Archive for June, 2006

Dirt-bag Debt Collectors.

I came across this article describing the tactics debt collectors use to get money from financially distressed debtors:

In one outrageous example, a collector for a funeral home threatened, to “rip the bodies” of the plaintiff’s parents out of the ground, “put them on his lawn…” and chop their heads off.

That’s not the only example given. However, in light of that example, one might be able to see how the use of the term “dirt-bag” may be justified, notwithstanding the fact that this is a professional blog. And some might even think it too polite a term to use.

Unfortunately, the article is not all together accurate because of this:

With new bankruptcy laws making it harder to wipe out credit card bills, experts say collection agencies feel justified doing whatever it takes to collect.

The only reason why it is “harder” is because there is more paperwork involved, and debtors seeking bankruptcy protection need to be consulting with attorneys who know the new law and are not just winging it. Statements like this only help perpetuate the misconception that bankruptcy relief is not available, which leaves many having to face these dirt-bag debt collectors for longer than they have to.

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Falling Prices, Rising Rates, Stormy Weather

Yesterday the news was about the escalating foreclosure rate in Massachusetts.

Today, Boston.com is reporting that home prices in Massachusetts dropped 4% during May.

That might not seem like a lot, but let’s look at this possible scenario: a home that might have fetched $400,000, is likely to get only $384,000.

Many are also accruing little equity or losing what little they may have acquired.
Interest rates on five-year adjustable-rate mortgages have increased more than one-half percentage point this year, to 6.32 percent, according to Freddie Mac, the national mortgage backer.

But the report ended on a peculiar note:

…economists said that as long as the national economy remains strong and job growth continues, the housing decline in Massachusetts would not be severe.
“You’ve seen pretty tremendous home price appreciation so as that cools off you’re going to see some fundamental changes,” said Bob Walters, chief economist for Quicken Loans in Detroit.
But a strong deterrent to a market crash like the one Massachusetts experienced in 1991 is strength in the US and local economies, which generates jobs and income for houses, he said.

I am assuming he did not get the memo: the Federal Reserve is expected to raise interest rates at its meeting on Thursday. This means that the housing payments for many borrowers are going to increase. Now I’ve said many times, I am no economist, but I am pretty sure that this interest rate hike will result in less money to spend and stimulate the economy, and ultimatley, less money for houses.

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A Perfect Storm

Are we headed for one? The number of foreclosures in Massachusetts continues to inch upward. According to a Press Release from ForeclosuresMass.com, the rate of foreclosures during the month of May are 105% higher than they were in May 2005 and over 165% higher than they were in May 2004.

From Jeremy Shapiro, president and co-founder of ForeclosuresMass.com:

“It is clear that many homeowners, especially those with adjustable rate mortgages, are being pushed closer to the edge as interest rates rise at such a consistent clip. We may be witnessing a ‘perfect storm’ scenario where a flat real estate market, higher interest rates, rising energy costs and specialty loans are causing significant difficulty for thousands of Massachusetts property owners.”

A Perfect Storm might sound a little dramatic. However, interest rates continue their creep upwards and it is expected that the Federal Reserve will announce a 25 basis point increase after their meeting on Thursday. It is expected that there will be a further increase in August.

And like all storms, the only way to protect yourself, your home and your family is to be prepared.

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NY AG Sues Debt Collector

New York Attorney General Eliot Spitzer has filed suit against Boyajian Law Offices, P.C., JBC Legal Group P.C. and JBC & Associates, P.C. for abusive debt collection practices and activities.

The suit alleges that the Boyajian companies (1) used dunning letters and falsely stated or implied that they came from attorneys; (2) falsely accused debtors of criminal activity, and threatened debtors with arrest; and (3) failed to supply verification of the debt when requested to do so.

In addition, they were apparently trying to collect on bad checks which were more than 6 years old – and in New York, the statute of limitations for bringing such a claim is 6 years. According to a report here the outfits were apparently collecting checks made payable to Ames and Bradlees, two retailers than have long since been out of business.

Boyajian released this fascinating statement:

“Our clients deserve the full protection under New York law to recover their losses from those who passed bad checks, regardless of the time period that may have elapsed,” he said. “Instead of protecting the consumers, it appears the Attorney General of New York is seeking to protect bad check writers who have written checks in the past.” [emphasis added].

