Debt Defense and Bankruptcy FAQs
What is Chapter 7 bankruptcy? Can a debt collector call my employer? Is there anything I can do to avoid filing for bankruptcy? Can I negotiate with my debt holder? We answer questions like these here.
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Who Will Know If I File Bankruptcy?
The fear of unwanted publicity in bankruptcy is common. This is usually the result of a difference in perception vs. reality.
While bankruptcy cases are publicly available, the only people that usually know of them are you, your creditors, court personnel, and anyone else directly involved in the case (attorneys, the trustee, etc.).
People often fear that their friends and/or co-workers will find out. But thousands of people file for bankruptcy every year in Massachusetts. You almost certainly know someone that’s filed - friends, family, neighbors, co-workers, etc. How many times have you looked these people up to see if they’ve filed? Probably never. And they probably won't look you up either.
Yes, celebrity bankruptcy filings are often reported on the news. But unless you’re famous, your case probably isn’t going to be that interesting.
What are the warning signs of illegal debt collection harassment?
When you get behind in paying your debts, the credit card company, doctor, bank, or other creditor you owe could hire a collection agency to attempt to collect your debt.
While many collection agencies are professional when collecting a debt, others are not even legitimate debt collectors. Some engage in illegal and abusive debt collection practices. Just because you owe a debt does not mean that you have to take this harassment. You may have rights that you can enforce under the Massachusetts Consumer Debt Collection Act, and the federal Fair Debt Collection Practices Act to stop these practices, and you may be entitled to compensation for your injuries under these laws.
What Are the Warning Signs of Debt Collection Harassment?
You need to know the warning signs of debt collection harassment so that you can identify “debt collectors” who prey on people like you and attempt to take their money. In addition, you should be on watch for debt collectors who threaten action they cannot legally take in an effort to frighten you into paying a debt. You may not even owe the debt that the debt collector is attempting to get you to pay.
Here are signs of illegal debt collection practices that you have a right to stop:
- Harassment. It is considered illegal harassment for a debt collector to use profane language or threats of violence, or to publish your name in a list of debtors. In addition, repeatedly calling you about a debt—sometimes multiple times in a day—or before 8:00 AM or after 9:00 PM is prohibited.
- Making false statements. Some debt collectors will lie in an attempt to get you to pay a debt. They may falsely claim to be an attorney or governmental official or make false statements regarding what could happen to you if you do not pay them. A common untrue statement is threatening to have you arrested for not paying the debt.
- Issuing improper threats of legal action. It is improper for a debt collector to threaten legal actions, such as the filing of a lawsuit, which he does not intend to take. It is also a violation of the law to threaten to garnish wages, seize property, or confiscate an income tax refund when the debt collection agency has no judgment against you.
- Using deceptive documents. Some debt collection agencies could send you fake documents that appear to be coming from a company, court, or governmental agency to convince you that you owe a debt or that a judgment has been entered against you. Using fraudulent documents in this way is illegal.
- Collection of what is not owed. In some cases, a debt collection agency will attempt to collect a debt they cannot prove you owe. You may not in fact owe the debt. It is also illegal to charge interest and other fees that cannot be charged under your contract with the creditor that you owe the debt to.
- Badgering friends and family. It is abusive for a debt collectors to contact family members, neighbors, and friends to discuss your debt with them.
- Communications after attorney representation. Once a collection agency has been notified that you are represented by an attorney, the debt collector should not contact you personally. All communications should be made through your attorney, and it is a violation of the law to continue to call you or send you emails or letters.
If you are the victim of abusive debt collection practices, you have a right to stop these illegal practices and assert your right to compensation for these violations of your important consumer rights.
Brine Consumer Law is committed to helping you stop debt collectors from harassing you and pursuing your claims for compensation. Many of these cases can be taken at no cost to you because the debt collector will be responsible for paying your attorney fees under debt collection practices laws. To learn more about your rights to stop abusive collection actions, call our office to schedule your free consultation.
How can I afford to hire a debt settlement attorney to help resolve my outstanding debt?
