But I want to keep my house!

 One of the biggest concerns people have when they meet me is whether they can keep their house if they file bankruptcy.  Fortunately the answer is usually "Yes, if ..."

The "if" part of the answer is that if you have a mortgage against your home you will, in any ordinary case, have to keep paying it.  If you have equity in your home, we can protect up to $450,000.00 of equity ("value minus mortgage balance") (more for farmers) and up to 160 acres in size, so it is unlikely that the trustee will try to take your home.

Now, sometimes, if you have two mortgages and if the first mortgage is more than the total value of the house, we can get rid of the second mortgage in a chapter 13.  And if you are behind on payments when you file bankruptcy, we can catch up in a chapter 13.  And on three occasions during my career I've run into a mortgage that's not valid because it was a refinance of a homestead and only the husband signed the mortgage.  

Other than that sort of situation, who will take your home is your mortgage company if you don't pay them. As a practical matter the mortgage company may stop sending you statements, so you will have to push the payments from your end rather than having the company pull it from your end.

But if you are current on your home mortgage when your case is filed, "all" you have to do is to stay current.

What will the trustee take?

Most people file a chapter 7 bankruptcy.  In a chapter 7 bankruptcy the trustee may claim some of your stuff.

There are two sets of exemption we can use in "state" and "federal".

The "state exemptions" protect (generally) $450,000 of equity in your home; $5000 of equity in one car;  $11,250 of household goods; $3,062.50 in wedding rings exchanged at the ceremony; tools of trade of $12,500 ($13,000 for farmers); three-fourths of wages due but not paid; Social Security benefits; and (in a bankruptcy context) $1,512,350 of 401(k) or IRA accounts.  There are some other exemptions that aren't as common.  The homestead exemption is single or joint;  the others are per person.

The "federal exemptions" protect $27,900 of equity in your house, $4450.00 in a car; $14,875 of household goods ($700.00 per item); $1875.00 of jewelry;  $1,512,350 of 401(k) or IRA accounts; Social Security benefits; and a wild card of up to $15,425,00.  And like the state exemptions,  there are some other exemptions that aren't as common.  These exemptions are per person.

What we do is match up what you own against this list (we can't pick and choose -- we need to use one list or the other) and see what doesn't fit into each little bucket.  The trustee gets what "doesn't fit".

Many people -- maybe most people -- who don't have a lot of equity in their home will be able to fit all their assets into the federal exemptions.,

Now, the trustee can't just take your "excess stuff";  he has to turn it into cash.  And to do that he has to sell it to someone.  You are the logical target market.  So if you have "excess stuff" we can sometimes haggle with the trustee and buy it back at a discount.

As always, this is at least mildly complicated;  that's why we meet in person or by Zoom and discuss and work these things out.  Feel free to call me at 320-252-4473.

Get Cheaper Internet

 I came across a program that will help some people save money on their monthly internet bill.

Internet access seems like a necessity these days, but what with inflation hitting all of us, it sometimes seems out of reach.

THe "Affordable Connectivity Program" will cover $30 of your internet bill.  I happen to have Spectrum internet, and everytime I log on at home there is a  banner at the top saying that I might qualify for a monthly discount.

Briefly, if your household income is less than a certain amount, you likely qualify for the program.  For a single person the amount is $27,180;  for a household of two it is $36,620.00;  for a household of four it is $55,500.00, and so on.

But in addition to the income qualification, if someone in your household gets government assistance, you also qualify.  "Government assistance" includes SNAP, WIC, SSI,  reduced school lunch and, I believe, Medical Assistance.

You can get more information and see if you qualify by going to this link:

 Home - ACP - Universal Service Administrative Company (affordableconnectivity.gov)

And by the way, there is another program for telephone service, called Lifeline, that  may help with the cost of phone service.  The income limits are a little lower for that program.  Here is the link for that program:   Get Started - Universal Service Administrative Company (lifelinesupport.org)

Can you get rid of judgments?

You have an outstanding bill. Or you have a bunch of outstanding bills. But you don't have enough money to pay, and the creditor has turned it over to collection.  You ask to set up a payment plan, but the collector refuses.

What happens next?   Generally, after a several months of collection calls and letters, you get a letter from an attorney that says something like "We are ABC Lawyers.  We have been  hired by Discover Card to collect an account you owe them.   They tell us you owe $5,315.00.  If we do not hear from you within 30 days we will assume that this is valid."   This letter is sometimes called the mini-Miranda letter (like the Miranda warning in police shows (You do not have to say anything...).  If you have a genuine dispute with the debt, now is the time to write and dispute the debt.  A phone call probably won't do the trick.

