, so the debt is not fully wiped and lenders see that as more of a positive and are more willing to lend to you,” said Shenwick. Still, he added it’s possible to generally rehabilitate your credit even with a Chapter 7 bankruptcy in a year or a year-and-a-half by doing two things: spending as little as possible and saving as much as possible.
Shenwick’s best tip for a credit rebuild: Get a secured credit card, as repayments will show up on your credit history. Secured credit cards are “secured” by money you deposit, unlike regular credit cards, which require no deposits.
Schachter also recommended secured credit cards; he suggested getting a card to pay for very small expenses like gas or groceries, and then making payments on time.
“I see people who do it for six months and that dramatically increases their score,” he said. “It shows they repay debt. It’s a great way to establish or re-establish credit, even for people who don’t have a bankruptcy on file.”
The bottom lineYes, you may be able to refinance your home after bankruptcy, although you may have a waiting period. And you’re more likely to get a government-sponsored FHA loan rather than a conventional loan.
To boost your odds significantly, focus on repairing your credit, steering clear of piling on more debt and, if you filed a Chapter 13 bankruptcy, sticking to your repayment plan. Still, boosting your credit standing may be your biggest ally: According to the 2018 LendingTree study, five years after declaring bankruptcy, 75% of filers were able to boost their credit scores to a loan-eligible 640 or more.
© Copyright 2012-2019 Student Loan Hero™, Inc., All Rights Reserved.
Seila Law Investigated for Illegal Sale of Debt Relief Services, plus more…
On February 27, 2017, the Consumer Financial Protection Bureau “CFPB” issued a civil investigation demand “CID” to Seila Law, LLC seeking information about its business.
to determine whether debt relief providers, lead generators, or other unnamed persons are engaging in unlawful acts or practices in the advertising, marketing, or sale of debt relief services or products, including but not limited to debt negotiation, debt elimination, debt settlement, and credit counseling, in violation of Sections 103 1 and 1036 of the Consumer Financial Protection Act of2010, 12 U.S.C. §§ 5531,5536; 12 U.S.C. § 5481 el seq., the Telemarketing Sales Rule, 16 C.F.R. § 310. 1 el seq., or any other Federal consumer financial law.
Seila Law’s response was to object to CFPB’s right investigate the firm, but did not deny any allegations. The 9th Circuit Court of Appeals (May 6, 2019) found the CFPB was empowered to investigate whether Seila Law was violating the Telemarketing Sales Rule, among other laws.
MUSINGS FROM DIANE:
I am always disgusted when anyone prays on someone who trusts them to do the right thing. Whether it is a bad mechanic, a doctor who prescribes unnecessary treatment or a lawyer who lies and intentionally misleads their clients. All of these sharks are focused on one thing – filling their own pockets. Of course, everyone has a right to make a living, but not if that means robbing someone.
My advice – use your common sense before hiring anyone (even my law firm). Check out their reviews (with the understanding that many are fake). If your gut tells you to run, then do so immediately.
How Can I Help You?
The post Seila Law, LLC Investigated for Unlawful Practices appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
It is a known fact that the past decade’s rough financial situations have affected the lives of millions of Americans throughout the country. Many of them have filed for bankruptcy to manage excessive debt and keep their homes from being foreclosed. While bankruptcy provides financial relief to those looking to manage debt, many are concerned […]
The post Will Bankruptcy Show Up on a Background Check in California? appeared first on The Bankruptcy Group, P.C..
When you file for bankruptcy, you immediately qualify for an automatic stay against creditor actions. This includes landlords evictions. Depending on why you’re being evicted, the automatic stay can buy you significant time to either come up with money or move out of your rental without being forced out by your landlord. In this article, we discuss Texas tenants’ rights in eviction proceedings, and how bankruptcy may help your situation.
What Happens If I File for Bankruptcy Before an Eviction?
