Archives for August 2014

Lessons from the Dark, Lucrative World of Debt Collection

Over the years, we have seen our clients’ individual unpaid debts being collected by one collection agency after another sometimes involving abusive tactics. Many but not all debt collectors are legitimate and law-abiding. But from time to time our clients run into debt collectors who are really abusive. When we have confronted these bad actors on behalf of our clients, they have not hesitated to extend their abuse, including foul language, to us. When he have worked with clients outside of bankruptcy to settle debts or have raised questions about a debt’s legitimacy, we have seen the debt getting handed off to collection agency after agency, each apparently ignorant of the past history or of the questions we have raised about the debt. When we have demanded documentation to support a challenged debt, the response is often to ignore these requests.

A recent expose in the New York Times Magazine entitled “The Dark, Lucrative World of Debt Collection” details the sometimes sordid behind-the-scenes reality of such debt collections. It is eye-opening. Here is a link to it: http://www.nytimes.com/interactive/2014/08/15/magazine/bad-paper-debt-collector.html?a=1&m=en-us&_r=0 As this expose shows, bad debts are a lucrative business. Debt buyers pay pennies on the dollar for bundles of bad debt, that they then try to collect, making large profits. And at some point they will sell the debts off again. What is being handed around is just a list of names, Social Security numbers, contact information, account numbers and supposed balances due. This may or may not be accurate.

These debts can include some that are so old that the right to sue on the debt has expired. In other words, the debt is uncollectible. Although not mentioned in the article, it logically follows from the minimal and often old account information that is sold, the debt may have been settled or discharged in bankruptcy.

The upshot for those facing collections is “debtor beware”.

Based on our experience and what this article reveals, here is some advice to follow if faced with unpaid debts in collection:

1. Don’t assume that the debt collector owns the debt or is authorized to settle it. You should receive a written demand on the debt stating who owns the debt. The demand should state that you are entitled to dispute the debt and if so they will supply proof that you owe it. This is a matter of federal law. If this has not happened, be very suspicious. As the article points out, some supposed debt collectors are thieves trying to collect someone else’s debt.

2. If you settle, make sure you have something in writing from the debt collector making a firm offer. This must have all the account information and must clearly state what payment terms will be accepted as “payment in full” or similar language. When you send in payment, make sure the check has a notation of the debt, the account number and “payment in full” or “payment under settlement letter dated [DATE]” or something similar.

3. Do not respond to threats to send you to jail. These are illegal and bogus.

4. Any time you are dealing with suspected abuse, you should keep a detailed log of who called, the date and time, what was said, and the contact number. The number given may be a bogus one. Always ask for a telephone number “in case we get disconnected”. You might then consider hanging up then calling back claiming you got disconnected.

5. Recording these calls is legal, so long as you tell them you are recording. Knowing they are being recorded will give pause to any legitimate collector. If it does not, then be extremely suspicious.

6. It may make sense to get an attorney involved. If you already have an attorney, then your conversation should be limited to telling the collector that, demanding that he/she “correct your records”, and contact your attorney. If you have hired an attorney to file bankruptcy, most legitimate collectors will then contact the attorney to verify this, then put your debt at the bottom of their stack. This only works if you have really hired an attorney.

7. If you are having these types of troubles, it is probably a good idea to meet with a qualified and experienced bankruptcy attorney to understand that option. You should prepare a household budget showing all your basic living expenses. Whether or not you proceed with a bankruptcy, don’t ignore this option. Bankruptcy under Chapter 13 can allow you to pay your debts to the best of your ability, in a controlled and court-supervised process.

 

How to Stop Collection Lawsuits Against You

Your Options to Stop Collection Lawsuits

Final collection noticeIf you have fallen behind on your financial obligations and have been threatened with a collection lawsuit, you may be considering bankruptcy as a way to stop legal action and get a fresh start. Before you file for bankruptcy, though, you want to do two things: prepare a detailed budget and if a suit has not already been filed, explore an out of court settlement. Finally, any settlement must be documented in a properly drafted agreement, which can be as simple as a letter signed by the lender or their collection agent, or as complex as a court order.

Prepare a Budget

Far too many people fail to budget, usually out of fear of what the numbers might tell them. But the reality is that the best way to know what you can afford and what you need to do is to have a plan. You may discover that you don’t have enough income to pay all your bills. That will allow you to start to prioritize, to determine which obligations are most important and to see that certain expenses are just not realistic. As you prioritize, remember that the most important asset you have is the one that gets you to your job and that allows you to earn income. Without a vehicle, you won’t be able to work unless you work from home.

Remember, too, that a budget is mostly an estimate. There will be some expenses that will be precise — car and mortgage/rent payments. There will be others that vary from month to month. The purpose of a budget is to give you a big picture.

Non-bankruptcy settlements.

