No Money To File Bankruptcy!

Bankruptcy is rising but filings are falling! Why? Simple answer: People do not have money to file for protection under the Bankruptcy Code. That may sound/read like an "Of course they cannot afford bankruptcy, they don't have any money!" Unfortunately, this is a new phenomenon.

Until recently, people would call regularly to ask for a free consultation to discuss financial problems which could result in a Bankruptcy case. Generally, we are able to work out payment arrangements with almost anyone. ALMOST is the operative word. If the person has no money and no job, and no way to pay us, even on a $25 per week basis, there is little that we can do as an office.

Understand that every lawyer does a certain amount of INTENTIONAL pro-bono work, and I do not know of an attorney who would turn away a truly troubled indigent person who just lost the house, car, wife/husband etc. That stated, none of us in Private Practice can do everything for nothing - work for free all of the time!
Because of the downturn and especially the lack of employment people aren't even calling because they feel that they cannot afford the cost of getting "peace of mind". My view of the problem is slightly different. We have accepted payments every week for a year from clients, all the while giving them as much protection as we could from creditors. Most lawyers will do that for people really in need.

Some ground rules apply:

1. Don't come in with your partner and state that you cannot afford our fees because you can't cut back on smoking 2 packs a day each. At $9/pk, that's $36/day or more than $1,000 per month.

2. While I encourage people to come in, I do not expect them to ask me to help them with a bankruptcy THEY are going to file.

3. Some folks will have to file Bankruptcy but do not want to give up they "toys" - the snowmobile, PWC, 4-wheeler, or cut back on the $200 per month cable or satellite bill because of all of the special sports channels and events, or drop the $200/mo cell service and on and on...

Filing for Bankruptcy is to give someone(s) in debt a "FRESH START". It is written that way in the Code and is discussed in cases and in Court. No one expects someone looking for that second chance to sell their soul, but to cut back on smoking, or drop a few cable channels, or give up the "bike" would seem a fair trade. The reality is that in a bankruptcy, where no unsecured creditor is getting paid back anything, you are not allowed to keep the snowmobile and the bike and the...

If you have a house, we can help you find the funds to pay your mortgage by eliminating unsecured debt. You can keep almost all of your personal property, except for things like the PWC for which you are paying $300/month for the next 36 months etc. But clothing, regular furniture, tools, in most cases automobiles (not 4 or 5), RETIREMENT plans including IRAs, and if you are renting or have no equity in your house a reasonable amount of cash/money in the bank. Depending on the situation, maybe even $10,000.

If you have the $10,000 but your debt is $70,000 you cannot pay everyone back if you have $35,000 in income and a child. But, you can either pay a small portion back, and you can pay the legal fees to file the Bankruptcy. It could be a Chapter 7 (no payback) or a Chapter 13 (payback of what you have left as disposable income each month). Or, if you wish, you can give the Trustee the $10,000, less attorneys fees, and have the Trustee distribute what is left to creditors on a pro-rata basis. It is not required, but if you feel that you should pay back what you can afford, the Trustee will certainly oblige. Just be aware that it isn't necessary in most cases.

ADVICE: If you are in debt to a point where you know you cannot make any meaningful payments, call a Bankruptcy attorney. Payment plans can be worked-out, and the initial consultation to find out about YOUR RIGHTS is always "NO COST" here.

Author's Copyright by Richard I. Isacoff, Esq., October, 2011

rii@isacofflaw.com
http://www.isacofflaw.com

Bankruptcy; Not a Four-Letter Word

Bankruptcy has had a bad reputation over the decades for some good and some bad reasons. The good reasons for a bad reputation all boil down to the issue of fraud: people who have assets and are hiding them from creditors, or people who went into business and ran up debt they could not afford, or consumers who bought "stuff" with credit (cards) with no ability to repay. In the later case, it's rather hard to repossess a vacation cruise, and in the former, if the money from profits is spent, it's gone for good. Unless intent to commit fraud can be shown, normally a Bankruptcy will wipe out debt.

Let's take a step back and discuss what a Bankruptcy does. Quite simply when a bankruptcy is filed, it protects the debtors from creditors. The are two main types of PERSONAL BANKRUPTCY - Chapter 7, where you eliminate debt without any repayment but surrender personal property and real estate that is not protected by law for the benefit of the creditors. A Chapter 13, requires that you have money left over every month AFTER paying REGULAR LIVING EXPENSES, and from the money remaining each month pay creditors on a pro rata basis.

