Debt Settlement!

Where the Scammers Have Landed Now...

We thought we’d seen it all with the mortgage broker scams and then the loan modification scams, where some poor schmuck is told something too good to be true, pays for said miracle to the unscrupulous vendor (never reading the paperwork to see if it matches what is being said), and then ends up losing everything. Well, the scammers have just moved on to the latest hotbed of activity: the Debt Settlement Solutions Scam.

This occurs when a Debt Solutions Company approaches someone with high credit card or other debt, offering to slash that amount to less than half, stating the debtor will only have to make small monthly payments to pay off the negotiated amount. The Debt Solutions Company writes all the creditors advising them to only contact Debt Solutions Company and leave the debtor alone. (This is at first a welcome relief for the debtor, but if the company is being unscrupulous about what settlement activity is – or isn’t – being achieved, then they have now cut off the ability for the debtor to be noticed that a lawsuit is coming.)

Next, Debt Solutions Company has the debtor set up a bank account which the debtor funds monthly. Their contract provides the settlement comp-any get paid a percentage of the savings (usually 25% to 35% of what they “saved” you), and that they get paid first. So in essence, Debt Solutions Company draws out all their fees from that account that was funded monthly long before any creditor gets paid. In the meantime, as the creditors aren’t getting paid a thing, they often do not enter into settlement arrangements and instead proceed with litigation against the debtor. This then forces the debtor to pay large sums of money to defend litigation which should not have occurred. The debtor often incurs the expenses for the creditor’s attorneys fees which are usually written into the original credit terms and conditions.

Many times I’ve had clients come in with lawsuits that were filed during the time period they were allegedly represented by the Debt Solutions Company who said they would protect them from having this happen. Most of the contracts I’ve read from Debt Solutions Companies, paint a very different story than what they have verbally told the client will happen. They tell the client the settlements will be entered into right away, so the client starts funding the account. The Agreements usually state the Debt Solutions Company have three to five years to enter into these agreements with the credit card companies. There is never a written guarantee that a lawsuit won’t be filed or the creditors won’t come after you during this time.

Although debt settlement can be done ethically – wherein your total debt amount is reduced and the creditors get paid, without it costing you a fortune in legal fees – you must be cautious about whom you engage on this. An ethical negotiator will charge you by the hour for the time put in on a case. Or, they will get a small deposit up front, and then get paid a specified bonus amount for each creditor who executes a settlement agreement with you. They will keep you apprised of the progress, or lack thereof, so you can strategically plan for alternatives in advance of a lawsuit being served on you.

Another stark reality is, that debt settlement is only successful if all the creditors get on board. If one creditor won’t play, it will sue, and get a judgment to levy against the debtor’s wages and bank accounts, thereby thwarting the ability to fund the settlement for the rest of the creditors who would play ball.

If you would like a free telephonic consultation regarding bankruptcy or any other legal matter, please contact us at (714) 331-1014 or email us at: info@locklearlaw.com.

Written by: Tina Locklear

Lienstripping...

…is not something you do in the privacy of your homes.

It is in fact, a term used to describe the determination made by a bankruptcy court that a previously secured second lien on real property is no longer secured by the property. In a Chapter 13 case then, the so-called stripped lien becomes an unsecured debt for the purposes of the Chapter 13 Plan. A portion of the original debt is then paid off over the term of the plan as part of the unsecured pool. Thus, after the 13 discharge, it’s gone, both as a personal liability and a lien on the property.

Secured debt and unsecured debt are two different classes of claims in a Chapter 13 and are treated differently. Non-priority unsecured debt is at the lowest end of the debt totem pole. A requirement of a Chapter 13 plan is that this class of creditors receive more than it would under a Chapter 7 (which is zero). When the lien is “stripped”, it becomes a part of this lower-class debt (unsecured debt), to the benefit of the debtor.

Please don’t try this at home. This is intended as an informational discussion only. There are many factors which can affect navigating through a bankruptcy case. Certain options may or may not be available to a particular debtor. Trustees and judges are people with different temperaments and views. For best case results, consult your attorney.

Written by Scott Reece

Medical Debts & Bankruptcy...

All medical bills are eligible for either a full discharge under Chapter 7 of the bankruptcy code, or for restructuring under Chapter 13 if you do not qualify for a Chapter 7.

The rising costs of healthcare have been a contributing factor to the overall increase in the number of bankruptcy filings in the U.S. A study published in the journal, Health Affairs, in June, 2005, reported that over half of U.S. bankruptcies were the result of healthcare-related debt. Such circumstances are not limited to those without insurance. An unexpected serious illness and the deductibles, co-pays, policy loopholes and other uncovered expenses can result in an insurmountable burden.

In July, 2007, Professor Elizabeth Warren from Harvard Law School testified before the House Committee on the Judiciary that, “the current health care finance system is bankrupting hard-working, play-by-the-rules American families”.

Decent jobs are not safeguards against financial disaster. Fortunately, relief is available through the bankruptcy court.

Written by Scott Reece

Bankruptcy Exemptions! What You Get To Keep…

Some people envision that filing bankruptcy means the debtor is kicked to the curb with a suitcase of clothes while they watch their house and all their belongings be sold off by an auctioneer. Not so!!! Bankruptcy exemptions are like “allowances”, or caps on the value of things that one is allowed to retain during and after filing bankruptcy. Things such as furniture, housing, vehicles, and money are among the items one may keep, subject to their value and the allowance permitted by the exemption.

There are federal exemption laws, and in some states, debtors may alternately choose state exemption laws. In California, however, use of the state exemption statutes is required.

