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The Dangers of Sonoma County Debt Settlement Companies

drowning-in-debt4.jpgDo you find yourself laden with debt? Have you been tempted to contact a debt-settlement company that promises to reduce your debt by negotiating with your creditors?

A new report issued by the Center for Responsible Lending indicates that consumers who enroll in a debt settlement program may increase their debt by as much as 20%.

What Is Debt Settlement?

Debt settlement can occur when a company you retain negotiates with your creditors to accept a lump sum that is less than the amount you owe. Unsecured debt, such credit card and medical bills, are usually eligible for settlement. In a typical case, a consumer will contact a debt settlement company, enroll in a program, and pay a fee once the debt is settled.

It sounds great, doesn't it? But problems can and often do ensue.

The inherent problem of the debt settlement process is that these types of companies advise its clients to stop making payments to creditors. Ostensibly, this tactic is used to communicate to the creditors that the consumer is in trouble and to further entice the creditors to accept partial payments. However, when consumers stop paying their bills, their credit score plummets.

In addition, there are times when creditors refused to negotiate the debt owed. In those cases, consumers can become embroiled in continued collection activity and lawsuits.

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Watch Out Santa Rosa: Deceptive Mortgage Practices Are Back!

agent.jpgDo you remember when a federal jury decided that Bank of America was guilty of selling subprime mortgages and ordered the bank to pay $863 million in damages? In that case, the US Justice Department argued that Countrywide, which Bank of America purchased in 2008, committed fraud by selling shoddy home loans over a two-year period to Fannie Mae and Freddie Mac.

Bank of America wasn't the only culprit. The US subprime mortgage crisis was the main culprit of the recession back in 2008. However, there were other factors contributing to the recession including the steady decline in home prices after peaking in mid-2006 and the percentage of households that became increasingly indebted. Inventive loan packages, such as easy initial terms and interest-only loans, were also to blame for the economic crash.

Industry experts agree that the banking and mortgage industries were mainly to blame. As a result, big banks became unpopular, and many private mortgage companies went out of business.

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FTC Rebukes Harsh and Deceptive Debt Collection Practices

debt-collector.jpgAre one or more debt collectors hounding you? Have you been tempted to authorize payment of your debt over the phone?

In a recent case, the Federal Trade Commission (FTC) determined that a Houston debt collection company - RTB Enterprises, Inc., which does business as Allied Data Corporation, and Raymond T. Blair - wrongly bullied English- and Spanish-speaking consumers and charged them transaction fees.

In addition, the FTC said the bill collectors were deceptive in their methods and claimed to be speaking on behalf of attorneys. Finally, the company threatened to sue consumers and coerced unsuspecting individuals to make payments toward their debts or reveal their personal information.

The FTC sued the debt collection company to rescind their contracts, provide restitution to consumers, and to stop the company from proceeding with its tactics.

The Case Against Houston-Based Allied Data Corporation

Allied Data Corporation had been engaged in third-party debt collection since 1993. Its clients included marketing companies, retail stores, retail websites and hospitals. Annually, Allied collected on one million accounts.

The FTC noted in its complaint that the company used more abusive debt collection tactics against Spanish-speaking consumers than those whose primary language was English. For example, the company's collectors claimed to be attorneys when they attempted to seek payment from Spanish-speaking consumers.

The collectors also warned that the case, if not closed, would head next to Allied's litigation or pre-litigation departments, even though those departments didn't exist within the company.

Oftentimes, Allied's employees would tell consumers that legal proceedings had already begun against the targeted consumers. They went so far as to convey file numbers to further intimidate individuals.

Perhaps worst of all, Allied's employees would tell consumers that they needed to pay the debt right away to avoid up to thousands of dollars of court fees. Allied made these threats even though it had no intention of suing the consumers they targeted. In fact, the lawsuit noted that Allied had no authority to sue consumers without seeking approval from their creditor clients.

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Northern California Man Fakes Bankruptcy to Avoid Child Support

shutterstock_41419909.jpgDo judges take child support seriously? Oh, yeah.

Take the case of a businessman from Northern California who declared bankruptcy and hid assets just to avoid paying child support and alimony.

Steven K. Zinnel and his wife split up in 1999 and a contentious divorce ensued. He declared bankruptcy and it was finalized in 2005. He wasn't really bankrupt; he had moved his assets to shell companies in order to reduce his child support obligations.

The courts don't look lightly on people who hide assets, try to file bankruptcy, and attempt to avoid support payments. In fact, this particular father received a prison sentence of 17 years. In addition, he must pay a $500,000 fine and forfeit assets worth more than $2.8 million.

