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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.
Imagine you’re going into college and staring at a bill for $25,000 for tuition and assorted other fees for your first year of school.
You’ve got two ways to pay the bill. You can take out a combination of federal and private student loans, or … you can agree to pay to a lender a set portion of your earnings over a defined period of time.
The latter is called an income share agreement, a concept originally proposed by economist Milton Friedman in his 1955 essay, The Role of Government in Education. Under an ISA, an entity (could be an investor, a bank, or even an employer) would give a student the money to pay for a college or graduate education in exchange for a fixed percent of the student’s future income to be paid for a fixed period of time.
For an example of what an ISA looks like, here’s the one offered by a company called Upstart.
There’s been renewed interest in the ISA over the past few years, including Investing in Student Success Act of 2014, a bill to increase the use of ISAs.
Now here comes Pave, a company that offers an income sharing agreement as an alternative to the traditional student loan. According to its website the company makes lending decisions based not only on FICO score but also on, “alternative factors that might demonstrate financial responsibility and creditworthiness, like education, employment history, current job status and future potential.”
Here’s a recent interview with the Pave CEO to learn more:
An income share agreement sounds like a great idea. The lender is more of a partner in the student’s future success. There’s an incentive for the lender to help the student get a good job because the higher the income, the better the lender’s return on investment. In situations where the school is the lender, bad job placement means the school has to do a better job of educating people in the first place because a failure to do so loses money for the school.
It’s great for the student as well, bringing income based repayment into the arena of private lending. Borrowers know that their payments won’t exceed a certain portion of their income, so they don’t have to worry about repayment quite as much as is currently the case with private student loans.
Looking at it that way, the ISA sounds fantastic for everyone involved.
But the income sharing agreement has some problems. If you can’t see them, consider that the economist who proposed the concept is the same one who is responsible for trickle down economics, an idea widely embraced in the 1980s and now just as widely vilified.
Who’s going to receive an ISA? Not the 18 year old undergraduate at a mid-level college who thinks she wants to be a math teacher at a public school. And definitely not a community college entrant who has yet to figure out what he wants to do with his life.
Instead, the ISA will be reserved for those who attend the top universities and opt for the major with the best employment options after graduation. People getting an MBA or other professional graduate degree will be more likely to have the earning record and career path that leads to the best job, so more money will go to them than to undergraduates.
Choosing a major based on return on investment is a great idea, right? After all, we don’t want a bunch of people getting degrees in Underwater Basket Weaving, do we?
But consider the long term impact of those decisions. Over time the market becomes flooded with computer science engineers and professionals from the top schools. Lesser schools, filled with the cast offs who can’t get better funding for their educational endeavors, struggle to attract the top talent. With graduates less likely to go into high paying fields, those schools suffer from a decline in alumni contributions.
At the same time, students from the best schools stop picking a course of study that includes English, history and philosophy because they know it’s not going to allow them to get the ISA. The inventory of teachers coming from excellent universities dries up, leaving universities with only those graduates who didn’t qualify for an ISA in the first place.
The rich get richer, the poor get poorer. And over a fairly short period of time, we as a society become dumber as the next generation becomes less likely to learn about history, philosophy, literature and similar fields.
First in your family to go to college? Recent immigrant? Slightly older student with some bad credit and employment history? Forget an income sharing agreement because you’re less likely to have the employment track record to please the lender. Instead, you’ll be left with the high cost private student loan, which will be even more expensive as banks recognize that they have more leverage than ever with those least able to get more attractive financing.
This isn’t to say that income sharing agreements are a bad idea – they’re a different way to approach the spiraling costs of higher education. But don’t buy into the idea that it’s a cure for what ails the world of higher education.
the income share agreement is an idea that’s more likely to work for graduate students in a field of study that’s in high demand.
For everyone else, it’s just another reminder of the growing divide between the haves and the have nots.
The post Income Share Agreements, and Their Role in Higher Education Inequality appeared first on Bankruptcy and Student Loan Lawyers - 866.787.8078.
In just thirteen months, Maria’s credit score after bankruptcy was above the national average Are you one of the people who still thinks bankruptcy hurts your credit score? Maria M was worried about her credit score when she came to talk to me in November 2013. That’s part of the reason she put off filing bankruptcy […]The post Maria’s credit score after bankruptcy is 640 by Robert Weed appeared first on Robert Weed.
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