Archive for December, 2010

Chapter 13 Bankruptcy and Foreclosure Is Not for Everyone

Sunday, December 26th, 2010

Question:
What should we do?  We have over $40,000 in credit card debt and $80,000 in a second mortgage. The value of our house equals our first mortgage and we had to move outside the area for a job opportunity.  There have been no offers on the house.  We don’t qualify for a Chapter 7 discharge and a bankruptcy attorney explained that over the next five years, we will end up paying all income, above our necessities and rent, towards our Chapter 13 payments to pay off the debts.  We would not be able to save a penny for the next five years, even for emergencies.  The legal fee for filing the Chapter 13 is $4,000, and we are not sure what this covers.  We are current with all our payments and have some credit cards maxed out, while a couple still have unused credit. The bankruptcy attorney advised us to stop paying everything: no more payments on credit cards and no more mortgage or other payments on the house, let have go into foreclosure.

My response:
Before you commit yourself to paying your entire disposable income for the next five years towards paying these debts and not able to save anything for a rainy day, perhaps you should see what happens if you stop paying some or all of your credit card debts.  You can then negotiate your credit cards and use the savings over the next few months to settle one or two of the credit cards.  There is a risk that all credit card companies will close your unused credit lines under the “universal default” clause in many credit card agreements, but maybe not or maybe they will not close immediately.

As to the two residential mortgages, consult with a licensed real estate agent or broker in your area, who has experience in short sales.  Perhaps you sell the house and satisfy both the first and second mortgages, to avoid foreclosure by either.  Selling the house should payoff the first mortgage.  Dealing with the second mortgage as an unsecured loan, will force them to settle for much less. I had a prospective client tell me that the second mortgage lender contacted them after the foreclosure and proposed to settle for 10% of the balance. That’s 90% off.  If you can get a good settlement, then this will lower by about 2/3’s your unsecured debt.

If you are successful with the second mortgage and a few other debts, you can then deal with the remaining debts in the civil courts, if they file credit card lawsuits.  I represent clients against creditors and debt collectors in credit card lawsuits.  Or, you can go back to the bankruptcy attorney with much less debt, which will give you much lower payments on the few debts included in the Chapter 13.  The risk if a five-year bankruptcy where you have no wiggle room for a bad month, is that if you have an income disruption or unforeseen expenses, unless the court approves a modification of the payments, your petition will be dismissed. In this economy, five years is a long time to expect no problems.

My web site has a video that discusses all your alternatives if you are sued in a debt collection lawsuit.  Please see:  www.stopcollectionlawsuits.com

Robert Stempler

Wage Garnishment on a Default Judgment. Help!

Friday, December 24th, 2010

Question:
My employer has received an order to garnish my wages. I am already living paycheck to paycheck. I cannot afford to lose any of my wages on an old debt.  I didn’t even know or receive anything about a credit card lawsuit or a judgment until this happened.  What can I do?

My response:
Many people who call me have this situation.  First, perhaps nothing will be taken from your wages or you can any part of your wages that may be garnished exempted.  Please see my legal guide on Avvo.com at this link, which will take you through all the steps you need to figure out how much can be deducted and how to lower that amount so it is bearable: Making Garnishment Bearable.

The next step you should also take right away: go to the courthouse and get a copy of the entire file.  You need not pay to have the court clerk “certify” the copy, a regular copy of the entire case file is fine for this purpose. If you have the case number, you may be able to go to the court’s web site and see the register of actions and perhaps print many of the documents.  I have another legal guide on Avvo.com on how to get civil court records online for free or almost free at:

http://www.avvo.com/legal-guides/ugc/getting-online-case-information-from-many-california-superior-and-small-claims-courts-1

At this point, you are ready to consult with a debt collection defense attorney, who has experience in setting aside default judgments.  Some lawyers don’t know how to get an old judgment set aside and mistakenly believe that after two years, a default judgment cannot be set aside.  That is not true, because the United States Supreme Court has held in numerous cases that the Due Process clause requires you to have your day in court, if you were not properly served.

When I am contacted for a default judgment, I typically ask for documents the client has proving where they were when the credit card lawsuit was supposedly served.  Many times a former or incorrect address is used for service. Then I will ask the client to provide me with documents proving that they lived at a different address, such as drivers license, DMV records, bank and credit card statements, lease agreements, business and official mail, and records from family court cases.  Anything that shows the actual address is good, so please do not throw away these documents, keep them organized in file folders or scanned into your computer.