In order to remove you from the premises, your landlord must file a suit against you and state the reason why they want to reclaim possession of the premises. This is called an eviction proceeding. The court will rule on the legality of the eviction and make a determination as to if an when you will be removed from the landlord’s apartment.
When you file for bankruptcy, any such action against you (including eviction or foreclosure) must stop. If you’ve filed for bankruptcy before the landlord could file for eviction, then the eviction would either be postponed until after the bankruptcy has settled or the landlord has the choice to petition the court to lift the automatic stay granted by the bankruptcy.
What Happens If I File for Bankruptcy During or After an Eviction?
Whether or not the bankruptcy stops an eviction depends entirely on when you filed in relation to the eviction judgment. If the landlord has already received a judgment for the right to possession (the eviction has already been granted by the court), then filing for bankruptcy will not stop the eviction process.
However, if the landlord has filed for eviction and not yet received a judgment from the court, the eviction process will be stopped in its tracks by the automatic stay granted in bankruptcy.
What Is an Emergency Filing?
An emergency filing allows you or your lawyer to file an incomplete bankruptcy in order to activate the automatic stay. You can file the rest of the paperwork later. In other words, the court doesn’t require that you have every piece of information in order to stop creditor actions against you. Moving quickly is your best chance to stop an eviction or buy yourself enough time to repay the delinquent rent that you owe.
Texas Tenants’ Rights and Delinquent Rent
Texas does not have very tenant-friendly laws. On the other hand, Texas does have very debtor-friendly laws. If you are delinquent in rent, a landlord can issue a three-day notice to either pay the delinquent balance or quit the lease. If you quit the lease, don’t pay the rent, or ignore the notice, the landlord can immediately initiate an eviction against you. You’ll need to move quickly and file for bankruptcy immediately if you wish to retain possession of your apartment.
If Your Landlord Fights the Automatic Stay
When you file for bankruptcy, it affords you an automatic stay to creditor actions including eviction, but the creditor (in this case, your landlord) can file to lift the automatic stay when the circumstances make sense.
When do the circumstances make sense? The court will usually grant the motion to lift the automatic stay if:
Your landlord is evicting you due to a lease violation and not delinquent payment of rent
In cases where you have violated the lease, the landlord will claim that their decision to evict was not based on economic factors. Bankruptcy is designed to protect you from creditors, not landlords per se. If your landlord is booting you for some other reason, then they will likely be able to lift the automatic stay and proceed with the eviction.
They successfully argue that there is illegal activity on the premises
The court will lift the automatic stay if the landlord argues that one of the primary reasons for evicting you is the presence of illegal activity on the premises. This can include drug use on the property. However, the landlord has the burden of proving that there is illegal activity on the property and they can’t just want into your apartment to prove it.
You cannot pay your back rent
The landlord will likely allege that you cannot pay the delinquent rent in order to lift the automatic stay. The automatic stay is in place in order to allow you to deal with mounting debt. If the landlord is in the midst of filing an eviction against you, and you have no means of repaying the landlord, the court might grant the landlord’s petition to lift the automatic stay.
You’re filing for Chapter 7 bankruptcy
Chapter 7 bankruptcy discharges the debts against you and, in most cases, without having to repay back the debts that qualify for a Chapter 7 discharge. This includes past rental fees, surcharges, and rent owed via the lease agreement. While your lease may still hold you liable for a full year’s worth of rent, Chapter 7 will successfully discharge that debt. If you file for Chapter 7, however, the landlord is likely going to assume that you have no intention of paying off your delinquent rent and, if that’s true, then the automatic stay can likely be lifted and eviction can proceed.
Can Bankruptcy Help Me Keep My Rental?
It can, but you need to be upfront with your landlord about your financial situation and you need to make the right choices moving forward. If you do file for bankruptcy and want to keep your apartment, Chapter 13 will be the better option because it works on a three- to five-year repayment plan. In other words, you’re showing that you will be repaying the debt owed to your landlord. In addition, Chapter 13 can discharge some of your unsecured debt.
