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Chapter 13 bankruptcy is complicated. They are difficult cases from the standpoint of debtors, creditors, bankruptcy attorneys and at times the bench. For this reason, things don’t always proceed smoothly the first time through the process. Like anything else, there is a learning curve to doing things. For debtors, the learning curve can be drastic.+ Read More+ Read More
The post When Your First Chapter 13 Bankruptcy Case Fails, Don’t Give Up appeared first on David M. Siegel.
If you have never heard the term “debt buyer,” you might be amazed to learn that large companies exist solely for the purpose of buying and selling consumer debt. These companies buy and sell billions of dollars of debt. Some are part of public companies that trade shares of stock on stock exchanges.In other words, credit card companies, hospitals, personal loan companies, banks and other lenders regularly sell and resell debt – and this may include debt owed by you.Here’s how it works. Let’s say that you open a Mastercard or Visa account with a local bank. Over the years you may start running a balance – perhaps $2,000 or $3,000. You are able to make the minimum monthly payment but the balance grows slowly. At some point, you find yourself with a problem – you miss one or two monthly payments and your account becomes two or three months past due. The credit card company cancels your account and starts sending you collection letters.At that point, the credit card company may decide that it would rather sell your delinquent debt for cash before it gets too much older. Depending on how delinquent the debt is, a debt buyer may pay only 4 or 5 cents on the dollar. Your 2 month delinquent debt of $3,000 will be packaged along with other similar debt and sold in bulk to a debt buyer at this discounted rate.The debt buyer may attempt to collect the debt by dunning you (calling repeatedly) or the buyer may retain a lawyer and sue you.Debt buying is a perfectly legitimate business as long as the debt buyer follows the rules. Debt buyers also know that most consumers do not know the rules so the debt buyers often take advantage of a consumer’s ignorance of the law and inattention to what is going on.Some of the illegal tactics used by debt buyers include:
- repeated collection calls that violate the Fair Debt Collection Practices Act ban on harrassment and after hours calls
- misleading consumer into consenting to autodialed calls
- failure to respond to consumer disputes of debt
- farming debt to law firms for litigation without appropriate documentation
- threatening consumers with lawsuits for debts where the statute of limitations has run
- collecting on debt where the debt buyer has no documentation
Debt buyers know that most consumers will not respond to collection lawsuits. High volume collection law firms may file hundreds or even thousands of lawsuits each month, often with little or no lawyer oversight, yet the collection firms win most of these lawsuits by default when the consumer/defendant fails to answer.The Consumer Financial Protection Bureau is starting to go after debt buyers who pursue shady practices. Recently, for example, the CFPB imposed a $79 million penalty against to large debt buyers – Encore Capital Group and Portfolio Recovery Associates.According to the Collections and Credit Risk web site:
The CFPB found that Encore and Portfolio Recovery Associates attempted to collect debts that they knew, or should have known, were inaccurate or could not legally be enforced based on contractual disclaimers, past practices of debt sellers or consumer disputes. The companies also filed lawsuits against consumers without having the intent to prove many of the debts, winning the vast majority of the lawsuits by default when consumers failed to defend themselves. The alleged practices violated the Fair Debt Collection Practices Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act.
Even more recently a federal judge in the Northern District of Georgia declared Georgia’s post judgment garnishment statute unconstitutional because it failed to include various consumer protection safeguards having to do with funds that are not subject to seizure. Whether this judge’s ruling holds up on appeal remains to be seen.While I applaud the CFPB’s actions, you should not assume that the debt buying and collection lawyer industries will suddenly change their ways. The profit in buying and selling debt is so great that some debt buyers may look at CFPB’s fines as a cost of doing business.
- If you are receiving collection phone calls, you do not have to put up with harassment even if you owe the creditor money.
- If a sheriff’s deputy knocks at your door and hands you paperwork do not put that paperwork in a drawer and hope that the problem will go away.
- Most importantly, do not assume that the only reason to call a bankruptcy lawyer is to file a bankruptcy. If you live in the Atlanta metro area, I invite you to call my office at 770-393-4985 to talk with Susan Blum or myself about any debt issue you may be facing. Sometimes the Bankruptcy Code may offer a solution but many times, a strongly worded letter, advice about how to respond to a collection lawsuit or even an explanation about the collection letter you have received will help you decide how to proceed.
Collection agents rely on your ignorance of the law and your fear of challenging their apparent authority to intimidate you into acting for their benefit. You do not have to play their game anymore.More about the debt collection business: click hereThe post Don’t Fall Prey to Illegal and Immoral Behavior by Debt Buyers appeared first on theBKBlog.
