Are you an Arizona consumer who has filed bankruptcy within the past few years?
Are your creditors still trying to collect your discharged debt?
Are your discharged debts still reporting as owed on your credit report?
I am regularly contacted by Arizona debtors who are still suffering the collection harassment the bankruptcy was supposed to stop! Unfortunately, many creditors sell the debts after they get notice of your bankruptcy. And, the debt-buyers who buy these accounts ignore the bankruptcy and hope you will too.
Sometimes their tactics are subtle, like reporting the accounts as outstanding to the credit bureaus, or sending soft letters suggesting that paying the debt will improve your ability to get new credit. Either way, they are violating the bankruptcy laws and perhaps the federal Fair Debt Collection Practices Act (FDCPA).
Sometimes they act much more boldly. When you question the validity of the debt, the creditor or debt-buyer will suggest that perhaps the debt was not discharged in the bankruptcy and that you still owe the money.
The bottom line is that if a creditor, a debt-buyer, or a collection agency makes any attempt to collect one of the debts included in your bankruptcy, they have violated the law.
If you are an Arizona consumer, I may be able to help you stop the collection attempts, and recover damages from these unscrupulous collectors. I offer a free phone consultation.
Call me, Floyd W. Bybee, at 480-756-8822
Both the FDCPA and Bankruptcy give Arizona consumers possible remedies for stopping collection harassment and abuse. The FDCPA allows Arizona consumers to recover damages from third party collectors who have harassed them, thus usually stopping any continued harassment. Bankruptcy, on the other hand, usually stops collection harassment with an injunction against all collection activity. (I say usually, as sometimes the harassment continues even after filing bankruptcy)
Many Arizona debtors find that they need to file for bankruptcy, but do not have the money needed to pay the lawyer’s fee up front. Some law firms will sign up the client, but do not file the bankruptcy case until all the lawyer’s fees have been paid — sometimes as much as $2,000 - $3,000 — which may take up to six months or more to pay. In the meantime, the collection harassment continues with no apparent remedy.
Use Both FDCPA and Bankruptcy!
My experience has been that many Arizona debtors have one or more existing claims against third party debt collectors by the time they meet with a bankruptcy lawyer. Under the FDCPA, the consumer is entitled to recover damages, including statutory damages of up to $1,000, from the violating collection agency. If pursued, these FDCPA cases may provide the additional money needed to pay the bankruptcy lawyer’s fees. So, by using the FDCPA, Arizona consumers are able to ultimately file their bankruptcy cases sooner, and with less money directly out of their own pocket.
If You Are Considering Bankruptcy, Please Call BYBEE LAW CENTER, PLC.
If you are considering filing bankruptcy, and you have collectors calling you about your debts, please call Floyd W. Bybee at (480) 756-8822 for a free phone consultation to see if he can help you.
Most Arizona consumers file bankruptcy in order to get a “fresh start” on their financial life. Yet, it is not uncommon for this fresh start to be spoiled by one or more creditors that refuse to acknowledge the bankruptcy and to continue to report their accounts to the credit reporting agencies or credit bureaus as if there was no bankruptcy.
Post Bankruptcy Credit Reporting.
Its debatable whether historical information concerning an account pre-bankruptcy can remain on the credit report. However, there is no debate that a creditor cannot report post-bankruptcy information concerning an account such as a current balance owed, a post-bankruptcy charge-off, or a foreclosure proceeding that occurred after the bankruptcy.
Obtaining Copies of Your Credit Reports.
All Arizona consumers should obtain copies of their credit reports about 60 to 90 days after their bankruptcy discharge to see if the creditors have properly updated their accounts to the credit reporting agencies.
The three primary national credit reporting agencies, or credit bureaus, are Experian, Trans Union and Equifax. You can obtain your updated credit report from each of these agencies by going to annualcreditreport.com. These reports should be free unless you have already received your reports within the past year. (There are many look-a-like or sound-a-like websites, but this is the one set up by the reporting agencies as required by federal law. It is advisable to stay away from the others.)
Many Creditors Will Not Update Credit Report Automatically.
