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One of the most common reasons why people file bankruptcy is to stop harassment from debt collectors. Debtors who file for protection should be aware of their rights and how to protect them. With a large number of people struggling during these hard economic times, debt collectors will do whatever it takes to collect payment. [...]
Some religions forbid people from charging interest on money loaned. A New York bankruptcy court shows that it doesn’t need to stand in the way of commerce.
We don’t talk about Chapter 11 bankruptcy here because I don’t usually take on those sorts of cases. And we seldom discuss religion because it’s not often that matters of faith intersect with matters of money.
But the curious case of Arcapita caught my eye as an example of how faith and money collide in odd ways.
Bahrain’s Arcapita Bank took a rare and bold step of filing for bankruptcy in New York in March 2012, going against the common practice of Middle Eastern companies to engage in debt workouts relying solely on consensual talks.
The numbers aren’t important, but the company was faced with a difficult situation in fashioning a plan to repay creditors.
That problem was that Sharia, Islamic law, got in the way.
Interest-Free Lending?
Sharia prohibits the payment or acceptance of interest or fees in lending. So, too, is it forbidden to invest in a business that provides goods or services considered contrary to Islamic principles.
This is similar to the Old Testament, which encourages loans to people so as to enable the poor to regain their independence, but forbids the charging of interest on the loan as being exploitative.
I’m sure there are other faiths and denominations that speak to a prohibition against charging or paying interest. If you know of one, let me know in the comments section below.
Arcapita’s Chapter 11 Problem
Unfortunately, business turns on the ability of the lender to obtain a return on investment that makes it a good idea to lend money in the first place.
Under Chapter 11 bankruptcy, you’re putting together a plan to repay your creditors over the long run. Agreements are modified under court supervision, then the parties go off to perform accordingly.
But without the ability to pay interest to the largest secured creditor in the case, Arcapita was in a tight spot. If it didn’t agree to pay interest to the creditors, there’s no way a Chapter 11 Plan would get confirmed.
The Murabahah Solution
What if the loan would be repaid at a set price that already included a profit margin acceptable to Arcapita and the lender?
The lender is compensated for the time value of money in the form of a profit margin, the borrower can do the deal, and the Chapter 11 Plan can be confirmed.
That’s exactly what Arcapita did. It’s called Murabahah, a “rent-to-own” type of arrangement that allows business to move forward. This is also how mortgages are often handled under Islamic law, fixing the costs at the time of contract.
No late payment penalties are allowed, which is why Islamic banks apparently ask for higher down payments to offset the risks of nonpayment.
Bankruptcy Court As Problem Solver
The Arcapita solution, which is the first Sharia-compliant Chapter 11 Plan on record in this country, shows that the bankruptcy court isn’t always a strict place to be.
Rather, I’ve found that in difficult situations it’s the bankruptcy court that helps fashion a solution that works for everyone.
In New York bankruptcy courts, loss mitigation allows the parties to come together to modify a home mortgage in ways that are at times extraordinary.
Disputes are handled, assets divided, and creditors made whole without being unfair to those who look for help.
This is an exceptionally unusual situation, but Arcapita’s Sharia-compliant Chapter 11 underscores just how well bankruptcy can work.
Image credit: JohnConnell
Sharia And The Chapter 11 Bankruptcy Problem was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
When you decide to work with us to determine if Arizona bankruptcy is the right choice for you, we will want to review all of your property (assets) and your debts. To read more about the kinds of information we will want, read our article on “Gathering All the Facts.” We will also want [...]
Peggy Tanous, former star of the television series “Real Housewives of Orange County” files for Chapter 7 bankruptcy protection. Known as a wealthy party girl to TV viewers, her financial liabilities include owing millions to a number of creditors including credit card companies, mortgage loans, and property taxes. Even though she reportedly owes millions, Tanous [...]
When you decide to work with us to determine if Arizona bankruptcy is the right choice for you, we will want to review all of your property (assets) and your debts. To read more about the kinds of information we will want, read our article on “Gathering All the Facts.” We will also want […]The post Determining Your Personal and Household Expenses in Arizona Bankruptcy appeared first on Tucson Bankruptcy Attorneys Trezza & Associates.
You may be able to settle your federal student loans.
You probably know that there are only two guarantees in life – death and taxes.
And you’ve also been told that when it comes to federal student loan debt, you’re on the hook for the full balance.
I can’t comment on the first (I pay my taxes but, to date, have not died) but I can tell you that settling the student loan beast isn’t a pipe dream.
Depending on your situation, it may or may not work out for you.
Federal Student Loan Settlement Guidelines
If you’re in default on your federal loans, the U.S. Department of Education explicitly allows debt collectors to settle your debt. If you’re current, that’s not going to happen.
