Every day, I hear stories of debt collectors harassing consumers. In most cases, the caller is polite enough, but they call 5-10 times a day. (How many times do these folks have to be told, “I don’t have the money to pay you right now?”) In a few cases, the caller is rude or threatening. (Clients have told me they’ve been called “deadbeats” and threatened with criminal prosecution for not making payments.)
But this is as bad as I’ve seen it. The consumer who was unable to pay was subjected to racial slurs, sexually explicit comments, and a suggestion to commit suicide.
(CAUTION: The following link will take you to an article with some adult language. Do not click if such language offends you.) CLICK HERE to read the full story.
Federal laws prohibit debt collectors from harassing or threatening debtors. However, fighting back can be difficult. Many people are intimidated by the caller, others feel they deserve the treatment because they are unable to pay their bills. And those that do choose to fight fail to gather any proof of the offense.
If you feel you’ve been victimized by a debt collector violating the FDCPA, write down the phone number of the offending caller and record any calls you receive from that number. Let the caller know that you are recording the call. If that doesn’t put an end to the harassment, contact a local consumer rights attorney. A good place to start is the NACBA Attorney Finder, available HERE.
If you cannot afford to pay all your bills, you’re already struggling. You don’t deserve to have insults and threats thrown at you by an anonymous bully.
When you file a bankruptcy petition, you will be required to attend a First Meeting of Creditors. This meeting will be conducted by a trustee. The trustee will swear you in and question you about the papers you filed. Schedules vary across the country, but in most of my cases, the meeting is held about 4 weeks after the case has been filed.
The Meeting of Creditors is often referred to as the 341 Meeting because it is provided for under §341 of the Bankruptcy Code (11 U.S.C. §341). In the Madison Division of the Western District of Wisconsin, the majority of meetings are held at 780 Regent Street in Madison, Wisconsin.
Many clients are understandably apprehensive about this meeting. In most cases, it will be the first time they have had to answer questions about their finances under oath. But it’s really nothing to worry about. While it is a serious proceeding, most 341 meetings go smoothly (assuming you and your attorney made all the required disclosures and submitted all the required documents). The trustee will not try to trick you, he or she will simply look to confirm that all of the disclosures you made were accurate. Tell the truth and you’ll be fine.
Common questions at the 341 meeting:
– Did you pay any creditor more than $600 in the 90 days before you filed your case?
– Did you pay any relative any amount in the 12 months prior to filing?
– Did you read, sign, and understand the papers that were filed?
– Were all the papers that you filed true and accurate?
Your bankruptcy attorney can tell you about other questions that may be asked at your meeting.
In most cases, the 341 meeting lasts approximately 10 minutes. Your lawyer will appear with you and will meet with you before and after the meeting to answer any questions. Let your attorney know if you have any concerns about your upcoming 341 meeting.
Last time, I listed a few common misconceptions about bankruptcy that I have heard from clients. As promised (I know it was difficult to wait), here are a few more:
“I know I can’t file on taxes/medical debt/credit cards/student loans/etc.”
Fact: There is no such thing as “filing on” any creditor. While some debts will survive the bankruptcy (aka, are not dischargeable), they must still be listed in your paperwork. Student loans will likely not be discharged, but some taxes may be. Medical debt and credit card debt is usually dischargeable. Your bankruptcy attorney can tell you which of your individual debts may not be discharged.
“If I file for bankruptcy, I’ll never get credit again.”
Fact: You will likely get credit card offers within six months of filing bankruptcy, though I recommend you live on a cash-only basis for awhile after bankruptcy. As a general rule of thumb, you should qualify for a vehicle loan within about 18 months of bankruptcy and a home loan within 4-5 years. The further you get from the bankruptcy filing date, the better your chance of getting credit, getting a better rate, and getting credit without a co-signer.
“Only deadbeats file bankruptcy.”