But if the debt is legitimate, the next thing is that someone will knock on your door and say "You've been served."  This is the summons and complaint, and you have twenty days after the date of service to send a formal response to the law firm.   If you don't do, you will be in "default" and the creditor  will be able to have the court enter a judgment against you.

What can the creditor do then?   Well, they can serve a garnishment on your employer and take one-fourth of your take-home paycheck (with a threshold of $413).  Or they can seize your bank account and you will have to show the court that the funds in the account are exempt.  This can go on and on, until the debt is paid.

However, if  you file bankruptcy the collections of ordinary debts must stop!  In some cases we can get back any money you have lost in the prior 90 days.

And the bankruptcy will generally discharge the debt, meaning that the creditor can no longer try to take your money.

If you are in financial trouble, or just want to discuss your options, feel free to call me to discuss your options.  You can reach me at:  320-252-4473.

Don't "Forget" What You Own

     I recently came across another case which reinforces the importance of being accurate when you fill out your bankruptcy papers.  For background, when you file bankruptcy, you must complete a list of assets, and give  values.  Then you must sign the papers "under penalty of perjury".  By doing so, you swear that everything in them is true, including that your forms are a complete listing of all of your property, income, and debts. 

     The case I saw involved a person who had filed bankruptcy and listed his household contents as being worth $9,000.00. Several years later he had a fire which apparently was a total loss.  He filed a claim with his insurance company for $300,000  of household contents (really!).

     The insurance company hauled out his bankruptcy papers and refused to pay the claim on the basis of "judicial estoppel".  "Judicial estoppel" is a situation in which in you have two separate legal proceedings.  In the first legal proceeding you take a certain position -- in the case I am talking about, that the household contents were worth $9,000.  But in a later case you take a different position -- that the household contents were worth over $300,000.  

     The insurance company was able to convince the court that there was no way on earth that the person had $9000 and only a few years later had $300,000.  The claimant tried to argue that he's bought a lot of stuff after filing bankruptcy, but his income during the years was not enormous.  So, the insurance company got out of paying the claim.

     Now, I think it is true that the Goodwill retail price of household goods is a lot lower than the replacement cost.  As I was writing this I looked at the Goodwill site and saw that I could buy a "Global guitar" for $8.95;  a similar one from the Walmart site was $99.95.  But the jump from $9000 to $300,000 was just too much for the court to accept.

     Even worse than having an inaccurate value, however, is omitting something.  There are lots of cases in which a person has a valid lawsuit claim and "forgets" to list the claim in their bankruptcy papers.  The person against whom the lawsuit would be brought can often convince the court to say:  "If you didn't list the claim in bankruptcy,  you can't pursue it after bankruptcy."  

      And, if you deliberately hide property or omit assets or omit important information about your financial affairs, in a worst-case scenario you could be prosecuted criminally for bankruptcy fraud.  

     The moral of this story:  Try to be accurate when you estimate the value of the things you own when we are filling out your bankruptcy petition.

     

Can a debt settlement company protect me from being sued?

 Unfortunately, the answer is “NO, you can be sued even though you are in a debt settlement plan.”

A “debt settlement company” is a company that promises to help you settle with your creditors.ⁱ They are the companies that advertise on radio and television with ads that say “If you owe $15,000 you may qualify to settle your debt” or similar statements. Examples are Freedom Debt Relief, in Tempe Arizona, and National Debt Relief, in New York City,

The basic plan for a debt settlement company is that they tell you to stop paying your bills-- at least the ones they accept. Usually they have you send them money each month. Some or all of that money is used for the fees of the debt settlement company. Once some money is accumulated they will contact the creditor and say something like: “He owes you $2,500.00. We’ll pay you $1,250.00 if you call the debt paid in full.” Sometimes the creditor will accept that settlement – it may be more likely if the original credit card company has charged off the account and sold it to a debt buyer, because a debt buyer usually pays a fraction of the face amount of the debt. This is very common with credit card debts – the credit card company will “charge off” your account and sell it to, for example, LVNV or Portfolio Recovery for literally a few cents on the dollar.  (By the way, you may get a 1099-C at the end of the year for the amount written off.)

Frankly, I think you can do this yourself. If you can raise some cash, you can offer to settle a debt without paying someone in Tempe Arizona to do it for you.