Upcoming Webinar Series: Collect Your Money in Bankruptcy
Attorneys Scott Chernich and Patricia Scott will be presenting a FREE webinar series this fall titled “Collect Your Money in Bankruptcy.” This three-part series will cover what to do as a creditor if you receive a bankruptcy notice in a Chapter 7, Chapter 11 or Chapter 13 bankruptcy. Read More ›
Tags: Chapter 11, Chapter 13, Chapter 7
Private Student Loans are the single worst debt in existence. They lack any formal Income Based Repayment (“IBR”) plans and the debts are generally not discharged in bankruptcy without undergoing expensive litigation and claiming a special hardship. In recent years, the National Collegiate Student Loan Trust, the largest holder of private student loans, has filed thousands of lawsuits against delinquent borrowers, and I count several hundred such lawsuits filed in Nebraska.
National Collegiate lawsuits are really no different than a basic credit card case, and they suffer many of the same problems:
Trusts Lack Capacity to Sue in Nebraska.
As a general rule, a trust is not a legal entity and lacks the ability to sue or be sued. Rather, the lawsuit should be brought in the name of the Trustee. (See Black Acres Pure Trust v. Fahnlander, 233 Neb. 28 (1989)). The Uniform Law Commission has written extensively on this issue and has proposed a uniform law to create “statutory trusts” that would enjoy the same rights given to corporations to sue or be sued.
A common-law trust arises from a private action without the involvement of a public official. Because a common-law trust is not a juridical entity, it must sue, be sued, and transact in the name of the trustee and in the trustee’s capacity as such. By contrast, a statutory trust is a juridical entity, separate from its trustees and beneficial owners. It has the capacity to sue, be sued and transact on its own.” Uniform Law Commission.
So, is National Collegiate a “common-law” trust or a “statutory” trust? Does that distinction make a difference in Nebraska? National Collegiate is organized as a Delaware trust agreement and that state does provide for statutory trusts empowered to sue. There are arguments to be made both ways, but until the courts rule on this issue, the first defense to these lawsuits is to file a motion to dismiss.
National Collegiate Must Show They Own the Loan.
You did not borrow money from National Collegiate. Most likely the loan originated from JPMorgan Chase or Bank of American or Charter West Bank. The loan was then assigned several times and eventually wound up in one of the several trust pools managed by National Collegiate. It is essential that National Collegiate be required to provide the “chain of assignment” showing how your loan was specifically assigned from the original lender to the National Collegiate Trust. Failure to prove the entire chain of assignment means the lawsuit must be dismissed for lack of standing.
Statute of Limitations.
In Nebraska, lawsuits filed for breach of a written promissory note must be filed within five (5) years of the date of last payment or from an acknowledgement of the debt. It is important to demand an account payment history from National Collegiate to verify the date of last payment. Very often the records of National Collegiate are sketchy at best and they seem to struggle to provide detailed account statements. If they do assert a payment was made in the preceding 5 years, research your bank statements to see if their record of payment matches your records.
Did a Prior Bankruptcy Case Discharge Some of the Student Loan?
Have you filed bankruptcy before? If so you may have discharged some of the National Collegiate obligation already. Although Federal Student Loans are not discharged in bankruptcy (unless you receive a Hardship Discharge), when it comes to Private Student Loans only the amount qualified under Section 221(d)(1) of the Internal Revenue Code is excepted from discharge. I have seen cases where loans were made for $30,000 per year when the actual cost of attending the college, including tuition, books, room and board and transportation expenses, was only $10,000 per year. Also, only loans to a qualified educational institution are protected. National Collegiate often sues for debts that have been partially or entirely discharged.
Statute of Limitations are not Tolled During a Chapter 13 Case in Nebraska.
If you can go five years without making a payment or requesting a loan deferment, the Nebraska statute of limitations may apply. (See National Bank of Commerce v Ham, 256 Neb. 679 (1999))., The 5 year limit must run prior to the commencement of the lawsuit and you must affirmative claim this defense in the written answer filed with the court. If you sense that you are about to be sued by National Collegiate, consider filing Chapter 13 to run out the SOL clock.
Negotiate the Debt.
National Collegiate is willing to cut a deal. Even if they are successful in obtaining a judgment, they still have the burden of collecting the debt. The fact that they have initiated a lawsuit means that they probably have not received any payment in years. I have represented clients who were able to settle $150,000 of loans for $30,000. Each case is unique, but National Collegiate is willing to consider reasonable settlement offers.
Image courtesy of Flickr and Occupy* Posters.
