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Math Proves Credit Card Debt Almost Impossible to Repay

By Jonathan on February 29, 2008

My colleague, Houston attorney Pamela Stewart, recently posted on her blog this interesting table that shows just how long it would take to pay off credit card debt if you make only minimum payments. If you have been sending in only minimum payments and you have a hunch that you have paid your debt two, three, even four times over, you may just be right.

This table assumes a 2.5% minimum percentage payment, and an absolute minimum payment requirement of $10.00 per month at an interest rate of 17%.

Amount Owed	Time Required to Pay Off Debt	Total Interest Expense
$1,000	12 years	$979
$5,000	24 1/3 years	$6,210
$10,000	29 years	$12,745

What Happens if You Fail to Reveal in Your bankruptcy the Existence of a Civil Claim for Damages?

By Jonathan on February 23, 2008

What happens if you forget to tell your bankruptcy lawyer about a pending lawsuit or even a pending claim? Nothing good – there is a very strong chance that the defendant can use your omission as a defense to your claim.

Massachusetts attorney Michael Goldstein writes about this issue in his Massachusetts Cyberlaw Attorney blog. In his blog post, Michael writes about a woman who lost the right to pursue a discrimination case because she failed to list the possible lawsuit as an asset in her bankruptcy case.

If you have a pending lawsuit or even a pending claim, there is a good chance that your trustee will take an interest in that claim as an asset of your bankruptcy estate. In Georgia, the trustee has the right to take over the claim in total, including the right to fire the lawyer you had picked and to settle the case without your knowledge or permission. Your only right to the case may be your declared exemption, which may only amount to a few thousand dollars.

If you have a case, whether or not a lawsuit has been filed, you need to advise both your bankruptcy lawyer as well as the lawyer representing you in your claim for damages. You most definitely do not want the nasty surprise of learning that your bankruptcy filing has teminated or limited your right to recover money damages.

How Does My “Stimulus Package” Check Affect My Bankruptcy

By Jonathan on February 21, 2008

I have received several emails over the past few weeks asking about the impact of the $600 to $1,200 check that many of us will receive in May as part of the Bush stimulus package. My colleague, Dana Wilkenson explains the impact in her post on the Bankruptcy Law Network blog:

If you are already in a bankruptcy, the tax rebate may have no affect on you at all. If you are planning to file a bankruptcy in the next few weeks, before you receive your rebate, the tax rebate is a potential asset that should be listed on your bankruptcy paperwork. If you are filing a Chapter 7 case, you may be required to turn all or part of the rebate over to your Chapter 7 trustee, unless it can be claimed as exempt under the laws applicable in your jurisdiction. In a Chapter 13, it may be a small part of calculating your payment to the trustee. Consult with your attorney about what to do with the tax rebate when you receive it.

If you file a bankruptcy in the six months after you receive your tax rebate, the rebate will be added to your other income for purposes of the means test. The tax rebate is supposed to arrive in May, shortly after most people receive their normal tax refund. If the numbers in your means test are close, it may be that the tax rebate (especially if combined with a tax refund at about the same time) will be enough to change the outcome. Many times such a problem can be resolved simply by waiting to file your case, but if you have a pending foreclosure or other legal action, you may not have that luxury.

What if your Chapter 13 plan provides that all tax refunds are to be paid to the Chapter 13 trustee? I have not heard anything directly from the trustee but I suspect that the Chapter 13 trustee will have his/her hand out. I will see if I can ferret out the trustee’s position prior to May – I wonder if one could amend his/her petition to declare the $600 or $1,200 check exempt pursuant to any unused exemption.

I certainly hope that Chapter 13 trustees can be persuaded to forego any seizure of the Bush economic stimulus checks. The purpose of this rebate is to help the economy by boosting consumer spending – it seems to me that given how difficult bankruptcy budgets are to maintain it would be nice to give bankruptcy debtors a little breathing room.

How Do I Know if My Chapter 13 Has Been Dismissed?

By Jonathan on February 21, 2008

I have been out of work for the last six months. Prior to my being unemployed I filed Chapter 13 to try and get a hold of my finances. I haven’t been able to make a payment for 4 months now and wanted to know if I haven’t heard from the Trustee’s office should I assume that my case has been dismissed?