Fact: Most of my clients have tried to pay their bills for many months before coming to see me, often cashing in retirement savings or giving second mortgages on their homes. I have yet to represent the person who has intentionally lived beyond his means, purchased luxury items on credit, and planned to simply walk away from his debt obligations. See THIS POST for a description of the typical bankruptcy client.
If you have other questions about bankruptcy or debt-relief alternatives, let me know. I’ll either reply personally or post an answer here for others to read.
Bankruptcy isn’t for everyone, but it might be the best solution for you. You probably found this post because you are researching your debt-relief options. Good for you! Major decisions about your financial future should never be made hastily.
If you have been dealing with debt problems, you have probably received a lot of information about bankruptcy from family members, friends, and debt collectors. Unfortunately, much of that information is actually MISinformation. While the friends and family members may simply be unaware of the facts, some debt collectors will blatantly lie to you. Here are some of the more common misconceptions about bankruptcy that I’ve heard from clients:
“I don’t owe enough debt to file.”
Fact: There is no minimum amount of debt required before you are allowed to file bankruptcy. However, if your debt load is relatively small, a bankruptcy alternative might be in your best interests.
“I make too much money to file.”
Fact: Just as there is no minimum amount of debt required, there is no amount of income that precludes one from filing for bankruptcy. A simple Internet search can reveal many bankruptcy filings of the rich-and-famous. If you make more than the median income for a similarly-sized household, a presumption of abuse may arise if you try to file a Chapter 7 bankruptcy. Even if your income is above median, the presumption may not arise, depending on the amount and nature of your debts. Finally, if the presumption of abuse arises and you cannot rebut it, Chapter 13 will likely be available to you.
“I’ll lose my house/car/boat/motorcycle/etc. if I file for bankruptcy.”
Fact: Most people don’t lose anything in bankruptcy. See THIS POST for the reasons why.
“I can’t file for bankruptcy because the collection guy on the phone told me I will go to jail!”
Fact: Debtors’ prisons are a thing of the past, but that doesn’t stop some unscrupulous debt collectors from trying to scare some money out of you. Assuming you didn’t take the credit with no intention of repaying it, the collector is bluffing.
I’ll post more bankruptcy myths next time. If you’ve heard something about filing bankruptcy and are wondering whether or not it’s true, send it to me and I might address it in Part 2.
Some people wait too long before calling a lawyer to learn about debt relief options. They may have been told that bankruptcy needs to be the last resort or they may believe their situation doesn’t call for drastic measures. However, just talking to a lawyer won’t worsen your situation. In fact, you will likely learn how to prevent sinking further into debt.
Here are some signs that you may have waited too long to speak with a bankruptcy attorney:
• A creditor has started garnishment proceedings against you.
• Your vehicle has been repossessed.
• You have received a foreclosure notice from your mortgage lender.
Bankruptcy may allow you to protect your assets from creditors. It is much more difficult to recover your money or property from a creditor than to prevent the creditor from taking it in the first place. Waiting until the last minute will likely reduce the help a bankruptcy attorney can provide. Don’t wait until you have lost your home or car, your wages have been garnisheed, or your retirement savings have been drained before contacting someone who can help.
It’s never too early to learn what your options are or to learn what you can do to protect your assets. A reputable attorney will never pressure you to file bankruptcy. Nor will an attorney encourage you to file if such a filing is not in your best interests. But if you wait too long, you may lose property or money you could have saved.
A successful bankruptcy case typically ends with the entry of an order of discharge. This means that all dischargeable debts are discharged and creditors may not attempt to collect on those debts. No phone calls, no small claims suits, no threatening billing statements. Some debts are nondischargeable. If a debt was not discharged, the creditor may resume collection activities.
First, the good news. Assuming you are an honest but unfortunate debtor, most of your debts will likely be dischargeable. Credit card debt, medical bills, small claims judgments, and payday loan debts are generally dischargeable. But not all debts fit into one of those categories. So, which debts are dischargeable and which aren’t?
