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One of the most frequent questions I get is: “How am I going to pay the attorney’s fees and costs for a bankruptcy?”
Yes, we know you’re seemingly strapped, but you actually have more resources than you realize.
Here are some:
1) Stop paying on the debt you are going to discharge anyway. In bankruptcy, almost all debts are dischargeable (wiped out). (There are a few, such as governmental fines, recent taxes, etc., but your bankruptcy attorney will identify them and discuss them with you.) The majority, such as credit cards, unsecured lines of credit, judgments, will be gone. Stop paying immediately and save up that money to finance your case. These are professional lenders, they understand.
And, by the way, once you hire an lawyer, you can stop the collector calls by simply telling them you have hired a bankruptcy attorney to prepare a case. Give them the name of your attorney, because they will call to confirm, and the calls will stop.
Professional lenders know they will be violating a court order by calling once you have filed, and since they don’t know when you will file, as a matter of company policy, they usually stop the calls altogether. Whew.
2) Get a “loan” from your secured lenders. If you have a mortgage on a house you want to keep, you may actually be doing the mortgage lender a favor by skipping a couple payments to pay for your case. If your goal is to save your home, you will probably be filing a Chapter 13 bankruptcy to catch up on your back payments — “cure the default” — and make your regular payments going forward.
Believe me, the bank does NOT really want to take your home. They are not in the real estate business. They are in the lending business. They want you to pay the mortgage and pay the arrears — that’s where they make money. If you skip a couple payments to get the money to set up a payment plan to pay them in Chapter 13, as well as freeing up more money by wiping out your other “junk” debt, such as credit cards, as a business matter, they won’t mind. You’re going to pay back the missed payments in the plan anyway.
3) Get help from friends and family. Now is the time to reach out. Everybody has somebody who will help. Think. Oftentimes, it’s somebody from your community, such as church or social group, with whom you have an affinity that will be there for you. You may be surprised.
And here’s the benefit to them: Once you’re debt-free, you’ll have even more resources to be able to pay them back. And no. Please, don’t tell me you have no friends and/or no family. If that’s the case, you may need a Dale Carnegie course. (Remember him? The author of “How to Win Friends and Influence People.” Google it.)
4) Take a “hardship loan” from your retirement plan. If you have a retirement plan at work, call the administrator and see if you can apply for a hardship loan from the plan. Most plans have this feature. Make sure it’s a loan, do NOT take a withdrawal. If you take money out of retirement plan (as opposed to a loan you pay back), you will have to pay taxes on it as well as 10% penalty. I see too many people turn a debt problem into a tax problem (which is way more expensive and onerous) when they take out withdrawals from the retirement plan to pay debts. It’s a no-no.
5) Use your tax refund. Like accountants, January through April can busy months for bankruptcy lawyers. Many people use their tax refund to pay the costs of a bankruptcy filing. It may work for you, too.
6) Go hi-tech: Crowd-fund your case. The Wall Street Journal today ran an article on the innovative use of “crowd-funding” to raise money for a variety of personal projects and causes, including:

• A 26-year-old woman trying to raise $3,000 on GoFundMe.com to go to circus school to be an acrobat.
• A group of young women using Tilt.com to raise money from participants for a bachelorette party.
• A 55-year-old woman who got laid off from her job, needed a break and got her friends to chip in $5,000 for a trip to Italy.

A quick perusal of the sites showed a variety of causes seeking funds for help for medical bills or funeral costs.
Who knows? It could be the wave of the future.
There are other ways to get the money to pay for a bankruptcy filing, depending on your particular situation. Sit down with an experienced bankruptcy lawyer and discuss it. We’re creative. Give our office a call.

CNN reports that the average student loan debt in the United States at the end of last year was nearly $30,000. In New York the numbers are almost as bad; the average is just over $25,000.  Between 2008 and 2012, student loan debt rose a shocking six percent per year. Seventy percent of college seniors nationwide graduate with student loan debt, and 20 percent of that debt is owed to high-cost private lenders.  So it makes sense that young people are drowning and looking for a life-line to escape from their sea of debt. Licensed attorneys can sometimes help.  Unfortunately though, at least some non-attorneys who are claiming to throw out a life preserver are actually sharks.
The New York Times reports that the student loan debt settlement industry is filled with such sharks.  These companies offer to help borrowers lower their monthly payments for a large up-front fee.  Traditionally this tactic was used to go after desperate borrowers with credit card and mortgage debt, but young people with crushing student debt provide a new set of victims for these companies.  This is particularly true since over half of recent graduates are unemployed or have low-paying jobs that do not even require the expensive college degree the young person is trying to pay off.
Illinois Attorney General Takes Action
One state, Illinois, is taking action to try to prevent these practices.  Illinois Attorney General Lisa Madigan is suing two such companies, Broadsword Student Advantage and First American Tax Defense.  The lawsuit claims that these two companies tricked vulnerable borrowers into paying for help that they never received.  The young borrowers paid hundreds of dollars up front for services.  Broadsword customers also paid just under fifty dollars a month for Broadsword’s so-called services.  The suit alleges the companies misled the borrowers about these fees, and that the companies sometimes faked being associated with federal debt relief programs.  Perhaps worst of all, the companies particularly targeted police officers, firefighters, and nurses for their services.
The Problem is Not Unique to Illinois
While Illinois is the only state to take action so far, it is not the only state with this problem.  Nationwide borrowers have filed hundreds of thousands of complaints with the Federal Trade Commission about these companies.  And the rate of complaints is growing.  Given the number of colleges and recent college graduates in New York, hopefully action will be taken in our state to prevent these practices.
What this means for borrowers who are in over their head is that these companies should not be trusted.  There are some federal programs in place that can help you with student loan issues.  To find out about those programs you should contact the U.S. Department of Education.  If your debt issues include more than just student loans, and bankruptcy is a possibility, you should contact an attorney at the Law Offices of Stephen B. Kass, PC to understand what options you have in your situation.
 