A Dallas bankruptcy attorney at Allmand Law Firm, PLLC can help you file for bankruptcy if you have to or negotiate with your landlord. Most landlords do not want the hassle of an eviction. To learn more about bankruptcy, Texas tenants’ rights, and your options, contact us today.
The post What Are Texas Tenants’ Rights in Eviction Proceedings? appeared first on Allmand Law.
How Does The Automatic Stay Help Those Filing for Bankruptcy
Filing bankruptcy can be an intimidating decision. But, did you know that there are various tools that can protect you during the process? In fact, one of the most beneficial tools for those filing bankruptcy is the automatic stay. The automatic stay is a part of all bankruptcy cases, and it stops all collection actions you may be facing from creditors or debt collection agencies.
The automatic stay can be a powerful instruments for protecting them against a number of financial burdens. If you are facing eviction, repossession or foreclosure, losing utilities or benefits, or are having issues making
child support payments, the automatic stay may benefit you and your family in a time of financial crisis.
Below are a few ways the automatic stay law can help you when filing for bankruptcy.
- It may stop utility disconnections. If you have been unable to pay your utility bill, companies may threaten to disconnect crucial resources such as water, electricity, and gas. Thankfully, the automatic stay will postpone these disconnections for a minimum of 20 days.
- It may stop foreclosure.
In most cases, the automatic stay will postpone proceedings if your home mortgage is at risk of foreclosure. However, it is noted that a person consider Chapter 13 Bankruptcy if they want to keep their house during the bankruptcy process. - It may stop eviction. In many cases, the automatic stay will prevent property owners from evicting tenants in improbable amounts of time. However, property owners may be able to find loopholes to evict you and your family sooner. While the automatic stay may be able to postpone the eviction for a few days or weeks, it is important to speak with an experienced bankruptcy attorney to discuss your situation immediately.
- May be able to stop collection of public benefits overpayments. If you received overpayments due to your public benefits, an agency would be entitled to collect these overpayments from your checks, typically.
However, the automatic stay law may be able to prevent these collections. - May be able to stop wage garnishments. When filing for bankruptcy, the automatic stay law will disallow any collection agencies to take any part of your salary. However, this may exclude and wages that may be taken to satisfy court judgments.
The Automatic Stay: How it Stops Creditors in Bankruptcy
The automatic stay is what stops creditors from pursuing collections against a debtor when bankruptcy is filed. In most cases, it either stops or temporarily ceases collection activity which gives you more time to handle finances. The action can be powerful against those who are at risk of eviction, foreclosure , utility disconnection and it can even disrupt wage garnishment .
The automatic stay is like a road block to creditors and collection agencies. If you are facing a utility disconnection, it may keep your utility from being disconnected for a couple of weeks. If you are facing foreclosure, the stay delays proceedings temporarily. While the lender may eventually proceed, Chapter 13 bankruptcy gives homeowners a likely chance to keep their home under an agreed payment plan.
The automatic stay may temporarily halt collection for situations such as overpayment of public benefits and eviction. In some cases, a creditor may try to work their way around the stay by getting the judge to grant certain collection activity. Certain tax collection situations may see a temporary halt in collections and the stay usually prevents liens or property seizures from the IRS. If you owe back child or spousal support, the stay may not be as effective but you have the chance to get other debts discharged and work on getting support payments made.
The automatic stay has helped many debtors by giving them time to work out their situation with their legal representative. Questions and concerns should be reviewed with a qualified bankruptcy attorney.
Bankruptcy Debtor Beware Of Automatic Stay Violators
When a debtor files bankruptcy, the creditors to whom they owe money are supposed to stop trying to collect. But as you may have guessed, that’s not always what happens. Sometimes, the creditor in a bankruptcy case takes their chances and attempts to pry some money out of the debtor even after they have filed bankruptcy. Some debtors who don’t understand the bankruptcy process or who are so overwhelmed because they are going through the process without a bankruptcy attorney, end up making payments to a creditor.
