Category Archives: Credit Cards

They Were Under Oath & On Reality TV! Part 1

Over the last couple of years, there have been two high-profile examples of reality television stars failing to fully reveal all of their property and possessions during bankruptcy proceedings.

These two examples provide insight into the effects of untruthfulness – where the intersection of facts and bankruptcy proceedings collide with fame and fortune.

Lying under oath has consequences for all – the rich and famous, the middle class and for the down and out. Anyone lying during their bankruptcy proceedings will get caught, and can pay a high price. Jail time is the scary reality!under oath

Joe and Teresa Giudice are our first case study. Their lives were detailed in a Bravo reality show called “Real Housewives of New Jersey,” which premiered in May 2009. That high profile and visible television presence spelled doom for them.

The Giudices filed a chapter 7 bankruptcy in October 2009, claiming that their income was not sufficient to pay their debts. That may or may not have been true at the time. But, their disclosure filed under oath to the New Jersey bankruptcy court in 2009 was definitely not true. Much of that falsehood was created by ‘leaving off’ personal property. Like ATVs, go-karts, a rental property (see page 17 on this linked U.S Department of Justice indictment), a cement mixer (who hides a cement mixer?).

Ultimately, in July of 2013, Joe and Teresa Giudice were federally indicted on 39 counts, including lying on their bankruptcy disclosures, and other counts stretching back over ten years, for fraudulently obtaining secured loans against properties, and tax evasion. In some cases, they had created false documents, like pay stubs for jobs that didn’t exist and tax returns that were never filed and were largely fiction. In other cases, they moved income around to shell companies.

The evidence was overwhelming. On October 14, 2014, after Teresa had previously plead guilty to four counts and Joe to five counts of bankruptcy and mail fraud, Teresa was sentenced to fifteen months in federal prison, with her husband Joe facing forty-one months.

Stay tuned for part two, with Abigale Lee Miller of Dance Moms.

Sources: Justice.gov, NYTimes.com, & this NYTimes.com.

Debt Vultures

If you have unpaid debt on credit cards and loans, a debt vulture could come circling.

What is a debt vulture? A debt vulture is my description for a kind of collection company that may be on your tail.

Image from http://occupywallstreet.net/story/debt-vultures.

Image from http://occupywallstreet.net/story/debt-vultures.

These types of collections companies have taken over a large segment of the collection of delinquent debt from people whom are unable to pay them. That kind of company is called a “debt buyer.”

Their business model is genius. These companies purchase debts that were written off by credit card issuers, store credit like Lowe’s, Home Depot, and Best Buy – along with medical bills and balances remaining after vehicle repossessions. They purchase these debts at a deep discount, in bulk (think hundreds of thousand accounts at a time!) and then the hunt commences!

They look for the unfortunate borrower, who has a job, with wages they need to pay their family’s bills, and look to force payment, usually through a lawsuit or the threat of lawsuit, and garnish wages and bank accounts.

And of late, my office has seen smaller and smaller balances being sued for – less than $500 in one recent case!

This scary industry is huge. The largest debt vulture of them all is Encore Capital, Inc., located in San Diego, California. You likely never heard of them. They don’t use their name to collect. They do it through subsidiaries with names like Asset Acceptance Capital Corporation, Midland Credit Management, and Midland Funding LLC.

If you get threat letters from these, and similar, companies, the debt vultures are after you.

The second largest debt vulture is Portfolio Recovery Associates. As a public corporation, you can buy their stock!

Both corporations make a handsome profit from this aggressive and depressing business model.

And, if you get mail from these companies, keep in mind that you are the ‘asset’ in Asset Acceptance, you are the ‘fund’ in Midland Funding, and the ‘portfolio’ in Portfolio Recovery. I think that these companies see you – their victims – as a body of ore, to be mined.

This is American commerce, and the debt is real. But most consumer debt has built-in contractual mechanisms, mostly default interest rates well over twenty percent – along with late fees – that cause the amount owed to mushroom.

Of special concern are unpaid accounts that are four years or more since payments were defaulted. At least in Arizona, these companies, if lawsuits and garnishments are their aim, must sue with the allotted time under state law, which, in Arizona, is a long six years from default. So, when a debt vulture is running out of time to sue is when this species gets most aggressive, often filing lawsuits before the deadline runs out to preserve their position.

Not all has been roses for debt vultures. In September 2015, the Consumer Financial Protection Bureau announced its findings into the debt collections practices of Encore and Portfolio, and ordered them to in some cases refund monies to consumers, and “overhaul their debt collection and litigation practices and to stop reselling debts to third parties.” You can read more about it here.

I predict that they’ll keep mining the ore body of the working public, because it is just too lucrative. After all, if these companies pay less than five percent of the face value of debt, and average even a paltry ten percent in total recovery, but they own hundreds of millions in debt, their profit margin is pretty beefy.

If you get mail or phone calls from these aggressive vultures, I can help you consider your course of action. Schedule a free and thorough consultation of your options by contacting my office for an appointment at (520) 299-4922.

Saving Pennies, Losing Dollars: Tales of Bankruptcy Filings Without Legal Advice

Mounting bills, calls from creditors and declining funds leads to a maddening level of desperation. People often feel that they are too broke to hire an attorney to file their bankruptcy. You are between a rock and a hard place, you need to get rid of the stress of your debts and it seems like the best thing to do is to file a bankruptcy on your own.

You are not alone in this thought. Between 25% and 33% of all bankruptcies filed in Arizona are filed by people who have either attempted to prepare their own bankruptcy documents or hired a paralegal service to prepare them.