While it is typically true that there are generally three options available to debtors in a chapter 7 bankruptcy with regard to their autos, there may in fact be a fourth option. In a chapter 7 bankruptcy case the debtor has the ability to reaffirm, redeem or surrender and auto. A fourth option which seems+ Read More
The post A Fourth Option To Deal With Your Car In Bankruptcy appeared first on David M. Siegel.
Choosing a college just got a little easier, thanks to a revamped government tool that provides information on what former students of each school might earn, how much debt they leave with, and what percentage can repay their federal student loans.
The revamped government website, the College Scorecard, was unveiled by the Obama administration on September 12, 2015 and lets prospective students and families easily find information about colleges and universities.
“Everyone should be able to find clear, reliable, open data on college affordability and value,” President Barack Obama said in his weekly radio address. “Many existing college rankings reward schools for spending more money and rejecting more students — at a time when America needs our colleges to focus on affordability and supporting all students who enroll.”
The site reveals a host of student outcomes at specific institutions, including:
- graduation rates;
- median salary information; and
- student loan repayment rates, including the share of a college’s former students who are paying down their federal loans within the first three years after leaving college.
The information is a step up from the old version of the site, which tracked former students in default on their federal loans. Those numbers hid the millions of borrowers who were in forbearance or otherwise not making their payments.
Now, students weighing their college options can see whether students at a particular school earn more than they would have had they entered the job market right after high school, graduation rates and typical student debt and monthly payments a student would owe for each school.
“Students deserve to know their investment of resources and hard work in college is going to pay off,” said Education Secretary Arne Duncan.
The Obama administration originally wanted the site to provide a college ratings system that would judge schools on affordability and return on investment. That plan was scuttled in the face of criticism from those in higher education as well as Congressional members who saw it as arbitrary, unfair, and a case of government overreach.
Click here to be taken to the College Scorecard.
Additional reporting:
Obama promotes online search tool with college-specific data to aid families in school choice
The New College Scorecard
Obama Administration to Unveil New College Comparison Search Tool
The post New Student Loan Tool Reveals Earnings and Repayment Data appeared first on Bankruptcy and Student Loan Lawyers - 866.787.8078.
I was fortunate enough to be invited for a short interview on a local radio station. This is just an audio program, but it is only 12 minutes long. I hope the information is informative.
Radio Interview with Attorney and Law Professor - Diane L. Drain
The post Radio Interview with Attorney and Law Professor – Diane L. Drain appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Fred’s after bankruptcy credit score is 707 Fred M was a small business owner. Because his business was dragged down by the recession, he has $50,000 in credit cards that had gone bad. Last fall Bank of America sent him a warrant-in-debt in a $17,000 credit card. So, Fred filed bankruptcy with me in October […]The post Fred’s after bankruptcy credit score is 707 by Robert Weed appeared first on Robert Weed.
Your mom told you to be careful when choosing your friends. What your mother did not tell you is that “friending” someone on social media will link their reputation to you. Sounds like a crazy woman is writing this blog, right? No, just a very cautious one who now understands that who you associate with on-line can affect not only your reputation, but also your ability to obtain credit. We all know that employers look at our social media as part of their “due diligence” before offering you that sorely needed new job. Also, that current employers fire employees because of the social media posts. What was new to me (living under a rock) was that my “private” friends could affect my financial future.
So how do I get from “friending” someone on my social media to having my application to finance a new car rejected? Start with the basics – Facebook is mining your information (now don’t be surprised, this has been going on for sometime). They are also mining your friends’ data and tying it back to you.
Facebook has a credit rating patent that allows them to provide lenders data (yours and your friends) that will assist the lender in determining your credit worthiness. According to this article Facebook will “most likely” not use this data. Really – are supposed to believe that Facebook would give up a very lucrative income source? Color me skeptical.
Laurel Papworth, social media strategist and University of Sydney academic, says that lenders in 36 countries are now using Facebook data as part of their tools for approving or rejecting loan applications.
According to CNN “Here’s how it would work: You apply for a loan and your would-be lender somehow examines the credit ratings of your Facebook friends.“If the average credit rating of these members is at least a minimum credit score, the lender continues to process the loan application. Otherwise, the loan application is rejected,” the patent states.”
Read more … There are lots of other articles are available on this scary topic.
Bottom line – do not “friend” just anyone who asks. Be selective and keep your social media contacts limited. Being responsible in how you broadcast your personal information will protect you from both physical and economical harm.
The post Your Facebook Friend’s Credit Score Can Affect Your Ability to Get a Loan appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
On September 9, 2015, the Consumer Financial Protection Bureau entered into a Consent Order with Encore Capital Group as well the companies it owns – Midland Funding, Midland Credit Management, and Asset Acceptance Capital – to refund millions to consumers who were subjected to illegal debt collection tactics by the companies.