This is unfortunate because sometimes the payments made by the debtor can really upset their already fragile financial condition. And even though the law says that creditors who violate the automatic stay should be punished, the punishment meted out against violators is mild or non-existent because debtors often don’t realize what happened and don’t file a complaint.
How to avoid the traps of bankruptcy automatic state violators:
- A debtor is not obligated to make any payments to any of their creditors once they file bankruptcy. Even if the creditor calls and makes threats against the debtor, they still are not required to make payments after their bankruptcy has been filed.
- The creditor cannot simply repossess any of your property without a court order after you have filed bankruptcy. This means that even if you failed to pay your mortgage, once you file bankruptcy, the mortgage lender must get permission from the bankruptcy court if they want to file foreclosure. Even then they may not be able to file foreclosure if you come up with a feasible plan to repay your delinquent mortgage and keep your house through bankruptcy.
- If a creditor violates the automatic stay after you file bankruptcy, you must inform them in writing that you have in fact filed bankruptcy and should not be contacted. You can tell them verbally; but also send a letter just in case you need to present this evidence to the bankruptcy court if they don’t cease with their illegal behavior. The bankruptcy court will look at the debtor’s due diligence to inform the creditor of their bankruptcy before they will be willing to grant any damages.
Can Creditors Avoid An Automatic Stay?
When a debtor files Chapter 7 or Chapter 13 bankruptcy , he/she will receive the protection of an automatic stay. The automatic stay prevents creditors from taking collection actions against the debtor in bankruptcy and also forbids the creditor from calling, writing, issuing a wage garnishment order, seizing the debtor’s bank account or assets, filing a lawsuit or filing foreclosure on the debtor’s home. However, there are circumstances where a creditor will seek relief from the automatic stay.
- A creditor will seek relief from an automatic stay in bankruptcy if the debtor does not have “sufficient” equity in the secured property or if the secured property has not been properly insured by the debtor. This most often happens in the case of vehicles and real estate property. For example, if you have a financed vehicle during bankruptcy and you fail to insure the vehicle, the creditor may seek relief from the automatic stay because of your lack of insurance on the vehicle.
- A creditor may seek relief from the automatic stay in bankruptcy if they believe that another court is more equipped to handle the legal issues in the case. This is most common when a divorce proceeding is taking place during bankruptcy.
- A creditor may seek relief from the automatic stay specifically in Chapter 13 bankruptcy before confirmation if they believe that they will not be given sufficient payment on a debt.
If a creditor is given relief from automatic stay, they will be able to continue their collections efforts against the debtor as if he/she never field bankruptcy. However, it’s important to understand that just because a creditor seeks relief from the automatic stay does not mean the bankruptcy judge will grant that relief. They must prove that relief from the automatic stay is warranted. If a creditor is seeking relief from the automatic stay during your bankruptcy case work with your bankruptcy attorney to challenge the creditor’s motion for relief.
Does the Automatic Stay in Bankruptcy Stop Student Loan Collections?
If you have student loan debt that is being pursued by the creditor when you file bankruptcy, collection efforts come to a halt due to the automatic stay. This also ceases collection attempts through bank and wage garnishments. This can give debtors time to figure out how to repay their loan obligations if they are unable to get them discharged.
The Brunner Test
It has been said that getting student loan debt eliminated or discharged in bankruptcy is impossible. There are qualifications determined through what is known as the Brunner Test to see if you qualify. There are debtors
who may actually meet qualifications but don’t bother to ask about them. It may be rare but it is possible, but you won’t know for sure unless you ask your attorney.
The Brunner Test looks at a few aspects such as your ability to pay, current financial situation and whether you have made good faith intentions toward making payments. You have to prove that making payments toward the debt is making things difficult for you when it comes to living needs.
When Does the Automatic Stay Go Into Effect?
The automatic stay in bankruptcy goes into effect immediately when your petition is filed. Creditors, including those you owe student loan payments to, should stop collection actions against you. As long as your case is pending they cannot continue to try and collect from you. If you are unable to get student loan debt discharged, after your case is completed you may still be responsible for the balance owed. Other unsecured debts may qualify for elimination making it easier for you to pay your student loans.