Many of those people end up having an unpleasant and expensive experience with the bankruptcy court. Many will have assets confiscated. Many will lose the only decent sum of money they receive all year – their tax returns. Yes, the bankruptcy court will take your tax returns! This is why you need to plan for a bankruptcy with an attorney.

Here’s an example what can happen if you choose to file a bankruptcy without the assistance of an attorney.

I met with a woman about a year ago who was unaware that her tax refund, which was substantial, would be confiscated by the Bankruptcy Court Trustee. She ending up losing nearly $8,000 in her tax return money that she desperately needed to the bankruptcy system. Because she didn’t have an attorney at her side. That money could have been used to purchase a vehicle, pay for an attorney, and help with utilities. With careful disclosure of that spending, she would have survived her bankruptcy without losing other assets. She thought she had to be in a rush to file the bankruptcy, and didn’t get the advice she needed to plan accordingly.

This can be avoided with experienced representation. 

I stress that this planning must be done appropriately, by competent attorneys with an intimate knowledge of what is allowable in pre-bankruptcy planning and what is not. Pre-bankruptcy planning is intricate and can take time. But it is extremely valuable.

Another classic scenario involves a person who has been sued, and is consequently highly motivated to file a bankruptcy before a wage garnishment starts, but may also have a large tax refund coming, or perhaps a reimbursement for some work expense, or a personal injury claim, or an inheritance.

Again, they rush in with no legal advice, get a paralegal service to type up what they think they need to file, and then lose assets unnecessarily.

Recently, my office assisted a bankruptcy client with pre-bankruptcy planning on how to purchase a home for their family by using a personal injury recovery as a down payment. We were able to help them to keep that home.

Saving pennies can cost significant dollars. The main ally you have is an experienced attorney who can offer sound advice and good knowledge. Document preparers, and, sadly, lawyers who charge cut rates and who will only provide cut-rate legal advice, are not in your best interest.

Don’t be penny-wise and dollar foolish!

If you have questions about your bankruptcy eligibility, or ways to avoid bankruptcy through other means, schedule a free initial consultation with Daniel Rylander by calling (520) 299-4922. Upon hire, we provide sustained support throughout your bankruptcy process.

Debt Settlement Ads – Are They Real?

Debt SettlementDebt settlement, sometimes referred to as debt consolidation, is touted on television commercial after television commercial as a cure for overwhelming debt, be it medical, maxed out credit cards, or unsecured loans and ‘store’ cards.

What is it? What do those smiling people in the advertisements really do?

First, most television spots are paid for by a company who solicits calls to their toll free line, with “operators standing by!” These companies then sell, that’s right, sell, the list of contacts, numbers and email addresses, to the real company which will (hopefully) do the work.

So, what is the work they do? And how does it work, or not work, for the person who responds to the TV ad or the myriad of online ads?

Debt settlement for the average financially stressed person works like this. Say a person owes six different accounts, with a total balance of $40,000. If that borrower stops paying those monthly payments – assuming he or she had been paying them and the monthly payments amounted to $500 – over, say two years, if the borrower spent none of that money for anything at all, but saved it, that borrower would have $12,000.

The borrower does this at the direction of the (usually for-profit) private debt settlement company that called back from that toll free call, or emailed back. Paperwork was signed. And the borrower, as part of the signed agreement, sends the money described above to an account somewhere else.

Then assume that the whole time, while not being paid, the creditors didn’t sue or do anything nasty, such as relentless phone calls, etc.

Got it?

Now the debt settlement company calls up each unpaid account, and talks them into settling for as low an amount below the balance as they can talk the account holders into.

The debt is gone. So what is wrong with debt settlement companies? Why, when a borrower types their debt settlement company name, or the name of a company they may hire, into an online search engine along with the word “complaint,” numerous negative comments pop up?

Here is what is wrong. First, these companies generally charge a minimum fee, often to be deducted from the distressed consumers deposits, before any work is done. Current restraints do exist in some telephone solicited business which don’t allow up front fees until at least one account is settled (visit this link —Bankrate.com— regarding  the Federal Trade Commission’s ban on upfront debt settlement fees by for-profit companies and services that are sold over the telephone.) But, you’ll pay fees.

Second, many companies, sadly, are frankly crooked. They’ll hide behind a P.O. Box, never answer complaints, tout success rates that are unrealistic, and won’t necessarily stop deductions of the payments if the consumer needs the funds.

Third, the monthly payments may be unrealistically high, depending on how much debt has to be settled.

Fourth, the deductions for the payments are often from the consumers account, which is already under stress. The borrower can lose track of their creditors, not remember who they were, believing the debt settlement company has it all under control. But, the creditors can continue to call, add fees, report the debt as bad debt, delinquent, and/or charged off, sell the debt, that’s right, sell the debt, and sue in an attempt to establish a judgment and garnish wages or a bank account.

Fifth, a creditor who receives less than full pay off of its claim will claim that loss with the IRS on a form called a “1099 debt cancellation form.” This is treated by the IRS as if the borrower actually received that money.

What we do at our law office is evaluate, realistically, if debt settlement will work for our prospective clients. The idea that you can save the funds to settle with the creditors, and be left completely alone during that time, is generally unrealistic. We do assist clients in settling these claims, if bankruptcy isn’t right for them, but only if the client currently has funds, now, that they can dedicate to settling debt.

So, our advice is, read the fine print before agreeing to anything. And if it sounds too good to be true, it probably is. We’ve successfully settled debts for clients that were not eligible for bankruptcy and had the funds to settle those debts. Do keep in mind, most companies will send a 1099 that reflects the amount of money the creditor had to write off.

Our office offers free initial consultations on these matters and will always give you realistic advice on your options.