The first place to look is § 523 of the Bankruptcy Code. Section 523 tells us that certain debts are not subject to the discharge. In other words, these debts are nondischargeable and will survive the bankruptcy. The debtor will still be liable for them even after the bankruptcy case is closed. Note that these debts must be disclosed on your bankruptcy schedules, despite the fact that they will not be discharged.
Domestic support obligations (child support, maintenance, etc.), student loans, some taxes, and debts for money obtained by fraud are the more common nondischargeable debts. There are other less common debts that are also excepted from the bankruptcy discharge.
It’s important to know whether or not your debts are dischargeable before filing for bankruptcy. Your bankruptcy attorney can advise you as to which of your specific debts are dischargeable and which are nondischargeable.
Many clients have been told that they can file bankruptcy “only on credit cards” or that they can’t “file on the house.” I don’t know where this information comes from, but it’s simply wrong.
If you file bankruptcy, you don’t “file on” anyone or anything. There is no such thing as “filing on” any creditor. If you file a Chapter 7 or Chapter 13 bankruptcy, you must list all your creditors, whether or not you intend to repay any of them and whether or not the debt is dischargeable. Similarly, you must disclose all of your assets, whether or not you intend to keep them. You are not allowed to pick and choose the creditors or assets that are listed; federal law requires you to disclose ALL of your debts and ALL of your assets.
Some debts (child support, student loans, some taxes) will survive the bankruptcy and will have to be repaid despite your discharge. You still have to list those creditors in your bankruptcy paperwork.
You may want to repay the $5000 you borrowed from Mom & Dad. Fine, you can repay them after filing, but you still have to list Mom & Dad as creditors.
Maybe you want to keep making your house payments and keep the house. You can do this, but you still need to list the mortgagee as a creditor and the house as an asset.
The next time someone sitting in the local tavern gives you some free legal advice and says that you should, “just file bankruptcy on the credit cards and leave everything else out,” simply nod politely and smile. The person is misinformed, but it’s not worth starting a bar fight over. (You were probably wondering how the picture was relevant.)
Clients understandably want to know how much their attorney will charge before committing to a course of action. Unfortunately, there are no easy answers. Each case is different and the fees reflect the complexity of an individual situation. Lawyers all have different fee structures, with some charging on an hourly basis and some charging a flat fee.
Fees can range from $750 for a Chapter 128 filing to $10,000+ for a complex Chapter 12 filing. Without knowing your individual circumstances and what options will best serve you, an attorney cannot tell you how much his/her services will cost.
I offer free initial consultations so clients can discuss their financial problems and get an idea of their options before committing to anything. Once I know the details of your financial life, I can explain your options and tell you how much I will charge to help you with any of them. You can then take some time to consider the options and make your decision from home.
Yes. A debtor who files the papers and represents himself or herself without the help of an attorney is known as a pro se debtor. Bankruptcy attorneys are required to inform potential clients that they can file a case without attorney. Although there is no law preventing it, filing pro se is a risky choice.
Bankruptcy is a very complicated area of law. It can be confusing even to attorneys who don’t regularly practice bankruptcy law. You can hire a petition preparer, but preparers cannot give legal advice. A petition preparer can simply help you fill out the papers. Take a look at THIS DOCUMENT to see how limited their services are. If you do not understand all the nuances of the law, you may put your assets at risk or lose the opportunity to discharge your debts.
I have seen many pro se debtors at Meetings of Creditors. A few handled their cases well and they got through the meeting with no problems. The vast majority had their meetings continued to another date because they failed to file something, failed to submit required documents to the trustee, or completed the petition and schedules incorrectly.
I suggest you consult with a bankruptcy attorney before making any decisions. If you are intent on filing pro se, be sure to visit THIS PAGE (Western District of Wisconsin) or THIS PAGE (U.S. Courts website) and gather as much information as possible. Please also check out THIS POST I wrote about pro se debtors on South Carolina bankruptcy attorney Russ DeMott’s blog.