According to the Consent Order, Encore Capital Group will pay up to $42 million in refunds and stop collection on $125 million in debt. It will also pay a $10 million penalty to the bureau’s Civil Penalty Fund.
Those are big numbers, to be sure. But the Consent Order is a treasure trove of information, giving us a deep look into the inner workings of one of America’s largest debt buying outfits.
The information is horrifying for anyone who’s been sued for a past due debt, and shocking for someone who’s never had to deal with Midland Funding or any of its related companies. But for lawyers who defend debt collection lawsuits, the Consent Order verifies what we’ve been saying all along.
Here’s what we learned:
- Midland Funding, Midland Credit Management and Asset Acceptance are wholly-owned subsidiaries of Encore Capital and share common officers and directors with Encore. Midland Funding and Midland Credit Management operate in concert with one another, and under the direct supervision of Encore Capital. Asset Acceptance was purchased by Encore in June 2013.
- From 2009 – 2015 Encore (which includes all of the other companies) collected over $5 billion in consumer debt and had net income of more than $384 million.
- From 2009 – 2015, Encore paid about $4 billion for approximately 60 million charged-off consumer debts with a total face value of $128 billion – in other words, Encore pays about $0.03 for every $1 of debt it buys.
- Encore has call centers in the United States but also in India and Costa Rica.
- The vast majority of debt collection lawsuits filed by Midland Funding, Midland Credit Management, Asset Acceptance, and Encore go unanswered by consumers and result in default judgments. The Encore companies have a business that is built on the knowledge that most people do nothing when they are served with a debt collection lawsuit,
- When Encore buys a debt it received an electronic data file with a consumer’s name, address, Social Security number, and information about the debt. Encore, Midland Funding, Midland Credit Management and Asset Acceptance do not receive any actual documentation about the debts they buy.
- Many of the purchase agreements state that the original creditor will provide documentation to prove the debt only if it’s available – and in some cases the agreements state that no documentation is available. Encore and its subsidiaries buy past due accounts in spite of the fact that no proof of many of the debts exist.
- When one of the Encore companies buys a debt, the original creditor doesn’t verify the amount due or even whether the debt is legally enforceable. Encore, Midland Funding, Midland Credit Management and Asset Acceptance buy debts that may be past the applicable statute of limitations and the balance claimed may be incorrect.
- When Encore buys a debt it says that it independently verifies all of the information in the date file, but it does not do so. The only investigation taken by Encore prior to a debt portfolio purchase has been to review the data file for information that is clearly incorrect, such as a default date listed as being prior to the date the account was opened.
- Encore continues to buy debts from sellers even if that seller has previously provided inaccurate information about debts. Encore knows that it is buying debts that have bad information, yet it continues to do so.
- In spite of the fact that the Fair Debt Collection Practices Act and Fair Credit Report Act give people the right to dispute or request verification of a debt, Encore’s policy has been to ignore those disputes unless they were made in writing within 45 days after Encore sends out an initial debt collection letter. Encore has been breaking the debt collection and credit reporting laws in spite of the fact that it is required to follow those laws.
- Encore has filed hundreds of thousands of debt collection lawsuits but hasn’t given its lawyers access to information needed to prove the cases. Encore’s lawyers have routinely filed lawsuits against people without verifying any information about the debt. In fact, Encore has prohibited law firms hired to sue consumers from contacting previous owners of the debt for account documentation, and has discouraged those firms from requesting documents from Encore unless it was absolutely necessary.
- Encore, Midland Funding, Midland Credit Management and Asset Acceptance don’t take a case to trial. When consumers have contested Encore’s claims and Encore lacked documentations necessary to obtain a judgment, Encore has instructed its lawyers to make one final attempt to convince the consumer to settle before dismissing the claim.
The Consent Order against Encore Capital is 63 pages, and reveals a debt buying operation that uses the court system as a way to pry billions of dollars from the hands of people who not only can’t afford it, but may not even be obligated to pay. Don’t take my word for it – read the document for yourself (and prepare to be appalled).
Though I applaud the government’s actions, it’s also useful to repeat that Encore and its related companies had $384 million in net income (that’s the amount of money the companies made after paying all expenses, salaries, and overhead) but is paying only $52 million. That leaves $332 million in Encore’s coffers.
With that slap on the wrist, do you seriously think Encore and the gang at Midland Funding are going to stop violating the laws and filing debt collection lawsuits without proof?
I wouldn’t bet on it. And that’s the major reason why you need to stand up for your rights if you’re ever sued for a past due debt.
The post 13 Horrifying Facts About Midland Funding You Need To Know appeared first on Bankruptcy and Student Loan Lawyers - 866.787.8078.
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