Blogs

Late night comedian John Oliver recently offered his unique and humorous take on the debt buying industry, noting that collection agencies are responsible for more lawsuits than any other type of plaintiff, and that many of these lawsuits claim money damages for zombie debt.  Zombie debt is debt that is not legally collectible because the statute of limitations has run.Debt buyers rely on intimidation and ignorance, and obtain legally legitimate judgments when consumer defendants fail to answer a lawsuit.Here’s how it works:  let’s assume that you visited a hospital or otherwise incurred a debt back in 1995 that you never paid. Under Georgia law generally the statute of limitations on an unsecured debt like a medical bill or a credit card debt would be no longer than 6 years.  So, by the end of 2001, your 1995 debt would no longer be legally collectible.  This means that if someone sued you in 2010 for the 1995 debt, you could answer the lawsuit by stating “this statute of limitations for collection of this debt ran in 2001 and plaintiff’s claim should be dismissed.”If you answered a lawsuit using language like this, any Georgia state or magistrate court judge would dismiss the debt buyer’s claim and you would be done.  You could also counterclaim the plaintiff for frivolous litigation, but that is a story for a different day.However, if you fail to answer the 2010 lawsuit, the attorney for the debt buyer would go to court and say, “your Honor, the defendant has failed to answer our complaint and we are requesting a default judgment.”  The judge would have no choice but to grant this request.Incredibly, a debt buyer can get a default judgment even if you were wrongfully identified as the debtor.  In other words, you can be sued for a medical or other debt that you never actually incurred, but if you don’t file an answer to the collection lawsuit, an enforceable judgment will be issued against you.By obtaining a default judgment against you, therefore, a legally non-collectible debt will become a legally enforceable judgment.  And the debt buyer can use that judgment to garnish you wages, put a lien against your house and car, clean out your bank account and take any other legal action to collect the debt.  Further, if you don’t file a written appeal within 30 days, you cannot later come back and say “I want to challenge this claim on the grounds that the statute of limitations has run.”  You now have an enforceable judgment to deal with and with limited exception, your only recourse is to settle the debt with the debt buyer, or file bankruptcy.
Debt buying is big business in the United States.  As he discusses in this video, Mr. Oliver set up a debt buying service and bought over $15 million in out of statute medical debt for $60,000 (this works out to buying debt at half a penny on the dollar).  Mr. Oliver “forgave” this debt but, obviously, most debt buyers pursue collection aggressively.If a debt buyer purchases debt at less than 1 penny on the dollar, but ends up collecting only 5% of what it bought, the return on investment is huge.  This is why the debt buying business is so big and so profitable.Currently, there is very little regulation of the debt buying industry although the CFPB (Consumer Financial Protection Agency), a federal government agency has sued a number of high profile collection agencies and collection lawyers for deceptive and misleading practices.  However, debt buying companies use their profits to lobby state legislators to pass industry friendly laws.How to Protect YourselfThe most important thing to remember is that you have to take action if you receive a collection letter or a lawsuit about any debt, but especially about an old debt.  Never make any payments or enter into a payment agreement on a debt without first talking to a lawyer (a bankruptcy lawyer or  a consumer rights lawyer – Ginsberg Law can be reached at 770-393-4985).

• If you make a payment on an old debt, you risk “reviving” that debt and extending the statute of limitations.
• Never, ever ignore a collection lawsuit.  Nothing good comes from a default judgment.
• Finally, do not take advice from a bill collector or creditor representative.  They will intentionally (or non-intentionally) mislead you and you can be sure that the information they provide you is not designed to help you in any way.

If you have any questions about debts or debt collection, please call our office – Susan Blum and Jonathan Ginsberg are here to answer your questions.The post Comedian John Oliver Explains the Debt Buying “Industry” and Zombie Debt appeared first on theBKBlog.

Do you have complaints about your mortgage lender or servicer?

Here is a summary of the highlights of a consumer complaint from Consumer Financial Protection Bureau (CFPB).  The April, 2016 consumer complaint report highlights consumer complaints related to mortgages. Unfortunately the report shows that consumers are still having problems with their services/mortgage companies when they are unable to make payments.
As of April 1, 2016, the Bureau has handled approximately 859,900 complaints across all products.

