Defending Collections Lawsuits on Credit Cards

Worried couple reading credit card bill sitting on a couch

It can happen to just about anyone. Things are going well, you’ve got a great job, so you feel confident putting a few extra items on a credit card. Before you know it, you have a hefty balance, but it’s okay, you’ll just pay it off over a few months. Then disaster strikes…you get laid off or sick and suddenly, you’re being hounded by credit card companies. Maybe you’ve even been served with a complaint. What’s your best course of action when you have to defend a collections lawsuit on a credit card debt?

The first thing you need to do is retain legal counsel. Don’t try to defend a lawsuit by yourself. It may seem like you are saving money, but it can cost you a lot more in the long run.

Next, collect all records you have related to the debt—any receipts, any records of payment. Your attorney will want as much accurate information as possible. In addition, request that the collection agency or its legal counsel produce all records they have. There’s a good chance that they have little to nothing, as most credit card collections are conducted by companies or people who have purchased the debts at a fraction of their face value. They may have little or no documentation other than the alleged amount of the debt.

If you haven’t hired an attorney yet and you’ve been served with a complaint, make certain you file a response to the complaint. The technical term for this is an “answer” to the complaint.

Send it to the court by certified mail and send a copy to the law firm and/or the collection agency that had you served. If you have been served with a complaint, though, it’s probably time to step back and look at the broad picture—is this a single problem or do you have far-reaching financial problems? Often, it’s better to attempt to negotiate a payment plan than to litigate. You may actually end up paying less through a negotiated settlement and you won’t have legal or court costs.

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. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Recording calls with debt collectors to document or deter abuse-watch out for these and other traps!

We have all heard the recordings telling us that our call “may be recorded for customer service”… Many of our clients in financial distress are dealing with debt collectors. Although there are well-established rules about what collectors can or cannot do, we hear all the time about abuses, such as threats of criminal action, repeated calls at late or early hours, calls of employers or relatives.

We suspect that these abusers think that most people will put up with the abuse and if they do pursue legal remedies, it will be a “swearing contest” in court. While debt collection is legal and proper, we have recommended that our clients document each call and consider recording such calls, but only if certain procedures are carefully followed.

In many states, including California and Pennsylvania, it is illegal to record a call or other interaction without the consent of all parties. So if the call originates in one of those states, a violation could trigger criminal action, or civil penalties. See Tape-recording laws at a glance

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So here is our recommendation: Start the interaction and your recording with a statement something like “I am recording this call, and will record any further calls from you. If you do not want to be recorded hang up and do not call again. If you continue or call again, I will assume you and your company consent”. If the person says they do not consent then hang up.

If a collector leaves a message on your answering service, save the recording. They knew they were being recorded and cannot complain.

Watch out for debt collection scams. Whenever dealing with a collector, be sure to get the name or extension number of who is calling, the name and address of the collection agency, the name of the creditor, the account number, and a telephone number to call back “in case we get disconnected”. Never give any information over the phone, such as Social Security or credit card numbers, dates of birth where you work etc. They are calling you. If they do not have this information that is their problem. Do not fall for the “we need this for verification” scam. Your goal is to get information from them. If they want further information, tell them to put it in writing and send it to the address they have so you can review it with an attorney.

Finally, most old debts have been sold off to debt buyers. While this is legitimate, sometimes companies or collectors who do not really own the debt may try to defraud the true owner by trying to collect on someone else’s debt. Or phony debt collectors. Be wary.

More importantly, if you are having trouble with debt collectors, get legal advice about your rights and options. And please note, every state and situation is different. This post is intended only to alert you in a general way to the potential issues and problems. It is no substitute for qualified and individual legal advice.

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. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Keeping debt collectors honest and how best to respond to them

We see a lot of people who are dealing with sometimes abusive debt collectors. A recent New York Times article, Jan 13, 2017: How to Keep Debt Collectors Honest and at Bay provides some excellent advice. Among the tips provided (and our tips) are:

