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In bankruptcy, a debtor must relinquish assets to satisfy debts. But there are exceptions to this general rule. Certain assets may be exempted from a debtor’s bankruptcy under federal and state law. Other assets, which are subject to a contractual loan agreement and the security interest of a lender, may be “reaffirmed” by a debtor pursuant to a reaffirmation agreement. The debtor may keep the asset, such as a house or a car, as long as the debtor enters into a new agreement with the lender that reaffirms the debt according to defined contractual terms, which may or may not track the original loan terms. Read More ›
Tags: 6th Circuit Court of Appeals, Billing/Payment, Chapter 7, Collections
Another Taxi Medallion Workout Success Story
Crains New York reported on July 11, 2019 that an auction of 16 medallions at an East Elmhurst, Queens, hotel came to an early end, with just three sales and a top price of $138,000.
Regrettably, this article demonstrates that taxi medallions continue to drop in price.
As many readers of this blog know, Jim Shenwick has developed a niche practice representing “underwater’ taxi medallion owners.
The strategies used by Jim Shenwick in taxi medallion workouts are as follows:
First, he does asset protection planning under New York State law to make sure that if the negotiations are not successful, or the taxi medallion owner needs to file bankruptcy, as few assets or property of the medallion owner would be available to creditors or the bankruptcy trustee.
Second, he commences aggressive negotiations with the bank (that holds the medallion loan), seeking that they “take back” the underwater medallion. This is known as a “walkaway”, or a “surrender”, of the medallion and it is a form of “out of court” workout. There are tax implications regarding the take back of a medallion by a bank under Section 108 of the Internal Revenue code, and those issues have been discussed in prior blog posts by Jim Shenwick.
Third, if the out-of-court negotiations do not work, in appropriate cases Jim advises the medallion owner to file for Chapter 7 bankruptcy (also discussed in prior blog posts).
Fourth, if neither of the options described above work, Jim then seeks a modification of the medallion loan with the bank.
Recently, Jim Shenwick concluded a successful negotiation regarding a medallion loan modification and the facts and strategy are discussed below.
The facts: An individual owned one taxi medallion subject to a loan on the medallion in the amount of $650,000. The individual also owned a house in Nassau County with a fair market value of approximately $600,000 and the house was not subject to a mortgage. The medallion was being leased out by a management company and the cash flow from the lease was not covering the monthly loan payment to the bank (a common problem). For several months, the client had been using money from their savings and checking account (out of pocket) to make up the difference. However, based on the property that the client owned and their age, they would be unable to make those payments indefinitely and they were nervous and stressed about their situation.
The Strategy: Jim Shenwick was retained to begin negotiations with the bank. Based on the value of the house and the amount of equity in the house, the bank indicated that they would not accept a surrender of the medallion. He then agreed to a modification of the medallion loan so that after the modification, the cash flow generated from the leasing of the medallion would equal the monthly medallion loan payments- the loan would be cash flow neutral.
While the result was not as ideal as a surrender of the medallion, under the circumstances at that time, it was the best solution for the client. The modification eliminated the need for litigation and a bankruptcy filing by the client. In the case of bankruptcy, based on the equity in the house, the client would have lost their house.
In a loan modification there are four variables: 1) The amount of the loan 2) The interest rate on the loan 3) The term of the loan 4) The amortization schedule for the loan. Once these four variables are determined, a loan amortization table can be used to determine the monthly loan payments.
Let's now discuss those factors and how they applied to the medallion loan modification. First, Jim asked the bank to write the loan down to the value of the medallion and the they refused (the amount of the loan for purposes of the loan modification was $650,000). Second, the bank agreed to an interest rate of 3.75% for the modification. Third, the bank agreed to a two-year term for the loan. The client requested a three to five-year loan repayment term, but the bank refused. Fourth, the bank advised that the loan be interest only to lower the monthly payments- which the client agreed to.
Based on the above factors, the parties agreed to modify the loan. After the modification, the cash flow generated from leasing out the medallion equaled the monthly loan payments and the medallion owner/ borrower no longer had to “go into their pocket” to cover the monthly payments.
