Archive for the ‘reports’ Category
Sunday, December 12th, 2010
The Wall Street Journal recently published a new story entitled Hidden Medical Debt Trips Up Homeowners. The report documented several cases in which small medical bills that had been turned over to collection resulted in a more than 50 point drop in a homeowner's credit score.
In one situation, a homeowner attempted to refinance his mortgage, only to discover that two unpaid medical bills totaling less than $50 had caused his credit score to drop. As a result of the lowered credit score the refinancing bank demanded over $4,000 in closing costs.
In another situation, less than $500 of medical debt reported to a collection agency disqualified a homeowner from a favorable interest rate, which would have resulted in tens of thousands of extra interest charges.
In many of these situations, the consumer never knew about the unpaid medical debt – the provider simply turned the claim over to a collection agency which immediately reported it to the credit reporting agencies as delinquent debt.
According to the Journal, "otherwise well-qualified borrowers with good loan-to-value ratios and steady employment are increasingly finding it difficult to refinance because of medical billing mistakes marring their credit."
If you or a loved one has been in the hospital, you probably know that a single visit can result in five, ten or even more bills from separate vendors – the hospital, the hospital pharmacist, the anesthesiologist, the ambulance service, etc. I do not find it surprising at all that a patient would not know about one or more bills.
I think that an important point here has to do with the cascading effect of negative credit. Even a small late payment on an account can result in a dramatic lowering of your credit score. Other creditors will receive electronic notice about your lowered credit score and when permitted, they will increase your interest rate, lower your credit limit and increase penalties and fees.
Lenders Often Cause Delinquencies by Changing Terms Unexpectedly
On more than one occasion I have met with a potential bankruptcy client who was forced into Chapter 7 or Chapter 13 because of changed terms, not because of any delinquency. These changed terms can arise from a tiny delinquency – like the unknown, unpaid medical bill issue discussed in the WSJ story, or for other reasons. Recently I met with a small business owner who was completely current on his personally guaranteed revolving line of business credit. His bank was taken over by another bank which conducted an audit and, without warning, the business loan was "called in."
One minute, my client was operating a viable, functioning small business that was current on its obligations – and literally within a matter of days, that business was shut down by a bank for no apparent reason.
The point here: examine your credit reports regularly and challenge even tiny delinquency reports as the damage to your credit will arise from the existence of the delinquency as opposed to the amount of the late payment. Even small downgrades to your credit score can result in a negative debt snowball.
Posted in Consumer Protection, Credit, Credit Reports, Credit Scores, Credit reporting errors, Discover, FDCPA Claims, General consumer bankruptcy info, a, arise, bank, billing, bills, cases, claim, debt, delinquency, demanded, entitled, hidden, knew, lowered, marring, medical, medical debt and bankruptcy, medical debt and credit reporting problems, mistakes, provider, refinancing, reports, score, simply, small, story, the, tiny, totaling, trips, turned, unpaid | Comments Off
Tuesday, November 2nd, 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? First, you should always be very suspicious of anyone who threatens legal proceedings, implies that you have no right to challenge a debt or suggests that you must resolve a debt issue immediately. Under Georgia law, at least, a lawsuit must be served by a sheriff's deputy (who has identification) or a process server. After service you have 30 days to file a response. No judgment will be issued any faster than 45 days after service – 30 days to file a response and 15 days to open a default by paying court costs and filing fees (which amount to less than $200).
Secondly, sheriff's deputies are not in the business of collecting debts. Their job is to serve papers only. If the person who looks like a deputy starts discussing the merits of the lawsuit against you, a red flag should go up.
Third, recognize that collection agents are not your friends and they are not on your side. Do not believe anything a collection agent tells you. When in doubt, call a bankruptcy lawyer – we will always talk to you over the phone at no charge.
Posted in Attorney, Consumer Protection, a, agency, an, and, bogus, built, car, collection, collection agency scams, collection agency tactics, consumers unicredit, courtroom, created, debts unicredit, depositions unicredit, dressed, employees, fake, general, hearings, issued, learn, paying, pennsylvania, pennsylvania , perpetrated, press, release, reports, scam, story , surrendering, the, titles the, unbelieveable, unicredit | Comments Off
Tuesday, September 14th, 2010
There are dozens of lawyers out there who offer to prepare and file bankruptcy cases. Some work in high volume "bankruptcy mill" firms that compete on price while others compete on experience, knowledge and service. Usually the cost differential is a few hundred dollars, but when you are considering bankruptcy, every dollar counts – so why would you want a lawyer like me as opposed to a firm that would offer to represent you for a lower price?
I could offer a glib answer like "if you needed brain surgery, would you look for the cheapest surgeon on the one with the most experience and industry recognition" but that does not really answer the question. Perhaps it would be helpful if you could look over my shoulder as I analyze a real life situation that came before me recently.
