The week I retained my attorney, I was served papers from one of the collectors (Eaton Group Attorneys) that they were going to seize the money in my bank accounts.
I called my attorney so she could stop them from carrying it out. She had already drafted a letter to that collector that had a judgment against me to cease and desist.
I hadn’t had a chance to write a post about it. I’ve been trying to focus on bigger articles on this and other blogs.
Lesson?
Once a creditor or collector has a judgment against you they can proceed with getting a writ of seizure or a writ of garnishment or both. They can force you into bankruptcy.
Even though a debt is unsecured, they can still legally come after you and take money and assets. Just because the credit card company probably won’t do it doesn’t mean the collectors they sell your debt to won’t do it.
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June 27th, 2008
Posted by
joubess |
Legal Issues |
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There is a difference between defaulting on unsecured debts and secured debts. I defaulted on unsecured debts.
First, remember that I’m not a lawyer and I’m not giving legal advice, but if anyone is telling you that you can default on a secured debt and end up keeping the asset, you’re getting bad advice. If the debt was secured they can repossess that asset. They can seize the asset itself and any other assets you may have that would cover the total debt you owe. There is a process they have to follow.
For example, if you default on a car loan they can repossess the car and sell it at auction (read pennies on the dollar). They won’t sell the car for as much as you owe on it so they will sue you for the difference. You can attempt to work out a payment plan with them by appearing in court and presenting your financial situation to the judge to get a payment plan or some other relief the judge orders. You will lose the law suit because you owe the money. The legal term for what the collector now has against you is a judgment.
If you didn’t appear in court they can take further legal action. They will get a writ of garnishment and/or seizure. That means they can garnishee your wages and seize any money in your bank accounts. They can come into your house and take assets until they have enough in value to pay off your debt at sheriff’s sale prices, which amounts to pennies on the dollar. They can take your family heirlooms, the baby’s crib, your furniture and electronics, whatever they decide until they have enough to cover what you owe. You can’t stop them or you will be arrested and put in jail. They bring the sheriff with them in case you cause any trouble.
I don’t know much about foreclosures on a first mortgage beyond what I’ve heard and read, but I know they take your house and sue you for the difference between what they sell it for and what you owe. They don’t usually come in and take your personal assets but they can.
If you default on a second mortgage, either a home equity loan or line of credit, they usually don’t want the house, they want their money. Defaulting on a second mortgage will usually get you sued and your wages garnisheed unless you can work out a payment plan in court or with the creditor before they file for a writ of garnishment. You will very likely end up with payments or a settlement for a second mortgage default, unless it’s for most of the value of the property.
Dealing with Repossessions and Foreclosures
There are ways to deal with repossessions and foreclosures. You can file for bankruptcy protection and get the repossessions and foreclosures under it so the debt is settled. You lose the assets but they can’t come after you for the differences you would owe outside of Chapter 7 bankruptcy. If you file a Chapter 13 bankruptcy, these debts will be a part of the total debt settlement agreement the court makes with you. After paying off the Chapter 13 bankruptcy (5 years), you no longer owe any of the debts that were discharged.
If You’re Not Bankrupt
If you’re behind on a car payment:
- catch it up and keep it current while you –>
- sell the car yourself before they repossess it. You’ll get more for it and may be able to finance the difference with a local small bank or credit union. Since the difference between what you owe and what you sold the car for will be much smaller, it’s less likely that they will try to seize your assets.
- work out a payment plan in which they don’t sue you and garnishee you wages or seize your assets
- get sued and have your wages garnisheed. If they sue you, you can appear in court and present your total financial situation to the judge, even though you will lose the suit, and the judge will set the payment terms.
- come up with the cash yourself. It would be better to take a cash advance on a credit card to pay these sharks off than to allow them to continue to harass you.
- If you don’t appear in court and work something out or pay the debt, expect further legal action that you won’t like including writs of garnishment and seizure
It’s in your best interest to make one or more of the less distressful options work for you than to allow the finance company to continue taking legal action against you.
If you’re behind on your mortgage payments you can do the following:
- work out a catch-up plan with the mortgage company (get the agreement in writing)
- sell your house for the amount you owe on it and pay off the mortgage(s)
- do a short sale without recourse (the price you get is less than what you owe on the house but the bank agrees in writing not to come after you for the difference)
- do a short sale with recourse (you have to pay the difference somehow and the bank will likely sue you)
- do a deed in lieu of foreclosure where you give the house back to the bank (with or without recourse)
- as a last resort, the bank forecloses on your mortgage
You have a lot of options when you’re facing foreclosure, and foreclosure is your last resort if you can’t make any of the other options work for you.