Robert Stempler

You are Summonsed to Court for an Unpaid Debt: Your Next Steps Count

Thursday, December 23rd, 2010

There’s a knock at the door.  You don’t recognize the person through the peep hole. The person persists, so you open the door to find out what they want to deliver.  The person hands you ten pages of legal papers stapled together. It’s a summons and other documents for a lawsuit concerning a debt that you had hoped was forgotten.  It’s seems like years since the last time you sent a payment on it, but the day of reckoning has arrived. The person leaves, after mumbling something about being “served.”

If you recognize the debt as one that you had and the lawsuit filing date is within the statute of limitations period, then as soon as possible, call the law firm on the papers to see what they want to settle.  The summons in California Superior Court provides for 30 days from the date you are personally served, and you will probably need as much time as possible to decide what direction you want to pursue.  Ask the total amount they require and what payment arrangements they would accept.

Find out if they can offer you a hardship waiver and what they need for you to obtain that. Also, how much discount they would offer for your hardship. At this point, you are exploring your options.  Do NOT set up a payment plan when you call the first time and do not give them any of your personal account information in the first call.  You need time to review your options and consider your finances, before you start giving out the keys to your bank vault.  Review your finances carefully, to know what you have and can afford.

They will probably ask you some questions. You need to be truthful, but that does not mean you need to answer every question asked.  They will ask questions about your finances. If you want to try to negotiate with them on the balance, you will need to give them basic information about you, such as your income and ability to pay.  They have probably seen your credit report, so they may already know your debts and payments, almost as well as you do. If they ask you to admit you owe this debt to them, you can truthfully say that you are still researching that and would appreciate them sending you documents they have proving their claim that you owe the debt.  You want proof in writing from this company.  A lawsuit itself is not proof, unless they attach exhibits to the complaint, which may or may not be sufficient.

If you are not sure that they have acquired this debt from a legitimate owner of the account, you should follow up any request by phone with a letter that you send by certified mail, return receipt.  A sample letter for verification of the debt within 30 days of first receiving a letter or other written communication from a debt collector is sample letter 1.1 at http://stopcollectionharassment.com/sample_letters.htm

Sending the letter does not resolve the lawsuit and it may not even stall for time.  If you have decided that they are demanding too much and you want to fight, then you or your debt collection defense attorney must file papers with the court and pay a filing fee to respond (usually hundreds of dollars for each defendant, even both defendants are married).  Timing is important, because if you fail to file the papers timely, the collection attorney for the debt collection agency will try to take advantage of your delay and request entry of a default judgment. That means a judgment may be entered soon thereafter, without a court fight.  To review the timing of when you must respond to a collection lawsuit, please see my blog posting: “Deadline to Respond to a Credit Card Lawsuit, Do Not Confuse with Hearing Dates.”

For a big picture review of all likely options, please visit: www.stopcollectionlawsuits.com

Robert Stempler

Freebies that Make Your New Year Bright

Friday, December 17th, 2010

The best thing you can do to ensure that you are not the victim of identity theft and that there are no bogus default judgments filed against you by debt collection lawyers in the court system is to check your credit report.  Now is a great time to get your credit report, because it will help you start the coming year by cleaning your financial slate.

Anyone with a television or a radio knows how to get a credit report, because the advertisers want you to believe it is free and memorize their jingle.  Free credit reports do not pay for expensive TV commercials and radio spots. Charging you an annual subscription and other fees is how they “get ya” to help them make a profit.  Besides, a report that merges the big three credit reporting agencies into one, mish-mashed report can be difficult to decipher who is reporting what.

Instead, I advocate people order every 12 months their annual credit report from https://www.annualcreditreport.com/cra/index.jsp, which is a web site set up by Experian, Equifax, and Trans Union to comply with federal law that requires them to provide every consumer with a free credit report once per year.  Here is a link to the Federal Trade Commission that has more information about the annual free report: http://www.ftc.gov/freereports. At this site, you can order one credit report at a time from each of the big three agencies.  For your privacy and protection, you must answer correctly some questions, such as your monthly mortgage payment, the name of the lender on your home mortgage, or how much was the original loan balance. The system allows you to print or save the report to your hard drive. If you save it, then you may print or view it on screen as many times as you like. If you exit without printing or saving the report, then the system will not let you view it for another 12 months for free.

To find out if there are any debt collection lawsuit default judgments against you, view the area on the report that shows public records.   Public records are court judgments, tax lien filings, and bankruptcy filings.  Some credit reports also show certain debt collections in this area.  There are other ways to see if a court has any judgments or cases against you, which is the subject of a legal guide I have on www.Avvo.com and another blog posting.