Earlier this month an email arrived from a couple who wanted information about bankruptcy. The wife wrote that she was a stay at home mom raising 2 children and that her husband lost his job about a year ago, and recently started back to work at a lower paying job. Their current household income is just under $50,000. They own a house that is now worth less than what they paid for it – the house is worth about $200,000 – the first mortgage is $210,000 and the second mortgage is $35,000. They own one older car outright and are financing a mini-van. They have also incurred around $25,000 of credit card debt – most of which was used trying to keep the mortgage current.
Earlier this year they fell behind on both the first and second mortgage. The first mortgage lender started foreclosure proceedings, but suspended foreclosure and offered to consider my potential clients for a mortgage modification. They have been making modified payments for several months but when they called the lender to ask if they had been approved for a permanent modification, the account rep told them that their modification paperwork had not been approved but that their application had been sent to another department for a reconsideration. News of this decision had not been provided to my prospective clients – the only reason they found out was from their call. No one from the mysterious reconsideration division was available and their multiple calls have not been returned for over 2 weeks.
They decided to contact me because they are getting the sense that the mortgage company is unlikely to approve their modification and they want to be prepared for a possible foreclosure. What are their options?
Here is what I advised them through my conversation with the wife:
First, I asked what was their desire regarding the house – was keeping the house a priority? The wife responded that they would like to keep their house but they were not sure they could afford it given the husband's reduced salary.
I explained that Chapter 13 is the type of bankruptcy that can stop a foreclosure but that Chapter 13 would not allow us to change the amount of the monthly payments, nor would it change the total balance due on the mortgage. Chapter 13 would allow them to "cure" their arrearage by paying that arrearage (the past due payments) over a five year period of time, along with other debts that would also be included in the Chapter 13 payment plan. However, if they were not able to afford the regular monthly payments Chapter 13 probably did not make much sense.
The only possible justification for a Chapter 13 would arise from the possibility that they could use Chapter 13 to "strip" the second mortgage and make that unsecured. Under Chapter 13 law, a second mortgage that is wholly unsecured, meaning that the balance due the first mortgage exceeds the fair market value of the home. If the second mortgage is wholly unsecured, we can file a motion to strip the lien, thereby making the second mortgage debt an unsecured claim in the Chapter 13. If our Chapter 13 plan called for paying unsecured debt at 5 cents on the dollar, then Chapter 13 might be something to consider.
In this case, the wife advised me that the monthly payment due the first lender was more than what they could afford, plus she did not seem enthusiastic about signing on for a five year payment plan, so we decided to remove Chapter 13 from consideration.
We then proceeded to discuss Chapter 7.
I pointed out that Chapter 7 would allow the couple to discharge their credit card debt as well as any potential liability arising from the surrender of their home. I felt that the real danger came from the second mortgage lender as it has been my experience that first lenders rarely pursue deficiency claims because of the Georgia law that requires them to go to court to certify the deficiency before a judge within 30 days of the foreclosure. Second mortgage holders, by contrast, need only file suit on the promissory note associated with their loans. I see far more deficiency balance claims from second mortgage lenders than from first mortgage lenders.
I also noted that since the foreclosure process could take several months, one strategy here would be to remain in the house and pay nothing – nothing to either mortgage lender and nothing to the credit card lenders. This strategy would allow my prospective clients to reduce their budget outflow dramatically for several months while they built up a small cash reserve, and then file bankruptcy in four to six months when creditors were starting to take action. I noted that this strategy was based on economics, and that they would have to be comfortable with the moral implications of this course of action. I also noted that this "wait until the last minute" strategy would cause significant damage to their credit in addition to the bankruptcy. By contrast, filing a Chapter 7 when there were few or no 120 day late references would make recovery from bankruptcy a little easier. Credit reports document payment histories and while a bankruptcy discharge will put the balances at zero, it does not delete the negative payment histories.
On the other hand, I advised the wife that if she and her husband waited to file and the husband secured a better, higher paying job, their household income might leave them with disposable income in their budget, or it might cause their household income to exceed the median income for a family of four, thereby making Chapter 7 much more difficult or impossible. It has been my experience that when household income exceeds the median (in Georgia the current median income for a family of 4 is $68,258) by $10,000 or more, it can be very difficult to qualify for Chapter 7 under the means test. Thus, if the husband was actively looking for employment and his target income was $80,000 or more, waiting to file Chapter 7 might not be the best idea.
The wife then asked me about the credit report issue – how long would it take for she and her husband to rebuild their credit. I responded by saying that it my experience, a Chapter 7 debtor can expect his credit score to remain depressed for eight months to a year following the Chapter 7 discharge. However, Chapter 7 has the positive effect of eliminating all debt and thereby causing an improvement to the debt to income ratio. Further, individuals can only file Chapter 7 once every eight years – so from a lender's perspective a recently discharged debtor has no debt and cannot file bankruptcy for at least 8 years.