Have Any More Questions About Bankruptcy and Student Loans?
If you have any questions you would like answered regarding bankruptcy and student loans don’t hesitate to give us a call.
Bankruptcy Offers Limited Automatic Stay Protection For Co-Signers
Do you have debt that has been co-signed by a relative or friend? Well if you file for bankruptcy, there is some limited protection for that co-signer through the automatic stay; but it is only temporary. Debtors who file for Chapter 7 bankruptcy or Chapter 13 bankruptcy enjoy the full protection of the automatic stay during bankruptcy and cannot be pursued by creditors for the repayment of a debt that has been discharged in bankruptcy. However, if their debt was co-signed by someone else the creditor will have the power to pursue that co-signer for repayment after the bankruptcy case is closed or discharged and in some cases they may be able to pursue the co-signer for repayment while the bankruptcy process is ongoing.
If a debtor in Chapter 13 bankruptcy has a co-signed “consumer” debt then the creditor is temporarily prohibited from pursuing the other debtor for repayment of the co-signed debt. This bankruptcy law was implemented to prevent creditors from applying indirect pressure on the bankruptcy debtor. However, the reality is that this will only delay collection action against the co-signer. If the debtor’s Chapter 13 bankruptcy plan does not allow for the full repayment of the co-signed debt, the creditor may ask the bankruptcy court for permission to pursue the co-signer for repayment of the debt. Most likely that permission will be granted to the creditor. For debtors considering bankruptcy who have co-signed debt, please take the time to discuss your bankruptcy with the co-signer. It is best to be honest and up-front about your financial situation. Even if they get upset by the bankruptcy, you have a better chance of salvaging your relationship with the co-signer if you are honest and avoid allowing the ramifications of the bankruptcy to be a surprise.
Exceptions to an Automatic Stay
An automatic stay goes into effect the instant you file your bankruptcy petition. This may seem like a huge relief, finally those harassing phone calls will stop and you don’t have to worry about your possessions being repossessed or foreclosure, at least for a while. But there are some debts that aren’t subject to the automatic stay, so it’s best to know what these are before you’re shocked by their continued presence.
- Evictions. If your landlord has already started eviction proceedings it may be too late to prevent it with an automatic stay. In some situations you can stop the eviction but you need to speak with your bankruptcy attorney immediately, before any paperwork has been filed by the landlord.
- Criminal Prosecution. If you’ve committed a crime or are accused of it then an automatic stay can’t prevent you from going to trial and anything that follows.
- Retirement Plan Loans. If you took out a loan against an IRA then any payments that are being automatically deducted from your paycheck will still be deducted.
- Support payments. Whether its child support, alimony or any other court ordered support payments will continue after an automatic stay.
- Paternity and Divorce. An automatic stay will have no effect on any paternity tests or divorce proceedings. The only time a divorce may be held up by an automatic stay is if there is property that needs to be divided.
There may be other exceptions to the automatic stay that apply in your situation so your best bet is to speak with a bankruptcy attorney.
Bankruptcy Grants Automatic Stay Relief Because Repayment Plan Not Feasible
In a recent Chapter 13 bankruptcy plan, the bankruptcy trustee ruled that the creditor (movant) would be granted relief from the automatic stay because the debtors could not offer adequate protection.
On August 17, 2005, Michael E. Redden, Jr. executed a note, payable to Movant, in the original principal amount of $152,000 (the “Home Note”). The Home Note provided for monthly payments of $999.01 per month, with a balloon payment due on August 17, 2010. (Movant’s Exhibit 1).1 The Home Note is secured by a deed of trust covering a home located at Lot 2, Block 1, of Cannon Acres, a subdivision in Harris County, Texas. (Movant’s Exhibit 2).