I hope you enjoy the new layout. Thanks for visiting and feel free to leave comments!
There is a lot of misinformation regarding bankruptcy in local communities and on the Internet. I have had many clients tell me that they’ve heard from a friend or family member that (pick one): filing bankruptcy means you’ll never get credit again, you have to give up everything you own if you file bankruptcy, you can just “file on” a few problem creditors, etc.
But when people read something on the Internet, they tend to give it more weight. Somehow, the Internet gives anonymous posters credibility. I recently read this post on another bankruptcy blog. I believe the paralegal was doing her best to give accurate information. But a lot of the statements she made were simply false. In my opinion, this is dangerous and irresponsible. Despite the disclaimer on her website (“this is not legal advice”), many consumers will make decisions based on what they read rather than on discussions with a lawyer.
Lawyers aren’t the only source of information regarding bankruptcy. But be sure to consider the source and quality of information you get before you make any decisions about your financial future.
As explained HERE, homeowners who file bankruptcy do not necessarily lose their homes. In fact, losing a home through bankruptcy is pretty rare. One of the first things you need to decide when considering bankruptcy is whether or not you want to keep your home. Sometimes it makes sense to keep making your payments and sometimes it makes sense to surrender the house to your lender.
If you file bankruptcy and want to keep your house, you’ll need to pay for it. Some people have the idea that a bankruptcy allows you to keep the house while the mortgage obligation is written off. I don’t know where this “free house” idea originated, but it’s not true.
What if you want to keep the house, but just can’t afford your current payments? In most cases, bankruptcy can’t force the lender to agree to a loan modification. But many lenders will work with you if you qualify for a hardship modification.
You may be able to find help through the U.S. Dept. of Housing & Urban Development. Another good resource is the Making Home Affordable program (HAMP). Not all lenders participate, so you may need to speak directly with your lender and ask if any hardship modifications are available.
If your efforts to save the house outside of bankruptcy prove unsuccessful, bankruptcy may be able help. By eliminating most of your unsecured debt, your budget may allow you to afford your mortgage payments. If you’ve fallen behind on your mortgage payments by a few months, Chapter 13 may allow you to cure the arrearage over three-to-five years if you can show that you can afford to do this in addition to making your regular monthly payments.
Contact a local bankruptcy attorney if you have other questions relating to the ways in which bankruptcy may help you keep your home.
Many of my clients start our initial meeting with, “I really don’t want to be here.” When I ask why, they usually express feelings of guilt and the reluctance to be “that kind of person.” Most people have an unrealistic view of the type of person that files bankruptcy.
It seems that the stereotypical bankruptcy filer is someone who irresponsibly ran up thousands of dollars of debt buying things they couldn’t afford. Trips to Europe, diamond watches, fur coats, and 50″ HDTV sets for all! According to the stereotype, once the creditors asked that the money be repaid, the debtor skipped merrily to my office and forced the creditors to take a huge loss.
I’m not sure where that view originated, but it certainly does not accurately portray my clients. The vast majority of my clients either incur huge medical bills and don’t have insurance (more on that some other time) or fit the following pattern:
1 – Something causes a decrease in income. Typical events: divorce, illness, injury, loss of a job, cut in pay or hours.
2 – The cost of living remains steady or even increases.
3 – People need to pay the rent/mortgage and need to eat. So they use credit cards for a few months, hoping that things will get better “next month.”
4 – For a few months, they make the minimum payments on the cards, just trying to stay afloat for a few more weeks.
5 – By the time things turn around, the client is in such a deep hole that there doesn’t seem to be any hope of ever paying off the debt.
I don’t see irresponsibility in that scenario. I see people doing whatever they can to put food on their tables and keep roofs over their heads. I have no doubt that the “stereotypical filer” I described earlier exists, but I haven’t seen that person in my office.
If you’re suffering financial hardship, you’re not alone. Don’t let guilt or shame keep you from talking to an attorney and learning about your options.