If the report contains any judgments, accounts, or inquiries by companies with whom you never had a credit relationship nor have authorized them to review your credit reports for an application for credit, employment, or insurance, then you may be the victim of identity theft or an attempt to steal your personal information and illegally use your credit. I prepared for www.Avvo.com a legal guide on how to protect yourself from identity theft, which is at this link: http://www.avvo.com/legal-guides/ugc/steps-after-learning-you-are-a-victim-of-identity-theft

My other web site has a free sample letter that you can send by Certified Mail to companies that you do not recognize on your credit report under the inquires section.  See sample letter 4.1 at: http://stopcollectionharassment.com/sample_letters.htm.

Happy New Year,
Robert Stempler

The “Deadbeat” Misnomer

Monday, December 13th, 2010

In the fourteen years that I have been representing consumers against financial institutions and debt collectors, I have met only one person whom I believe obtained debts for non-essential items that he knew he would not be able to pay, when the debt came due. That’s how I would define a “deadbeat,” although the term is often applied to a spouse who has the money, but refuses to pay court-ordered child support.

In this difficult economic period, I have noticed fewer debt collection attorneys referring to debtors as “deadbeats.” A few years ago, it was not unusual for the creditor or debt collector’s attorney to use the term, when referring to my client. I cannot recall the last time I heard it spoken. More often, I hear the other side refer to “hardship cases.”

This may not be good news for our economy, but not hearing this term is a welcome development. Over the years, I have heard many reasons that people fell behind on credit cards and other debts. Examples that I recall most: job loss, medical bills, child care, disability, unexpected automobile repairs, death in the family, identity theft, mistaken identity, false charges, and dealership fraud.

I have been honored to represent many consumers, as they struggle to keep their family together on a tightening budget, with fewer ways to save for emergency needs and special situations that arise. I am proud that my clients are not “deadbeats.”

Robert Stempler

Motion for Summary Judgment: How it Costs You Money and Avoids a Trial

Sunday, December 12th, 2010

Most people want their “day in court” with a trial on the merits.  Debt collection lawyers have several procedural tricks up their sleeves to keep their time to a minimum in credit card lawsuits, by getting a court judgment without a trial.  I discussed the civil procedure known as, “motion for judgment on the pleadings,” in my September 2, 2010 blog entitled: “Today A Court Entered Money Judgments Against Consumers Who Tried DIY Lawsuit Defense.”  In this blog, I discuss the “Motion for Summary Judgment,” which many lawyers and judges abbreviate to “MSJ.”

Many consumers believe that they can explain their side of the case to the judge at trial, if they file the right papers within 30 days of being served with the lawsuit. Even those debtors who timely file the “right papers” in court, lose almost all the time, after the debt collection attorney files an MSJ.  The case is stacked against debtors. MSJ is the procedure in which the judge reviews the law and the evidence, determines if there are any material issues that require a trial, or if a judgement can be entered for the moving party.

Debt collection lawyers file many MSJs every week, because it is efficient for them to win without having to go to court for a trial.  It’s also more efficient for the court.  In the time that the court can hear one debt collection trial, it could probably enter judgment on five or more cases, when the creditor files MSJ.

In a recent conversation that I had with a seasoned debt collection lawyer, he told me that in ten years of representing debt collection agencies and creditors, he has filed five or six MSJs per week on average.  Assuming six MSJs over 10 years with 50 weeks per year, that means he has filed about 3000 MSJs and won almost all of them.

Under the 2010-2011 State Budget, the filing fee for an MSJ is now $500, which will be added to the judgment against the consumer, if the MSJ is granted.  Or, if the debtor defeats an MSJ, the $500 fee may still be added to the final judgment, if the creditor wins at trial.

To view a sample MSJ by a debt collection law firm, please follow this link: http://www.stopcollectionlawsuits.com/collection_lawsuits_examples.php on my web site.  About half-way down, you’ll see six PDF files that are actual examples of the papers used by a debt collection law firm filing an MSJ.  Most debt collection firms use a similar format.

Hiring an experienced debt collection defense attorney is no guarantee that you will defeat an MSJ and have “your day in court.”  However, your chances improve markedly, because we know what facts to prove to defeat an MSJ.  And, we also have the experience to know when we should advise our client to settle, so our client does not lose a judgment and end up paying the extra court costs.

Robert Stempler