When you are behind in your payments on your credit cards and other debts, it can seem impossible to see how to bring your accounts current. On top of that, you most likely have the stress of having creditors and collection agencies hound you by sending you frequent threatening letters or emails and calling you—sometimes multiple times in a day.
You may know hiring a debt settlement attorney could help you develop a plan to get out of debt, but may not see a way to pay him. However, you may find that hiring an experienced debt settlement attorney is more manageable than you think.
How Do Debt Settlement Attorneys Charge Their Attorney Fees?
Different debt settlement attorneys could charge their fees in a variety of ways. When you first meet with an attorney, you should discuss how he would charge attorney fees in your case. If you decide to hire an attorney, he and you should enter into a written agreement that states how you will be charged for his services. Some of the ways that debt settlement attorneys charge attorney fees include:
- An hourly rate.
- A flat fee that is based on the number of creditors that you have.
- Percentage of your debt to be negotiated.
- Percentage of your savings in your settlements.
How You Can Pay Your Debt Settlement Attorney
When trying to figure out how you can pay a debt settlement attorney and whether it is worth it to do so, it is important to consider how a debt settlement attorney can help you because your attorney can actually save you money. Some of the ways that he can assist you include:
- Stopping abusive, threatening calls and other collection practices by debt collectors and creditors.
- Evaluating your financial situation to determine whether you can pay your debts or need to file for bankruptcy.
- Negotiating payment of your debts—sometimes for significantly less than you owe.
- Asserting your legal rights to compensation for illegal debt collection practices.
- Defending you in court if you are sued and raising defenses that could result in the dismissal of the lawsuit or reduction in what you owe.
How can you practically afford a debt settlement attorney? Here are some ways to do so:
- Keep in mind that a debt settlement attorney will understand the challenges you face in paying his fees when you are struggling to pay the debt you already owe. He will work to develop a payment plan that meets your needs and resources. Brine Consumer Law handles many debt defense cases on a low-cost flat fee that many of our clients have found affordable.
- Many debt settlement attorneys offer a free initial consultation. You should take advantage of this opportunity to meet with your top potential attorneys to discuss how they think they can help you, the fees that they will charge, and how they expect you to pay them.
- You may be able to work out a monthly payment plan to pay the attorney fees you owe. Some attorneys will agree to this or delay payment until they work out the settlement of your accounts for you.
- You may be able to pay the attorney fees from your savings in payments to creditors if your attorney is able to negotiate a settlement for significantly less than what you owe, reduces your interest rate, and reduces or eliminates late fees and other charges.
Given the long-term financial and legal benefits you will obtain, it will be worth the effort to figure out how to hire an experienced attorney who can help you to work with your creditors. At Brine Consumer Law, unlike other attorneys, we will look at all of your options to help you pick the one that is right for you.
Do you need help reducing your debt or stopping threatening collection actions by your creditors? Christopher Brine is committed to advising you all of your options and often offers a low-cost flat fee agreement. Call Brine Consumer Law today to schedule your free consultation to learn how we can assist you.
What happens if I default on my student loan?
If you are like many people, you received thousands of dollars in student loans while you were in college. The monthly payments can sometimes be as high as a person’s rent or mortgage payment. It can be very challenging to pay every month, especially if you are also facing other financial hardships. However, defaulting on a student loan—especially a federal student loan—can result in your facing serious financial consequences.
What Are the Consequences of Defaulting on a Student Loan?
You may become delinquent in your student loan payments for a number of reasons, such as unemployment, low pay, lack of raises, and other financial obligations. You are delinquent when you miss one payment, and this is different than being in default. Once you start paying a student loan late, it is often hard to bring the loan current.
When a loan is considered in default will be determined by the type of loan you have and the terms of the loan agreement. Some federal student loans are generally not considered in default until the debtor has missed nine payments. However, a private student loan and some federal loans can be considered in default after you miss just one payment.
Some of the consequences of default on a student loan can be severe, such as:
- Accelerating the loan. Once you are in default of your student loan, the lender can accelerate the loan, which means the entire amount of the loan is now due. You could also owe additional amounts due to interest, late fees, and other expenses being added to the loan balance.