Call to FBI Leads to Arrest of Zinnel

Zinnel's problems began soon after he contacted the FBI and asked an agent to investigate his ex-wife for trying to get illegal access to his private health insurance information. When the FBI heard his ex-wife's side of the story, they became more interested in Zinnel's bankruptcy than her alleged offense.

The FBI discovered that Zinnel had laundered funds through a company owned by his attorney Derian Eidson. He and Eidson had set up a trust account through which he could essentially launder money from an investment in an electrical firm and some real estate. Furthermore, prosecutors discovered that Zinnel had placed much of his property in other people's names before and after his 2005 bankruptcy.

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Divorce or Bankruptcy: Which Comes First?

January 28, 2014, by Law Offices of James V. Sansone

BK and Divorce.jpgDid you know that someone gets divorced every 10 to 13 seconds in the U.S.? Some of those divorces occur in couples who are also contemplating filing for bankruptcy. What should they do? File or divorce first, or proceed with bankruptcy?

Despite how difficult if may be for an unhappy couple to stay together and live in the same home, in most, but not all, cases it's best to file for bankruptcy first and complete that process before initiating divorce proceedings.

Chapter 7 vs. Chapter 13

To help you understand the differences between Chapter 7 and Chapter 13 bankruptcy filings, here are some explanations:

Chapter 7 Bankruptcy: Also known as liquidation bankruptcy, Chapter 7 allows for the discharge of unsecured debts including credit cards, medical bills and personal loans. In the average case, a person is usually able to exempt all their personal property. The Chapter 7 process can be completed in as little as 90 days, allowing you to begin rebuilding your financial standing and proceeding to the next phase, your divorce.

Chapter 13 bankruptcy: The Chapter 13 process allows you to create an affordable payment plan that gives you the chance to catch up on past due debts. The payment plan, lasting three to five years, gives you the opportunity to pay off lowered settlement amounts to your debtors and discharge your remaining debt once the plan is complete.

Benefits of Filing for Bankruptcy First

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Judges Can Exercise Discretion Over Attorneys' Fees in Bankruptcy Cases

January 7, 2014, by Law Offices of James V. Sansone

Atty fees.jpgA recent study found that while bankruptcy attorney fees vary from state to state, between 2005 and 2009 fees averaged $1,080 to $1,200. In Idaho, fees were as little as $700. In other parts of the country, they can climb to $2,500.

Those fees are in addition to the fees the bankruptcy court will collect when you file. Filing fees can range from $306 for a Chapter 7 filing to $1213 for a Chapter 15 bankruptcy.

Is Your Bankruptcy Attorney Charging You Too Much?

If you feel that your attorney is overcharging you to handle your bankruptcy, you may find some relief from the judge. Bankruptcy judges may regulate attorney compensation and have the authority to discipline attorneys for charging excessive fees.

Take the example of James Glen Whitley. In 2008 and 2009, he failed to reorganize his debts under his Chapter 13 filing. On March 4, 2009, the court dismissed Whitley's 2008 petition without prejudice (without prejudice means that none of Whitley's rights or were considered to be lost or waived). However, in 2009 the court dismissed his case again, this time with prejudice (when a judge dismisses the case with prejudice, the party who filed the claim is forbidden from re-filing the case). But then a few months later, the court vacated its dismissal of Whitley's case and converted his filing to a Chapter 7 case.

This Was a Complicated Legal Case

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Fraud in the Foreclosure Market & 8 Tips To Be Thankful For on How to Find Your Starter Home

November 26, 2013, by Law Offices of James V. Sansone

turk2.gifBuying a foreclosed house can be an economical way to purchase your starter home. In some cases, repairs may be needed or kitchens might need some remodeling but despite those improvement costs, there isn't a cheaper way to purchase a house.

In recent years, the real estate market has enjoyed a bounty of foreclosed properties for first-time buyers and investors to scoop up. Home prices began to slide by June 2007 and by 2008, 2,800 homes in Sonoma County were lost to foreclosure. Distressed sales peaked at 76% of all homes on the market in February 2009.

The Great Recession, which began with the subprime mortgage crisis, forced too many families out of their homes, which often ended up in foreclosure or a short sale. The good news is that the worst of the foreclosure crisis is behind us.

Don't worry about losing an opportunity to purchase a foreclosed home. There's always an opportunity to get a foothold in real estate by purchasing a home at an auction.

And there is always someone who figures out a way to defraud the foreclosure system.

