Bankruptcy Information

Bankruptcy Foes: Debt Relief Company Settles With NC Attorney General

by Susanne Robicsek, North Carolina Bankruptcy Attorney

Bankruptcy is not something that anyone wants to do, but it is often the best course of action for a consumer in debt. Filing for bankruptcy is often seen as a failure, sign of weakness or immoral. Understandably, people who file don’t go around telling everyone how much better life is for them now that they filed, but people sure are quick to mention how terrible it is to file.

In an effort to avoid filing bankruptcy, people will often try many different ways to avoid filing including working with a credit counseling company in a debt management program or a settlement program.

The NC Attorney General Roy Cooper announced in a press release that a settlement has been reached against “The Consumer Law Group of Boca Raton, Florida“, a company described in the press release as a “bogus Florida law firm that falsely claimed it would reduce consumers’ debts…”

“Debt relief scams take advantage of struggling consumers, adding to their burden instead of helping them get out of debt,” Cooper said. “I’m pleased that we’ve been able to win money back for these consumers, money that can hopefully help them pay off bills and get on better financial footing.”

The North Carolina Attorney General’s Office sued this particular debt settlement company after consumers complained about all sorts of problems they had with the company.

The settlement by the Attorney General’s Office is a nice victory for consumers, however it took a a lot of work and a lawsuit to shut this company down. Sadly, many more of these companies remain in business and more will pop up, playing on the desire of most people to try to honorably settle their debts.

The Attorney General took on one of the really bad companies and won, but the problem is that many of these companies are not acting in the debtor’s best interest and they are still out there.

(To see a news video on this story, go here)

Even if reputable, since none of them can offer legal advice since they aren’t lawyers, when you go to one of these companies, many just explain the program they offer and never give full information on alternatives that may be better for the individual.

And bankruptcy might be the better option – which is not something you want to discover after you have spent hundreds or thousands of dollars trying the alternatives.

Chapter 13 is a good way to pay what you can towards your debts, but protect you and your assets and keep your creditors away. Some people pay all their debts off in Chapter 13 payment plans, but others pay a reduced amount.

Chapter 7 helps you get a fresh start fairly quickly, if you aren’t in a position to make payments. You get to keep some of your property (for many people, they keep everything) and can allow you to get your budget balanced and provide for your family.

I encourage people with debt problems to first see an experienced bankruptcy lawyer who can discuss all your options, since I feel that an attorney can explain how bankruptcy works, explain the myths about filing for bankruptcy, but also explore any non-bankruptcy options.

I often encourage clients who might have some discretionary funds available to pay towards their debts to to see a good credit counselor before making up their mind after seeing me. That way they know that they have explored all their options and examine other viewpoints, but that their decision is based upon facts and sound advice.

Debt settlement or debt management programs might make sense for people who earn more money than they need to cover their regular and ongoing expenses, or who have a lump sum to pay towards debts that might not pay them in full.

However in considering these options, you would need to be sure that your budget is sound, and that it not only covers your monthly expenses but also includes things that don’t come up every month (like car maintenance, house repairs, medical bills, clothing, etc).

You don’t find yourself in financial trouble a few months or years down the road, after you use all your ‘extra’ funds to pay towards the debt program. Especially when you should have seen those predictable emergencies coming. (Also see Liz Pulliam Weston’s Article: The $0 Emergency Fund)

A reputable credit counselor will not charge fees up front in North Carolina.

Charging fees up front for debt reduction, negotiation or debt settlement is not allowed in North Carolina.

The Consumer Law Group tried to get around this law by falsely claiming to be a law firm providing legal services.

You can read a number of past articles on dealings with the Consumer Law Group here by Steve Rhode website.

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Debt Buyers Must Follow Rules Too, Says Missouri

by Wendell Sherk, Missouri Bankruptcy Attorney

When credit card debt goes bad, banks sometimes sell it to vulture investors at a steep discount. The vulture debt buyer then often tries to sue on the account to collect more than they paid. And their lawsuits are often the final straw forcing folks bankruptcy, where the debt buyer usually wants a share of any repayment too.