- Reporting to major credit reporting agencies. When your student loan is approximately 90 days past due, the lender will report your delinquency to the three major credit reporting agencies—Equifax, Experian, and TransUnion. The credit reporting agencies will report your delinquency on your credit report, which may limit your ability to obtain any credit and result in higher interest rates from lenders.
- Sending your account to a collection agency. If the lender cannot get you to bring your loan current, it could refer your loan to a collection agency to attempt to collect the debt. Unfortunately, a collection agency may engage in threatening and abusive practices when attempting to collect a student loan.
- Garnishing your wages. If you default on a federal student loan, your wages can be garnished without a court order. The government or guaranty agency can garnish up to 15 percent of your disposable income.
- Taking your income tax refund and federal benefits. If you are in default of a federal student loan, your federal income tax refund and up to 15 percent of your Social Security retirement and disability benefits can be taken without a court order to apply to your loan.
- Suing you. Both the federal government and private lenders could sue you to obtain a judgment against you if you default in your student loan payments. Unlike other debts, there is no statute of limitations for suing you for student loans.
Let Brine Consumer Law Help You With Your Defaulted Student Loan
Unfortunately, you cannot discharge a student loan in bankruptcy. However, if you are in default of your student loan, you still have options to avoid the harsh consequences you could face. Let Brine Consumer Law help you explore all your options and help you to negotiate a payment plan, enter into an income-based repayment program or other federal program, or consolidate your loans with the federal government or your lender. To discuss your situation and legal options, call our office to schedule a free consultation.
What is Midland Funding LLC?
Credit card companies will often sell defaulted debt to another company who will then try to collect it at a profit. These companies are referred to as “debt buyers” and are considered debt collectors under state and federal collection laws.
In Worcester and Middlesex counties, Midland Funding LLC is one of the most active debt buyers. In 2015, Midland filed over 1,300 lawsuits in Worcester District Court alone.
The Consumer Financial Protection Bureau recently took action against Midland (and its parent and affiliated companies) for violations of consumer protection laws. Among other things, it found that they often filed lawsuits without knowing if they could substantiate the debt in court. They have also filed numerous cases where the debt was past the applicable statute of limitations. Most disturbingly, the CFPB found that they have obtained tens of thousands of judgments and settlements from consumers based on misleading affidavits it provided. A complete copy of the Consent Order is available here.
If you are served with notice of a lawsuit filed against you by Midland, you only have a short period of time to respond. If it was filed in district or superior court, you will only have 20 days to respond. If it was filed in small claims court, then your trial date should appear on the paperwork you received.
If you don’t respond to the lawsuit, then Midland can obtain a judgment against you by default. It can then try to collect that judgment by placing a lien on your property, garnishing wages, attaching your bank account, or other methods.
Attorney Brine has substantial experience in cases with Midland and other debt buyers. Phone consultations at Brine Consumer Law are free, so contact us today to discuss your case.
Am I eligible for Chapter 7 bankruptcy?
A Chapter 7 bankruptcy filing is a fairly straightforward process. It typically takes about 100 days from start to finish and can be a great option if your goal is to eliminate credit card debt. However, you must qualify for a Chapter 7 based on your income and household size. The form you will need to complete for this is referred to as the “means test.”
There are two parts of the means test. First, you must compare your household income with the median income for your household size. As of May 1, 2016, the applicable median incomes in Massachusetts are as follows:
- Household of one: $57,594
- Household of two: $72,346
- Household of three: $90,506
- Household of four: $111,595
The calculation of your income is based on the last six months, although expected changes may be factored in. Also, these numbers are based on gross income received before any taxes or payroll deductions are counted.
If your income is less than the median amount, then you automatically qualify for a Chapter 7 and the rest of the means test form can be disregarded. If your income is above the median amount, then the second portion of the means test must be completed in order to determine whether you are eligible.
The Second Part of the Test: Income and Expenses
The second portion of the means test is a comparison of monthly income and expenses. The idea is to determine whether you have sufficient disposable income each month, such that your case should be a payment plan under a Chapter 13. However, the form only allows you to deduct certain expenses.