Here are a few things you should keep in mind while you prepare to file bankruptcy.
– Don’t throw away your pay advices. If you are employed, the Bankruptcy Code requires you to submit all the paycheck stubs you received in the seven months before filing. Some employers allow you to access this information online and others will provide a payroll report for you, showing the gross amount earned, itemized deductions, and net pay for each pay period. But saving your pay stubs is the easiest way to provide this information to your bankruptcy attorney.
– Don’t use credit cards, convenience checks, or credit card cash advances.
– Don’t pay more than $200/month on any past due bill. Talk to your lawyer before paying anything other than (1) regular rent/mortgage payments, (2) regular car payments, (3) usual ongoing bills you pay in full every month (utilities, cable TV, cell phones, etc.).
– Don’t pay any money to family members or friends. If you owe your parents money, you can pay them back after filing for bankruptcy.
– Don’t give anything away or title assets in someone else’s name. Hiding assets or transferring them is a sure-fire way to lose the assets. You may even face criminal charges for bankruptcy fraud. Disclose the assets and exempt them.
– Don’t pay off unsecured credit card debt with the proceeds from a home equity loan or second mortgage.
Avoiding these actions can make it much easier for you and your attorney if you decide to file a bankruptcy.
Check out this recent article from CNNMoney.com. I’m glad to see the government start to crack down on these companies. Search the web for “debt settlement scam,” and you’ll find thousands of horror stories.
Before agreeing to pay anything for help in reducing your debt, read these articles:
MSNBC – from 2007
Bankruptcy Law Network – from 2008
Consumer Reports – from 2009
Many of my clients come to me after they tried to pay their debts with a debt settlement company. While some of these agencies are legitimate, many others simply drain what’s left of your bank account, pay themselves for their “services,” and don’t pay your creditors a dime. You can pay into the program for months and your debt will not be reduced. When the creditors don’t get paid, they sue you. I’ve had clients who have spent thousands of dollars on these programs. In the end, their bank account balances were much lower but their debt remained virtually unchanged. Had they consulted with an attorney first, these clients would have learned about all their options from the start.
I have yet to meet a client who didn’t want to pay back at least some of his or her debt. But you owe it to yourself to learn about your options before signing up with any debt settlement agency. If your debts are manageable and you would like to try and pay back a portion of what you owe, a bankruptcy attorney can help. However you decide to proceed, a visit with an attorney is likely to save you both time and money. As I pointed out in an earlier post, visiting with an attorney and getting information should never be the last resort.
The website will undergo substantial changes this weekend. Mark Bromley recently took a new job with the Wisconsin Attorney General’s office and will cease his private practice as of December 1, 2010. Bret Nason will continue to represent consumers in southwest Wisconsin.
We are no longer known as “Bromley & Nason,” the website looks different, and the domain name has changed from bromleynason.com to nasonlawfirm.com. But the services provided to consumers and small businesses in Grant, Iowa, Lafayette, Crawford, Richland, & Green counties will remain the same.
Thanks for visiting and check back soon for more major updates!
The New York Times recently published this article, explaining part of the nationwide foreclosure crisis.
A 2008 article on CNNMoney.com suggested that bankruptcy is a “last resort” for consumers. I agree that bankruptcy shouldn’t be the first option a struggling family should consider. However, filing bankruptcy is often a better solution than draining retirement savings, pulling equity out of your home to pay credit card bills, or falling deeper into debt.
1. Get the stats: Yes, BAPCPA overhauled the Bankruptcy Code in 2005. While the intent may have been to make it more difficult to file, the result has been that most people who qualified for Chapter 7 bankruptcy before BAPCPA will qualify today. Why are consumer bankruptcy filings on the rise? To steal a phrase from the early 90’s, “it’s the economy, stupid.”