Compromises are account settlements that involve a reduced overall payment to satisfy the federal student loan debt in full. Compromises are not to be offered as the first option in collection negotiations, and debt collectors are instructed to discuss it as an option after exhausting other negotiation opportunities.
Types Of Federal Student Loan Settlements
The U.S. Department of Education allows three types of settlement options:
- Standard compromises, which are as follows:
- You pay only the current principal and interest (waiver of projected collection costs/fees);
- You pay at least the current principal and half the interest (50%); or,
- You pay at least 90% of the current principal and interest balance.
- Discretionary compromises, which involve a payment of less than the standard compromise amount. All discretionary compromises require prior approval by U.S. Department of Education, so the collection agency can’t agree without some back-up documentation; and
- Nonstandard compromises, which are offered to only a very limited number of student loan borrower without approval by the U.S. Department of Education.
How A Federal Student Loan Settlement Gets Paid
If your settlement is approved, you’ll have to pay it by certified funds (cashier’s check, money order, certified personal check) or by credit card. The collection agency will not accept personal checks.
In addition, all settlement offers are valid for 90-days from the date of the date of approval. If you’re going to be making payment after the 90-day deadline, the collection agency will need to get approval from the U.S. Department of Education.
After Settlement, The Tax Man Cometh
When you settle a debt, you will get a Form 1099 in the mail. You may need to pay taxes on the forgiven amount of the loan, so be careful to factor that into your calculations before settling.
Get A Student Loan Lawyer Involved Or DIY?
I’ve had clients come to me after they tried to settle their federal student loan debts on their own, only to fail miserably. Some people have done themselves in by their words or actions, others can still be helped.
It all depends on you, your ability to negotiate on your own behalf, and the attitude of the debt collector.
But as far as I’m concerned, the risk of an unsuccessful negotiation is far larger than the cost of getting me involved. If you’re talking about $20,000 in federal student loan debt, settling it is going to make a huge difference in your life – why risk it?
Image credit: TiggerT
The Truth About Settling Federal Student Loans was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
Bringing you the most up-to-date news, tips and blogs throughout the web. Here’s your Bankruptcy Update for June 11, 2013 Could BofA Still Toss Countrywide into Bankruptcy? National Envelope Hopes To Lick Bankruptcy Filing Arcapita’s novel sharia bankruptcy plan approved
Filing bankruptcy can give you the relief you need when the time is right to file. Some people are quick to say that the process may do more harm than good, but for many who have filed (including a long list of celebrities), it is the beginning of a getting your finances and your life [...]
This is part of our series on How To File Bankruptcy.
When you file bankruptcy, a failure to list all personal property may mean you don’t get to keep it.
When you think about property, you think of houses and cars. You’re not thinking about that junky sofa, a stack of CDs you abandoned years ago for an iTunes account, or that lawsuit you’re thinking about bringing.
Forget to list them on your bankruptcy schedules and you could find yourself giving it all up.
List All Personal Property
Under the bankruptcy laws, you’re required to disclose on your schedules all property you own.
That includes a laundry list of “stuff” you don’t ordinarily think about.
Everything from household furnishings to clothing, from bank accounts to potential lawsuits, from livestock to ammunition. It’s all got to be disclosed and valued.
How To List The Property
As with real property, you are required to describe the property with as much accuracy as possible. For example, you’ve got to provide the following information:
- description and location of the property;
- the nature of your interest; and
- the current value of the property.
How To Value Personal Property
The value of each item of personal property is the amount you could reasonably expect someone to pay for it. We’re not talking the cost to replace the items – we need to know how much would pay you for this particular item.
For musical instruments and jewelry think about, “pawn shop value”.
For collectibles, consider what a collector would pay.
Clothing and household furnishings? You’ll need to talk about Salvation Army valuation.
If you’ve got a pending lawsuit, we’ll need to talk with your lawyer and get a sense of what the case is worth.
Failure To Disclose
If you don’t list a piece of property, you lose the right to keep it.
The reason for this is that if you fail to list a piece of property, you can’t exempt any portion of the value. And given that all of your property becomes part of the bankruptcy estate when your bankruptcy case is filed, a failure to exempt the property means you haven’t kept it away from the estate.
This comes up most often in the case of a pending lawsuit for personal injury or money damages. If you don’t list it on your bankruptcy schedules, the other side will walk into court and get the judge to dismiss the case.
By failing to list it on your bankruptcy schedules, you’re effectively telling the world that you don’t own it.
That’s why I spend so much time with my clients talking about property. It’s important to protect you and cover all the bases.