I have been holding back on calling them to dismiss it myself because I am hoping my financial situation will change. Is there any way to find out without my status without contacting my lawyer or trustee. The only recent correspondence I have received from my lawyer was for my financial management course.

–M

Jonathan Ginsberg responds: M, first I would advise you to contact your lawyer about this. Your lawyer is on your side and may be able to offer helpful advice. I see no reason why you would want to avoid speaking with your lawyer about problems with your Chapter 13 case. You are paying your lawyer good money to serve as your advocate – why not get your money’s worth.

To answer your question – your case is not going to be dismissed without your knowing about it. In most cases, the trustee will file a Motion to Dismiss Case based on your failure to fund the case. If that should happen, you will have 20 to 30 days in which to negotiate a Consent Order with the trustee. Here, again, is where your lawyer earns his/her fees.

If your case is under “strict compliance” for whatever reason, you will get notice of default and an opportunity to cure the default, but no opportunity for a hearing before the judge. I talk about these two forms of dismissal notice in a post on the Bankruptcy Law Network blog.

Again, don’t exclude your lawyer from this process.

Fictional Web Site Illuminates the Sad Truth About Payday Loans

By Jonathan on February 19, 2008

I recently ran across a very enlightening blog describing the activities of a fictional group called the Predatory Lending Association. A tounge in cheek creation of a legitimate organization called the Center for Responsible Lending, the PLA web site includes the following mission statement:

The Predatory Lending Association is dedicated to extracting maximum profit from the working poor by increasing payday loan fees and debt traps. The working poor are an exciting, fast growing demographic that includes: military personnel, minorities, and most of the middle class.

Although there is no such organization as the “Predatory Lending Association,” you may very well recognize some of the tactics and activities described.

The real web site for the Center for Responsible Lending includes a very interesting interview with the former manager of a payday loan store in which some of the very sleazy lending practices of this industry are described by someone who has been on the inside.

By in large, Georgia has done away with the payday loan industry by passing laws that limit interest rates and payday loan activities. However, it seems that every legislative session, lobbyists for the payday loan industry try to convince lawmakers that payday loans should be made legal again in Georgia. Should your state representative be tempted to change Georgia’s law, do not hesitate to make your views known using the information set out on the PLA site and on other Internet resources.

Thanks to Kevin Chern of the Bankruptcy Lawyers Blog for bringing this website to my attention.

Can Project Lifeline Help You?

By Jonathan on February 15, 2008

Earlier this month, President Bush and Treasury Secretary Henry Paulson, together with representatives from Bank of America Mortgage, JP Chase, Citigroup, Countrywide, Washington Mutual and Wells Fargo announced the creation of “Project Lifeline” designed to help financially strapped homeowners avoid foreclosure. You can read more about Project Lifeline here.

Together, the participating mortgage companies service about half of all mortgages in the United States. Project Lifeline is designed to add 30 days to the foreclosure process in order to give homeowners additional time to renegotiate or come current with their loans.

The specifics of this program are somewhat unclear to me. A search for “project lifeline” on Bank of America’s web site yielded no results. A search on Washington Mutual’s web site yielded no results. Countrywide’s web site does not have a search function, nor does the web site for Chase Mortgage.

Presumably, a homeowner looking for relief from his mortgage delinquency will have to call the same mortgage company that has previously been calling him to demand payment. Obviously, any effort by the mortgage industry to head off foreclosures is welcome, but I don’t sense that there is a whole lot of effort being put into Project Lifeline.

My colleague Scott Riddle points out on his Georgia Bankruptcy blog that Project Lifeline is not available to debtors in bankruptcy. It is also not available if you have rental homes or if your home is empty.

In reading various blogs, it appears that the primary criticism of Project Lifeline has to do with its focus. As blogger Paul Kedrosky points out, high foreclosure rates are a function of declining home values, not interest rates. Kedrosky argues that homeowners are likely to walk away from their homes and mortgages if they realize that the value of their home is greatly exceeded by the debt on that home. It will be interesting to see if Project Lifeline does anything to stop the growing number of foreclosures.

I would be interested to hear from anyone who has attempted to delay foreclosure using the Project Lifeline tactic and if you agree with Mr. Kedrosky that foreclosures are more a function of falling home values rather than rising interest rates.