Archive for the ‘Bankruptcy’ Category

If you have been served by a deputy sheriff or constable, or by first class mail, a document entitled “Application for Supplementary Process,” your problems with debt have become very serious.  Your Creditor(s) have already obtained a judgment for money against you in a separate legal proceeding. In all likelihood, you have received a copy of the complaint, relevant motions, and judgment associated with that proceeding. Supplementary process is the next step that enables creditors to collect monies owed to them.  Supplementary Process is used to compel a Debtor to pay the amounts due on the money judgment. This is a process that is permitted under the laws of the Commonwealth, specifically Mass. Gen. Laws ch. 224 s. 14.

After an  Application by a Judgment Creditor has been made to a District Court, you will be issued a summons by the Court, which commands your attendance a  hearing on a specific date and time.  The goal of the application and summons is to compel you to be physically present at a courthouse. This will allow the attorney for the Judgment Creditor to investigate your financial affairs and examine your ability to pay the outstanding judgment. Many collection attorneys send a financial worksheet to Judgment Debtors to fill out prior to the hearing date.  Otherwise, you will likely be handed this worksheet by the collection attorney on the day of supplementary process hearing.  In most cases, the Creditor’s attorney will insist that you enter into a monthly payment plan, or make a lump sum payment, if there are assets available to satisfy the judgment. In other words, your Creditors are placing you on a court supervised payment plan and schedule, and can use the District Court as an enforcement mechanism.

If you fail to appear at the scheduled Supplementary Process hearing, you will be defaulted by the Clerk, and a Capias will issue against you.  The court will also continue (reschedule) the hearing for a later date.  A Capias is a civil warrant, also called a “bench warrant,” for your arrest.  This warrant was issued because you have failed to obey the summons issued to you, and failed to be physically present at the Supplementary Process hearing.  Once the Capias is issued to the Creditor’s attorney, you will likely be contacted by a Deputy Sheriff from the Sheriff’s Department, who will provide you with instructions on where you must meet him/her prior to the continued hearing date. If you fail to cooperate with the Deputy Sheriff, you can be placed in custody by the Sheriff’s Department, and will be physically transported to the courthouse for examination, and will be required to explain to the Court your reasons for non-compliance with the summons.  In other words, there are great risks associated with being uncooperative during a Supplementary Process proceeding, and you should make every effort to comply with a Court issued summons or the Deputy Sheriff, until you decide to file for bankruptcy.

How can one avoid Supplementary Process and its perils?

The most certain method of stopping a supplementary process proceeding; collection attorney investigation of your financial affairs; court ordered payment plans; court summonses; oversight by the Sheriff’s Department; and arrest, is to file a Chapter 7 or Chapter 13 bankruptcy petition. The automatic stay, 11 U.S.C. s. 362, prohibits your creditors from engaging in collection activity against you after you have file a petition for relief under the bankruptcy code.  If you are subject to a supplementary process proceeding, a copy of your Notice of Bankruptcy Case filing can be provided to the Deputy Sheriff and/or the District Court, which will suspend that proceeding until you receive your bankruptcy discharge.  A bankruptcy petition has many benefits, and it is extremely effective in terminating the pains and perils associated with supplementary process.  Even if you have an inability to pay the judgment on the first hearing date, the Supplementary process action will remain ongoing and you may be required to go to the courthouse every 3-6 months, depending on the court’s schedule.  If you are currently subject to this proceeding, please contact one of our bankruptcy attorneys for more information on how to obtain a fresh start and stop collection activity against you.

Your lenders will generally “write off” a delinquent account as a bad debt after 180 days, or six months. Most lenders attempt to collect their debts for a period of 180 days, and then, after that period,  issue a “charge off.”  This action is reported to the consumer reporting agencies (such as Experian) and will appear as a “charge off” or as “collection” on your credit report.

A “charge off” means that your delinquent debt was sold and/or transferred for collection purposes to a third party.   In all likelihood, after your debts are charged off, you will remain legally responsible for repaying the debt.  In other words, your debt is a contract to repay money, and those rights may be sold, assigned, and transferred to a third party. Some of the large credit card companies use collection agencies to collect their debts.  Here, credit issuers prefer to outsource their collections to aggressive third party agencies who take the risk and rewards in collecting delinquent debts.  In the alternative, many companies and debt collectors are active in the delinquent consumer debt market, and purchase delinquent debt from credit card companies. In these cases, your debt is sold to these companies for a fraction of its full value.

In either instance you have a right to request that the original creditor or new account owner provide documentation that verifies the debt.  You have a right to request a record of assignment and transfer if your debt was sold to a third party.  You also have the right to request an account statement that provides a breakdown of the principal and interest owed, as well as a statement of all credits made to your account. For more information, see the Fair Debt Collection Practices Act, 15 USC s. 1692(g) for the Federal statutes concerning the validation of debts.

If you are considering paying debts that are now owned by a third party, keep in mind that paying off those debts may not improve your FICO credit score. The most important factor that weighs upon your credit score is what the original creditor reports to the consumer reporting agency. This report is weighed upon much more heavily than what is reported by a debt collector or third party assignee of a debt.  In other words, paying off collections accounts does not improve your FICO credit score.

Judge William C. Hillman, United States Bankruptcy Judge for the District of Massachusetts, recently issued a ruling that a Debtor’s Chapter 13 plan cannot be confirmed if a portion of the Debtor’s income is used to pay monthly expenses associated with a vacation property or second home. This opinion does not apply to investment properties, such as rental properties.