While the solution was not perfect, under the facts and circumstances of this case it was the best result for the client. Effectively, we have “kicked the can” down the road for two years with the hope that medallions will increase in value during that period of time. If medallions do not increase in value, the client can either do another loan modification, seek a surrender of the loan, or file for bankruptcy.
Anyone who is interested in discussing an underwater taxi medallion loan modification or similar strategy is advised to contact Jim Shenwick
I just finished a survey of people who filed bankruptcy with me three years ago. Here’s one big thing I found out: credit scores three years after bankruptcy are almost the national average. Right about half of the people who filed bankruptcy with me three years ago have a score above 670. A 670 score […]
The post Credit scores after bankruptcy are close to national average, in just three years by Robert Weed appeared first on Robert Weed - AE.
Nearly one million Americans file for bankruptcy each year because of medical debt. A sudden illness or accident could put you underwater overnight. And while bankruptcy is not the only option, it remains one of the most powerful tools that debtors have to find financial relief. In this article, we discuss how to get rid of medical debt through bankruptcy, and how a Dallas bankruptcy attorney can help.
Figure Out What Kind of Debt You Have
Under bankruptcy laws, medical debt is treated as an unsecured, nonpriority debt. The good news is that in Chapter 7 bankruptcy, these types of debts can be discharged completely, providing you with much-needed relief.
If you used a credit card to pay for your medical bills, don’t worry. Since credit card debt is also unsecured, nonpriority debt, you can use Chapter 7 to wipe out the debt fairly easily.
Make Sure You Are Eligible for Either Chapter 7 and Chapter 13
A Dallas bankruptcy lawyer can help you determine whether you are eligible for bankruptcy, and whether Chapter 7 or Chapter 13 makes the most sense for your needs. For example, if you don’t pass the means test and therefore don’t qualify for Chapter 7, you may be able to file Chapter 13, which allows you to pay back a portion of your debt. But the eligibility requirements for Chapter 13 are a little different, and the process is a little more complicated. So it’s best to speak to an experienced attorney about your options.
Know Your Options
When it comes to medical debt, there are a few options for people who are struggling to make payments on their home and car loans and monthly expenses. Options may include:
- Negotiating a deal directly with the hospital to repay a portion of the debt or repay the debt interest-free.
- Finding a debt consolidator who is willing to purchase your debt for a lower APR and then repaying all the debt in one lump sum.
- Assessing public options to pay your medical expenses.
- Filing for Chapter 7 or Chapter 13 bankruptcy.
Check Your Insurance Benefits
Verify that the service you paid for is not covered by your health insurance. If the doctor’s office made a billing mistake and the insurance company should have paid the bill, be sure to be proactive in trying to clear up the error. This can save you thousands.
Negotiate With the Hospital
In some cases, you can haggle with the hospital to reduce the amount owed. In other cases, you may be able to negotiate to repay the principal interest-free. If you call the hospital and tell them that you either refuse to pay their exorbitant rates or simply can’t, the hospital may be more receptive to reducing your outstanding balance.
Negotiate a Repayment Plan
Hospitals are generally more than willing to negotiate a repayment plan. But many find themselves out of work directly after a major medical event. If you have savings you can draw on, you may be able to repay the debt incrementally.
Apply for Medicaid
If you’re out of work, you may qualify for Medicaid. If you do, Medicaid can kick in retroactively and pick up the tab on outstanding medical expenses. You will only have a specific window in which to apply.
If you’re paying off medical debt for your child, they may qualify even if you don’t.
Put the Bill on a Credit Card
While this is not a very good solution as most credit cards will have higher interest rates than other options, it can be a way to get creditors off your back, at least temporarily.
Consider Debt Consolidation
Unless you have sterling credit, most debt consolidators will balk at purchasing your debt. It’s a bit of a catch-22. Those who really need a debt consolidator won’t qualify for one. Those who don’t, will. If you have otherwise good credit, it’s worth a shot to see if a debt consolidator is willing to purchase all of your debt and allow you to repay at a lower interest rate. It never hurts to ask, right?