Northern California Investor Faces Conspiracy & Mail Fraud Charges

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Filing for Bankruptcy During the Federal Shutdown: What You Should Know

October 8, 2013, by Law Offices of James V. Sansone

Shutdown.jpgFederal defense worker Rob Merritt was barely making ends meet when President Barack Obama and Congress reached an impasse, forcing many federal departments to come to a halt.

As soon as the shutdown began, visitors to national parks were turned away and U.S. residents found doors shuttered to other federal services. In many departments, large numbers of federal employees were furloughed, leaving those who remained poorly equipped to properly serve members of the public.

For example, the National Labor Relations Board furloughed 1,600 employees, leaving 11 workers in place. The Internal Revenue Service, which employs 94,516 workers, dropped to just 8,752 workers.

Even worse, the U.S. Department of Housing and Urban Development, which subsidizes housing costs for the nation's poor, slashed 8,360 employees from its normal rank of 8,709.

Some federally furloughed employees, some of whom have to continue to work without pay, are now like Merritt, financially vulnerable.

Merritt, who earns $80,000 annually, was already borrowing money using his credit cards to support his wife and four children. He accumulated an insurmountable amount of debt when he underwent heart surgery in April. His wife was in the process of changing careers but had to stop interviewing to help take care of her husband.

If Merritt had been furloughed - like tens of thousands of other federal workers - he would be filing for bankruptcy right now. He's one of the luckier federal employees. Although his check will be delayed, he will eventually receive one - unlike furloughed employees who aren't working and won't ever be able to recoup the lost income.

Is Now a Bad Time to File for Bankruptcy?

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Protect Yourself from Unscrupulous Collection Agencies

September 24, 2013, by Law Offices of James V. Sansone

debt-collectors.jpgAre you being hounded by debt collectors? Did you know that you have rights that can protect you from unscrupulous collection agencies?

A San Francisco federal judge recently approved a preliminary $3.2 million settlement in a class action lawsuit involving a private debt collector who posed as a district attorney in an attempt to collect $20 million from overburdened and scared consumers.

Case Summary

Corrective Solutions, the debt collector in this case, contracted with district attorneys to collect on bounced checks. Then the company targeted consumers with a history of bounced checks.

Corrective Solutions sent the consumers letters on phony district attorney letterhead, threatened them with jail time, and suggested that collection fees of up to $200 would be applied to each check that had bounced.

The debt collector lost his case when a preliminary settlement was reached earlier this month. A final hearing on the settlement is scheduled for January 2014.

This wasn't the first time Corrective Solutions had to deal with unhappy consumers and the justice system. Corrective Solutions was previously called National Corrective Group, Inc., which filed for Chapter 11 Bankruptcy four years ago to avoid four class action lawsuits in several states.

How Can You Protect Yourself from Agencies Like Creative Solutions?

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Abusive Debt Collection Tactics Are Under Fire

bigstock-Tax-Man-898892-300x199.jpgAre you being harassed by a debt collector? You now have a formidable advocate on your side: President Barack Obama.

Obama's consumer protection agency, angered by the tactics of some debt collectors, is on a mission to teach consumers how to battle abusive attempts at debt recovery.

From Home Loans to Credit Cards

Not so long ago, federal regulators began targeting the debt collection practices of some mortgage lenders. Unfortunately, some of those same, harassing tactics are now being used in the credit card business as they attempt to recoup delinquent debt.

It's been reported that national banks and large department stores sometimes relentlessly pursue consumers who are delinquent in their payments even though this debt collection method is restricted under the Fair Debt Collection Practices Act.

Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank Wall Street Reform and Consumer Protection Act prohibits collection firms from committing deceptive or abusive acts or practices. The Consumer Financial Protection Bureau (CFPB) is using this regulation to curb the efforts of collection firms by teaching consumers how to protect themselves.

If you are being targeted by a collection firm and feel that its actions against you border on being abusive or deceptive, you can use a letter the CFPB created to send to your bank or other collection agency to stop the abusive tactics.

The CFPB also has letters to let collection firms know that you need additional information before proceeding with payment. In addition, there are templates for informing collection agencies that you dispute the collection amount and that it needs to stop contacting you until it can provide evidence proving that you're responsible for the subject debt.

The CFPB is also educating consumers about the little known fact that consumers have the right to tell collection agencies to stop harassing them with their incessant phone calls.

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The Taxman Cometh: When Ex-Spouses Lie about Their Income

tax man.jpgDo you fudge the numbers when you file your IRS tax returns? If your answer is yes, you're not alone. The IRS estimates that unreported income costs the U.S. Treasury $250 billion or more a year in unreported taxes.