On May 4, 2006, Michael E. Redden, Jr. executed a second note, payable to Movant, in the original principal amount of $32,000 (the “Lot Note”). The Lot Note provided for monthly payments of $392.66, with a balloon payment due on May 4, 2011. (Movant’s Exhibit 3).2 The Lot Note is secured by a deed of trust covering an undeveloped lot located at Lot 1, Block 1, of Cannon Acres, contiguous to the home securing the August 17, 2005 note. (Movant’s Exhibit 4).
What is adequate protection in bankruptcy? Basically adequate protection is when the debtor can protect the creditor’s interest in the property which secures a debt, either because they have equity or because they are making some type of payment. In this particular case the bankruptcy debtors’ property was inundated with various liens leaving no equity cushion and they were unable to have their repayment plan confirmed because the trustee did not think it was feasible. In the end, the bankruptcy trustee ruled that the creditor could receive relief from the automatic stay because they would not otherwise receive payment and there was no point in allowing the debtors to retain the property which secured the outstanding debt.
Failure To Record Assignment Prevents Automatic Stay Bankruptcy
In the recent Chapter 13 bankruptcy case of a debtor whose home was foreclosed on, the bankruptcy court declined to lift the automatic stay preventing the creditor from taking possession of the home.
US Bank National Association (“US Bank”), Trustee for the C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-CB2, nonjudicially foreclosed on the residence of Debtor Eleazar Salazar (“Salazar”), by exercising the power of sale under the deed of trust. At the time it foreclosed, US Bank was not the original beneficiary of record, and it had not recorded an assignment of the deed of trust conveying to it an interest in the deed of trust.
After the foreclosure, two lawsuits were filed in state court: Salazar filed to invalidate the foreclosure sale and to seek damages against US Bank and other parties, and US Bank filed to regain possession of the residence through an unlawful detainer action against Salazar. The unlawful detainer; suit was on the verge of trial when Salazar filed his chapter 13 bankruptcy case.
Ultimately the bankruptcy court ruled that it would be less damaging to both parties if the automatic stay remained in place because the foreclosure process was flawed due to the failure to record the assignment. The bankruptcy court decided to review the debtor’s Chapter 13 bankruptcy plan to see if it was feasible and if the debtor could provide adequate protection for the property while repaying the debt. If it is determined that the foreclosure was in fact illegal, the lender may be obliged to accept a Chapter 13 bankruptcy repayment plan despite their objections.
Automatic Stay Lifted Despite Debtors’ Arguments Over Lawsuit Location
In the business bankruptcy of Jim’s Maintenance & Sons, Inc. and Jim’s Commercial Cleaning Ltd., the bankruptcy court ruled to lift the automatic stay for Target Corporation, allowing the creditor to pursue lawsuits against the debtors in both Texas and Oklahoma. The debtors in the case argued that lifting the bankruptcy automatic stay for both lawsuits would unfairly burden them because they did not have an attorney willing to travel to Texas to represent them.
The details of the bankruptcy case:
In 2000, Target Corporation entered into contracts with Jim’s Maintenance & Son’s Inc. and Jim’s Commercial Cleaning Ltd. (collectively “Jim’s Maintenance” or “the debtors”) in which Jim’s Maintenance agreed to provide cleaning services for Target at certain stores. Target terminated its relationship with Jim’s Maintenance in May 2006. That same year, former employees of Jim’s Maintenance brought two separate lawsuits against the company and Target in the Southern District of Texas (“the Fuentes case”) and the Western District of Texas (“the Iztep case”). The former employees asserted that Jim’s Maintenance and Target were liable for failure to pay overtime and minimum wage in accordance with the Fair Labor Standards Act.