2. Know the consequences: Of course, bankruptcy will adversely affect your credit score. So will repeated late payments, defaults, and foreclosure. When you seek credit following a bankruptcy, the potential lender will see the bankruptcy on your report, but it will also see what you’ve done since the filing. Have you defaulted on any loans since the bankruptcy? Have you made late payments and incurred extra fees? If not, you’ll be more likely to get credit.
The CNN article says you may lose your home or car if you file a Chapter 7 bankruptcy. Very few filers lose any of their assets in a Chapter 7 bankruptcy. See this related blog post for the reasons why.
3. Gauge your eligibility: Credit counselors cannot give legal advice. If you want to learn about all your debt-relief options, a lawyer is your best source. Once you’ve explained your situation to a bankruptcy lawyer, he/she will explain all of your options and advise which makes the most sense for you. Visiting with an attorney does not obligate you to file bankruptcy; it’s just a smart way to learn about your options so you can make an informed choice.
4. Know the Rules: The CNN author says, “if you file for a Chapter 7 bankruptcy . . . you won’t be able to save your home.” This is quite simply untrue. Most of our clients choose to keep their home and continue to make monthly mortgage payments. Again, a bankruptcy attorney can help you decide if it is in your best interests to keep your home in a Chapter 7, surrender the house, or keep the house in a Chapter 13.
If you don’t need bankruptcy, a lawyer will tell you tell you that. The time to file is before you’ve lost everything, not after. What should be the last resort, losing your home and draining your retirement savings or filing bankruptcy?
This applies to all consumers, whether or not you are considering bankruptcy.
Consider keeping your deposit accounts and loans at different financial institutions. If you owe money to a bank or credit union, don’t keep any deposit accounts there. There are a number of reasons to switch your deposit accounts to another bank or credit union.
Setoffs: A setoff occurs when the bank/credit union takes money from your deposit accounts to pay itself for a loan you have with that institution. Closing your deposit account (or keeping a very low balance) & moving your money to a different institution will reduce the risk of a setoff.
Frozen accounts: Some financial institutions place a freeze on any accounts held by bankruptcy filers. While it is likely that you will eventually get the money back, you may be without liquid assets for a few weeks or months. If your paycheck is automatically deposited into an account that the bank/credit union has frozen, you will not have access to your money until the freeze is lifted.
Automatic payments: If you have automatic withdrawals set up for your credit card accounts, the withdrawals may be difficult to stop, even if you file bankruptcy. If you need the money in your account to make your mortgage or car payment, you may find that the credit card company has taken it. It is generally easier to close the bank account than to get money back from a creditor who has been authorized to withdraw it from your account.
Not all financial institutions freeze accounts or exercise rights of setoff. Your attorney can tell you which banks or credit unions in your area to avoid. If any creditor improperly removes money from your deposit accounts after you have filed bankruptcy, contact your attorney immediately.
In most cases, yes.
Based on recent conversations with clients, it seems there is a common misperception that bankruptcy debtors automatically lose their home and all of their possessions in the bankruptcy. While a Chapter 7 bankruptcy is referred to as a “liquidation” bankruptcy, most debtors do not lose anything.
The Bankruptcy Code allows debtors to keep a certain amount of equity in their assets via exemptions. Wisconsin allows debtors to use either the federal set of exemptions or the Wisconsin exemptions. Each has its benefits; your attorney can help you decide which set of exemptions should be used in your case.
If you have less than $22,975 (using federal exemptions) or $75,000 (using Wisconsin exemptions) of equity in your home (value of the house – amount owed on all mortgages = equity), and are current on your mortgage payments, you can usually continue to make your mortgage payments and keep your house in a Chapter 7 bankruptcy. Married couples are allowed to double those exemption amounts. If you are behind on your mortgage payments, a Chapter 13 bankruptcy will allow you to cure the arrearage over 3-5 years.
The same principle applies to vehicles. The Wisconsin exemptions allow you to keep up to $4,000 of value in your vehicles and the federal exemptions provide a $3,675 vehicle exemption. If your vehicles are worth more than the exemption limits, there are ways to protect that excess equity.