This debt collector is saying “I don’t care what the statute of limitations says”! Boyajian (who is reportedly a lawyer in California) is defending himself and his companies by saying that he does not care what the law says. And it’s not like he could have been misquoted – this was from a written written statement.

Are these entities and are these activities what Congress is thinking of excluding from the Fair Debt Collection Practices Act? If it is, then consumers – and attorneys general in all 50 states need to be concerned.

See my prior posts:

Bounced Check Chaos

Pay Attention to this Legislation

FDCPA Amendment Under Consideration

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Define “Date”

Attorneys rely on courts’ interpretations of statutes in representing their own clients. Since BAPCPA is fairly new, its new rules and requirements are still working their way through the courts. Among the requirements that I have written about is the need to obtain credit counseling prior to filing bankruptcy. I refer to this as the “ticket in”. This certification from a US Trustee approved counselor needs to be obtained before filing. But now, an issue is arising in the courts as to when the credit counseling needs to be done prior to the filing. At least two bankruptcy courts have chimed in on the issue, and they are not agreeing.

Under section 109 of the bankruptcy code:

an individual may not be a debtor under this title unless such individual has, during the 180-day period preceding the date of filing of the petition by such individual, received from an approved nonprofit budget and credit counseling agency described in section 111 (a) an individual or group briefing (including a briefing conducted by telephone or on the Internet) that outlined the opportunities for available credit counseling and assisted such individual in performing a related budget analysis.

So what does the term “date of filing of the petition” mean?

(more…)

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No Cake and No Discharge

It’s a question I am asked often:

“Do I need to list this on my bankruptcy petition?”

The answer is always “yes.” The rule of thumb, actually the only rule is to list and disclose everything.

In a May 24, 2006 decision from the US Bankruptcy Court in Boston, a debtor learned what happens when you do not list and disclose everything: the discharge order was revoked.

(more…)

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NYC Investigating Debt Collectors

The Fair Debt Collection Practices Act is a federal law that gives many protections to consumers. While the law has broad sweeping effect across the nation, states and municipalities are allowed to enact even stronger protections.

In response to a 70 percent increase in consumer complaints in two years, the New York City Department of Consumer Affairs held information gathering hearings, and may propose tighter restrictions on debt collecting agencies.

“People ought to pay their debts,” Jonathan B. Mintz, the city commissioner of consumer affairs, said during a break in the five-hour hearing. “But when debt-collection companies cross the line, which unfortunately they appear to be doing in an increasing way, then something has to change.”

Read more about it in the New York Times.

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Chapter 13 for Chapter 7 Debtors

Lately, I have been getting calls from financially distressed folks who are seeking to stop foreclosure through a Chapter 13 filing. These individuals have recently received discharges in Chapter 7. Presumably, many of these people were among the many that filed before the Bankruptcy Abuse and Consumer Protection Act (BAPCPA) became effective in October 2005. The number one question I am asked by these former Chapter 7 debtors is “can I file Chapter 13 to save my home?”

Under the old law, a debtor could file a Chapter 13 petition following the receipt of a Chapter 7 discharge without any restrictions. The law is different now.

(more…)

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Bankruptcy Gets Three Cheers

Not too many people care to share the personal and often painful journey of living with unmanageable debt and seeking bankruptcy protection, but I am happy to have found this one to be able to share.

From today’s New York Times Magazine:

In late 2002, after five years of negotiating these calls, and of imagining that I’d somehow conquer my debt, I acknowledged it would never really happen. I filed for bankruptcy to free myself of around $20,000 of debt. It felt good. I was full of relief and gratitude for the chance to start again. I did not feel the guilt I feared I would. And I came to love the sound of no phone ringing, of not having to lie and say [that I] was somewhere else.

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The Road to Foreclosure: Non-traditional Mortgages

Foreclosures in Massachusetts continue to rise. ForeclosuresMass.com reports that they are at a 12-year high.

From today’s Worcester Telegram:

The role played by the state’s slow economy [in the high foreclosure rate] is not clear, but many home buyers who used sub-prime loans or variable-rate mortgages are having trouble keeping up with payments as interest rates increase — especially those who purchased properties with little or no down payment.

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