  1.  If you are at all unsure that the debt is valid or the amounts are correct, demand documentation to validate the debt. (Debt collectors often do not have this information but be insistent).
  2. Put all requests in writing. In fact, demand the name of the collector, a mailing address and contact information, the name of the original creditor, and the name of the current owner of the debt.
  3. Don’t assume that the collector or the party they claim to represent really own the debt. A lot of bad debts get sold off. Some collectors have attempted to collect “stolen” debt accounts that they do not own.
  4. Do not let collectors call you at work or call neighbors. Demand that they stop, orally and in writing. Keep all those papers.
  5. If the debt is older than 6 years since you first defaulted (unless you entered into a payment plan after that) any suit may be barred in New Jersey by the statute of limitations. (if it is a store credit card, the limitation is 4 years). Demand the date when the debt first became past due.
  6. Do not put up with abuse. If this happens, tell the collector you are recording the call and if possible record it. (Recording a call without notice is a criminal violation in many states and if your collector is calling from one of those states you could get in trouble)
  7. Finally and most importantly, you need to assess your finances and get professional advice. Start with doing a budget for just your basic living expenses (ie food, shelter, transportation, medical care etc). Often there is no money left over to pay debts being collected, or not enough. There are budget forms for you to use on the Forms page of our website. http://www.nv-njlaw.com/bankruptcy-forms-2/
  8. Finally, do not be reluctant to use bankruptcy as a tool to pay, settle or obtain relief from your debts. As we have noted in another blog post, at least one study has shown that those who used bankruptcy to overcome financial distress later had better credit and better access to credit than those who did not.

The Most Effective Way to Discharge Debt – Be Honest with Creditors

In a Chapter 7 liquidation bankruptcy proceeding, you have the right to discharge certain debts in exchange for the sale of non-exempt property. That right, though, is not absolute. If there’s evidence that you have been less than forthright with the bankruptcy court, or that you have engaged in wrongful conduct, the bankruptcy court has the power to deny a petition for discharge. Here are some of the situations where your Chapter 7 discharge petition may run into problems.

Dishonesty in Obtaining Debt

If you incurred debt through false pretenses, through fraud or misrepresentation, or through illegal acts, that debt may not be subject to discharge. For example, if you embezzled $100,000 from your employer, but spent the money, you cannot file for bankruptcy protection to discharge the restitution requirement. Likewise, if you obtained credit cards or consumer loans through fraud or misrepresentation, including the falsification of income or debt, the creditor to whom you owe that money may ask the bankruptcy court to deny discharge.

Another way to lose the right to discharge debt is to fail to disclose income or debt during your bankruptcy proceeding, or to otherwise mislead or lie to the bankruptcy court. You must fully disclose all information about the assets, debts and income, and ignorance will typically not be an acceptable defense. Hire a bankruptcy attorney, tell your attorney the truth about everything, and you’ll be fine.

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. For an appointment, call our office at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Dos and Don’ts of Home Loan Modifications

Home Loan Modifications

If you are struggling to make your monthly mortgage payment, you may be considering pursuing a home loan modification. Here are some things you want to be certain to do, as well as some pitfalls to avoid.

Dos

The most important thing to do when investigating the possibility of a home loan modification is to be realistic. Your lender has no legal obligation to change the terms of your loan. They will only give serious thought to doing so if it’s in their best interests, so you’ll have to put yourself in their shoes and try to determine why you should be allowed to modify the loan.

You’ll also want to put together an honest budget before you take any further steps. Look at how much income you have, as well as your other expenses, and be realistic about what you can afford per month. Don’t try to negotiate a modification if you won’t be able to stay current.

Do consider filing a Chapter 13 bankruptcy petition. It may be the best form of home loan modification available. You’ll have the added bonus of the automatic stay in bankruptcy, so that creditors can’t bombard you with calls and letters.

Don’ts

Don’t assume that your modification is permanent—verify it. If your lender agrees to a modification, be careful to clarify that it’s not just a trial modification. A lender will often allow you to amend the terms on an informal basis, but retains the legal right to reinstate the original terms. Keep thorough records of every correspondence between you and the lender, so that you have evidence that the modification is permanent.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Challenges to the Discharge of Luxury Purchases and Cash Advances

One of the advantages of a Chapter 7 bankruptcy is that it allows you to permanently discharge certain debts, meaning that you will no longer have personal liability for them. As a general rule, credit card debt can be discharged, but there are limits.

Under the bankruptcy laws, any debts arising from the purchase of luxury goods  within 90 days of your petition for bankruptcy  made from a single creditor will be presumed to be fraudulent and non-dischargeable, if the purchases total more than  $650. This result is not automatic. The creditor has to file a Complaint in the bankruptcy seeking non-dischargeability. If it does so, the burden is on the debtor to prove that the purchases or resulting debt were not made with intent to defraud the creditor. Stated another way, a creditor will not be required to prove that you did not intend to pay or that you intended to discharge the debt in bankruptcy. Instead, you will have to  introduce evidence to demonstrate that the purchase was not a luxury, but necessary for the support or maintenance of the debtor or a dependent or spouse, or that the purchase was not made for a fraudulent or improper purpose.

