When Does a Claim Accrue against Chapter 7 Debtors?

I have a pending auto accident case in which the issue of when a claim accrues against a Chapter 7 debtor has come up.  In my case, the debtor was involved in an automobile accident approximately one year prior to her filing a Chapter 7 bankruptcy petition.  Attorneys for the plaintiff placed the debtor's insurance company on notice of the plaintiff's claim, but did not place the debtor on notice.  The plaintiff's attorneys filed suit two months after the debtor filed her Chapter 7 petition.  About thirty days after plaintiff filed her complaint, the bankruptcy court entered an order of discharge and closed the the debtor's case.

A motion to dismiss the plaintiff's lawsuit is now pending.  The argument in favor of dismissal is that the automatic stay renders the complaint filed by the plaintiff void.  Thus, the argument follows that since the complaint is void because it was filed in violation of the automatic stay, the suit must be dismissed.

This is certainly a frustration for the plaintiff.  Had she known about the bankruptcy, she could have filed a motion for relief from the automatic stay and agreed not to pursue any recovery from the debtor beyond available insurance coverage.

One lesson learned from this case is that plaintiff's counsel should do a quick search on PACER (the federal case reporting system) to determine if defendants have filed for bankruptcy protection.  A lesson for debtors is that they should be sure to include any potential claims against them in their bankruptcy filing.

Stay tuned to learn the outcome of this interesting legal question.

www.debt-relief-law.com

www.henry-legal.com

(502) 245-9100

Student Loans and Bankruptcy

Student loan debt is the most pressing problem in the realm of consumer law.  There is currently $1.48 trillion in outstanding student loan debt, and 44.2 million Americans have at least some outstanding student loan debt.  The current student loan delinquency rate is 11.2%, and the median student loan payment for borrowers between the ages of 20 and 30 is $203 per month.

Generally speaking, student loans, whether federal or private, are not dischargeable in bankruptcy.  If you can show undue hardship, meaning that repaying the loans would result in your inability to maintain a minimal lifestyle, you may be able to discharge part or all of your student loans.  However, courts are extremely reluctant to find undue hardship.

Using Chapter 13 to Address Your Student Loans

Chapter 13 of the bankruptcy code is a means that is available to address student loan debt.  Chapter 13 is a repayment plan that is usually 36 to 60 months in length.  Your payments will be based on disposable income left after your reasonable monthly living expenses.  For example, if you have $300 disposable income after your reasonable monthly living expenses, your Chapter 13 plan payments will be $300 per month.  The money goes to the Chapter 13 Trustee, who distributes the money to your creditors, including your student loan creditors.

Chapter 13 Approaches to Student Loan Debt

Chapter 13 allows the creation of different classes of unsecured creditors, which includes student loans, credit card debt, health care debt, etc.  You can treat student loans in one of three ways in a Chapter 13.  

First, you can treat student loan debt the same as all other unsecured creditors.  This means that student loan creditors will receive the same payment percentage as all other unsecured creditors.  

Second, you can create a special class for the student loans and pay a higher percentage to the student loan creditors than to the other unsecured creditors.  

Third, you can create a special class for the student loan creditors and pay zero percent to them while paying the remaining unsecured creditors.

The approach taken will vary depending on your individual circumstances.

Cautions Regarding Chapter 13 and Student Loan Debt

Some cautions are in order.  First, your student loan debt will not be discharged via the Chapter 13 plan.  Any unpaid portions on the student loans will remain, and interest will continue to accrue.  But, all collection actions have to stop during the repayment period.  Your other unsecured debt will be discharged if you successfully complete your repayment plan.

While not a discharge or long-term solution, Chapter 13 may be the best means to address your student loans if you are unable to pay them.  Of course, once you complete your repayment plan, you should have more disposable income.  But, if you still are unable to pay, you could always immediately file another Chapter 13 petition.

If you are struggling with student loan debt, contact a skilled bankruptcy lawyer to discuss your options.

www.debt-relief-law.com

(866) 279-9721

(502) 245-9100

Neighbor Spoofing: The Latest Robocalling Plague

Have you gotten a call lately that looked like it was from your area only to hear a telemarketer on the other end when you answer?  Most likely, you have.  This is called neighbor spoofing, and it is one of the latest tricks robocallers use to get around call blocking software.

Neighbor Spoofing Defined

Neighbor spoofing is a form of caller ID spoofing used by telemarketers, scammers, and robocallers. Neighbor spoofing uses auto-dialing and VoIP (Voice Over Internet Protocol) services to send unsolicited phone calls with an outgoing Caller ID that closely matches your area code and phone number.

By matching their caller ID as closely as possible to the phone number they are placing the call to, spammers can trick more of their targets into answering the phone. 