“Today’s report shows that consumers are still running into too many dead ends and obstacles in resolving issues with their mortgage servicer,” said CFPB Director Richard Cordray. “The Bureau will continue to press to make sure that people can get the right information and the timely help they need.”

Mortgage Spotlight:
At this time there is more than $10 trillion in U.S. mortgage loans.  This is the largest consumer debt in the world. To help avoid another real estate mortgage melt down the CFPB has established requirements for lenders.  Such as confirming a borrower can afford a mortgage before making the loan.  CFPB also created consumer-friendly forms which help potential borrowers shop for mortgage loans and avoid surprises at the closing table.
As of April 1, 2016 the Bureau had received approximately 223,100 mortgage complaints. Some of the findings in the snapshot include:

• Problems when consumers are unable to pay
• Confusion over loan transfers
• Communication issues with servicers
• Most-complained-about mortgage companies: Wells Fargo, Bank of America, Ocwen, and Nationstar Mortgage.

Submit a complaint to CFPB
 
The post Complaints About Your Mortgage Lender? You are Not Alone. appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.

Financial experts bemoan the “crisis” in student loan debt (over $1.2 trillion as of 2015) and the rising rates of credit card debt ($733 billion as of 2015) but no one seems to be talking about yet another debt bubble – the huge rise of auto loan debt.In 2012, total auto loan debt in the United States passed $1 trillion. Currently, the average household owes over $27,000 to vehicle lenders. More problematic, many of these loans extend well beyond 3 or 4 years. According to Edmunds.com, as of 2014, over 60% of auto loans were for terms over 60 months, with nearly 20% of these loans using 72 to 84 month terms.60 months, of course, equals 5 years. 72 months equals 6 years, and 84 months equals 7 years.Why a Long Term Vehicle Loan Means TroubleYou may ask “why should I be concerned about signing a 60 or 72 month car loan if I can afford the payment?” The answer, in a word, is “depreciation.”Cars and trucks are depreciating assets. This means that they go down in value with each day and each mile of wear and tear. When you sign off on a 5 year or longer loan, you won’t be break even on your loan for at least 3 years. All your payments through at least year 3 (and most likely longer) will be applied to interest only. And my experience has been that folks who pursue long term vehicle loans often have less than perfect credit such that their interest rates are 7%, 8% or even higher.This means that if your vehicle breaks down, or if you want to replace your car or truck 3 or 4 years into the loan, you will have to come out of pocket to satisfy the loan. If your vehicle is totaled in a wreck before the break even point, you will have to come out of pocket to pay off the loan because insurance companies pay property damage settlement based on “low retail” value.If the dealership offers to “roll your existing payment” into a new loan, you’ll end up paying even more, because the new loan will include the leftover finance costs from the original loan plus the unfavorable terms from the new loan.In essence, a 5 year or longer car loan equals a long term rental, except that you bear all the risk of loss. In case I am not being clear, a 5 year or longer loan is a toxic loan, and almost never a good idea. Even 4 year loans are less than ideal.How Can You Escape from Long Term Vehicle LoansSo, what can you do if you are stuck in a long term vehicle loan? Some credit unions will consider a refinance that would allow you to reduce the term down to 3 years but that assumes (a) you can handle a higher payment and (b) that your credit score has improved to allow for a lower interest rate.Another option to consider is Chapter 13 bankruptcy. Chapter 13 includes an interesting concept called a “cram down” that applies to car and truck loans. If you took your loan out more than 2 ½ years ago (910 day), we can reduce your loan balance to the value of your vehicle. We may also be able to reduce that high interest rate to a rate closer to the prime rate (which is currently around 3.5%).

• Here’s an example: Tom owns a car worth $15,000, that he bought 3 years ago with a 72 month loan at 8% interest. His current balance is $21,093 and his monthly payment is $440. In Chapter 13, we can cram down the $21,093 balance to $15,000 and reduce the interest rate to 4.5%. Tom will end up paying around $235 per month to the lender within his Chapter 13.