For purposes of the bankruptcy law, a luxury item is considered to be any goods or services not reasonably required by the debtor for his or her own support or for the support of any legal dependent. While the determination of whether an item is a luxury item depends on circumstances, items like food, gas, clothing and furniture are more likely to be considered non-luxury than jewelry, home appliances, books, or a computer.

The same presumption applicable to luxury purchases also applies to cash advances on a credit card or other open end credit plan made within 70 days of filing, to the extent that these total more than $925. This does not apply where the cash advance is for a business purpose.

We generally recommend that our clients stay away from these kinds of purchases or use of credit. Like any unusual or suspect financial dealings, these will commonly result in suspicion and greater scrutiny across the board. When anticipating a bankruptcy, it is generally best to play it straight and stay within the bounds applicable to the “honest but unfortunate debtor”.

That said, a certain amount of legitimate planning going into a bankruptcy is permitted. The wisest course of action is to consult with and follow the advice of an experienced and ethical bankruptcy lawyer.

Contact Neuner & Ventura, LLP

At Neuner & Ventura, LLP, we provide a free initial consultation to every client. To set up a meeting, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Can Student Loans Be Discharged?

It’s getting to the point, for many, where the cost of a college education is one of the biggest of life’s expenses, greater even than the cost of a home. Not surprisingly, as many college graduates struggle to find good jobs, many consider bankruptcy as an option to get their finances under control. The key question—can student loan payments be discharged in a federal bankruptcy filing?

Though many people don’t know it, there are limited circumstances where student loan payments can be wiped out under the bankruptcy law. Under what is known as the Brunner test (so named because of the U.S. Supreme Court case that laid down the principles for discharge of a student loan), you can discharge student loan obligations if you can demonstrate that repayment would cause you an “undue hardship.”

Under Brunner, a debtor can eliminate student loan debt by showing all of the following:

  • The debtor does not have sufficient income to maintain a minimal standard of living for himself/herself and dependents
  • The debtor has no reasonable prospect that the current financial situation is likely to change
  • The debtor has made a good faith attempt to pay off student loan debt

It’s important to understand that, without evidence to the contrary, most courts will presume that a debtor’s income will increase over time and that a debtor will be able to attain a minimal standard of living. Accordingly, any debtor seeking discharge of a student loan payment will need to affirmatively demonstrate that his or her situation is not likely to change. A debtor may introduce the following types of evidence to support that claim:

  • A mental or physical disability
  • Lack of education or training
  • Poor quality of education
  • Lack of job skills
  • Age of debtor

Exploring the options for income based repayment or discharge of student loans through various federal programs is a good idea and also a necessary first step. You can find information about what types of loans you have at this site: https://www.nslds.ed.gov/nslds/nslds_SA/. Information about federal student loan forgiveness and cancellation can be found here: http://studentaid.ed.gov/repay-loans/forgiveness-cancellation

If you resort to a bankruptcy, discharging student loans will require that you file a “bankruptcy lawsuit” in the bankruptcy seeking a judgment of dischargeability.  Achieving success is possible, but difficult at present. Hopefully courts or Congress will find a way to ease the path to dischargeability.

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. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients Across South Jersey

Debts for Willful and Malicious Injury

Our bankruptcy laws were enacted to provide debtors with the opportunity for a fresh start. But what if the debts you incurred were the result of intentional acts of misbehavior, even criminal acts? What if you assaulted someone, or if you were grossly negligent and caused serious injury to another person? Should you be able to rid yourself of that obligation by filing for bankruptcy protection?

From a long time, certain debts, for “willful and malicious injury,” have not been eligible for discharge. For almost the entire 20th century (from 1904 to 1998), the “willful and malicious” exception was liberally applied. If it could be shown that the act or behavior was intentional, the debtor could not discharge the obligation.

In 1998, though, the U.S. Supreme Court clarified what was malicious or willful. In Kawaahuau v. Geiger, the debtor was a doctor who was found liable for malpractice and filed for bankruptcy protection because he had no malpractice insurance. The question was whether his intentionally or recklessly not carrying such insurance, leading to an inability to collect for his medical negligence made the malpractice judgment non dischargeable. The Supreme Court said no: “nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury”. Other courts, including the Third Circuit Court of Appeals have said that an act done intentionally which is substantially certain to cause injury, and for which there is no justification or excuse will be treated as willful and malicious. In other words, an intent to cause harm can be inferred and proven form such circumstances.

The “willful and malicious” exception does not apply to mere carelessness. But intentional torts (eg assault or battery, theft) or some act that is illegal will most likely fall within it.

This is something you should discuss with a qualified bankruptcy attorney.