Once you have these reports you should review them carefully for errors and to make sure each account included in your bankruptcy has been updated to show a status of “included in bankruptcy.” Some creditors will update the account status to the credit bureaus automatically, but many do not.
Disputes Need to Be Sent Certified Mail, Return Receipt Requested.
If any accounts have not been updated, then you need to send a letter to that particular credit bureau stating that the account was included in your bankruptcy, giving the case number and the filing date, and requesting that the account be updated accordingly.
Your dispute letters must be sent via certified mail, return receipt requested so that in the event your credit report is not corrected or updated, then you have proof of the dispute and proof that the credit bureau received your dispute. If you chose to dispute the accounts on line, which is what the credit bureaus prefer, then you have no proof of your dispute or that the credit bureaus received it. In other words, DO NOT DISPUTE ON LINE.
What to Do If the Accounts Are Not Corrected.
If the dispute process corrects the errors, or updates the report to show the accounts as included in bankruptcy, then you are set. However, if the errors are not corrected, or the updates are not made to each of the accounts, then you need to seek a consumer lawyer to assist you in proceeding against the credit bureau and/or the creditor for false credit reporting.
Contact a Lawyer Experienced in the Fair Credit Reporting Act.
Floyd Bybee of the BYBEE LAW CENTER, PLC represents Arizona consumers who have credit reporting issues under the Fair Credit Reporting Act or FCRA. Bybee exclusively represents Arizona consumers in the areas of false credit reporting, collection harassment, and other consumer credit issues.
If you would like a free phone consultation to see if Bybee may be able to assist you, please call (480) 756-8822.
An Article today in the Arizona Republic claims that January bankruptcy filings in Arizona have risen some 63% over last year to almost 1000 per month. This amount is still quite a bit lower than filing rates in the years leading up to the changes to the bankruptcy code and almost insignificant compared to parts of 2005.
A bit of video from MSNBC this morning discussing the Fed Rate Cut this morning and it's potential effect on housing. I tend to agree with the woman with the red hair that argues that inventory is high because prices are still too high. A low interest rate will help, but prices of homes in Arizona were not in line with incomes and maybe they still aren't. The video is here.
In any event, if you have a steady income and a home loan or two, and you are putting out more than you take in related to your home, you may want to look at a refi.
This Article from MSN's Liz Pulliam Weston, makes several good points about debt management. Of all her points, the most common that I see is the use of credit to service other credit. What usually happens is a trip to the attorney.
The most important and most obvious suggestion that I can give is.... do not borrow money from credit card lenders, unless it is an absolute emergency.
Former HUD Secretary and Republican Vice Presidential Nominee Jack Kemp writes today about the need for legislation amending the Bankruptcy Code to fight the record number of foreclosures that are on the way. You can read his own words.
By Jack Kemp
January 18, 2008
When I was Housing and Urban Development secretary in the administration of President George H.W. Bush, we fought against economic pessimism every day in the effort to spread the American dream of homeownership, particularly for moderate- and low-income families. Over the last 15 years, homeownership, especially among people of color, has risen to historic levels. In just the last five years, 2.8 million families bought their first homes. Now, the sub-prime mortgage crisis is threatening to roll back this progress.
It is clear that sub-prime loan foreclosures are only going to get worse. How can the government help homeowners without putting taxpayer dollars at risk or sending the wrong signals to the housing market?
There is no single answer. Some ideas being floated are intended to bail out Wall Street fund managers who made bad decisions on mortgage-backed securities. Other proposals have the unintended effect of propping up investors who bought property for speculative gain. Some notions, such as programs to educate and counsel homeowners, are a positive but small step. But the reality is that markets do work, and although credit markets are in distress, progress is being made.
I applaud the White House efforts to encourage mortgage servicers to modify existing adjustable-rate loans for a limited number of borrowers who cannot afford interest rate resets. However, depending solely on the goodwill of an industry that bears no small measure of responsibility in this crisis is unlikely to be the full answer.