The primary reasons for filing a bankruptcy are not voluntary at all: 1. Medical bills and illnesses 2. Loss of a job or substantial reduction in hours 3. A birth or death in the family 4. A two income household becoming a one income family 5. Bad money management. A DISTANT 6 is fraud - maybe 5%, although some experts will claim 10%.

For whatever reason, people have a negative opinion of bankruptcy - yet people would be surprised to find out about friends and neighbors have filed for protection.

Going to a different reason to have a more moderate opinion of bankruptcy filings is that THE OLD AND NEW TESTAMENTS, AND THE QUR'AN all encourage a forgiveness of debt to those truly troubled by debt. That is for the CREDITOR to FORGIVE the DEBTOR.

It makes no sense for a retired person on a fixed income to have to make a decision between food or medicine; or for a family to have to deny a child the presence of a parent so that parent can work 3 jobs to just pay basic bills. Please do not misunderstand: it is not suggested that filing a bankruptcy is the first course of action to think about, but it should not be the last, after losing everything.

Simple tips, some repeated some not:

1. Don't solicit credit cards or get as many as you can. Determine how much credit you need and only borrower that much.

2. If you find yourself using credit for living expenses, seek a credit counseling service such as Consumer Credit Counseling or Money Management International - just be certain that it is a true not for profit agency, not a scam. If you have to pay a big up front fee - stay away.

3. If you have a bank where you are known and are comfortable at a branch, ask if the bank has someone to help you budget your money.

4. As soon as you find yourself ready to get a second card/loan to make payments on the first, consult an attorney who handles bankruptcy as she/he will also deal with basic debt counseling.

5. Don' let pride get in the way of keeping your peace of mind or all you have left is a piece of mind.

For more in-depth information visit my website http://www.isacofflaw.com or other resources like the National Association of Consumer Bankruptcy Attorneys, or the American Bankruptcy Institute.

Author's Copyright by Richard I. Isacoff, Esq, September,2011

rii@isacofflaw.com
http://www.isacofflaw.com

Credit Card Companies - Legal Loan Sharking?

The last post discussed the Debt Collection practices of many credit card companies. As the economy tightens even more, many people will turn to their credit cards as a last resort to buy necessities, like food, medicine, and gasoline (to get to work if they still have jobs). An earlier post discussed the companies raising interest rates for no other reason than they can.

The majority of the card companies are owned by banks In some cases these are the same banks which are trying to recover losses incurred in bad loans; often, improper mortgage lending practice results. So, "Let it go forth throughout the land that WE, who can offer 0% financing and raise the rate the next day, have determined that NOW is the time to strike. The masses need us more than ever and we can cash-in".

LOSE HERE, MAKE IT UP THERE!

Cynical - no - realistic. I was in the business and know how it used to work. Consequently, I understand all to well the need for a profitable business line in the Bank to offset losses. Citibank, as an example, has let business many customers know, that at the expiration of the current card, the interest rate will go to the prime rate (the rate the best businesses get from banks) PLUS 18.99%. Even now, with the prime rate extremely low, the effective interest factor on one of those business cards would be 22.24%. And that is for business which pay every month, and pay more than the minimum. Others are being told that they are no longer welcome, and to find another lender.

What makes this difficult is that the same approach is being taken in the retail side, with ordinary people who pay every month, with maybe a late payment (5-10 days) once in a while. They get charged a late fee of $29-$39 depending on the card, and then, if they are late at all, the card issuer raises the rate to the "Default Rate" which is between 24.99% and 31.99%. Further, in all of the card agreements the issuers state that they have the right to raise the rate to the Default Rate if, in the opinion of the issuer, the card holder has a change in financial circumstances. This translates to "if you are late on any card, even once, we can jump your rate from 6.99% to the Default Rate. The term for this provision and practice is the "Universal Default Provision".

Delinquencies are rising quickly, not because people do not want to pay, but because of a late payment the interest rate has jumped 400%, and the card holder can no longer make even the minimum payment. If he/she has more than one card, the effect is multiplied by the number of cards. Now come the collectors!

COLLECTORS - THEY DEMAND THE 30 PIECES OF SILVER - OR ELSE!

Most collectors receive a commission on what they collect. Some collectors are paid strictly on a commission basis. To make a living, the collectors will lie, insult, threaten, call family members, neighbors, ask for post-dated checks, and do many of the things that are illegal under federal or state laws, or both. (see the post dated February 8, 2009 for details).