Banks and mortgage companies will work with you on other options if you’re persistent, have a written plan or actual offers to present to them, and you sit down with someone at the bank or mortgage company face-to-face who has the authority to make a deal with you and put it in writing.
The bank really doesn’t want your house. If they end up with your house then they have to sell it. Foreclosure sales are usually by auction at the court house directly after a set of properties are foreclosed on. The bank or mortgage company will then sue you for the difference between the auction sale price and what you owe. They will win the judgment and can take further legal action to garnishee wages and seize money and other assets. Again, it’s in your best interest to work something out before a foreclosure happens.
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June 15th, 2008
Posted by
joubess |
Legal Issues, Resources |
4 comments
If you haven’t read my first post on my bankruptcy proceedings, please read it here.
I’ve been working on my To-Do list
I located the Capital One law suit papers in my business file cabinet and took them to my attorney’s office yesterday afternoon. Hopefully, she’ll get a cease and desist letter out to them this coming week.
I’m about half way finished with the 26-page information packet. As soon as I get everything done on that I will get online and get another pre-bankruptcy certificate. I’m working on those two things this weekend.
I called my accountant and my 2007 tax return should be finished in 1-2 weeks. I need to call back and discuss what tax implications bankruptcy has. I haven’t ever seen anything about bankruptcy and taxes. I have to conclude from this that 1) it has no affect on your taxes, 2) any affect is minimal, or 3) nobody is worried about taxes unless you owe the IRS. I’m going to talk to my accountant again and do some more research to see if there are tax implications when you file for Chapter 7 bankruptcy and whether they will affect me.
My Attitude About My Debts
Just before I retained my attorney I received another letter from Capital One that they reported my delinquent account to all three credit reporting agencies. The first words that came to mind were “so what, it’s not like my credit isn’t already in the toilet”. It may seem like I don’t care about my debt anymore. I sure don’t care about my FICO score. In some ways I do care about the debt. I spent the money and I feel bad that I can’t pay it back without jeopardizing my future and my son’s future.
But in some ways the credit and collections systems have abused me so much now that they don’t deserve anything more from me, especially not my fear of any actions they may take against me. The debts I defaulted on are unsecured. They took a calculated risk when they gave me unsecured credit. That risk is built into their interest rates and fees and they know about how many debtors default and for about how much. They have recouping systems in place to cover those losses and still make a profit. They didn’t make such a bright decision when they gave me a bunch of credit in the first place. I didn’t make such a bright decision in applying for all the credit either. We were both stupid and we both deserve to pay some stupid tax.
I feel I’ve paid my stupid tax over the last two years of attempting to catch up on what I owe and to pay whatever was fair when I could no longer catch up.
The original creditors have already taken a tax write-off on the defaulted debts and sold them to collectors to recoup some of the money. The collectors bought the debts for pennies on the dollar and received some payments toward them. Some collectors sold some debts to other collectors. Two of my debts have been sold three times. Those collectors also jacked up the interest rates so much and added so many fees to each balance that the majority of what I still owe is added interest and fees, not original interest or principle. I no longer feel a moral obligation to pay off legal loan sharks.
Capital One sued me in 2006 and hasn’t taken any further legal action against me, so it’s just another empty threat. Since they have a judgment against me they could file for a writ of garnishment of my earnings. They haven’t done that. They could get a writ of seizure of my assets but that’s far less likely than garnishing wages. They could get a writ to just seize money in bank accounts. They haven’t done that either.
Now I’m legally under the bankruptcy protection umbrella and they can’t do anything more to me. The report to the credit bureaus was the last action they could take. I retained my attorney a few days after receiving that letter.
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June 14th, 2008
Posted by
joubess |
Bankruptcy |
4 comments
This is part I of my experience. I’ll post additional parts as I continue through the process. Right now I’m guessing this will be about a 3-part article based on what my attorney told me.
I met with my attorney Wednesday, May 28. She went over the laws of Chapter 7 bankruptcy in the State of Louisiana and we discussed my income sources and expenses, and why I want to file for bankruptcy.
My attorney’s name is Elizabeth Hall. She specializes in bankruptcy and I found her name on a bus stop bench that I’ve been driving by for the last 2 years going to and from tutoring. I checked with the Louisiana Bar Association and found she’s been practicing law here for 20 years and specializes in bankruptcy. The entire process costs $799. That includes her fee and court costs. There are very few things for which she charges an extra fee, and so far, none of my information requires them.
Her retainer fee is $100 and she’ll file the case when the full $799 has been paid to her office. She accepts payments until your case is paid for before she does all your paperwork and files your case. She says all bankruptcy attorneys do it this way because all the clients are in financial trouble and no one will take on any credit risk with people like us.