What is missing is a rational and urgent push to help the estimated 2.2 million families in danger of losing their homes to foreclosure in the near future. Congress is considering a small fix that would have more impact on these families than any other option under consideration: temporarily allowing bankruptcy courts to give the same relief to homeowners on principal-residence mortgages that businesspeople get on real estate investment loans, that farmers get on farm loans and that individuals receive on loans for vacation homes, cars, trucks and boats.
Bankruptcy law is wildly off-kilter in how it treats homeownership. Under current law, courts can lower unreasonably high interest rates on secured loans, reschedule secured loan payments to make them more affordable and adjust the secured portion of loans down to the fair market value of the underlying property -- all secured loans, that is, except those secured by the debtor's home. This gaping loophole threatens the most vulnerable with the loss of their most valuable assets -- their homes -- and leaves untouched their largest liabilities-- their mortgages.
In the absence of modification, many of today's loans will result in foreclosure. When servicers are unwilling or unable to voluntarily modify exploding, unsustainable home mortgage loans, Congress has a duty to consider involuntary modification in bankruptcy court, where the same relief is granted on all other secured loans. The proposed Emergency Home Ownership and Mortgage Equity Protection Act being considered by Congress would do just that. It is targeted at only sub-prime and nontraditional mortgages and will be available for only seven years after it is enacted in order to mitigate against the next wave of exploding interest rate resets.
The key is to avoid an overreaction that would have negative long-term effects on the housing market. Allowing certain distressed homeowners limited bankruptcy protection provides the greatest potential benefit with the least market disruption, and it will not cost the Treasury a dime. Moreover, a tweak to the bankruptcy code is a narrowly targeted solution. It is estimated that more than 600,000 homeowners could use bankruptcy protection to modify their loans and stay in their homes.
Some argue that expanding bankruptcy relief for homeowners would encourage frivolous bankruptcy filings, but recent reforms have made filing a very onerous process. People who bought homes with the intent of flipping them two years down the road are not going to go through the aggravation, embarrassment and cost of bankruptcy.
Why do we need to keep people in their homes? As HUD secretary, I saw firsthand that homeownership makes neighborhoods safer, encourages
investment and raises our overall standard of living. People care more deeply about their neighborhoods if they have an ownership stake.
Homeownership is not about left or right, conservative or liberal, Democrat or Republican. The House Judiciary Committee has passed a bipartisan compromise version of the bill, and the full House is expected to take it up next month. Both the House and Senate need to pass it -- and soon.
(Article located and provided to me by Max Gardner)
Are you facing foreclosure? You may be aware by now that the law has required your lender to issue a 1099 showing any "forgiven" debt. Forgiven debt is the debt the lender may write off or walk away from if the home was worth less than they were owed.
This has meant that the forgiven amount had to be included on your tax return as income.
There has always been two exceptions to this "rule". Generally, they are that you were "insolvent" at the time this happened (i.e. your assets were worth less than your debts), or 2) it happened during a bankruptcy.
There is now a third, limited exception, thanks to the Mortgage Forgiveness Debt Relief Act of 2007.
To the extent that the debt went into purchasing or improving your personal residence, not taking a trip or buying a car, it will now be excluded from the personal income definition for the years 2007, 2008 and 2009.
I meet with people in financial trouble for a living and am often amazed at the amount of the car loan payment(s) that I see.
Generally, these high car loan payments appear to be the result of two things.
1) Wanting to live up to the proverbial Jones' next door and:
2) "rolling" the old car loans into the new one in order to do so, like the couple in this article from the LA times.
From my vantage point, there are few that try to avoid the "jones'" and drive less expensive cars. These car payments become so high as a result that they wreck budgets and often lead to bankruptcy.
In the article, this young couple was thrilled that their payment was going to be less than $700.00 per month. With gas costs, insurance, upkeep, registration costs etc. this car is likely costing them $1000.00 or more per month. Many offset the hit on the rest of the budget this car cost makes by borrowing from credit cards. After just a few months, the debt on the cards and the car are no longer serviceable, and the couple is out of options.
To make matters worse, the law no longer allows them to "cram down" the amount they owe on the upside down car to the actual value of the car in a chapter 13 bankruptcy, unless the car has been purchased more than 2.5 years prior.
