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Pardon Me if I Seem Cynical

By Jonathan on March 21, 2009

My Bankruptcy Law Network colleague Cathy Moran notes that our friends in the credit card industry bought the inside cover of a recent issue of Newsweek to announce the release of their new web site HelpWithMyCredit.org. My heart is truly warmed to know that my friendly credit card issuer is here to help me. After all, “these are tough financial times for millions of Americans. That’s why some of the country’s major banks and electronic payments networks have come together to create Help With My CreditSM, providing information and resources to assist and educate customers struggling to make their credit card payments.”

What helpful and compassionate advice does the credit card industry offer. I hate to spoil the surprise, but….why not:

pay on time
stay below your credit limit
understand account fees
pay more than the minimum amount due
watch for changes to the terms of your account
sign up for online servicing

Gee, that was useful. I’m sure that all those struggling families can sleep easier with all that help.

I’m sure glad that they did not waste any space on their web site with tips that no one really cares about like how to get interest rates reduced, what are the criteria for negotiating reduced balances, stopping harassing phone calls.

Our friends in the credit card industry – always thinking of us!

Can Mother’s Inheritance Be Designated for Kids’ Education if Mother Files Bankruptcy

By Jonathan on March 19, 2009

Last week I wrote a post about car titles. Specifically, I discussed the issues that arise when a bankruptcy debtor’s name appears on vehicle titles when those vehicles are actually used, maintained and kept by the debtor’s parents. Now comes a similar related question about inherited money.

Blog reader Shelley writes as follows:

I am the mom in a family of 4 with a disabled husband. Recently my father died and left me a lump sum of money. I have been told that before I can file bankruptcy, I will have to use up this money until it is gone..which means i would not be able to give my children a head start for college or to help their families through the bad times where they cannot find work etc..is there a way around this at all?

Here is my response: if you inherit money, whether or not the money has been distributed to you, that inheritance is considered as an asset of the estate. Under Georgia law, you can shelter some of that money – $5,400 under the “wildcard” provision, but that is it. If you were to file Chapter 7, the trustee would seize this cash and use it to pay the claims of unsecured creditors. [Read more…] about Can Mother’s Inheritance Be Designated for Kids’ Education if Mother Files Bankruptcy

Georgia Collection Law Firm Facing Lawsuit from Governors’ Office of Consumer Affairs

By Jonathan on March 17, 2009

Today’s AJC reports that Marietta collection law firm Frederick Hanna & Associates has been sued by the Governors’ Office of Consumer Affairs following multiple complaints about collection tactics used by the firm. In November, the state consumer office served an investigative demand notice (i.e. a subpoena) on Mr. Hanna’s law firm asking for documents about the firm’s collection practices. Hanna contends that because his office is a law firm the state agency has no right to this information.

Among the complaints leveled against Hanna along with other high volume collection firms (Hanna opens 50,000 new files a month!) is that they engage in collection of s0-called “zombie debt,” accounts purchased by collectors for pennies on the dollar because it is old – so old that the statute of limitations has run and the debt buyer has no legal right to sue. [Read more…] about Georgia Collection Law Firm Facing Lawsuit from Governors’ Office of Consumer Affairs

Does the Name on the Car Title Matter?

By Jonathan on March 15, 2009

As a bankruptcy lawyer, I have to deal with the consequence of what I call “real world” activities. In the non-bankruptcy world people make decisions that will save money and make life easier. For example, blog reader Lou writes me with a question about car titles:

I might need to file chapter 13 in the future. I filed a Chapter 7 in 2003 and now have a lot of credit card debt. I have a house but I do not want to keep it. When the house goes into foreclosure the only property I will have in my name is 3 cars valued from $6000 to $8000 each. I only own one of them. The other two belong to my parents. I got loans in my name for the cars because I got the best rates, but when they were paid off I never signed the titles over to my parents. In a ch. 13 will all the cars be considered mine, or is there a way to prove that they belong to my parents? My name is the only name on the titles.

It appears to me that Lou and his parents made a common sense decision at a time when bankruptcy was not a consideration. Lou most likely qualified for better rates because he was working so he made a decision to help out his parents by applying for car loans in his name. His parents have made all the payments so as far as they and Lou are concerned the cars belong to the parents.

Unfortunately this is not how the bankruptcy court will look at things. [Read more…] about Does the Name on the Car Title Matter?

Can Long Term Unemployment Support a Claim for Hardship Discharge of a Student Loan

By Jonathan on March 3, 2009

With the economy headed south, I am hearing from more and more people who have either lost their jobs or who have been unemployed for a while with little hope of finding employment soon. Some of these folks have outstanding student loans and they are not happy at all when the U.S. Department of Education or other student loan servicer grabs their tax refund to pay all or part of an outstanding student loan.

Unlike other creditors, student loan creditors do no have to sue you and obtain a judgment in order to collect from you. Blog reader Nancy describes a disheartening scenario:

I am dealing with a student loan that’s 25,000.00 and the Department of Education took my tax return from me. I am a single mother with a special needs child and needed every bit of that money. I have been on unemployment since Jan of 08. Things are not looking up for me in finding employment in my area. I am roommateing with a friend just to make ends meat here and I was told that maybe filing for a chapter 7 would be good for me. I have no credit card debt but I do have some hospital bills. Not sure what I need to do, I know that I can not afford this 25,000 student loans which by the way started out only 15,000. Interest has taken over and made it an impossible dept to pay off. Please tell me what I should do. I also cant afford to have my taxes taken away every year from something that will never be paid off due to those interest rates.

Here is my response: As a general rule, bankruptcy is not a good tool to reduce or eliminate student loans. [Read more…] about Can Long Term Unemployment Support a Claim for Hardship Discharge of a Student Loan

Should You Pay Back Your Parents or Siblings Before Filing Bankruptcy

By Jonathan on February 28, 2009

Should you pay back your parents, siblings, friends or other relatives before filing bankruptcy? I get this question frequently as many of the potential clients I see have borrowed money from private sources in an effort to avoid bankruptcy.

My Bankruptcy Law Network collegue Susanne Robicsek answers this question clearly and concisely in a 2007 post on the BLN blog. Susanne’s advice remains valid – do NOT pay back a personal loan prior to filing bankruptcy without first talking to a bankruptcy lawyer.

There are two potential issues if you pay back mom or dad, or the next door neighbor. First, there is the problem of “preferences.” Congress recognized that debtors would be tempted to favor certain creditors in a pre-bankruptcy setting. The bankruptcy code contains a section that addresses so called “preferential” payments on old debts. [Read more…] about Should You Pay Back Your Parents or Siblings Before Filing Bankruptcy