Obviously every case will be different, but if you have a long term vehicle loan at a high interest rate that you signed more than 2 ½ years ago, Chapter 13 can most likely save you thousands of dollars.All Debts Must be Included in Chapter 13Like any other financial tool, Chapter 13 is not a “free lunch.” You should not enter into any form of bankruptcy before educating yourself about both the positives and negatives. You will have to pay a lawyer to analyze your income and expenses, debts and assets and to prepare a Chapter 13 filing.Understand as well that when you file bankruptcy, you have to include (and modify) all of your debts. In many cases Chapter 13 can reduce your monthly expenses and reduce your total debt but Chapter 13 is not the right remedy for every person.If you are stuck in a long term vehicle loan, however, it does make sense to find out whether a Chapter 13 cram down can help you. Susan Blum and I have been representing Atlanta area residents understand how personal bankruptcy works for over 25 years. We are happy to answer your questions – call us at 770-393-4985 or use the form on this page to reach us by email.The post Relief From Your 72 Month Car Loan appeared first on theBKBlog.

http://nwdrlf.com/wp-content/uploads/2016/06/Attorney_Tom_McAvity_June_2016_Interview.mp3

Katherine:
Attorney McAvity? You’re going to help me with your name. We’re going to practice this again. Attorney McAvity.

Tom:
I’ll try. I’ll try.

Katherine:
Is here today to answer questions about bankruptcy. He’s given me a little grace on his last name here. He’s going to spend some of the next several months with us answering all of your questions when it comes to bankruptcy, anything from the terminology and the process and really helping you to be more comfortable with the process and helping you understand that it’s not as scary as it may have felt the moment you had to make the decision about this. We’re going to start with some terms that our listeners have been curious about. I’m glad that you’re here today to help us get some answers on those. Thank you for being here with us on This Needs To Be Said radio.

Tom:
I’m happy to be here.

Katherine:
One of the first times that we came across was a cram down. What is a cram down in terms of bankruptcy?

Tom:
A cram down actually is a wonderful feature of chapter 13 bankruptcy, which most of our clients don’t initially want to file, because they’ve heard that they’re going to have to make payments back and that it’s not going to be as good as a Chapter 7 bankruptcy where they are done in a few months. Then a lot of them hear about the cram down future and that they wanted to file chapter 13. What a cram down is, is it’s a feature that’s only available in Chapter 13. It comes up in a few different situations.
Let’s say you own a car, and you owe $10,000 on it, and it’s worth about 5. For most of us that’s often the case. Cars are rarely worth what you owe on them. You can kind of feel yourself, as I have on numerous occasions and told myself that the car was probably worth what I owed on it, but usually most of us are underwater on our cars. The cars are worth a good deal less than what you owe. In this example if you own a car and it’s worth less than what you owe, what you’re entitled to do is just repay back the amount that the vehicle is worth through the chapter 13. Where in Chapter 7 you might keep your car loan but have to repay $10,000 to your car creditor, in chapter 13 you might repay only 5. It’s a great feature. Often in a 2 car family it can just save a family a ton of money.
It can come up and see whether instances. One where with personal property … One thing I should mention, that I forgot to mention, is that the cram down for cars is available where the car was financed at least 910 days ago. That’s the one condition for doing the cram down. The other instance where it can come up is personal property. Let’s say you financed a refrigerator and now the thing is worth 50 bucks to have someone tow it away, and you still owe $1,000 on it. You’re entitled to just repay the amount that the refrigerator is actually worth. With personal property the only condition is that it has to have been financed over a year ago. Again as you can imagine with TV loans, furniture loans, refrigerator loans usually you owe way more than the stuff is worth. There’s a potential there for a lot of savings.
The final situation, you don’t see it come up much, although it sure would be wonderful if it did, is was investment property. Say you have a rental property. You’re entitled to cram it down to the amount of the property is actually worth. The reason why this doesn’t come up that much is yes, you can cram down that rental property to the actual value of the rental property. The problem is you have to repay the entire amount during the 3 or 5 years chapter 13 plan payment. For most of us that’s just not realistic, so you don’t see that come up a whole lot. The other thing I should mention for all of these is in a lot of cases we are reducing the interest rates as well. Normally it’s somewhere between 4 and 6%. For a lot of us we are paying a whole lot more than that in interest, so once again chapter 13 provides a great opportunity for a family to do some real savings. Sorry to talk your ear off.