The problem, from your standpoint, is that a debt settlement company simply cannot stop a lawsuit. They are usually not lawyers; even if they are lawyers, they are likely not licensed to practice law in Minnesota and therefore according to court rules cannot represent you in court. Their only tactic is to tell the creditor: “Hey, we can get you some cash if you settle the debt”, but it is up to the creditor whether they will take less than full payment.

What I usually see is that you have been paying their debt settlement company $300 a month for s ix months, but the creditors has not settled and now gets impatient and sics their lawyers on you. You call the debt settlement company in a panic and say “I’ve been sued” and the debt settlement company says: “You have to defend yourself”.

If you in a debt settlement plan and get sued anyway:

a) You can try to settle the debt yourself. The problem is that the debt settlement company has your money!

b) You can defend the suit. Once in a great while the suit is actually against the wrong person – maybe they sue Robert Anderson Jr. for a debt owed by Robert Anderson Sr. If you can show that the debt is owed by that other Robert Anderson you can beat the suit.  Or perhaps the debt is too old to collect.

c) You can file a bankruptcy. That’s where I come in. Very often filing bankruptcy is cheaper than continuing with the debt settlement company, immediately stops garnishments or other collection efforts, and because your debts are now behind you, you may be able to rebuild your credit score sooner.

Bankruptcy is not for everyone, of course; but if you are curious if it will help you, I’d be happy to discuss it with you. Call me at 320-252-4473.

i  Minn. Stat. 322B.02 says:

"Debt settlement services" means any one or more of the following activities:

(1) offering to provide advice, or offering to act or acting as an intermediary between a debtor and one or more of the debtor's creditors, where the primary purpose of the advice or action is to obtain a settlement for less than the full amount of debt, whether in principal, interest, fees, or other charges, incurred primarily for personal, family, or household purposes including, but not limited to, offering debt negotiation, debt reduction, or debt relief services;

(2) advising, encouraging, assisting, or counseling a debtor to accumulate funds in an account for future payment of a reduced amount of debt to one or more of the debtor's creditors; or

(3) offering to provide advice, or offering to act or acting as an intermediary between a debtor and the federal government, state government, or their political subdivisions to delay payment of delinquent taxes owed, establish a payment plan for delinquent taxes owed, or obtain a settlement for less than the full amount of delinquent taxes owed.

Any person so engaged or holding out as so engaged is deemed to be engaged in the provision of debt settlement services, regardless of whether or not a fee is charged for such service

Sam Calvert is a “debt relief agency” and helps people file for relief under the Bankruptcy Code. 

Collection calls before and after filing bankruptcy

A major benefit of filing bankruptcy is that it can lift a load of stress off of you. Before you file you may worry about judgments, garnishments, and repossessions. Often you get call after call after call from collectors. The caller may tell you that you will be sued. That may be true, but no one is going to jail just because you didn’t pay a credit card debt.

Calls should stop cold when your case is filed. This is because filing the bankruptcy creates what is call “the automatic stay”. This is, in effect, a court order which orders creditors to stop trying to collect their debt from you. Major creditors will get their notice of your filing electronically; small creditors will likely get their notice by mail, which means there is a lag of a few days between filing and the creditor getting the notice. If you are contacted in the first few days after your case is filed, you should politely tell the creditor that you filed bankruptcy, that your case number is such-and-such, and that that your attorney’s name is Sam Calvert, whose number is 320-252-4473. But after the first few days, you should not be contacted.

If a debt collector keeps calling you after the case is filed, and if they know about the bankruptcy, you can actually take them to court for violating the automatic stay (or the discharge order, once that is filed at the conclusion of the case). If you get such a call, write down the name of the creditor, write down the date and time of the call, and the name whoever is calling you (that is, if they don’t hang up on you as soon as you start asking!).

Now, there are exceptions, for instance, debts that are not discharged (recent taxes, student loans, etc.). And your mortgage company or car lender may keep sending you notice that you want—because you want to keep your house or your car.

And there is an industry that buys up old debt and tries to collect it later. If one of those writes or calls you, they may say “If you filed bankruptcy, this is not an attempt to collect a debt.” Which of course it is, but the collector will pretend they didn’t know (and it’s possible they really don’t know, because they didn’t look for the information.) In that case follow the instruction above: Politely tell the creditor that you filed bankruptcy, that your case number is such-and-such, and that that your attorney’s name is Sam Calvert whose number is 320-252-4473. This possibility is another reason to periodically check your credit report (which you can get for free from annualcreditreport.com) to make sure that old debt does not reappear on your credit report – and if something does appear, dispute it with the credit reporting agency.

If you are struggling with debt, feel free to call me at 320-252-4473 to talk about your options.