Target subsequently brought cross-claims against Jim’s Maintenance for breach of contract and other claims in both Texas cases. In May 2008, Jim’s Maintenance filed for bankruptcy protection and an automatic stay of all litigation against the debtors went into effect under 11 U.S.C. § 362(a). After filing for bankruptcy, Jim’s Maintenance filed a civil action against Target in state court in Oklahoma, which was later removed to federal court in the Western District of Oklahoma (“the Oklahoma litigation”). Target subsequently moved the bankruptcy court for relief from the automatic stay to allow it to continue litigating its cross-claims in the Texas cases and to allow it to file comparable counterclaims in the Oklahoma litigation. In February 2009, the bankruptcy court lifted the automatic stay.
The debtors appealed the bankruptcy court’s decision arguing that the Texas case should still fall under the automatic stay due to their inability to afford representation in the case. The bankruptcy court ruled against them saying that they will lift the automatic stay in both cases and that the debtors could move to have the Texas case moved to Oklahoma. The bankruptcy court also noted that the debtors never argued against the validity of lifting the automatic stay, only that the location of the second law suit would unduly burden them.
How a Bankruptcy Automatic Stay Works for You
When a debtor files for bankruptcy, the first form of relief they receive is an automatic stay. An automatic stay stops creditors in their tracks so that the debtor’s assets, including property and wages can be protected from seizure while the bankruptcy case proceeds.
Bankruptcy’s automatic stay prohibits creditors from calling a debtor’s house or work. The bankruptcy automatic stay also prohibits creditors and their attorney’s from sending the debtor letters; but most importantly, the automatic stay stops all lawsuits and wage garnishments against the debtor from proceeding. Even if a creditor has already won a judgment against a debtor, the creditor can no longer collect on the judgment after the bankruptcy automatic stay has been put in place. The creditor must also stop any wage garnishment or bank account seizure already in place against the debtor.
If the creditor fails to obey the bankruptcy automatic stay they may be fined or penalized by the bankruptcy court. Penalties could include money damages and attorney’s fees awarded to the debtor.
When to Call Allmand Law Firm, PLLC
Bankruptcy does not always have to be an intimidating process. In fact, for some, bankruptcy might be the best option to get out of a sticky situation. For this reason, it is important to speak with a skilled bankruptcy attorney
in Dallas to make sure your situation is looked at detail by detail. With tools such as the automatic stay, bankruptcy can be a helpful way to keep you and your family living in a comfortable situation.
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Cash Tyme Must Pay $100,000 for Failure to Follow the Law
The Consumer Financial Protection Bureau (Bureau) 2/5/2019 announced a settlement with Cash Tyme, a payday retail lender with outlets in Alabama, Florida, Indiana, Kentucky, Louisiana, Mississippi, and Tennessee. Cash Tyme is the operating name for CMM, LLC, and its wholly owned subsidiaries in those states.
According to the consent order, the Bureau found that Cash Tyme violated the Consumer Financial Protection Act of 2010 by:
- Failing to take adequate steps to prevent unauthorized charges;
- Failing to promptly monitor, identify, correct, and refund overpayments by consumers;
- Making collection calls to third parties named as references on borrowers’ loan applications that disclosed or risked disclosing the debts to those third parties, including to borrowers’ places of employment as well as to third parties who were themselves harassed by such calls;
- Misrepresenting that it collected third-party references from borrowers on loan applications for verification purposes, when in fact it was using that information to make marketing calls to the references; and
- Advertising unavailable services, including check cashing, phone reconnections, and home telephone connections, on the storefronts’ outdoor signage where such advertisements contained information that was likely to be deemed important by consumers and likely to affect their conduct or decision regarding visiting a Cash Tyme store.
Failure to provide initial privacy notices to borrowers and failed to follow the Truth in Lending laws.
Also, the Bureau found that Cash Tyme violated the Gramm-Leach-Bliley Act and Regulation P by failing to provide initial privacy notices to borrowers. The Bureau also found that Cash Tyme violated the Truth in Lending Act and Regulation Z when it failed to include a payday loan fee charged to Kentucky customers in the annual percentage rate (APR) in loan contracts and advertisements, and rounded APRs to whole numbers in advertisements; and when it published advertisements that included an example APR and payment amount that was based on an example term of repayment, without disclosing the corresponding repayment terms it had used to calculate that APR.