Katherine:
No. I’m taking notes as you’re talking.

Tom:
About the cram down.

Katherine:
Not at all. I’m taking notes as you’re talking, because these are things I didn’t even know. When the question came to me, I’m just like “I don’t know, but I know somebody that can answer the question.” This is great information. What about collateral valuation? What does that mean? To me that’s like “blah, blah, blah.” What does it mean?

Tom:
It sure sounds like “blah, blah, blah,” doesn’t it?

Katherine:
Mm-hmm (affirmative).

Tom:
There’s what it means and what it … I’m just going to say what it tends to actually mean. When the court is looking at what this stuff is worth … Let’s take this example where the car is worth 5 and you owe 10. For practical purposes we might want to, our firm and the consumer, we might want to say this car is worth only 5, because let’s say that’s the wholesale value of it. We want to give a real value, whereas the creditor will want to give a retail value, which is really high. I think the reality is, for practical purposes, though there’s a much longer legal definition of it, the judge is going to ask us to meet somewhere in between those two values. Probably a little closer to their creditors value honestly, but in most cases it doesn’t matter. The car or the personal property is so underwater that meeting somewhere between wholesale and retail, maybe a private party value, if you look at that on Kelley Blue Book for cars, our clients do really well just striving for a private party value, which is probably fair. We’re talking about what the property would sell for to a private party, not what it would sell for on a car lot.

Katherine:
What about if someone’s unemployed? Of course when people are unemployed things financially change. Get my tongue together. Is bankruptcy something that they can consider?

Tom:
Absolutely. Particularly for chapter 7. At least in assessing whether the consumer is eligible for bankruptcy, it makes the inquiry really easy, because if you’re unemployed, obviously you should qualify at least on the basis of looking at your income. Even for chapter 13 though, we see a lot of people filing chapter 13 where they’re just receiving unemployment, and they end up making some kind of nominal payment to the bankruptcy court. It’s allowed. The only qualification for chapter 13 is that there’s a regular source of income. Unemployment is a regular source of income. At least we hope. Probably more regular than a lot of sources. The answer is yes. For our firm we make it really easy if you’re unemployed, because we are one of few firms that will actually take some of the attorney fees before filing, but most of them afterwards in monthly installments, which makes it a whole lot easier if you’re unemployed to get a case filed.

Katherine:
What’s the difference between a mortgage modification and bankruptcy?

Tom:
They’re not mutually exclusive. I think a lot of people think … They think of it that they have two options. Let’s say that you’re behind on your mortgage. You think, “I either need to get this mortgage modified or I need to file a chapter 13 bankruptcy.” A chapter 13 bankruptcy will enable you to take the mortgage arrears that you’re behind and repay them over a 5-year period at a 0% interest. You can’t beat it in terms of an interest rate, because you’re paying what you’re behind at 0% interest. It’s almost like someone’s giving you an interest-free loan. They really kind of are over a 5-year period. Maybe you pay that back slowly, or maybe you pay most or all of that back in one lump sum at the end of a 4 or 5-year period. That’s how you can handle mortgage arrears in chapter 13.
In a mortgage modification you are often either increasing the length of the loan or hopefully decreasing the interest rate, at least this is in theory, and taking those mortgage arrears that you’re behind and putting the back in the loan. Where I don’t like the mortgage modification is if you’re taking those arrears and putting them back in the land and you’re not lowering the interest rates, and just the lengthening the term of the loan. You’re adding potentially anyway tens of thousands of dollars to your mortgage obligation, whereas in the chapter 13 you could be repaying that at 0% interest and not accruing more and more interest debt over the course as the years go by.
I would like to point out that they’re not mutually exclusive. You can always file a Chapter 13 to stop a foreclosure to start that process or get a loan out of default, and then pursue a mortgage modification while you’re in chapter 13. In fact what we’ve seen is lenders who were not willing to modify mortgages at all, this is often the case, is you’ll see a lender who is not willing to modify a mortgage prior to the chapter 13, you can’t even reach him on the phone, they come to the table after the chapter 13 has been filed. It can often be an impetus

Katherine:
Why is that?