Also, while you can deduct the true cost of your expenses for many items, that is not the case for everything. For example, expenses for food, clothing, and transportation costs can only be deducted in presumed amounts based on your household size—regardless of what your true cost for these items are. Because of this, the means test can sometimes lead to frustrating results. It is therefore important to speak with an experienced bankruptcy attorney about your case.
Attorney Brine has significant experience in all aspects of consumer Chapter 7 cases, including means test issues. Phone consultations are free, so contact Brine Consumer Law today to discuss your options.
Can a debt collector call my family?
Both federal and state laws prohibit debt collectors from certain types of communications with third parties. For our purposes, a third party is anyone who isn’t either you or the debt collector—including friends, family, coworkers, and neighbors.
Under federal law, the Fair Debt Collection Practices Act (FDCPA) states that, unless you agree otherwise, a debt collector may only communicate with: you, your attorney, credit reporting agencies, the original creditor, the attorney for the original creditor, and the attorney for the debt collector. Communications with all other third parties are prohibited, with one exception. Debt collectors may contact other third parties “for the purpose of acquiring location information” about you.
There are several limitations imposed on such communications:
- The debt collector must state that they are calling to confirm or correct location information about you. They cannot identify themselves as a debt collector, and cannot state the name of their employer unless specifically requested by the third party.
- The debt collector cannot state that they are calling about a debt, and cannot state that you owe a debt.
- The debt collector cannot contact the same third party more than once, unless the third party requests further communications, or the debt collector reasonably believes that the third party gave them inaccurate location information and that they now have accurate information.
- If communication with third parties is by mail, the debt collector cannot: use any language or symbol (on the envelope or its contents) that suggests the message is from a debt collector or has any connection with the collection of debt, or communicate by postcard.
Hiring an Attorney Gives You Even More Protection
Additionally, once a debt collector knows that you are represented by an attorney, then the debt collector cannot communicate with any person other than your attorney. Violations of any of these rules constitute a violation of the Fair Debt Collection Practices Act and entitle you to actual damages, statutory damages of up to $1,000, and attorney’s fees.
In Massachusetts, the Attorney General and the Division of Banks have each issued debt collection regulations that primarily correspond with the FDCPA. Violations of any of these regulations also constitute a violation of the Massachusetts Consumer Protection Act.
Most cases for violations of the Fair Debt Collection Practices Act or the Massachusetts Consumer Protection Act can be handled for no out-of-pocket cost to you, as the laws require the debt collectors to pay your attorney’s fee. Therefore, if a debt collector has improperly contacted third parties in an effort to collect from you, then please contact Brine Consumer Law today for a free consultation.
Can the court say “No” to my bankruptcy case?
One of the most common questions my bankruptcy clients ask is whether their case can be rejected for some unknown reason. They fear that the judge won’t like them, or maybe he’ll think they were irresponsible with money.
Thankfully, this fear is misplaced. The short answer is no: a bankruptcy case cannot be automatically rejected. Bankruptcy is your statutory right to relief from unaffordable debt. It is not subjective and you cannot be denied relief even in the unlikely event that the judge actually doesn’t like you or thinks that you were irresponsible. In fact, most clients never even see the judge.
Here in Worcester, once a bankruptcy case is filed it is automatically assigned to a Chapter 7 trustee. The trustee is a court-appointed representative of your creditors. It is the trustee’s job to examine your case in order to determine whether you have any significant assets that can’t be protected, or if there are any other issues with the case. You and your attorney will have an in-person meeting with the trustee about a month after the case is filed. While you will testify under oath at this meeting, it is not a court hearing. It’s not even held in the court. Instead, it’s typically held in an office building on Main Street in Worcester.
However, the longer answer is that there are of course some limitations on bankruptcy relief. There are some types of debts that normally aren’t dischargeable, such as domestic support obligations, most student loans, and some taxes. Most other types of debt will generally be dischargeable unless you committed some bad deed—fraud, concealment of assets, lying on your bankruptcy petition, etc. Some bad deeds can result in one particular debt not being dischargeable, while others can impact the entire bankruptcy case. Fortunately, this isn’t something that most people will need to be concerned with.