File for Bankruptcy
You can file for either Chapter 7 or Chapter 13 bankruptcy. In Chapter 7, your debt will be wiped clean immediately, but you will have to deal with your credit taking a temporary dive. If your credit is already in shambles, that’s not much of a loss. If it’s not, you can still rebuild your credit after bankruptcy.
During the rebuilding phase, you can take out secured loans or secured credit cards. Over time, this will improve your credit. For those with already bad credit, your credit is likely to be better than it was before the bankruptcy. For those with sterling credit, you may want to exhaust all other options before filing for bankruptcy.
How to Get Rid of Medical Debt That Has Gone Into Collections
If your medical debt is in collections, so long as the statute of limitations hasn’t run out on it, the collections agency can sue to get a judgment against you. Once they’ve done that, they can garnish your wages, levy your bank account, or place a lien on your real estate. In Texas, the statute of limitations is four years.
Once that statute of limitations has elapsed, the debt is no longer collectible. It will be sold to a collections agency for pennies on the dollar, but all that collections agency can do is harass you. They no longer have any legal means to forcibly extract the debt from your savings or property.
A Dallas Bankruptcy Attorney Can Help
If you’re struggling under a mountain of medical debt and you can’t afford to repay it while still putting food on your table and paying other necessary expenses, bankruptcy can help. Talk to Allmand Law Firm, PLLC today to learn more about how to get rid of medical debt and find the financial relief you need.
The post How to Get Rid of Medical Debt appeared first on Allmand Law.
When medical debt becomes unmanageable, it can be recipe for financial ruin. But can you file bankruptcy on medical bills?
Yes — in fact, it’s one of the primary reasons most people file bankruptcy. Below, we discuss the process of eliminating medical debt through both Chapter 7 and Chapter 13.
Medical Debt Is a Leading Factor in Bankruptcy Filings
Medical emergencies can happen to anyone and without warning, leaving you in a situation where you’re out of work, bills are piling up, and you have thousands of dollars in medical expenses. You’re looking for a job, but your health is still recovering. What happens when you can’t pay your debt? Medical debt accounts for the majority of bankruptcies.
What Happens When I Have Outstanding Medical Debt?
Outstanding medical debt will immediately go into collections. Once that happens, you can expect to receive phone call after phone call until the debt is paid. With the help of a collections attorney, the primary creditor can initiate several collections actions against you. These include:
- Placing liens on your property;
- Garnishing your wages; and
- Levying your bank account.
In other words, they can take their money by force, if necessary. To do this, they must first file a lawsuit and receive a judgment against you. The court will notify you that this action has been taken.
The bankruptcy process will prevent the creditor from garnishing your wages or taking other aggressive actions. In essence, the moment you file for bankruptcy, all creditor actions against you must stop immediately.
How Is Medical Debt Treated in Bankruptcy?
In bankruptcy, medical debt is treated as an unsecured debt. Similar to credit card debt, unsecured debt is unlike secured debt (like your car loan or mortgage) in that it is not backed by tangible property.
So what does this mean? It means that as unsecured debt, medical bills can be discharged entirely in Chapter 7 bankruptcy. Some debts are given special priority treatment and can’t be eliminated in bankruptcy — but medical debt is not one of them.
A Dallas bankruptcy attorney can help you determine whether filing Chapter 7 or Chapter 13 is best for your situation.
Eliminating Medical Debt in Chapter 7 Bankruptcy
Chapter 7 is known as liquidation bankruptcy. In the process of filing, your most valuable assets become part of a bankruptcy estate. These assets are then liquidated to repay a portion of your debts. You can protect assets up to a certain amount of value.
Texas has some of the most permissive protection statutes of any state in the country. Chances are the bankruptcy trustee will not find anything to liquidate. In other words, your debt will be wiped clean and you will be free to rebuild your credit over the next few years.
Eliminating Medical Debt in Chapter 13 Bankruptcy
Chapter 13 bankruptcy is known as reorganization bankruptcy. All of your debts will be consolidated into one monthly payment. The amount you will have to pay will be determined by what is within you means, taking into account your income and expenses. You make this payment over the course of three or five years, and at the end of that period, your debts are discharged.