Some of these robocallers spoof phone numbers associated with the IRS.  If your phone has name plus caller ID, then you are likely to answer.  The callers then try to extort money from you for taxes you don't owe.  Beware that the IRS will never call to try to collect money.

What to Do

Unfortunately, there isn't a great deal that can be done unless you invest in a paid app for your smartphone.  The best approach is not to answer any call from a number you don't recognize. Robocallers normally won't leave voicemail because of he possibility that the call might be traced.  If the call is important, then the caller likely will leave a voicemail.

Remember that if you do happen to answer a spoofed robocall, don't engage.  No matter how angry you may be, hang up immediately.

We will keep you posted with developments on this front as they unfold.

www.henry-legal.com

(866) 279-9721

(502) 245-9100

Consumer Bankruptcy Basics

Bankruptcy is a means for individuals and businesses to get a fresh start by either eliminating their debt or repaying their debt over a term of months (usually 60 months).

If creditors or debt collectors are calling you, perhaps bankruptcy is right for you.

Chapter 7--eliminates most unsecured debt. In business this is a liquidation of assets to be distributed to creditors.

Chapter 11--business reorganization plan.

Chapter 12--farming reorganization plan.

Chapter 13--repayment of debts usually over 60 months. Can be an effective means to keep a family home if you’re behind on your payments.

Chapter 7: Eliminates most unsecured debt (usually will not eliminate student loan debt).

Secured Debt--3 Options:

Reaffirm

Surrender

Avoid Lien (non-purchase money lien)

The Means Test (looks at median household income for household of your size)

Chapter 13: Repayment plan usually over 60 months

Can put arrearage on mortgage in plan and pay mortgage outside plan

Repayment is usually less than 100% and can be based on your income

Can be payroll deducted

www.debt-relief-law.com

(502) 245-9100

Considering a Debt Settlement Company? Here are Some Tips

If you are considering hiring a debt settlement company, you should consider the decision carefully.  I have considerable experience working with debt settlement companies in my debtor defense practice.  I must say that my view of these for profit debt settlement companies is not particularly positive.  Sadly, many of my clients have paid thousands of dollars to a debt settlement company only to have a lawsuit filed by a creditor who is not receiving payments filed against them.  And, in most cases, we have no defense to raise against the lawsuit.  The only alternative at this point for many clients is to file a Chapter 13 bankruptcy if they own property or a Chapter 7 if they don't.  I once had a client who owned real estate with a value of approximately $150,000 who had two judgments against him for approximately $25,000 while working with a debt settlement company.  Even though he was on Social Security disability, he had to file a Chapter 13 bankruptcy to protect his real estate, which could have been seized and sold to satisfy the judgments.  Below are some thoughts that may help you in deciding whether to hire a debt settlement company.

Some of your creditors may also refuse to work with the debt settlement company you choose. In many cases, the debt settlement company will be unable to settle all of your debts.

Debt settlement companies often claim they can negotiate with your creditors to reduce the amount you owe. However, before working with a debt settlement company, you should remember: Debt settlement companies often charge expensive fees. Debt settlement companies typically encourage you to stop paying your credit card bills. If you stop paying your bills, you will incur late fees, penalty interest and other charges, and creditors will likely step up their collection efforts against you. Unless the debt settlement company settles all or most of your debts, the built up penalties and fees on the unsettled debts may wipe out any savings the debt settlement company achieves on the debts it settles. Using debt settlement services can have a negative impact on your credit score and your ability to get credit in the future.

You could owe taxes on debt that is forgiven. If a portion of your debt is forgiven by the creditor, it could be counted as taxable income on your federal income taxes. You may want to consult a tax advisor or tax attorney to learn how forgiven debt affects your federal income tax.

You could end up further in debt than when you started. Most debt settlement companies will ask you to stop paying your debts in order to get creditors to negotiate and to collect the funds required for a settlement. This can have a negative effect on your credit score and may result in the creditor or debt collector filing a lawsuit while you are collecting settlement funds.  I see this happen frequently in my practice. And if you stop making payments on a credit card, late fees and interest will be added to the debt each month. If you exceed your credit limit, additional fees and charges may apply. This can cause your original debt to increase. 

Don't do business with a debt settlement company if it: (1) Charges any fees before it settles your debts; (2) Touts a "new government program" to bail out personal credit card debt; (3) Guarantees it can make your debt go away; (4) Tells you to stop communicating with your creditors; (5) Tells you it can stop debt collection calls and lawsuits; or (6) Guarantees that your unsecured debts can be paid off.

If you do business with a for-profit debt relief company, the company may tell you to put money in a dedicated bank account, which will be managed by a third party. You may be charged fees for using this account.