Tom:
You know what I think it is they don’t want to be repaid the mortgage arrears at 0% interest over 5 years. The modification becomes a little more attractive to them. I think also potentially they see that you’re eliminating all of your other debt, so maybe that is one of the obstacles to getting the modification done. That’s removed or is on its way to being removed after the bankruptcy is filed. It could be that as well.

Katherine:
That definitely sheds a whole lot of light on what I was even thinking. I was like, “Well, wouldn’t it just make sense that one would eliminate the other,” but you’re saying that there’s a possibility that they both could be used together, and that the bank may be more enticed to listen to what you have to say.

Tom:
Absolutely.

Katherine:
This last question I have for you until our next meeting, we’re talking about all sources of income. We have tax season that is just passing is. Maybe some people have still delayed or maybe they’ve gotten an extension. When they think about getting a tax refund they’re concerned that “If I file bankruptcy, will that money be garnished? Will my wages be garnished if I file bankruptcy?”

Tom:
You certainly won’t get garnished after you file bankruptcy at all. Bankruptcy will stop almost all garnishments from taking place. If you’re getting garnished right now, the surest way to stop that garnishment is by filing bankruptcy, because the creditor can’t garnish you afterwards. That’s the solution. Please, if you’re out there and getting garnished, there’s just no need for that going forward. Please contact a bankruptcy attorney immediately to put an end to that. In terms of the tax refund, you usually can protect a tax refund if you live in a state that has the federal exemptions, because it provides enough protection to make sure that you keep that next tax refund. I can’t say that that’s always the case, but it’s almost always the case.

Katherine:
It’s a possibility.

Tom:
There are a lot of states that have large enough exemptions to enable you to do that as well. In chapter 13 sometimes you’re asked to contribute part, and in some states all of your tax refund. I know that where I practice in Oregon and Washington, in the case of Washington you can always keep a large part of the tax refund, and normally in Oregon you can as well. I would say the norm is that you’re going to be asked to contribute some part of your tax refunds.

Katherine:
That would be fair enough. Let everyone know how to pronounce your name, and teach me again how to pronounce your name, and then how can they get in touch with you outside of This Needs To Be Said? I gave it my best try. I did. I thought I had it.

Tom:
No, I thought you were great. I thought you were great. You did better than some of my family. It’s Tom McAvity. I can be reached at our Seattle office at 206-674-4559 or our Portland office at 503-232-5303. Our website is and nwdrlf.com. That’s the acronym for Northwest Debt Relief Law Firm, so nwdrlf.com.

Katherine:
You also have a book on your website that people can get a copy of.

Tom:
The Benefits of Bankruptcy. I wrote it about a year ago, because I just wanted to have material so that if people were wondering what the benefits of bankruptcy were, and either they weren’t ready to come into a lawyer’s office, or they were just a little shy to be asking the questions about it, they’d just be able to consult to consult a book to get some of those answers. I wrote one for readers in Oregon and Washington in mind, so that they could get the information that they needed. Currently anyway I’m giving out the books for free with no obligation whatsoever. If anyone does contact me, I would be more than happy to mail them a copy. Not a coffee. A copy.

Katherine:
I want to copy. Thank you so much, and until next time, Attorney McAvity. We will talk about more about bankruptcy and what their questions are when it comes to bankruptcy. Thank you so much for your time.

Tom:
I’ll talk to you then. Thanks. It was a pleasure. Bye-bye.

.inter_tbl {margin-top: 30px;border:none;}.inter_tbl tr td:first-child {min-width: 85px;}.inter_tbl tr td:nth-child(2),.inter_tbl tr td:nth-child(2) p {font-size: 13px;line-height: 20px;}
The original post is titled Attorney Tom McAvity – June 2016 Interview , and it came from Portland Bankruptcy Attorney | Northwest Debt Relief .