If your budget leaves some money available to bring past due debts current, AND if you have not already been sued by one or more of them AND if you do not have a lot of separate past due bills, some people may benefit from reaching out to their creditors to explore non-bankruptcy options. Some but not all creditors will work with you to some degree. Some creditors have forbearance options that allow you to skip a payment or two and add it to the end of the loan. Many utility companies will allow you to set up a payment plan over a longer period of time.

But before doing this, you should explore the bankruptcy option. All too often we see people who struggle to pay high interest credit cards or other loans, often using up protected retirement funds. You need to clearly understand your limits and explore other options.

One such option is Chapter 13. Chapter 13 allows you to control the repayment process. Once you get approval of a repayment plan, all your creditors are bound by it. Even where the plan provides for full payment of all creditors, the repayment is almost always without additional interest. In other words, a Chapter 13 bankruptcy gives you a guaranteed court approved payment plan.

That said, Chapter 13 is not always the best option. But to know that, you need to get the help of an ethical and experienced bankruptcy attorney. Our practice is always to explain the non-bankruptcy options to our clients. And if you decide to forego bankruptcy, an attorney’s help in securing agreements from your lenders is often valuable. The bottom line is that your creditors may would rather have something paid than nothing. And their preference is not to force you into bankruptcy, as that severely limits their options and typically makes the process more expensive for them.

Settlements must be in writing.

We often say that an oral agreement is not worth the paper it is written on. What one person tells you on the phone may be ignored or forgotten by another agent. Written agreements should be reviewed by a lawyer. At a minimum they should specify who the lender is, that the signer is an authorized agent, the agreed payment terms, that so long as you abide by those no further collection action will take place, and what the lender will do when all payments are made. That said, this is still an area where the help of an attorney may be money well spent.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we know that the bankruptcy process can be intimidating and confusing. We offer a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney. For an appointment, call our office at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients Across South Jersey

How to Stop Vehicle Repossession

Steps You Can Take to Avoid Repossession of Your Vehicle

Car on the back of towtruckIf you are behind on your vehicle payments, your lender can typically repossess your car at any time. You can suspend a repossession effort with a bankruptcy filing, as you will be entitled to the protection of the automatic stay once you file. The automatic stay prohibits most creditors (including auto lenders and lessors) from calling, writing or taking legal action to collect a debt outside of the bankruptcy process.

The available bankruptcy exemptions can be applied to the equity you have in the vehicle, and if sufficient should prevent its sale by a bankruptcy trustee. If your vehicle is completely paid off, then its fair market value is all equity. If the equity you have in the vehicle is greater than the exemption amount, the trustee may still take your vehicle, sell it to pay off other creditors and give you the exemption amount in cash after paying off the car loan balance.

If you owe money on your vehicle and are facing repossession, there’s little benefit to filing a Chapter 7 petition, as this will only slow the process of repossession, not prevent it. Unless you will be in a position to bring the loan current or “buy back” the vehicle from the lender in a process called Redemption, a Chapter 7 bankruptcy is only a temporary fix.

Your best option if you choose bankruptcy is often a Chapter 13 filing. In a Chapter 13 proceeding, you will have to resume payments on the loan, but can cure the arrears (ie bring the loan current by paying the back payments through a bankruptcy plan) over as long as 60 months.

In Chapter 13, you may be able to “cram down” your loan and pay the fair replacement value over 3 to 5 years. Essentially, you replace the loan with a new loan that pays the value plus interest, so that at the end of the payments you have bought the car back from the lender. This makes sense only if the loan balance substantially exceeds the market value of the vehicle. While this process is underway and so long as you meet the applicable payment requirements and keep the vehicle insured, the automatic stay protects you, so that your lender cannot seek to accelerate the loan or collect more than you have agreed to pay.

Bankruptcy, however, may not be necessary to stop repossession. The first thing you want to do when you have fallen behind on your car payments — or even if you know in advance that you won’t be able to make a payment when it’s due — is to reach out to your lender to see what your options are. Some lenders have forbearance options, which allow you to pay only interest for a short period of time, or even allow you to make no payments for a month or two. Typically, though, interest will accrue during that period. If you reach any agreement, BE SURE that it is documented in writing and that you keep careful records of all payments you have made or will be making.

The other important thing to do when you are struggling to meet your financial obligations is to prepare a detailed household budget. This allows you to compare income to necessary expenses.

Priorities here are important. For most people, having reliable transportation is a top priority. Without a vehicle, you can’t get to a job. If you can’t get to a job, you can’t pay anyone.

Above all, facing up to these problems early and understanding all the options with the guidance of an experienced and knowledgeable attorney is critical.

Contact Neuner & Ventura, LLP

We understand the stress, anxiety and confusion that can be associated with a potential bankruptcy filing. We offer a free initial consultation to every client. We do, however, reserve the right to charge a fee to review any work done by another attorney. For an appointment, call Neuner & Ventura at (856) 596-2828 or send us an e-mail. Evening and weekend appointments are available upon request.

Representing Clients Across South Jersey

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