My clients are honest, hard-working people who have had some unexpected event happen that wrecked their finances: job loss, divorce, medical problems, etc. Bankruptcy provides them a way to get a fresh start without any subjectivity or judgment. And unless you’ve previously committed some bad deed like fraud, you shouldn’t have any concern about a rejection of your case.
If you are considering a Worcester bankruptcy filing, please call Brine Consumer Law to discuss your situation. All consultations are free.
When Are Income Taxes Dischargeable in Bankruptcy?
While there are a few types of debt that are never dischargeable in bankruptcy, income taxes are not one of them. However, income taxes are not always dischargeable either. There is a three-part test that income taxes must satisfy in order to be dischargeable.
Specifically, in order to be dischargeable:
- The tax return you owe on must have been due to be filed at least three years ago.
- The tax return you owe on must have actually been filed at least two years ago.
- The taxes you owe must have been assessed for at least 240 days.
In most cases, if the taxes aren’t at least three years old, then they may not satisfy these requirements. However, IRS collection activity can complicate these time calculations. For example, a request for an offer in compromise may lengthen the time need to obtain a dischargeable status.
Additionally, under recent court decisions, you may have difficulty discharging income taxes if your tax return was filed late, or if the IRS or MDOR filed a return on your behalf.
Finally, these rules only apply to personal income taxes. Other types of taxes, such as sale tax or payroll taxes, are not dischargeable.
How Will Taxes Impact My Case?
If you owe significant tax debts, then there are two additional items that should be mentioned.
- First, if the IRS or MDOR already have a tax lien against your property, then in some circumstances, you may be able to reduce or eliminate the balance of that lien altogether.
- Second, and perhaps more important, is that the Worcester, Massachusetts bankruptcy court does not consider taxes to be “consumer debt.” This is important for people who might otherwise have difficulty qualifying for a Chapter 7 due to the means test. One exception to the means test is if more than half of your total debts are not “consumer debt.” In that scenario, you will automatically be eligible for Chapter 7 and no means test is required.
Therefore, if you are dealing with significant tax debts, you should discuss all of your options with an experienced bankruptcy attorney. Contact Brine Consumer Law today for a free consultation.
Will I Lose My Property if I File Chapter 7 Bankruptcy?
The myth that you will lose all your property from filing Chapter 7 is common. Unfortunately, it seems that this fear may be caused by simple terminology.
A Chapter 7 bankruptcy filing is technically considered a liquidation. However, the vast majority of cases are considered “no asset” cases, in which the value of your assets has no impact on the case, and no property is lost. This is due to exemptions.
What Is an Exemption?
An exemption is a state or federal law that allows you to protect a specific amount of value in your assets. For example, Massachusetts state law allows you to protect up to $7,500 in equity in your vehicle ($15,000 if you are handicapped or over the age of 60). Unless you have a newer vehicle without a car loan, odds are you may not have this much equity in it. Even if you do, though, there is also a “wildcard” exemption of up to $6,000 that can be applied to any asset. Therefore, depending on the value of your other assets, you may be able to fully protect a vehicle with up to $13,500 in equity.
There are specific exemptions available for many other items too, including cash, bank accounts, furniture, clothing, and cars. If you own your home and have a Declaration of Homestead filed, then you may be entitled to an exemption of up to $500,000.
There are separate exemption rights under state and federal laws, and you are only allowed to use one set. Depending on your circumstances, then, it may be more beneficial to use either state or federal laws.
What If My Exemptions Aren’t Enough?
If the available exemptions are not enough to protect all of your assets, then you may still have several options to consider. You might choose to file a Chapter 7 anyway, and attempt to “purchase” the asset back during the case. Alternatively, you might file a Chapter 13 bankruptcy instead, which requires a payment plan. There is no loss of property in a Chapter 13, but you are required to pay the full value of your unprotected assets through the payment plan. Finally, you might consider non-bankruptcy options such as debt settlement, debt consolidation, or fighting debt lawsuits.
To review your particular circumstances, contact Brine Consumer Law today for a free consultation.