There are two sets of exemptions in CA and one must choose between the two. One set is geared towards those claiming a “homestead” interest in property. The homestead exemption includes real property or personal property (such as a mobile home) where you live. The maximum homestead exemption based on equity in your residence is $75,000 for a single person. The amount increases depending on your age, marital status, etc. If you have no positive equity in your home, you can keep your home without declaring an exemption for it. This first set of exemptions identifies other allowable exemptions.

The second set of California exemptions is geared towards those who have equity in their home, or do not own real estate at all. This set of exemptions includes a “wildcard” which allows up to $21,825 of any property, at the debtor’s discretion, in addition to the specified exemptions for other property.

The coordination with your attorney to select the exemptions to use in order to keep your property, is a critical part of retaining as much of your assets as possible when filing for bankruptcy. There are an unlimited number of scenarios that can play out depending on what you own, what you owe, and what you want to keep. For these reasons, it is very important that the legal counsel you retain to guide you through the process is knowledgeable about exemptions and your rights.

If you would like a free telephonic consultation regarding bankruptcy or any other legal matter, please contact us at (714) 331-1014 or email us at: info@locklearlaw.com.

Written by: Scott Reece

Myths of Bankruptcy

Since the implementation of the Bankruptcy Reform Act of 2005, the bankruptcy process has undergone some changes. Unfortunately, these changes have been either misreported or misunderstood, leading many people who might benefit from such a move to reject bankruptcy outright.
All of the following statements are FALSE...

Bankruptcy Relief Is No Longer Available –
FALSE ! – Almost all of the relief available prior to the Reform, survives in today’s code. It is somewhat more involved but it still works.

You Can’t File Bankruptcy If You Have a Job –
FALSE ! – The “means test” was developed to divert some filers who make more than the median income for households of their size in their state of residence to Chapter 13. You MUST have a job to file a plan in Chapter 13.

Medical Bills Can’t Be Discharged in Bankruptcy –
FALSE ! – Almost all unsecured contract debt, like credit cards, personal loans, and medical bills remain dischargeable in bankruptcy. The law as-described-by-bill collectors might imply otherwise.

Chapter 13 Plans Require Repayment In Full of Debt – FALSE ! – Chapter 13 plans range from plans that pay general unsecured creditors nothing to plans that pay 100%, with every variation calculable in between. How much you must pay in 13 is driven by the interplay between your disposable income, the value of your non exempt assets, and the total of priority debts you have.

Bankruptcy Represents Personal or Moral Failure –
FALSE ! – Over 90% of bankruptcies are traceable to job loss, illness, or divorce, factors largely out of anyone’s control. Bankruptcy is a fresh start.

People Who File Bankruptcy Can’t Get Credit For 10 Years – FALSE ! – People in Chapter 13 borrow money during the case. People who file for Chapter 7 obtain credit after discharge. The rates are higher, but credit is available. This myth probably got its start in the fact that the Fair Credit Reporting Act allows the reporting of a bankruptcy for 10 years.

You Lose Everything You Own in Bankruptcy –
FALSE ! – Over 95% of bankruptcy cases filed by individuals are “no asset” cases in which the debtor keeps everything he owns. That’s because exemptions provide for assets that the debtor can keep and some assets, like pensions, are beyond the reach of the court. That exemption may allow you to keep your home and many assets.

Bankruptcy Costs Society Too Much –
FALSE ! – Credit card issuers are wildly profitable despite the small percentage of loans discharged in bankruptcy. Banks, however, have cost society an incredible amount.

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-- Written by Scott Reese

Radars Beware!

It’s a clear sunny day, one that reminds us of why we love living in Southern California. There’s a slight breeze blowing and you’re enjoying the rarely quiet and traffic-free street until you hear the dreaded sound of a police siren behind you. You look up and to your surprise (and mortification), you see the flashing red and blue lights of the California Highway Patrol. You quickly pull over and brace yourself.

The officer walks up to you and tells you that he caught you speeding and that his radar recorded your speed at 43 m.p.h. while you were in a residential zone. Were you really driving that fast on that quiet suburban street? Could it be that you missed a marked black and white CHP vehicle? Where’s that rewind button when you need one?

Don’t worry just yet. There is a way to fight those pesky radar tickets! With a little bit of research and some worthwhile time spent disputing the ticket, you may be able to get the citation dismissed, avoid paying the fines and penalties associated with the ticket, avoid traffic school, and avoid an increase in your insurance premiums. If that sounds attractive to you, read on.

If you got a speeding ticket and there was a radar involved, you most likely got cited for violating Vehicle Code Section 22350. A copy of the California Vehicle Code can be found on the Department of Motor Vehicles website: www.dmv.ca.gov. Vehicle Code Section 22350, also known as the “Basic Speed Law,” states “No person shall drive a vehicle upon a highway at a speed greater than is reasonable or prudent having due regard for weather, visibility, the traffic on, and the surface and width of, the highway, and in no event at a speed which endangers the safety of persons or property.”

To fight this ticket, you should dispute this ticket by filing a Request for Trial by Declaration (Form No. TR-205). This form is available to you either via a request to the Court when you post your bail (necessary to dispute your ticket) or via the following website: www.courtinfo.ca.gov/forms/. It’s a relatively simple form to complete; however, you need to provide a brief statement about the facts surrounding your citation (such as when you were cited, location where you were cited, driving conditions, etc.) and the law(s) supporting your claim that your citation should be dismissed.

There may be several different legal bases to dispute your citation. Keep a lookout for our next newsletter to see if it fits your situation.

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Tina Locklear
The Law Offices of Tina Locklear