Judge Hillman ruled that a Debtor’s income that was dedicated to paying expenses for a vacation property (such as a mortgage) are not permitted and should be used to pay unsecured creditors; thus allowing the Chapter 13 trustee’s objection to a Debtor’s Chapter 13 plan.

In a Chapter 13 bankruptcy, a Debtor is permitted to deduct certain expenses from his income (such as food, clothing, utilities, etc.). The amount of money left over after all allowed expenses are paid is known as disposable monthly income. The disposable monthly income is paid to the Chapter 13 trustee who pays the money to the Debtor’s unsecured creditors. (for a more detailed explanation, visit our chapter 13 information page).

This ruling means that if a Chapter 13 debtor owns a vacation home; he/she is not permitted to include any of the expenses associated with associated with that property (such as utilities, taxes and mortgage) because the expenses are not reasonable and necessary. This ruling likely will apply to all types of vacation property, including time shares.

A vacation property is viewed as a luxury, and cannot be retained by a debtor in a Chapter 13 proceeding. The property must be liquidated and proceeds must be turned over to creditors, or surrendered in the bankruptcy proceeding. In other words, Chapter 13 debtors in Massachusetts will not be able to keep their vacation homes unless their creditors receive a 100% dividend/payout.

If you owe money to a creditor and do not timely pay your debts, or are delinquent, you will inevitably receive telephone calls from your creditors or debt collectors. Numerous clients of Grantham Cencarik, P.C. have protested to their bankruptcy attorneys that many creditors call their cell, home and business telephone anywhere between 5-6 times per day. This rule typically applies to each creditor. Because you are required to provide updated telephone numbers to your creditors, and telephone numbers are easily discoverable, your creditors and collectors consider your telephone line “fair game” during the collection process.

What can you do to stop calls from creditors and collectors?

If you have already filed bankruptcy, the automatic stay, 11 U.S.C. s. 362, prohibits all of creditors and collectors from contacting you for the purposes of collecting a debt. Once you bankruptcy petitions has been filed, your creditors and the collectors will be notified of the case filing, and the calls will gradually terminate. If one of your creditors contacts you after your petition has been filed, provide them with your case number and that you have filed for bankruptcy in the District of Massachusetts. This should put an immediate end to collection calls.

If you have not yet filed for bankruptcy, are in the middle of the bankruptcy process, or still deciding whether to file for bankruptcy, there are actions that you can take to eliminate off collection telephone calls. Pursuant to the Fair Debt Collection Practices Act, your creditors must cease and desist debt collection communications if you notify them in writing that you do not wish to be contacted. The next time you receive a call you should answer it. Then, ask the caller which account they are calling in reference to; as well as the name, address and fax number of the caller (collection agent). Make sure to include all this information on your letter that instructs the collector not to contact you. If you are receiving calls at work, make sure to inform them not to call you at work or that your employer does not permit such calls to be made to your place of employment. Make sure to fax and mail this letter to the collector.

Keep in mind though, that just because your creditors are no longer calling you; they have not stopped collection of your account. Usually, your creditor’s next step will be to sue you for the money you owe them. Once they get a judgment against you, then your creditor has new powers to make you pay, such as seizing a vehicle, garnishing your wages, or forcing you to come to court on a monthly basis. The only way to stop your creditors is to either pay them, or to file bankruptcy. For more information, contact us by calling 1-888-5-BOSTON, or 617-497-7141.

Just one question…How many of you reading this post had their credit card interest rate raised or minimum payment raised before February this year? My guess is nearly everyone did. Why you may ask? Well, despite the typical corporate greed reasons, the answer is simple.

Last year, Congress passed new legislation designed to help the average borrower. This legislation that was signed by President Obama last May, prevents card companies from raising rates on existing balances unless the borrower is at least 60 days late and would requires the original rate to be restored if payments are received on time for six months. The law also requires banks to get customers’ permission before allowing them to go over their limits, for which they would have to pay a fee. This law went into effect in February of this year.

So how did the credit card companies respond to this law? Simple….they all raised their rates just before February regardless of the borrower’s payment history or credit score. So effectively, the credit card companies gave them selves a quick raise before they were no longer allowed to. (I guess the bailout wasn’t enough.)

So for most of you who were probably just making ends meet up until February, you are now finding that it is harder and harder to keep up with your payments, even falling behind on your bills or losing money to bank overdraft fees that seem to creep up on you when you least expect it.

Well, guess what? You are not alone. We have had several recent clients who saw their credit card payments increase over $500 a month. Prior to this, they had perfect credit and had never missed a payment. After their payments increased they fell further and further behind until finally they ran out of options.

The point is, there are options available. For a few with relatively small balances, credit counseling may be an option. However, if your balance is over $20,000, you may find this option unacceptable. This leaves Bankruptcy. Bankruptcy provides people like you with an an opportunity to take control of your finances. In most cases, through bankruptcy, you are able to discharge all of your unsecured credit card debt. This leaves you debt free and gives you an opportunity to start over with your credit score.

Keep in mind that bankruptcy is not for everyone; but for most, it is a very powerful tool that will allow you take control of your finances. Our firm provides a free consultation for anyone who is having problems paying their credit cards. There are no obligations, so contact us today.