Chapter 7 vs. Chapter 13 for Medical Debts
In order to qualify for either Chapter 7 or Chapter 13, you must meet specific requirements.
To qualify for Chapter 7, you must make below the state median. In Texas, that is around $60,000 a household. Those who make below this number can automatically qualify for Chapter 7. Those make above this number will be required to take the means test. The means test is a survey of your financial obligations versus your income. If it is determined that you have enough disposable income to repay some of your debts, you will still qualify for Chapter 13.
In Chapter 13, there is a limit on how much money you owe. As of April 1, 2019, the total amount of unsecured debt you can owe and still qualify is $419,275.
What happens if you make too much money for Chapter 7 and owe too much money for Chapter 13? Can you file bankruptcy on medical bills even in this situation? Yes, but you would have to file under Chapter 11.
What If I Qualify for Both?
There are pros and cons for filing either Chapter 7 or Chapter 13. Most people tend to choose Chapter 7. Chapter 13 bankruptcy is more expensive and, while it will eliminate all qualifying debt, you will have to repay your debt.
However, the negative impact on your credit score for filing under Chapter 7 are more severe than they are for Chapter 13. In Chapter 13 bankruptcy, the bankruptcy stays on your credit report for seven years. In Chapter 7, it will appear on your bankruptcy report for ten years. But for a number of reasons, that penalty isn’t as bad as it sounds.
In most cases, you will be able to begin rebuilding your credit immediately. Over the next few years, you will start seeing major improvements to your credit score. In fact, with the right choices, your credit score will be higher than it is now, even with the bankruptcy.
A Dallas Bankruptcy Attorney Can Help You Understand Your Options
Can you file a bankruptcy on medical bills? With the help of a Dallas bankruptcy attorney, you can wipe the slate clean and move forward with a fresh financial start. If you’re mired in debt due to medical expenses, call Allmand Law Firm, PLLC today to learn more about your options.
The post Can You File Bankruptcy on Medical Bills? appeared first on Allmand Law.
Public Service Loan Forgiveness Program Mismanaged
CONSUMER FINANCIAL PROTECTION BUREAU SPOTLIGHTS BORROWER COMPLAINTS ABOUT STUDENT LOAN SERVICERS MISHANDLING PUBLIC SERVICE LOAN FORGIVENESS PROGRAM
Consumer Bureau Launches “Certify Your Service” Campaign to Help Teachers, First Responders, and Other Public Servants Stay on Track
June 22, 2017 – The Consumer Financial Protection Bureau (CFPB) today issued a report spotlighting complaints from borrowers about student loan servicers mishandling Public Service Loan Forgiveness.
The Public Service Loan Forgiveness program provides people in public service jobs with a path to debt forgiveness after 10 years
The Public Service Loan Forgiveness program provides people in public service jobs with a path to debt forgiveness after 10 years, with the first borrowers eligible in October 2017. Borrowers report that servicers delay or deny access to loan forgiveness through wrong information about their loans, flawed payment processing, and bungled job certifications. The CFPB also issued updated guidelines to prioritize oversight of servicers’ administration of the Public Service Loan Forgiveness program. Also, the Bureau is launching the “Certify Your Service” campaign to help public servants stay on track for federal loan forgiveness.
“Borrowers have told us about student loan industry practices that delay or deny access to expected help such as the Public Service Loan Forgiveness program,” said CFPB Director Richard Cordray. “We want those in public service jobs who give back to our communities to be able to stay on track, and not worry about unnecessary debt due to servicer errors.”
“We’ve promised our teachers, nurses, first responders, and other public servants that they have a path to a debt-free future if they make their payments on time while serving our communities for a decade,” said CFPB Student Loan Ombudsman Seth Frotman. “When the companies responsible for delivering on this promise aren’t up to the task, our dedicated public servants shouldn’t have to pay the price.”
Complete Report “Staying on Track While Giving Back
These include teachers, social workers, first responders, servicemembers, nurses, and other public health professionals.