If you get behind and the calls start "when will you be sending in you payment? If I don't get it by then I will repossess your dentures", do not panic. Keep track of who call, when the call takes place, and the basic content of the call. Again, please refer the the Feb. 8th posting for details.

Try to determine if you can enter a payment arrangement, not with an individual creditor if you have multiple cards, but with all of them. Contact "Consumer Credit Counseling Services", or "Money Management International". They are the only 2 true non-profit organizations that have good relationships with most card issuers and which charge a nominal fee for services. They DO NOT charge a large up-front fee. Run from places that do.

AGAIN, E-MAIL OR CALL ME IF YOU HAVE SPECIFIC QUESTIONS AND NEED HELP.

Author's Copyright by Richard I. Isacoff, Esq, February, 2009

http://www.isacofflaw.com/
rii@isacofflaw.com

FAIR Debt Collection

While we are waiting for Congress to decide if the economy is worth saving, making up their minds if home ownership is a thing of the past, we should all be aware of what DEBT COLLECTORS can and cannot do LEGALLY. (While some of these rules are Massachusetts specific, many are not. Where possible annotations will be made. The Massachusetts Regulations are being used as a base because they are actually more stringent and strict than the federal Fair Debt Collections Practices Act - "FDCPA")

The primary difference, between many states' and the federal rules, is that the federal rules apply to Debt Collectors which specifically leave out a collector in the employ of the actual original creditor. For instance, a Debt Collector is an agency, call it the "XYZ Collection Agency", working for the "Bank of Wherever". On the other hand, if a bank employee, from the bank's own collection department calls trying to collect a debt, the FDCPA does not view that as a Debt Collector, which would trigger many of the protections. Massachusetts law regards employees of a creditor and collection agencies in the same light.

(NOTE: For the sake of ease, where the Federal Rule is stricter the note "FR" will appear after the item)

Collection Agencies and Creditors MAY NOT

1. Call you at home about one debt more than twice in any 7 day period, or more than twice in a 30 day period at any place else, like your place of work

2.Call you at work if you ask that they not. Unless the request is put in writing by you, the request is only good for 10 days. Put it in writing and send it certified return receipt requested. Then unless you specifically allow such calls, they are banned totally.

3.Call you without identifying the name of the creditor and collection agency for which the call is being made, and the name of the person calling. He/she can use a fake name, but the creditor/agency must be able to state who the person really is.

4. Contact you at all if you state that you are represented by an attorney (give them the attorneys name as a safety measure)

5.Use profanity or obscene language FR

6.Threaten you with legal action that the creditor/collection agency or does not take or expect to take "FR"

7.Tell anyone, except an attorney whose name you have given to the collector, about your debt, or that you even have one. The exception is if you give the collector written authority to do so.

8.Mail you anything that would lead anyone to believe that you have a debt (sending a postcard or using a return address like "XYZ Collection Agency, 5 Nasty Lane,..." or "XYZ Visa, Collections Department, ...."

9.Ask you to send post-dated checks "FR"

10.Call you outside of normal waking hours. If the caller does not know, 8am-9pm is allowed. If you state that you work nights and sleep days, any call during the day will be a violation

As delinquencies and other late payments increase, collectors, both in-house and working for an agency, will become significantly more aggressive. That has already started. Many collectors work on a strict commission basis, so getting you to send anything is good for the collector. Even getting a promise to send money by a certain day can bring the collector a commission. Remember, when all is said and done, a collector is a salesman - he/she is selling you the need to pay, even if you cannot.

Do not fall for the line "Well, I see on your credit report that you still have $1,200 left on the ABC Mastercard. Why don't you use that to pay us. I will be glad to take your card information over the phone. That will stop us from taking you to Court next week" DO NOT DO IT!!!! In addition to taking money that you cannot pay back, you are allowing yourself to be bullied and are permitting the collector to act illegally. Get his name, the company name and a return telephone number. Send the information to the Attorney General's Office, Division of Consumer Affairs, or the equivalent in your state.

More about creditors, and credit card companies in particular, within a few days.

As always, if you have a specific question, e-mail or call me. Please state that you have a question related to this BLOG.

Author's Copyright by Richard I. Isacoff, Esq, February, 2009

http://www.isacofflaw.com/
rii@isacofflaw.com