So, some advice for all of us whose last name is not "Jones"....swallow some pride and drive a less expensive car. Put the difference toward other aspects of your budget like retirement.
Then the next time you see the young couple driving a $55,000.00 SUV, and ask yourself how they are affording it...? You will know the answer and pat yourself on the back.
A short note about Bankruptcy, Tax Debt and Credit Cards. As those who read here are probably aware, certain taxes can be discharged in a chapter 7 or chapter 13 bankruptcy, and the general rule about credit card debt is that it is dischargeable.
But what about those tax debts that are not dischargeable. Can those debts be "converted" to dischargeable debt by paying them with the credit card?
Not in a chapter 7 Bankruptcy.
The Bankruptcy Code does not permit a debtor to discharge credit card debt that was created in order to pay the non dischargeable tax debt.
In other words, be careful before you pay any large tax debt with credit of any kind. You may be ruining your best chance in the future to rid yourself of the debt. Talk to an attorney familiar with tax debt in bankruptcy.
"Reverend Billy", is a self proclaimed anti spending preacher and preaches in name of the "Church of Stop Shopping".
He has been marching the streets with his parishioners preaching the evils of consumerism. You can read the ABC article here.
I found this funny, and thought I would share because I identify with the preacher. I tend to get preachy as well, about using credit to shop.
I am sure that my family and friends get tired of hearing my "spending on credit" spiel. Most clients already understand by the time they visit. I tell them anyway. It can be annoying, I know.
No one should use credit unless they have an emergency or unless they are sure that it can be paid off at the end of the month.
Go without, make do, but don't start building high interest debt. If you already have and are thinking about doing it some more, stop.
See what I mean. Annoying.
ABC Nightline did a recent report about the Bankruptcy Boot Camp of O.Max Gardner, III. You can read the ABC report on Max's blog HERE.
Mr. Gardner's main beef is with the mortgage servicer. The Servicer is the company that contracts with your lender (really a trust or group of trusts that hold collateralized debt/mortgage obligations, including yours) to act on it's behalf.
Servicers are always trying to find new ways to produce income. They will tack on fees in order to do so. Perhaps you have seen some, like drive by appraisal fees, attorney fees, monthly broker price opinions, and multiple late fees.
In a chapter 13 bankruptcy, the servicer will often charge these fees in secret i.e. not disclose them to the borrower nor to the court.
These accumulated and non disclosed fees then re-appear after the bankruptcy is over with, usually when the borrower attempts to sell or refinance the home.
The problem is that the borrower has filed the bankruptcy in order to catch up, so that when the bankruptcy is complete, there will be no arrears and any threat of foreclosure will be over as long as the regular payments are made.
These hidden fees are a violation of the bankruptcy discharge.
An attorney can file an "adversary proceeding" or in other words sue the servicer in bankruptcy court for this discharge violation. Doing so allows the bankruptcy filer to get the mortgage current as was originally intended by filing the chapter 13. If successful, the servicer may have to pay your attorney fees.
I attended the bootcamp in December 2006 but wherever you live, if you are a chapter 13 filer and have been having problems with your mortgage servicer, you should contact a Max Gardner Boot Camper and discuss your options.
From an article posted at bankrate.com: a bill seeking to permit those with certain subprime mortgages to use the bankruptcy code re-write the mortgage has made it through committee. In a chapter 13 bankruptcy as the law now stands, a debtor cannot alter the rights of the secured home lender unless the lender has a second mortgage that is wholly unsecured. This bill would allow the debtor with "bad" mortgage to "cramdown" or alter the amount owed on the loans themselves even if the loan is not wholly unsecured.
This is considered by many to be a dramatic resolution to the pending foreclosure wave. For those in the bankruptcy world though something like this makes the most sense.
If you are facing foreclosure you may have a solution in the bankruptcy court even if this change does not occur. Contact me to discuss your problem.
Bankrate.com has an article out today about the efforts being made by lenders on adjustable rate mortgages to "freeze" interest rates in order to slow down the foreclosure rate. Read it here.