Guess who is likely to lie? Yes, the maligned CEOs in this country. However, other people tend to lie on their taxes too, including business owners, who can inflate expenses; people with rental properties, who can inflate repair costs; and people with investments.

Everyone else who files taxes and works for an employer must submit an employer-verified W-4, which notes your income and taxes paid. Employees have little occasion to lie to Uncle Sam.

Beware of the Angry "Ex"

If you think the IRS discovers tax evasion through their network of detectives, you are somewhat correct. However, the IRS often discovers unreported income or inflated expenses from estranged ex-wives still looking for revenge, or angry ex-husbands who might be unhappy with the fact that the ex-wife's lover is living with the couple's children.
As Shakespeare said, "Hell hath no fury like a woman scorned." Or in some cases, like a very angry ex-husband.

Community Property in California

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Are Santa Rosa College Students Headed for Bankruptcy?

Ball-Chain-student-loan-debt-wedding-300x295.jpgAfter years of studying and spending tens of hundreds of hours in the library, you're finally free from school.

Unfortunately, you're not free of the student loan debt you accumulated.

If you just graduated from law school or medical school, your student loans will be even higher and possibly saddle you with debt you'll need to repay for many years to come.

The good news - if you consider this good news - is that you're not alone. It is now estimated that 70 percent of the graduating classes of 2013 owe an average of $35,200.

$1.1 Trillion in Student Loan Debt

According to the Consumer Financial Protection Bureau and the Department of Education, 38 million student-loan borrowers now owe in excess of $1.1 trillion. Their debt includes federal, state and private loans and loans made by their families. Some students placed a portion of their debt on their credit cards and are paying exorbitant interest rates.

The student loan debt in California is lower than the debt in New York but more students in California are delinquent in repaying their debt, according to a Wall Street Journal report. Some experts believe this discrepancy is due to students attending East Coast private schools that better equipped them to repay their loan debt.

Hello, McDonalds!

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Financial Instability of Sonoma County Families Breeds New Forms of Fraud

bankownedpic.jpgSonoma County foreclosures may be less common than they were two years ago, but they continue to besiege financially vulnerable homeowners.

According to The Real Estate Report, notices of default in Sonoma County - the first step in the foreclosure process - jumped 52.1% in February. But the good news is that there were still down by 70.1% from the previous year.

Due to the avalanche of foreclosures in recent years, banks continue to own about 685 properties in the county.

Financial Vulnerability Breeds New Forms of Fraud

The Great Recession saw too many people lose their jobs and their homes. Unfortunately, unscrupulous individuals saw a window of opportunity amid this atmosphere of pain and financial uncertainty.

As part of their fraud, companies cropped up, claiming they could prevent foreclosure by negotiating with a consumer's lender or obtaining a loan modification.
These services were offered at a price and naïve and desperate homeowners facing the prospect of foreclosure gladly paid the fee.

Many of the companies pretended to be affiliated with the government or government housing assistance programs. Others falsely claimed to offer legal services or "audits" of consumers' loan paperwork to help them negotiate a resolution with their lenders.
Unfortunately, promised services were never delivered.

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What Do You Do When Your Credit Report Is Wrong?

CreditReportIllustration.jpgHave you checked your credit card report lately? It could have errors that are causing you to unnecessarily pay higher interest payments, mortgage and vehicle loans, and insurance premiums. Those errors could even prevent you from landing a new job.

According to a study by the Federal Trade Commission (FTC), as many as five percent of consumers had errors on one of three major credit reports. In some cases, the errors worsened the consumer's overall credit rating.

Credit reports contain more than a record of your debts. It also includes information about whether pay your bills on a timely basis and will note if you've been sued or filed for bankruptcy.

Your Credit Information Is for Sale

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What Happens When Your Debt is Purchased?

February 19, 2013, by Law Offices of James V. Sansone

images.jpgThe Federal Trade Commission (FTC) receives more complaints about debt collectors, including debt buyers, than about any other single industry.

The Problems with Debt Buying

What is debt buying? It occurs when companies purchase a creditor's debt and then tries to collect the amount owed. Debt purchasing can be a lucrative business, with companies known to purchase debt for just a few cents on the dollar.

For consumers, debt buying can become a nightmare. There are cases in which debt collectors seek to recover funds from the wrong consumer for an erroneous amount.

In 2009, the FTC studied the issue by obtaining information from nine of the largest debt buyers that together amassed 76.1% of all debt sold in 2008.

As part of the study, the FTC studied 5,000 portfolios containing nearly 90 million consumer accounts. Although the accounts were worth $143 billion, debt buying companies purchased the debt for $6.5 billion. Credit card debt accounted for 62% of the portfolios.

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