Northern California Bankruptcy Lawyer

On The Bankruptcy Soapbox

The Soap Box

The New Rules Of Asset Protection

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I coined a new rule about asset protection schemes after meeting with a bankruptcy prospect:

If the asset protection plan is too complicated for the owner to explain, it probably won’t stand up to challenge.

This man had paid an attorney a fistful of money to create LLC’s and limited partnerships, each of which held fractional interests in the other entities.  Some pieces of real estate were owned outright by one entity or another; others were held jointly.  One LLC was the general partner in another entity.

The client came with a chart, with arrows running back and forth.  He couldn’t explain how it worked, or why it was structured that way, other than to make it difficult to reach his wealth.

But it came down to this:  if there is no explicable business reason for this arrangement, it probably represents a scheme to hinder, delay, and defraud creditors.  One a bankruptcy trustee could penetrate.

What fraud?

One of the hardest concepts of debtor/creditor law for the public to grasp is that of fraudulent transfers.  Here’s the rule:  you cannot legally transfer property for less than its present value in order to keep the asset from creditors.

Put another way:  you can’t give your assets away to keep them from creditors.

At law, there are two kinds of fraudulent transfers:  ones with actual intent to hinder creditors, and ones that are constructively fraudulent. [Read more…]

Mix Old Debts & Good Faith Payments For Bad Results

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mummy case wikimedia

Old debts don’t live forever.

The shell of the debt may hang around, like this mummy, but inside the shell, the debt is dead.

But just like a bad mummy movie, old, dead debt can be brought back to life.

All it takes is an attempt on your part to be honorable , or an attempt by a debt collector to con you, and you can give otherwise dead debt a new life.

Because, in many states, the statute of limitations is reset when you make a payment on a debt that is otherwise non collectible.

How old debts get new life

The debt collector on the phone has a tough job:  he has to convince you to write a check  on a debt you haven’t been paying.

Suing you takes a long time and costs money.

So it’s cheaper if he can persuade you to mail or wire him some money.

Often, the collector tries to frighten or shame you into paying.  He doesn’t care that you probably aren’t paying because the money isn’t really available under today’s circumstances.  That’s your problem.

After all, he’ll tell you, this is your debt and your responsibility.

Often as part of the conversation about settlement or payment over time, the collector asks that you make a small payment, to show your good faith.

Which of us doesn’t want to act in good faith?

It’s a great pitch.

Only, that payment may revive the debt and endow it with a brand new set of years in which the debt can be collected. [Read more…]

Can You Spot The Signs Of A Collection Scam

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Burglar, Ninja

It’s pretty scary when a $300 payday loan turns into an investigation by the Federal Crimes Bureau.

Not only was the recipient of the letter  below being  “investigated for crimes”,  his Social Security number would be suspended, and a court case initiated against him immediately.

At great cost and embarrassment.

Unless, of course, he sent the writer money.

The writer assures him that it will go so much better for him if he just pays up.

Except, while the debt referenced may be real, the collector is not.

This is a scam.

How collection scam works

The scammer  here got possession of enough information about a real debt to construct a scary threat.  If my friend who got this letter didn’t send them money, “before his legal file is downloaded inside the courthouse”, all kinds of ugly things would happen.

And it managed to scare my friend, because he does have an unpaid pay day  loan.

Because the debt referenced is real, it’s easy to conclude that the rest of this parade of horribles is real as well.

The fake collector plays on guilt about not paying a real debt; on ignorance about how collection law works; and on fear of being exposed to friends and associates as a “bad person”.

Signature features of scam

Let’s look at each of the ways the scammer shaded the truth in the collection letter. [Read more…]

The Collection Call That Terrifies

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tyrannosaurus

Nothing strikes terror in someone behind on their bills like the fear that the collector will call their family.

Sheer terror.

It works, too. That fear is second only to a wage garnishment for bringing people to see a bankruptcy lawyer.

The only flaw in the collector’s strategy in contacting your family about your debts is that it’s illegal.

Flat out illegal.

There is a small exception: a collector can contact family or employer to get your contact information. They cannot, lawfully, discuss your debt or identify themselves as a debt collector.

So attempting to use your family to pressure you to pay a debt is forbidden.

Unfortunately, there is a segment of the collection industry that is lawless.

And the law has limits: Federal law applies to third party debt collectors, but not the original creditor. It covers only the collection of consumer debts, not business debts.

California protections broader still

California’s Rosenthall Act adopts many of the federal Fair Debt Collection Practices Act strictures on debt collecting, and makes them applicable to the original creditor as well.

So, under the Rosenthall Act, your original creditor has no more leeway in collection tactics than a third party debt collector does.

Exercising your rights

Like any rights you have, they are only really useful if you insist that your rights be honored.

Both the FDCPA and the Rosenthal act provide for statutory damages payable to the consumer whose rights are violated.

To enforce your rights, you need to gather information about the caller who crosses the line.  Make note of their phone number, the date, time, and what they say on the phone.  These are the facts that will support your damage for damages.

Being left alone

You have the right not to be contacted about your debts.  

That doesn’t mean you can elect not to be legally responsible. It does mean that you are entitled to get collectors off the phone and out of your mailbox.