The Public Service Loan Forgiveness program, launched in 2007, is meant to encourage people to enter public service despite increasing levels of student loan debt. For these borrowers, this program can relieve the financial stress caused by unmanageable student debt and lower-wage public service work. To be eligible, borrowers must have a qualifying loan; be enrolled in a qualifying repayment plan, such as an income-driven repayment plan; and make 120 on-time payments while working for a qualified public service employer. Student loan servicers are responsible for administering these requirements.
The report highlights complaints about servicing problems that may knock borrowers off track as they seek loan forgiveness earned through their public service and guaranteed by federal law. The report analyzes complaints from March 1, 2016 through Feb. 28, 2017. Some borrower complaints describe industry practices that delay or deny access to promised loan forgiveness, forcing some to forfeit months or years of qualifying service. This can add hundreds or thousands of dollars to the total cost of borrowers’ student debt. The report spotlights borrower complaints about:
- Incorrect or insufficient information from servicers about loan forgiveness eligibility
- Processing delays and errors that cause borrowers to miss out on qualified payments
- Job certification problems that knock borrowers off track
Click here for the updated Bureau manual for student loan servicer supervision
“Certify Your Service” Campaign
In addition to the report, the Bureau is also announcing “Certify Your Service,” a consumer education campaign to empower student loan borrowers working in public service to protect their progress toward loan forgiveness. It includes guides developed specifically for first responders and teachers about what programs are available, which ones are best for each individual’s circumstance, and how to get on the path to loan forgiveness. The Bureau is also updating its tools for employers to help their employees get started in the Public Service Loan Forgiveness program, and tips for helping employees stay on track. Public service employees aiming for Public Service Loan Forgiveness should:
- Make sure they have the right type of loans
- Enroll in the right repayment plan
- Certify that the work is in public service:
- Stay on track
Student loan borrowers experiencing problems related to repaying student loans, including the problems identified in today’s report, can also submit a complaint to the CFPB.
Click here for more information on CFPB consumer guides and tips for loan forgiveness
MUSINGS FROM DIANE:
The Public Service Loan Forgiveness program was designed to help teachers, nurses, firemen, police and other public servants find a way to reduce their student loans, while serving our communities. Do I believe that military should be included – definitely, but I was not asked :-( Many of these dedicated people planned their adult lives around this program with the expectation that their student loans will be forgiven after several years of underemployment. They put off buying a home or even raising children. Now to find that the program is mismanaged is sickening (but not surprising).
How Can I Help You?
The post Mishandling Public Service Student Loan Forgiveness appeared first on Diane L. Drain - Phoenix Bankruptcy & Foreclosure Attorney.
Credit Repair Fraud – Prime Credit, Commercial Credit Consultants, Arthur Barens (Park View Law)
CFPB TAKES ACTION AGAINST CREDIT REPAIR COMPANIES FOR CHARGING ILLEGAL FEES AND MISLEADING CONSUMERS
Companies and Individuals to Pay More Than $2 Million in Penalties and Relinquished Funds
6/27/17 – The Consumer Financial Protection Bureau (CFPB) today filed two complaints and proposed final judgments in federal court against four California-based credit repair companies and three individuals for misleading consumers and charging illegal fees. The Bureau alleges that the companies not only charged illegal advance fees for credit repair services, but also misrepresented their ability to repair consumers’ credit scores. Under a proposed final judgment, Prime Credit, LLC, IMC Capital, LLC, Commercial Credit Consultants, Blake Johnson, and Eric Schlegel would pay a civil money penalty of more than $1.5 million. Under a second proposed final judgment, Park View Law, known formerly as Prime Law Experts, Inc., and its owner Arthur Barens would pay $500,000 in relinquished funds to the U.S. Treasury.
“Today, the Bureau is taking action against companies that charged illegal fees and misled consumers about their ability to fix their credit,” said CFPB Director Richard Cordray. “We will remain vigilant about protecting consumers from companies that mislead them to turn a dishonest profit.”