Consider as an alternative to a debt settlement company consulting with a non-profit, consumer credit counseling service. These organizations will attempt to work with you and your creditors to develop a debt management plan that you can afford, and that can help get you out of debt. They usually will also help you develop a budget and provide other financial counseling.

Also, you may want to consider consulting a bankruptcy attorney, who may be able to provide you with your options under the law. Some bankruptcy attorneys  will speak to you initially free of charge (we don't charge for an initial consultation).

In conclusion, if you are considering hiring a debt settlement company, think the decision through and consider your options before signing up.

www.debt-relief-law.com

(502) 245-9100

Stop Foreclosure

     Early in this decade home foreclosure was a raging epidemic.  With the improving economy, the foreclosure epidemic went away… or did it?  In 2016 one in 2505 mortgages in Kentucky was in foreclosure, and one in 1036 mortgages in Indiana was in foreclosure.  On March 4, 2017 Zillow listed 5037 foreclosed Kentucky homes and 9685 foreclosed Indiana homes for sale.   In the first quarter of 2016 70% of loans in foreclosure were originated prior to 2009 even though these loans accounted for only 30% of outstanding loans. 
      As of February 2017, the first mortgage default rate nationwide was 0.72% (7.2 loans per 1000), and the second mortgage default rate nationwide was 0.48% (4.8 loans per 1000).  The trend for both first and second mortgage defaults increased from fall 2016 according to the S&P/Experian indices.
     While there may be a lower percentage of defaults compared to the height of the recession, the statistics above clearly show that many residents of Kentucky and Indiana are facing the prospect of losing their homes.  The sad fact is that many of these folks will lose their home unnecessarily.
     When people fall behind on their mortgage payments, either first or second mortgage, they suffer a feeling of helplessness.  Since they did not have sufficient income to meet their obligations, they often feel that there is no way to ever catch up.  However, the Bankruptcy Code provides a potential source of relief for those who are facing a possible foreclosure.
     Chapter 13 of the Bankruptcy Code allows persons who are behind on their mortgage to place the amount they are behind in a plan to repay their debts over a period of 36 to 60 months.  And, if they have a second mortgage but no equity in their home, the second mortgage can be “stripped off” and treated as any other debt.
     Regular mortgage payments are made outside the Chapter 13 plan.  If the person fails to make the required payments, the mortgage holder may ask the court to allow it to move forward with foreclosure.
     Suppose a person has a $200,000 first mortgage, but the home is only worth $275,000.  Suppose also this person has a second mortgage of $50,000.  Since there is no equity in the home to secure the second mortgage, it can be stripped off and treated as any other unsecured debt.  These debt are paid back at less than 100%, sometimes much less, and when the Chapter 13 plan is completed and the court enters the discharge order, the second mortgage is erased.  But, if the person fails to complete the plan payments and the case is dismissed, the second mortgage is not stripped off.

     Stripping off the second mortgage only works when there is no equity in the home to secure the second mortgage.  For example, if a home has a first mortgage of $200,000 and a value of $300,000 with a second mortgage of $75,000, then there is $100,000 to secure the second mortgage.  But, if the first and second mortgages exceed $300,000, the second mortgage can still be stripped off.
     A person facing foreclosure needs to consider whether she can afford to keep the home.  If it it is a tight financial situation, then perhaps Chapter 13 is not the best choice.  An experienced bankruptcy attorney can certainly provide guidance in this regard.

www.debt-relief-law.com

$49.9 Million TCPA Settlement Approved

The United States District Court for the Northern District of Illinois granted final approval of a $49.9 million Telephone Consumer Protection Act class action settlement against US Coachways, Inc on November 9. 

The plaintiffs filed the original Complaint against US Coachways on July 29, 2014, alleging that the motor coach leasing company sent out thousands of unlawful text messages to whom they hoped were potential customers in violation of the TCPA. The lead plaintiff allegedly received more than 20 unsolicited text message advertisements.   

The class consists of “all persons within the United States who received one or more text advertisements on behalf of US Coachways, Inc. at any time in the four years prior to the filing of the Complaint continuing through the date of the Settlement Agreement.”  There were no requests for exclusion and no objections from the class, which consists of more than 85,000 individuals. 

US Coachways cannot fund the settlement and tendered a claim for coverage to its insurer for defense and indemnity, but the insurance company denied coverage.  US Coachways has now  assigned its rights against the insurer to Plaintiff and the class, and agreed to contribute $50,000 which was applied toward the cost of notice to the class.  Plaintiff and his counsel will next pursue an action against the insurer to collect on the $49.9 million judgment.

henry-legal.com   866-279-9721