Related Articles
Can Student Loans Be Discharged in Bankruptcy?
Student Loans: New Debt Epidemic
12 Myths About Bankruptcy
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I recently met a client who first learned that she had been sued when she received a post card in the mail from the court indicating that a default judgment had been entered against her.  Frequently I meet clients who first learn of a judgment when their paychecks or bank accounts become garnished.  “How can they garnish me when I never had a chance to go to court!” is the common complaint.
Over 90% of all collection lawsuits result in a default judgment.  Most folks just figure they owe the debt and chose not to contest the lawsuit, even if the amounts are wrong.  However, a big reason for default judgments is that the defendant moved and the lawsuit summons was served at an old address.  So, when the Sheriff cannot serve the lawsuit because the has defendant moved the Sheriff will typically file a report with the court that says “attempted to deliver, defendant not found at this address, unable to deliver summons.”  The Sheriff typically does not report that the defendant has moved to another address, he just reports that the defendant could not be served.
The Problem of Alternate Service: 
 So, what does the creditor do when they cannot serve summons to the defendant at his or her last known address? They file a Motion for Alternate Service.  Under this procedure, the Sheriff will go back to the last known address and tape a copy of the summons to the door and the creditor will also send a copy by regular U.S. mail.    Now that is all fine and dandy if the defendant actually lives there, but what good is this when the defendant has moved?  Of course, the defendant who no longer lives at the former address never gets a copy of the lawsuit and consequently does not file a written response with the Court.  The result?   Yes, the creditor gets a default judgment since no written response was filed with the court and garnishments soon follow.

A recent client reported that the Sheriff actually served notice on her 10 year old daughter who then failed to give it to her mother.  Service on a ten year old?  Can they really do that?

The Solution: Motion to Vacate Default Judgment:
If a creditor has not properly notified you of a lawsuit and obtained a default judgment as a result, the corrective action is to file a Motion to Vacate the default judgment.  The Nebraska court system provides a standard form.  Here is a better form.  It is important to tell the court why the service was ineffective (i.e., you moved or you were on vacation or the person who accepted service did not give you a copy ,etc.).  A recent client reported that the Sheriff actually served notice on her 10 year old daughter who then failed to give it to her mother.  Service on a ten year old?  Can they really do that?  Actually, that notice was somewhat questionable, but the creditor got a default judgment anyway.   
The practice of allowing creditors to obtain default judgments by alternate service is especially troubling when the same creditor has been calling the debtor at work on a regular basis.  Why didn’t the creditor have summons served at work when residential service was note made?  A typical motion for alternate services states the following:  “The Plaintiff shows and affirms to the Court that the Defendant cannot be served by reasonable diligence by one of the following methods of service:  Personal service, residence service or certified mail service, and as a result moves the Court to allow the use of an alternate method of service as provided by statute.”  I would argue that Reasonable Diligence requires at at least one attempt to serve at work, especially if the debt collector has been calling their work, and that failure to make such an effort could be viewed as a violation of the Fair Debt Collection Practices Act.
Image courtesy Flickr and David Singleton.

Texas entrepreneur Samuel Wyly has filed for bankruptcy on Sunday, stating he does not own the assets to pay roughly $400 million in penalties for an overseas fraud scheme.
According to the Chapter 11 petition, Wyly stated he had assets and debt between $100 million and $500 million. He attributed his debt to the “massive costs of investigations and then litigation” by the Securities and Exchange Commission.
“While the debtor has substantial assets, he does not have the ability to pay the full amount of all asserted claims at the present time,” according to the filing.
A New York judge ruled last month that Wyly, 80, and the estate of his late brother, Charles, must forfeit up $187.7 million plus interest. In May, a civil jury found they were involved in a 13-year fraud scheme in which they used offshore trusts and subsidiaries to conceal stock sales.
It is believed the Wylys accrued upwards of $550 million in untaxed earnings through their system, which lasted over a decade.
The SEC is listed as Wyly’s second greatest creditor, with a claim of $198.1 million, according to court documents. Wyly listed the Internal Revenue Service as his biggest creditor, with disputed debts “unknown.”
Depending on how interest is calculated, the total payment owed by Wyly and his late brother’s estate will fall between $300 million and $400 million.
The Wylys created, grew and sold numerous companies since the 1960s. Their most noted companies include Sterling Software and Michael’s craft stores, which were both sold for $4 billion and $6 billion, respectively.
The SEC stated the Wylys used profits from secret stock sales in several of their companies to purchase real estate in Aspen, Colorado, a horse farm in Texas, jewelry and art. The brothers were also major donors to many Republican candidates and politicians.
In 2010, Wyly appeared on Forbes’ list of the 400 richest Americans, with an estimated new worth of $1 billion.
Outside of the filing papers, there is no official statement on the Wyly bankruptcy at this time.
The post Wyly Bankruptcy: Tycoon Owes $400 Million appeared first on The Bankruptcy Blog.