How To File Bankruptcy: Listing Your Personal Property was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
If your car has been repossessed and you live in California, your life may get a lot more difficult. Or not.
Most people think that if they don’t pay the car loan, the lender will come to repossess the vehicle. Once that’s done, they figure it’s all over.
That’s exactly what my client thought when the tow truck was hauling away his Ford Explorer. Fast forward a few months and he knows better.
Now, so can you.
When A Vehicle Can Be Repossessed
In the beginning, there’s a car loan. You miss a payment and figure that a delay of a few days won’t make a difference. With so many cars in California, it’s not uncommon to be late by at least a few days.
What you don’t know is that under California law, the lender can repossess your vehicle without any prior notice to you so long as you’re as little as one day late on payment.
In fact, the lender can repossess a car in California whenever there’s a default in the terms of the contract. That includes not only missing a payment but also an insurance lapse.
It’s a good idea to read the contract carefully so you can find the landmines.
Who Can Repossess A Vehicle
Under California law, the car finance company as well as a registered repossession agency can repossess your automobile.
In order to have authority to repossess the vehicle, the company must be licensed or registered with the California Department of Consumer Affairs, Bureau of Security and Investigative Services. You should always ask to see the license before surrendering your car to a repo agent, and verify that license with the California Bureau of Security and Investigative Services.
Place And Time Of Repossession (And The Shakedown)
A repossession agent in California can’t come into a private building such as a garage, nor can they enter a secured or locked area such as a gated driveway, without the permission of the owner of the premises.
Your car can, however, be repossessed from unsecured driveways, streets, parking lots, and other publicly accessible areas in California at any time of day or night.
You don’t need to be present when the vehicle is taken, so if you park on the street and go to sleep there’s a chance the car may be gone when you wake up.
If you happen to be present when the car’s being taken, you may be able to save the car by paying the balance due rather than losing your wheels. If that happens then you have the right to receive an itemized receipt, and the repossession agent is required to forward your payment to the car lenders.
Timeline After Repossession
Once the car is repossessed, the clock starts ticking.
California law gives the repossession agency 48 hours to give you a Notice of Seizure that provides you with the name and contact information of both the legal owner and the repossession agency.
You must also be given an Inventory of Personal Effects that includes a list of your personal property in the vehicle when it was taken, as well as information about how to recover your property and the amount of storage fees. The repossession agency must store your items for 60 days, after which all unclaimed property can be discarded.
One caveat about your personal property. Anything that’s been installed or affixed to the car such as that awesome audio system or custom rims – you’re not getting that back unless you negotiate with the lender directly.
Selling The Car After Repossession
Once the lender has taken the car back, they’ve got to take some action before they sell it.
Under California law, the lender needs to serve you (either personally or by certified or first-class mail) you at least 15 days’ written notice of intent to sell the vehicle.
This Notice of Intent to Sell must be served within 60 days of repossession, and gives you the right to ask that the lender delay the sale for 10 days.
Your Right To Get The Car Back
Not only do you have the right to get the car back and reinstate the loan when it’s repossessed, but California law gives you the opportunity to redeem the vehicle and reinstate your loan at any time prior to sale.
California Civil Code forces the lender to reinstate your loan if all past due amounts are paid, unless the legal owner can prove that you did one of the following:
- Provided false information on your loan application
- Hid the vehicle in order to avoid repossession
- Damaged, or threatened to damage, the vehicle in a way that reduces its value
- Committed, or threatened to commit, violence against anyone involved repossessing the vehicle
- Used the vehicle in the commission of a criminal offense
- Your right to reinstate your loan contract is limited to once every 12 months, and twice over the life of the contract.
What Happens After The Car Is Sold?
Theoretically, your lender could get more for the car at sale than you owe on the loan. I’ve never seen it happen, but anything’s possible.
If the sale of the vehicle results in a surplus, the surplus amount must be returned to you within 45 days of the sale.
If the sale does not net enough to fully satisfy your loan and other amounts due, you will be liable for the deficiency balance.
In order to collect the deficiency, however, the lender has to sue you for the balance due. They need to serve you with the Complaint, you get an opportunity to file an Answer, and you can fight it out in court.
Remember – Repossession Is Not The End
If you fall behind on your car payments, California law doesn’t leave you hanging.
You can cure the default and keep your car.
If you lose your car, you may not have to pay any deficiency.
And if you are sued for a deficiency, there are ways to defend the case.
So long as you’re proactive, things may not turn out so bad.
Image courtesy drbrain
Your Options for Dealing With Repossession Under California Law was originally published on Consumer Help Central. If you're seeing this message on another site, it has been stolen and is being used without permission. That's illegal, a violation of copyright, and just plain awful.
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