The article discusses who benefits and who doesn't. Of course in the short term, borrowers would benefit. I am no economist, but my sense is that in the long term it is all going to come back to haunt the bank and the borrower, no matter what is done.
Student loan debt is difficult to deal with if you are unable to pay. The debt cannot be discharged in bankruptcy except in very limited circumstances. The collector of the student loan debt is able to add exorbitant fees for failure to make payments. Many have student loan debts that are disproportionately higher than the value they received from their education.
Some help in finding solutions has arrived. A new website created by the National Consumer Law Center attempts to explain the borrowers rights in plain language. I have reviewed it and found it to be very informative.
You can visit the site here.
Katherine Porter of the Iowa School of Law, has written a law review article about the relationship between the credit industry and those who have filed for bankruptcy and have been discharged. She explains what those familiar with the post bankruptcy world have known for a long while. If you recieve a discharge of your debt, the credit industry sees you as a potential customer...again. It will delude you with offers to set up a new credit line.
She argues that the credit industry's claim that consumer debt is wholly the fault of the borrowing consumer who is opportunistic and seeks out the credit is incorrect. This is clear from the amount of marketing to the post bankruptcy community. An outtake from the article makes her point:
"Consumer credit and consumer bankruptcy filings have grown rapidly over the last two decades, and several researchers have attempted to
understand the relationship between these two intertwined features of the modern American economy. Teasing out causation is almost impossible,
as consumer advocates lay blame on the industry and the industry responds by citing the same data to show consumer misbehavior. Using a
novel vantage point, this analysis examines what the credit industry's behavior toward recently bankrupt families reveals about its internal
profit models and the likely causes of consumer bankruptcy. The empirical evidence on post bankruptcy credit solicitation belies the
industry's characterizations of bankrupt families as opportunistic or strategic actors. Original data from longitudinal interviews with
consumer debtors show that many lenders target recent bankrupts, sending these families repeated offers for unsecured and secured loans. The
modern credit industry sees bankrupt families as lucrative targets for high-yield lending, a reality that has important implications for
developing optimal consumer credit policy and bankruptcy law."
The article can be read in it's entirety HERE. (It is 64 pages, have fun)
I do not disagree that the credit industry targets the newly bankrupt. I also agree that debtors are not as opportunistic as the credit industry would have everyone believe.
However, I oppose more government regulation to rein in new solicitation. Many believe that the consumer is incapable of protecting himself or herself. I disagree. The real solution lies with the consumer. The consumer has some power and that power lies in the ability to say no.
My simple advice to clients post bankruptcy, and the real solution to the problem of new debt after bankruptcy:
1. Throw all solicitations in the trash, i.e. destroy them.
2. Don't ever borrow money from a credit card provider again, unless you have a real emergency.
3. Live below your means.
When a consumer files a chapter 13 bankruptcy to save a home from foreclosure, he or she must pay the amount of the past due payments and fees that existed prior to the filing over the course of the Chapter 13 plan. After the Plan is filed, in Arizona, the consumer must continue to make timely monthly house payments.
During the chapter 13 plan, mortgage companies that are servicing the loan will charge the consumer various fees that are theoretically related to "servicing" the loan. These fees must be disclosed to the Court and permission granted for their payment. Some of the disclosed fees are reasonable and some are unreasonable and would never be allowed if challenged.
Some however, are hidden and only show up after the chapter 13 case is over. They usually appear when the consumer attempts to re-finance the home.
Fees that are disclosed to the Court and approved because they were never challenged by the consumer are legal. Hidden fees that show up after the fact are not, and according to this New York Times article are often the cause of foreclosure problems both inside and outside of the Bankruptcy context.
If you are behind on your mortgage and are using a chapter 13 bankruptcy to dig out, make sure that the fees that the mortgage servicer is charging are properly disclosed to the court and challenged if inappropriate. If after the bankruptcy, a number of fees pop up that were no where to be found during the case, talk to a lawyer familiar with the subject before closing on a new loan or paying the fee. You can contact me here and we can speak for free about the problem.