Under the terms of the consent order, Cash Tyme must, among other provisions, pay a civil money penalty of $100,000.
Copy of the consent order
MUSINGS FROM DIANE:
Who uses payday or title loan companies? Typically the most desperate who have no other place to go for money to pay necessities, such as food, rent or a car loan. What happens when they sign this type of outrageous loan? The borrower finds that the terms of the loan were lies. They end up borrowing more money to pay the loans, while not paying their rent or mortgage and not buying food. If it was a car title then they will lose their car.
It appears that the cost of payday and title loans is as much as 400% to 700% interest. Most state laws would not allow this type of loan, but the payday loan companies have taken these loans to states that permit this type of lending, or to foreign countries, or Indian reservations. Doubt me? Read the links below.
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Debt Collectors Cannot Yell, Curse or Threaten You
There are Rules Governing Debt Collectors
Debtor collectors are not allowed to call you before 8 am or after 9 pm (your time zone, not the caller’s). They cannot yell, swear, use crude language or threaten you in any way or do anything else that could be seen as harassment. Nor can they threaten to do something that they are not legal allowed to do – such as come to your home and take your property (without the appropriate court order). The FDCPA is a federal law that limits what debt collectors can do.
Fraud, Identity Theft, Phantom Debt and Others
According to Consumer Sentinel’s 2018 Data Book, published February, 2019, has consumers complaints about: fraud, identity theft and other consumer protection topics. Reporting agencies received about 608,000 complaints from consumers about debt collectors. Of those, more than 40 percent concerned efforts to collect “phantom debt” – debts which consumers say they don’t owe. If you believe you are being pursued for a debt you don’t owe, the FDCPA allows you to request verification of the debt.
Ask for Verification and Keep Records
You have a right to request the collecting agency’s name, physical address and phone number. Always ask for a verification letter with details. Keep records of all contacts (date, time, name of caller) because this information will help you later if the debt continues to be an issue.
Never Give Out Your Personal Information
If the collector requests personal information such as your social security number or bank account number – never provide it. Instead, request written documentation of the debt. If they start to threaten you with arrest or harm, write down the Caller ID number, and ask for the person’s name and report them to the Consumer Financial Protection Bureau and/or the FTC. But, be aware that many of these sleazy types are ‘spoofing’ legitimate phone numbers for law firms and government agencies.
Global Asset Financial Services Group LLC
Last week, a federal court shut down one alleged phantom debt collection scheme at the request of the Federal Trade Commission. The operation, called Global Asset Financial Services Group LLC was accused of “falsely claiming to be attorneys or affiliated with attorneys to pressure consumers into making payments on debts they did not owe, and threatening to take legal action against consumers if they did not pay. The group includes 10 companies and six individuals as proposed defendants: GAFS Group, LLC; Regional Asset Maintenance, LLC; 10D Holdings, Inc.; Trans America Consumer Solutions, LLC; Midwestern Alliance, LLC; LLI Business Innovations, LLC; TACS I, LLC; TACS II, LLC; TACS III, LLC; Cedar Rose Holdings & Development, Inc.; and their principals Ankh Ali, Aziza Ali, Kenneth Moody, David Carr, Jeremy Scinta, and Omar Hussain.
Midwestern Alliance
According to the FTC “One of the companies behind the operation, Midwestern Alliance, is a debt broker that allegedly bought, sold, and placed fake debt portfolios that it obtained from former payday loan generator Joel Tucker even after consumers said they did not recognize the debt or had already paid it,” news release
MUSINGS FROM DIANE:
Everyone will agree that we are responsible for our legitimate debts. If we cannot or will not pay, then somebody has to help collect these debts. But shady debt collectors will go far beyond what’s allowed by law. Every day I hear from consumers who are harassed and threatened by these con-artists. Their lives, jobs and sanity are affected by this creeps who lie about the debt or the law governing their “right” to collect the debt.
How Can I Help You?
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