I assured the wife that I made it my practice to follow up with my clients who had received a discharge to review their credit reports three to five months after discharge. I have found that at least half of the time, there are errors on the credit reports that artificially depress post bankruptcy credit scores and sometimes, the errors are actionable, meaning that we can collect damages from creditors for Fair Debt Collection Practices Act violations. In a few cases I have been able to collect enough in damages to cover the attorney's fees and filing fees associated with the original bankruptcy filing!
I ended by conversation with the wife by thanking her for contacting me. I then followed up our conversation with a brief email summarizing what we had spoken about and providing her with the "get started" link to one of my web sites.
I hope you can see that even a "simple" fact pattern can give rise to a variety of options and pratical considerations. Consumer bankruptcy is not a "one size fits all" practice and I am able to raise all of the points that I did because I have seen a lot of different issues over the past 23 years. If you have any questions about what have written here or if you want to discuss your personal situation, I encourage you to contact attorney Susan Blum or me by phone at 770-393-4985 or send us an email.
Posted in Chapter 13, Chapter 7, Credit, Current, Foreclosure, General consumer bankruptcy info, Georgia Bankruptcy, Lenders, Mortgage, a, and, because , choosing a bankruptcy lawyer, claims, deficiency, document, easier , exceeds, georgia, histories, house, household, in, income, keeping, lender, median, payment, priority , proceedings, pursue, rarely, reports, responded, started, the, wife | Comments Off
Thursday, April 15th, 2010
Earlier this month I received a call from a Chapter 7 client that I had represented several years ago. He is attempting to refinance his house and has discovered that a judgment creditor has a lien for several thousand dollars. The creditor was listed on the case, but neither he no I knew that there was any judgment.
I directed him to visit the county courthouse and pull the file for this case. He did and he reports that the return of service shows that his wife was served by a sheriff's deputy. His wife has no recollection of being served. We did list the creditor on the bankruptcy petition but because we did not know that there was a judgment, we did not file a motion to avoid the judgment lien. What can he do?
There are a number of lessons you can learn from this man's experience. First, you should always obtain copies of credit reports from all 3 credit bureaus prior to filing bankruptcy. In Georgia, you can get a free credit report from each of the 3 main credit bureaus twice a year. Online, you can go to annualcreditreport.com and download your reports. Because credit reports obviously contain sensitive information the annualcreditreport.com system will ask several questions to identify yourself. These are usually multiple choice questions – for example, the system may say "your credit report shows that you previously lived on one of the following streets: (a) Oak Street (b) Thompson Street (c) Ivers Road (d) none of the above.
If you are unable to answer these questions, the system will instruct you to mail away for your credit reports – here is a link to a page on my website with the credit report request letters.
Credit reports are helpful because they will usually show pending lawsuits as well as the names, address, account numbers and debt amounts for most of your creditors. Obviously I can't require all bankruptcy clients to bring me credit reports but it sure helps avoid "forgotten" creditors or judgments.
As far as what we can do, there are a couple of options. First I want to make sure that service of process was correct. If you are served with a lawsuit in Georgia, the sheriff's deputy (or private process server) has to complete a document called a "return of service" that states when a party was served and by whom. Section 9-11-4 of the Official Code of Georgia provides that service on an individual must be made on the defendant himself, or "by leaving copies thereof at the defendant´s dwelling house or usual place of abode with some person of suitable age and discretion then residing therein."
In this case, if the sheriff's deputy served my client's wife, then service is most likely valid.
However, I sometimes see situations where the return of service is unclear as to who was served or even situations where the return of service is blank. In these cases, a defendant can "collaterally attack" the judgment on the grounds that service was not made and he did not know about the lawsuit.
If it turns out that service is valid, my client will have little choice but to negotiate a settlement of the real estate debt. Interestingly the Chapter 7 discharge would eliminate any personal liability he might have for this debt, but the liability remains as to his real estate.
My experience has also been that judgment creditors will become more amenable to negotiation the longer a real estate lien remains unpaid. Here, my client could forego a refinance (or threaten to to forego a refi) and use the argument that the judgment creditor might have to wait for years to get paid as leverage to negotiate a reduced payoff.
Posted in Chapter 7, Chapter 7 issues, Credit, Negotiation, Post bankruptcy credit rebuilding, a, amenable, avoid, bankruptcy and judgments, client, deputy, estate, forego, judgment, lawsuit, letters credit, lien, lien , longer, my, or, post-bankruptcy, private, process, real, refinance, remains, report, reports, request, served, server, the, threaten, unlisted judgment creditors, unpaid , wife | Comments Off