You have to communicate your desire not to be contacted about your debts one creditor at a time.

A request not to be contacted must be in writing.  It should be sent to the correspondence, or billing inquiry address of the creditor, not to the payment address.  And you should send it certified mail, return receipt requested, so you have proof that it was received.

The new federal Consumer Financial Protection Bureau has sample letters you can use to communicate with creditors. Here’s a sample letter for Californians to claim your rights against creditors and collectors.

Again, you need to be able to prove that you invoked this right in order to collect damages.  Keep copies of your letter and the proof of receipt.  Keep a log if you continue to get calls.

Assess the big picture

On your time line, figure out how big your debt problem is and what your alternatives are.

Image courtesy of verifex and Flickr. 

Money Troubles Plague My Vacation

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I needed a vacation, badly. After a long year launching Money Health Central, practicing bankruptcy law through the Great Recession, and teaching new bankruptcy lawyers at Bankruptcy Mastery, I was drained. Three weeks away sounded like Nirvana.

I had three weeks in which I didn’t have to post a thing to the three or four sites I write for; three weeks without a phone number. Three weeks to turn my focus elsewhere.

Trouble was. I bought local newspapers as we visited England and Scotland. Consumer money issues were everywhere.

Not even the euro crisis and looming Greek default could push stories about individual money matters off the radar. What was in the newspaper ended up in my head.

The problems for the middle class seem to mirror those in the States, embellished in the UK with significant rises in prices for everything, especially energy.

Here’s a roundup of money matters from three weeks abroad.

  • The cost of university is rising so fast that British students are rushing to take exams to allow them into American universities which are cheaper than in the UK.
  • Increasing numbers of graduates have student loan debt and no job.
  • Payday lending is thriving, while a few Members of Parliament campaign against legal loan sharking.
  • Banks have been exposed added unwanted credit insurance to loans and made to establish a fund to make customers whole.
  • Over and over again stories of miserable customer service provided by banks are reported.
  • Card issuers cut available credit by 95% for someone who paid off the balance each month.
  • Debt settlement schemes thrive there too.

Sounds just like the things I fret about professionally here in California. It’s eery how similar the world is these days.

Image courtesy of Benson Kua.

Credit card “overspending” parallels housing crisis

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Forbes has compiled a list of cities where credit card spending is highest.

My scan of the list suggests that this list is simply another version of the areas of the country where housing is in trouble.  Homeowners with outsized mortgage payments rely on credit cards to make up the difference needed to support the family.

Which leads me to those TV ads for attorneys or other services offering help with mortgage modification.  Assuming the advertiser is successful in negotiating a mortgage modification, the homeowner is still  left with the debt  that piled up while they struggled with the original loan terms.

Even without the ability to modify mortgages on principal residences, Chapter 13 is a superior tool for addressing the homeowner’s entire financial situation.

And the fees for the professional involved are subject to court supervision, something missing from those drumming up business on TV.

Taking my own advice Part Two

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The return receipt on my “do not contact” letter to ATT arrived at my office showing receipt on July 6th.

Between July 7 and July 10, we got seven calls at home about the disputed account; on July 12th, we got a call from NCO who announce that the account has been turned over to them for collection.

As of yet, I have no contact information for NCO. When I get it, I will repeat my “do not contact” letter, invoking my rights to be free of collection calls under FDCPA and California’s Rosenthal Act.

They’ll get an invitation to call my lawyers, Moran Law Group, to discuss resolution of the dispute.

Check back for updates. The beginning of the tale.

Read the conclusion.

The Price of Keeping the Car

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Car manufacturers lobbied Congress to make it harder for debtors to keep their cars through bankruptcy.  And they got what they sought.

In Chapter 7, that was accomplished by eliminating the “ipso facto” clause, which said that merely filing bankruptcy was not a breach of the purchase contract. The expectation was that debtors would reaffirm their car loans, giving the car lender the right to sue for a deficiency judgment against the debtor should the debtor later default, rather than risk losing the car.

Reaffirmations would diminish the debtor’s discharge and lock the debtor into paying for a car that might well be worth substantially less than the loan balance.

Debtor’s attorneys were expected to certify that repaying a car loan would not create a hardship for the debtor; if the attorney wouldn’t/couldn’t so certify, the reaffirmation agreement needed to be approved by the bankruptcy judge after a hearing. Most bankruptcy judges were less than enthusiastic about this new role.

Debtor’s lawyers have wondered about the continued existence of “pay and drive”, the practice of car lenders allowing the debtor to keep the car for so long as the payments were current and the car insured. Putting debtors to the test of reaffirming a badly upside down car or returning it to the lender might not be such a great idea for the auto industry if debtors shucked their greatly depreciated vehicles.

At last weekend’s banrkuptcy seminar, judges and lawyers reported that in practice, only Ford Motor company is routinely repoing vehicles where the post bankruptcy debtor has not reafffirmed the debt but remains current on payments and has insurance. All the rest of the lender community has apparently figured out that they do not want to “eat steel” and take possession of a flood of cars worth less than what is owed from debtors willing to continue paying for them.

Perhaps, a bit of common sense has inserted itself in the world of BAPCPA.

 

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