I had another attorney, but he raised his prices considerably and I decided if I don’t have enough money to pay my bills, I don’t have enough money to line his pockets. My previous attorney also does a lot of other work, so I figured I needed someone who specializes in bankruptcy to handle my case.
It’s a really small world. I’ve met my attorney’s dad. He was a chemical engineering professor at LSU when I was a student. I never had Dr. Hall as a professor because I was in chemistry, not chem-e, but many of my friends had him and really liked him. He was like me. He got a bachelor’s degree and worked in industry for awhile before he went back and got his Ph.D. and decided to teach. I don’t have the Ph.D., but the teaching with industrial experience is similar. My industry experience is what gives my students the edge above their classmates.
Anyway, the meeting lasted about 45 minutes and she gave me a lot of paperwork to fill out and bring back. I retained her that day, so she is writing letters to the two creditors who sued me to cease and desist from collections calls and letters. Capital One Bank and Eaton Group attorneys sued me. Eaton Group is in Baton Rouge and Elizabeth knows them personally, so getting that taken care of is easy. I have to locate and bring the law suit papers from Capital One to her. They weren’t in my stack of paperwork and I’m not sure where they are. I seem to lose things so easily these days. As soon as I find them, I’ll bring them over to her so she can write to them as well.
Bankruptcy in Louisiana
Here is a list of the what you must have to file:
- Take a Pre-Bankruptcy Credit Counseling course dated within 6 months of the date of filing and obtain a certificate of completion
- Sign a contract with the attorney that acknowledges you understand that bankruptcy fraud is a felony, all bankruptcy cases are audited, any questionable documents or acts are investigated by the FBI, and if cause is found, you will be prosecuted by the U.S. Attorney General (scary, but part of the new law)
- Personal information and list of dependents
- Current employment information (including spouse if married)
- A list of all sources of income, the amounts and when you are paid
- A list of all real estate you own
- Details about your home’s value and mortgage(s), including any foreclosure proceedings
- Vehicle information, including debt owed and whether in danger of repossession
- A list of all checking and savings accounts
- A list of all asset accounts, including retirement and college savings accounts
- Child support (paid to you or to whom you pay it)
- A detailed list of your material possessions, exempt and non-exempt
- Any tax debts you owe
- A complete list of secured and unsecured debts (some information is collected more than once), including creditor or collector, address, approximate balance, interest rate, co-signer information, and monthly payment if applicable
- A list of monthly expenses
- Answer several questions about your financial history
- Answer several questions about your family, such as if your parents are living, and if not, when they died, how much you inherited and where the money and assets are
- Copies of the following: driver’s license, Social Security Card, Vehicle registration, Vehicle title if owned outright, bank statements, pay stubs, the previous two years of tax returns, and your credit counseling certificate
Exempt items are all your basic household furniture and appliances, clothing, and computers, especially if you use them in a business or to earn any sort of an income.
Your house is exempt if you have less than 25% equity in it and your paid-for car is exempt if it’s worth $7500 or less.
Non-exempt items are TVs, DVD players, DVRs, VCRs, stereos, alarm clocks (WTF?), game systems, iPods and any other non-computer electronic devices. Non-exempt items are valued at thrift store prices. For example, TVs are valued at about $50 each. An alarm clock is valued at $0.50.
On the day you file, you can only have $500 worth of cash, savings, money in your checking account and non-exempt assets. If you have more than that, the trustee will take it to stand against your debts. Any tax refunds and stimulus checks will also be seized unless you can show you spent them on necessary items or paid for normal living expenses with them. Since I just got my 2006 refund and I’m expecting my 2007 stimulus check and possibly a refund, I’ll need to wait until I’ve used that money up before I file.
Between the time you start the filing process (retain an attorney) and get everything ready for the trustee, you have to keep track of all your spending, especially any amount over $500. They look back into your financial life and accounts 6 months as well. Since I use the MyTMMO website for budgeting, I have a record of all our expenses since April of 2007. You can sell any items for cash as long as you account for the spending of the cash, so garage sales are okay. You can also buy exempt items if you can show a real need for them, like a new refrigerator if your old one breaks down and can’t be repaired for less than the cost of a new one.
Since tutoring hours are down over the summer and delivering pizzas only pays about $1,800/month, I’ll have to wait until August or September to file. The tax refunds are what I’m using to live off of this summer along with part-time tutoring and delivering pizzas, and what little I earn online which isn’t much yet. I’ll also have to reduce my savings and use that money to pay for living expenses.
If my income goes up considerably over the next few months I may have to file for a Chapter 13 bankruptcy. Your debts aren’t discharged. The trustee negotiates with each of your creditors and comes up with a payment plan with them. You pay a certain amount of money each month for 5 years and at the end of 5 years, all debts that were in the bankruptcy are discharged. If my income goes way, way up, I’ll negotiate and pay the debts myself. I hope that happens, but I’m a realist and don’t think it will. If I thought that, I wouldn’t have retained an attorney.