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. For an appointment, call Neuner & Ventura at 856-596-2828 or send us an e-mail. We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

Debts for Embezzlement and Violations of Fiduciary Duty

Though many unsecured debts may be discharged in a federal bankruptcy proceeding, some obligations, such as child support, student loans and certain tax debts, are difficult or impossible to discharge. Debts brought about by embezzlement or breach of fiduciary duty are also often among those that cannot be discharged. A recent opinion by the U.S. Supreme Court has provided some clarity as to when violation of fiduciary duty prohibits the discharge of a debt in bankruptcy.

In Bullock v. Bankchampaign, NA, (2013), the Supreme Court justices ruled that, for breach of fiduciary duty to prevent the discharge of debt, it must be shown that the debtor must have either known that his or her behavior was a violation of a fiduciary duty, or must have acted with gross recklessness as to whether or not the behavior was improper.

In the Bullock case, the party who sought to discharge the debt was the trustee of a trust created by his father. Over a period of years, he borrowed money against an insurance policy in the trust, using it for his own benefit. However, he always repaid the loans with interest. Nonetheless, he was sued by his brothers, who were beneficiaries of the trust, and was found liable for self-dealing. The jury rendered a verdict in favor of his brothers, and granted them a monetary award. The debtor could not pay the judgment and filed for bankruptcy protection.

In its ruling, the Supreme Court of the United States concluded that the debtor had been held to the wrong standard—that breach of fiduciary duty requires a knowledge of or reckless disregard for whether the loans were a breach of fiduciary duty. They found no evidence that the debtor had either.

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. For an appointment, call our office at 856-596-2828 or send us an e-mail . We do, however, reserve the right to charge a fee to review any work done by another attorney. Evening and weekend appointments are available upon request.

Representing Clients across South Jersey

How debt buyers and creditors get judgments when they do not have a right to sue, and what you can do about it

Most bad consumer debt is sold off to “debt buyers” who make a good living buying bad debt for pennies on the dollar then collecting it. As a recent New York Times article points out, these creditors have been able to get judgments on debts that are too old to sue on. Worse, when the judgment debtors tried to stop this practice by a class action lawsuit, they were thrown out of court because of a clause in the original loan agreement that forced all disputes into arbitration. Courts have rejected the argument that by going to court themselves, the debt buyers waived their right to rely on this clause.  “Sued Over Old Debt, and Blocked From Suing Back” 12-22-2015

There are some important take-aways here.

  1. Read the credit agreements and understand what you are agreeing to. Some credit cards give you a limited time to “opt out”. Arbitration looks simple and less expensive, but in fact you may be giving away important rights.
  2. Keep your own records of what you have paid or charged. You may need them later.
  3. When faced with collection, demand proof and keep good records of all contacts, letters or communications. Debt collectors are required to provide proof of the debt if you ask in writing. Because they have bought the debt in large bulk purchases, they likely do not have the original documents.
  4. Watch the statute of limitations. In New Jersey, creditors have 6 years from the date of the last payment after default in which to sue. Even a $1 payment after that time has passed could start the clock running all over again.
  5. If sued, seek legal advice and seriously consider filing an Answer IN WRITING, FILED WITH THE COURT. YOUR ANSWER MUST BE IN THE HANDS OF THE CLERK BEFORE THE STATED DEADLINE EXPIRES. Calling the collection attorney does not protect your rights. A qualified attorney can advise you about the rights and defenses you have. These might include
    1. Plaintiff does not own the debt and is not qualified to sue me.
    2. Plaintiff is not entitled to use the courts to sue me. (In New Jersey out of state businesses must file certain reports in order to sue in our courts)
    3. The statute of limitations has expired. (See above and check the law in your state)
    4. If Plaintiff is owed money, the amount claimed is wrong. (This will require production of account records and possibly the loan agreement. You need to carefully assemble your records to show what you think is due)
    5. NOTE,  THESE ARE ONLY EXAMPLES: you are entitled to demand proof, but you may not have a valid claim to the above defenses or you may have other rights and defenses. Always seek legal advice and assistance, even if it is only a consultation.
  6. When dealing with debt collectors, keep careful written records of who contacted you, when and how, and what they said. You may have a counterclaim against the debt collector, but again, proof is key. Do not hesitate to record the conversations, but be sure to tell them, at the beginning of the recording, that you are recording. Not doing this can result in criminal liability in your state or the state where the caller is at.

For many people, debt collection is more likely to be a symptom of bigger problems. You should consult with a qualified attorney about how you can use Chapter 7 bankruptcy to discharge debts you cannot afford to pay, or Chapter 13 to pay what you can afford over time.

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