Blog

Authorities Halt “Unconscionable” Scam by Collection Agency

By Jonathan on November 2, 2010

My Bankruptcy Law Network colleague Dana Wilkinson, who practices in South Carolina, reports on an unbelieveable scam perpetrated by a collection agency in Pennsylvania. According to a press release issued by the state attorney general, the Unicredit Collection Agency created a bogus “court system” to trick consumers into paying debts.

Unicredit employees dressed like sheriff’s deputy’s and “served” papers resembling lawsuits on consumers

Unicredit issued fake “court notices” for hearings and depositions

Unicredit built a fake courtroom, complete with a fake judge, where debtors would be intimidated into providing access to bank accounts or surrendering car titles

The Pennsylvania attorney general has shut down Unicredit and has filed suit against the company seeking restitution for harmed consumers.

What can we learn from the Unicredit story? [Read more…] about Authorities Halt “Unconscionable” Scam by Collection Agency

Aspire Visa Sued in Class Action re “Credit Restoration” Claims

By Jonathan on October 27, 2010

If you have had trouble with credit in the past and your credit score has been damaged, there is a good chance that you have received a credit card solicitation from Aspire Visa. Aspire, which is a card marketed by Compucredit Corporation and Columbus Bank and Trust (of Columbus, GA), promised to help cardholder rebuild their credit with a $300 limit secured credit card.

The catch, as noted by California consumer lawyer Mark Anderson in his blog is that Aspire VISA charged consumers a $29 finance charge, a monthly $6.50 maintenance fee, a $150 annual fee all charged against the $300! The consumer received a mere $63 in credit while being charged $257.

At this point, no settlement has been reached and the case could go to trial next year. The plaintiff cleared a procedural hurdle in August of this year when the 9th Circuit Court of Appeals ruled that the class action (Greenwood vs. Compucredit and Columbus Bank and Trust) could go forward despite provisions in the small print of the cardholder agreement requiring customers to submit to arbitration rather than the courts.

The Greenwood case illustrates the perils of fine print in credit card agreements, especially if you are a customer who is post-bankruptcy or dealing with a poor credit history. While credit cards like MasterCard or Visa are great for rebuilding credit, we have found that it can be easier to start with a gasoline credit card or a retail store card rather than a general purpose card. With new consumer protections in place, you can be sure that credit card issuers will be sure to find loopholes to add fees and costs.

Chapter 7 in Georgia Becomes More Difficult on November 1, 2010

By Jonathan on October 14, 2010

The United States Trustee has released revised median income figures for Georgia households. These new figures will apply to Chapter 7 and Chapter 13 cases filed after November 1. The revised figures continue the trend of lower household income amounts meaning that it will be more difficult to avoid a “presumption of abuse” in Chapter 7 filings. Presumably the new numbers reflect lower household income figures associated with the current recession.

The Bankruptcy Code looks to median household income figures compiled by the U.S. Census to determine whether or not you have the “means” or capacity to pay back some or all of your bills. Means testing was introduced into the consumer bankruptcy process in 2005.

The chart below summarizes the impact of the revised numbers:

Family size	Median income thru Oct. 31	Median income: after November 1	Change
1	$40,546	$38,748	-$1,798
2	$55,061	$51,184	-$3,877
3	$60,887	$55,767	-$5,120
4	$68,258	$68,122	-$136

The impact of this change is most pronounced on two person and three person families. Lower median income numbers mean that more filers will end up in Chapter 13 since anyone “above median” will be presumed to have enough money to pay back creditors in a Chapter 13. Chapter 13 cases filed using the new numbers will also result in higher monthly trustee payments because the amount of funds “available” to pay back creditors will be higher.

Above median debtors are not without hope – those filers can still qualify for Chapter 7 under part 2 of the means test, but that process puts more scrutiny on a filer’s budget and adds to the complexity of the filing. Read more about the forthcoming change to the median income tables on the Bankruptcy Law Network, where my colleague Jill Michaux has posted an article entitled “The Means Test Gets Meaner.”

Bottom line: if you are considering Chapter 7, look closely at that option prior to November 1, 2010 or risk an unpleasant post-Halloween surprise.

The Problem with 401(k) Loans and Consumer Bankruptcy

By Jonathan on October 3, 2010

Most of the clients who I represent in Chapter 7 or Chapter 13 cases view bankruptcy as their absolute last resort. Usually, by the time they get to me, these clients have exhausted every other alternative – they have borrowed money from relatives and friends, sold possessions on eBay and cashed out or borrowed against retirement plans.

All of these choices, by the way, create unintended consequences – if you are reaching that point of desperation where you are thinking about selling things, cashing out retirement plans, etc., I would rather that you call me before taking any action because of the risk that you might unknowingly lose some of the benefit from your bankruptcy filing, or possibly disqualify yourself altogether.

Retirement plan loans such as 401(k) loans create a variety of issues and are almost always a bad idea in a bankruptcy context. Presumably you borrow against your 401(k) because you need cash now, you expect to repay that loan in the near term, you want to preserve your 401(k) account for the future, and because you do not want the tax consequences associated with cashing out your 401(k).

Bankruptcy trustees, however, look at 401(k) loans in a different light. They see any allocation to repay a 401(k) loan (and sometimes any ongoing contribution to a 401(k) plan) as an unnecessary reduction of disposable income that would otherwise be available to pay creditors. 401(k) loan payments cannot be counted as allowable deductions in your means test calculations. And both Chapter 7 and Chapter 13 trustees and/or creditors will often object if you include a 401(k) loan repayment allocation in your Schedule I and J budget in either a Chapter 7 or Chapter 13. [Read more…] about The Problem with 401(k) Loans and Consumer Bankruptcy

New Georgia Household Income Amounts Effective November 1, 2010

By Jonathan on September 23, 2010

The chart below summarizes the impact of the revised numbers:

Family size	Median income thru Oct. 31	Median income: after November 1	Change
1	$40,546	$38,748	-$1,798
2	$55,061	$51,184	-$3,877
3	$60,887	$55,767	-$5,120
4	$68,258	$68,122	-$136

Bottom line: if you are considering Chapter 7, look closely at that option prior to November 1, 2010 or risk an unpleasant post-Halloween surprise.

Will Bankruptcy Issues Affect Georgia Governor’s Race?

By Jonathan on September 19, 2010

If you have been reading your local newspapers, you may be aware that Nathan Deal, the Republican candidate for Governor of Georgia, is facing scrutiny about his personal finances and about the bankruptcy filings of his daughter and son-in-law.

According to the Atlanta Journal-Constitution, Mr. Deal personally guaranteed bank loans totaling over $2 million that was used to build and finance a sporting goods store owned by his daughter and son-in-law called Wilder Outdoors, located on Highway 365 near Gainesville. Unfortunately for the Wilders, the sporting goods business failed, leaving about $2.5 million due. Mr. and Mrs. Wilder filed Chapter 7 bankruptcy in 2009, discharging their obligations on the outstanding bank loans, leaving Mr. Deal exposed as the guarantor.

Mr. Deal and the Wilders were able to refinance the business loan several years ago prior to the closing of the business but now, a $2.5 million debt will come due in February, which would be about a month after he takes office if he wins. [Read more…] about Will Bankruptcy Issues Affect Georgia Governor’s Race?