Commercial Credit Consultants is a Wyoming corporation with a principal place of business in Los Angeles, Calif., that has also operated under the name Accurise. It offered and sold credit repair services to consumers from the summer of 2009 until the summer of 2012. Prime Credit, also known as Prime Marketing, LLC and Prime Credit Consultants, is a Los Angeles-based company that offered similar credit repair services from the summer of 2012 through the fall of 2014. IMC Capital is a Los Angeles-based company that provided credit repair services in 2012. Johnson was the founder and majority owner of Commercial Credit Consultants, Prime Credit, and IMC Capital, while Schlegel was the president and a minority shareholder of Commercial Credit Consultants and Prime Credit.
Arthur Barens owned Prime Credit’s business partner, Park View Law, based in Los Angeles. From March 2013 through September 2014, Prime Credit marketed and sold credit repair services to consumers using Park View Law’s name, and provided credit repair services to consumers who entered into contracts with Park View Law. Park View Law continued to offer and provide credit repair services through a similar arrangement until as late as June 2015.
In complaints filed with the proposed final judgments, the CFPB alleges that the defendants made misleading, unsubstantiated claims that they could remove virtually any negative information from consumers’ credit reports and could boost consumers’ credit scores by significant amounts. The companies attracted thousands of customers through sales calls and their websites, at times targeting consumers who had recently sought to obtain a mortgage, loan, refinancing, or other extension of credit. The CFPB alleges that the companies charged these consumers millions of dollars in illegal advance fees for their services. The Bureau alleges that these practices violated the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule. Specifically, the CFPB alleges that the defendants:
Charged illegal advance fees: Federal law bars telemarketers and certain companies from requesting or collecting fees for credit repair services until certain conditions are met about the delivery of those services. The companies charged a variety of fees for their services before demonstrating that the promised results had been achieved as required by law. Specifically, the companies charged consumers fees for an initial consultation to review a consumer’s credit report. The company also charged set-up fees totaling hundreds of dollars and monthly fees that often equaled $89.99 per month.- Failed to disclose limits on “money-back guarantees”: The companies offered a money-back guarantee for certain services. However, they failed to disclose that the guarantee had significant limits, including that the consumer must pay for at least six months of the service to be eligible for the guarantee.
- Misled consumers about the benefits of their services: The companies misrepresented that their credit repair services would result in the removal of negative entries on consumers’ credit reports. The companies also misrepresented to customers that their credit repair services would, or likely would, result in a substantial increase to consumers’ credit scores. The companies lacked a reasonable basis for making these claims.
In addition to paying the amounts contained in the proposed final judgments, all defendants would be prohibited from doing business within the credit repair industry for five years and permanently prohibited from violating the Dodd-Frank Act or the Telemarketing Sales Rule. They have been filed with the U.S. District Court for the Central District of California, and they are only effective if approved by the presiding judge.
In September 2016, the CFPB filed a lawsuit alleging similar violations of federal law against Prime Marketing Holdings, a credit repair company that partnered with Park View Law from September 2014 to June 2015. That litigation is ongoing.
The Bureau also issued a consumer advisory in September 2016 to alert consumers about companies that engage in potentially misleading credit repair services.
A copy of the complaint filed in federal district court against Prime Credit, IMC Capital, Commercial Credit Consultants, Blake Johnson, and Eric Schlegel
A copy of the proposed final judgement filed in federal district court against Prime Credit, IMC Capital, Commercial Credit Consultants, Blake Johnson, and Eric Schlegel
A copy of the complaint filed in federal district court against Park View Law and Arthur Barens
A copy of the proposed final judgement filed in federal district court against Park View Law and Arthur Barens
MUSINGS FROM DIANE:
People are very trusting. They believe the lies of these credit “repair” companies because they believe there is no other option. Are there alternatives – of course!! I refer folks to the National Foundation of Consumer Credit Counselors, a true non-profit that has been around for more than 40 years. Their business is to help people pay off credit cards over a period of time, at (perhaps) a reduced interest. There is also bankruptcy, which I know that sounds scary, but it is a great idea to educate yourself about both of the these options. NEVER use a credit repair company.
How Can I Help You?
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Updated daily, this blog will keep you informed on the latest bankruptcy news! 
Learn more about how Bankruptcy works and what you need to know.