Buying bad — “distressed” — debt is a large, highly automated and risky business. The debt buyers pay very little and get very little information about the account history, the borrowers, and how the balances are calculated. And consumers are encouraged to take on faith that the balance was calculated properly — and that the debt buyer is really the owner of the account. Debt buyers would prefer that courts accept their word of honor too.

The Missouri Supreme Court recently disagreed though. The Court ruled that a debt buyer had to be able to properly prove it owned an account before it could try to sue to collect the debt. In effect, it ruled that the court is not simply an extension of the collection process — it is an independent arbiter where a case must be proven, not presumed.

That would seem like a simple idea, right? How can you sue over a loan if you can’t prove you are the one owed any money? It’s a simple idea at the heart of all court cases. It’s called “standing,” which comes from the old idea that you have to have a right to “stand” in court to ask for help from a judge. Standing is so fundamental that federal rules (based on the Constitution) as well as Missouri law say that a party’s standing to be in court is always subject to review by the court and cannot be waived by another party.

In the 2012 Missouri case, the court ruled that a debt buyer had to be able to provide testimony from the original lender how the records of the account and transfer to the final alleged owner were prepared. In other words, they could rely on business records from other companies — but those companies needed to provide witnesses to testify how those records were created and kept in order to use them in court. The debt buyer couldn’t simply use its own record-keepers — even if they knew how the bank usually did its work — to “authenticate” another company’s records.

This should not be hard to understand. I can’t testify from first-hand knowledge how my neighbor balances his checkbook unless I sat there and watched him do it. I might know he’s an accountant and very careful and, in my opinion, would not lie. But how do I know how he did the math last week?

It would be surprising if any court let me testify about something like that. But judges sometimes see complicated business records like credit card account sales deals and assume everything was proper, and forget that they should not assume anything. In the case of debt buyers who are not original lenders, a “bill of sale” of a huge list of accounts does not prove standing to be in their courtrooms asking for the time of day.

The problem here is identical to the problem of “robo-signing” and fraudulent or non-existent mortgage foreclosure documents. The mortgage industry is simply a variety of debt buyer. Most of the mortgage loans are not owned by the original lender and proving that they own the loan and have the right — standing — to enforce it is how they got into so much trouble in the last couple years.

All of this begs the question how some courts can allow debt buyers to have claims in a bankruptcy case, or prosecute motions for relief from stay, if they can’t prove ownership of the loans. Some courts have asserted that the debtor putting this information on their schedules amounts to admission they owe the money. The state supreme court concluded that standing can’t be granted by a party but is fundamental to invoke the courts’ power. So it remains to be seen if more bankruptcy courts will take up concerns about standing in the future.

Photo Credit: The National Archives

The Ordinary Business Terms Preference Defense

by Nicholas Ortiz, Boston Bankruptcy Attorney

The 2005 amendments to the Bankruptcy Code modified the landscape for a key defense to bankruptcy preference actions. Preference actions are when a trustee or debtor in possession sue a creditor for the return of payments made in the 90 days before a bankruptcy. The concept is that creditors that receive more than similarly situated [...]

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How Long After Filing Bankruptcy Can You Buy A Home?

by Jay Fleischman, New York Bankruptcy Lawyer

Buy a home after bankruptcy? Seems like a stretch for all but those who win the lottery once the discharge is issued. But play your cards right and you could be worrying about scheduling a closing date sooner than you ever thought possible. After filing bankruptcy, you’re debt free. No more calls, no more lawsuits. [...]

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Top Ten Bankruptcy Myths Countdown: #8 Bankruptcy Will Ruin Future Credit

by Karen Oakes, Southern Oregon Bankruptcy Attorney

One of the concerns about filing for bankruptcy is that those folks will never be able to obtain credit again after filing for bankruptcy protection and assistance. Most times, nothing could be further from the truth as bankruptcy may actually improve folks’ credit score, according to my clients’ experiences (and as explained by [...]

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