I still owe my attorney $699, so some of my refund money will go to pay her. My car needs two new tires and my transmission needs to be flushed. I also need a couple of things done to the house that will cost a few hundred dollars. She said to just keep all receipts for car repair and the like until the whole process is over.
From the day you file, it takes the trustee about 3-4 weeks to complete your bankruptcy, discharge all your debts and reaffirm any debts you plan to keep. I’ll be keeping my house so I’ll be reaffirming my first and second mortgages. The trustee will also require a full accounting of the student loans I co-signed on and whether I’ll have to start paying them. He or she will set up a payment plan with them if I have to pay. I’m not sure I’ll have to pay because I haven’t heard from those companies in quite awhile and my friend is working 60 hours a week, so I think she’s paying them herself. She says she’s paying them. I would have heard from the companies if she wasn’t paying. I heard from them late last year when she was laid off and wasn’t making payments.
Conclusions
Basically, your earnings, living expenses and spending habits will be scrutinized, but you’ll be fine as long as you’re behaving yourself and not hiding assets. Most of us in this boat who tried to pay our debts but can’t aren’t going to have trouble here because we’ve been budgeting, not eating out, working extra, and covering basic expenses of daily living and getting to and from work first. Most of us have also sold most of the non-exempt items to help pay down our debts.
I looked up the statistics comparing the percentage of people who file for bankruptcy legitimately and those who abuse it, and the maximum percentage of people who abuse the system or commit fraud is 10%. Those who commit fraud are being caught, prosecuted and put in jail. The statistics were the same before the new bankruptcy law took effect. The difference now is you have to have both pre and post bankruptcy financial counseling, and the U.S. Attorney General’s office is much more aggressive about tracking down those who commit fraud and prosecuting them.
My To-Do List
- Find Capital One law suit papers and take them to attorney
- Complete pre-bankruptcy credit counseling and obtain certificate
- Fill out the 26-page packet of paperwork from attorney, make copy for my records and return to her office
- Collect all required supporting documents
- Copy all required supporting documents and take them to attorney
- Pay attorney’s fee each month until paid in full
- Continue living on a frugal budget
- Keep all receipts
- Keep all expense records up-to-date
I hope you never have to go through a bankruptcy, but if you do, it’s not as horrible as many make it out to be. Many call it a life-changing experience, but for me, the weight of the debt was the life-changing experience and this is relief from that weight. Please leave your thoughts in the comments.
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June 4th, 2008
Posted by
joubess |
Bankruptcy, Debt Reduction |
7 comments
I’ll called today to make an appointment with my bankruptcy attorney. The appointment is on May 28, a week from today. My attorney is on vacation this week or we could have met sooner.
Here’s the list of documents I have to bring with me:
- Driver’s License
- Social Security Card
- Paycheck stubs
- Bank statements
- Tax returns
- Credit and collections statements
- Law suit papers
- Business financial statements
- List of house contents
Additionally,
- Budget
- Debt snowball
- CCCS certificate
- Contact information for all creditors
I have most of them together. I need to print current bank statements and financial statements.
A Fly in the Ointment
Then starting June 2-6, I have jury duty. I have to spend 5 days in the jury pool. They call about 400 people per week, and then you don’t have to serve again for at least two years.
Last time I didn’t get called to do anything (yeah!) and spent 5 mornings at the River Center Branch of the public library. I got a lot of reading done. I expect much of the same this time. Even if my group makes it into screening for a trial, they usually wouldn’t pick someone like me. I’m a scientist and I’m not swayed by non-physical evidence or emotional testimony. I could be called for a civil trial which would still require evidence.
The downside is I can’t start tutoring that week during the day because they can keep us until 4:30 p.m. They usually don’t, but they can, so this will hit my income hard. They will pay for mileage, but that is barely a drop in the bucket compared to the money I’ll be losing.
I would try to get out of it based on financial hardship, but about the only things that will keep you off jury duty here is death, hospitalization, or you’re out of town on business or in the military on active duty. They don’t really give a rip what your problems are. They need warm bodies and your’s will be one unless you like jail.
Oh well. I’m bringing my laptop and seeing if I can pick up a non-encrypted wireless signal so I can work online while I’m waiting. If not, I may be able to get on one of the library’s computers and work an hour at a time. Sessions are 60 minutes, then you have to log in to get on another computer for another hour. I haven’t been to the River Center Branch in a long time so I don’t know how many computers they have available. I’ll be finding out, though.
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May 21st, 2008
Posted by
joubess |
Bankruptcy |
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