Consumer Guide to Bankruptcy, Debt Collection, Garnishment, Repossession and Foreclosure
Bankruptcy is a process by which consumers can eliminate or repay some, or all, of their debts under the protection of the federal bankruptcy court. Generally, bankruptcy takes one of two forms — liquidation or reorganization. I will predominantly discuss Florida, and some Illinois and Colorado.
Alternatives to bankruptcy . . .It is often said that bankruptcy should be a “last resort” for financially troubled consumers. This advice is oversimplified. In some cases, legal rights can be lost by delay. It is especially important to get early advice about bankruptcy if you are hoping to use the bankruptcy process to help save a home or a car, or to stop or prevent garnishment. While bankruptcy can prevent a foreclosure or repossession, bankruptcy usually cannot help once the sale process has been completed and your property interest in the collateral has been terminated. Under Florida law, this occurs upon the issuance of the Certificate of Sale, which typically is by 11 AM on the day of the sale. Florida is a deed, mortgage and promissory note state and forecloses by judicial foreclosure. It is important to understand the specifics of your own state in regards to real estate financing, land ownership and foreclosure procedures. We have also used bankruptcy as a defense to foreclosure sales in Colorado and Illinois. There are extreme differences between each of the three states. If you have questions about about bankruptcy to defend against foreclosure in a different state, feel free to contact us. You may live in a state that we are willing to join the Federal Bar and Bankruptcy Bar, and if not, we will provide you contact info for one of consumer defense colleagues in your state.
In some situations, however, it may make sense to explore alternatives to bankruptcy. Such alternatives may include an out-of-court settlement with creditors, mortgage modifications or negotiating a reduction of payments to creditors. If facing garnishment in Florida, call us right away. Florida might have more garnishment defenses than any state in the country. It certainly has more than Illinois or Colorado, where bankruptcy is more likely to be the best option to stop garnishment.
Collection harassment . . .Consumers with debt problems often consider bankruptcy primarily to stop harassing telephone calls and letters from creditors. Once we are retained, we tell our clients to tell all clients that they have retained our services. Then by law, the creditors must stop calling our clients. They are allowed to call us regarding the debt. If they do, it is typically only to tell us where to serve them with the notice of bankruptcy.
The Fair Debt Collection Practices Act (FDCPA) and the Florida Consumer Collection Practices Act (FCCPA) provide invaluable rights to consumers to prevent illegal and harassing debt collection activity. If you are being harassed by debt collectors, record their calls and save their voice messages. When a debt collector or creditor starts their communication with a statement such as "This call may be recorded for quality assurance.", it gives you the right for them to record the call, and you are consenting to the recording by staying on the line. However, it also give you the right to record the call without telling them you are recording the call. We advise our clients, for their own protection, to absolutely record anyone that announces they may be recording the call. In our experience, companies that say that they may record the call, can always find the recordings that prove that they are in the right. However, if the recording of a call would would benefit the you as the consumer, when you ask for a copy of it, you should expect to hear "we don't record every call" or "we routinely purge recordings to conserve space on the server"
Side note on recording harassing debt collectors, and others . . .There are apps that can be installed on your cell phone to record calls. Some will beep during the call and others will not. Clients have brought us recordings made by putting the call on speaker phone, and using their phone, tablet, laptop, video camera or $20 digital recorder from Amazon or Walmart. All that said, I strongly advise to not share the recording with anyone but a experienced consumer protection lawyers. Confidential settlements often fetch a higher price for consumers than do settlements where the information has already gone viral. Not to mention, you may find friends and co-workers to be less willing to talk to you on the phone out of fear that you might record them and publish the conversation. Also remember this, in the 21st century, it is smart to assume that someone is recording what you are doing or saying or both. If you have any questions on the legalities of recording conversations, we are fond of the subject and welcome your emails. And as mentioned earlier, discussing recording phone calls is a subject best only discussed with consumer protection lawyers like us, versus risking losing the trust of your friends and family.
Florida is an all party consent state when it comes to recording conversations. It it illegal to record a live or phone conversation unless all persons involved are notified prior to recording that you are initiating recording. If the other people say that they do not consent to you recording, you are not required to stop recording. You have a right to record your conversation as long as you make it unmistakably clear that you are recording (although typically not in courthouses unless you have permission from the judge). The other people have the right to continue to speak or stop speaking until you stop recording. If they continue to speak after they stop, that is on them, provided that you didn't pretend to stop. Also, a lot of people ask about recording Home Owner Association (HOA) Meetings, Condo Association Meetings or town hall type meeting in their communities. For HOA and Condo meetings, the answer is generally yes, but their are exceptions to when you cannot. In town hall type meeting in your community, let's put it this way, whatever you whisper is likely to be recorded by a few people.
Illinois and Colorado are single-party consent states, which means that anyone who is participating in a particular conversation can record the conversation without asking permission or informing the other participants that they are recording the conversation. However, just because it is legal, it does not make it moral or intelligent to do. If you record someone without their permission, you best keep it secret from everyone except your attorney. Disclosure of the recording, especially reckless disclosure of the recording, could manifest into a wide range of consequences, including but not limited to bodily harm or being charged criminally for alleged extortion or blackmail. Also, be extra smart where you store your recordings. If you use your cell phone, you should definitely secure your phone with a strong password, and encrypt the SD card and the local phone storage, in case you lose your phone.
What bankruptcy can and cannot do . . .Bankruptcy may make it possible for you to:
● Eliminate the legal obligation to pay most or all debts. This provision is called a “discharge,” which is designed to give the debtor a fresh financial start.
● Stop foreclosure on a home and allow you an opportunity to cure a default.
● Prevent repossession of an automobile or other personal property.
● Stop wage garnishment, debt collection harassment and other similar collection activities.
● Prevent termination of utility service or restore service if it has already been terminated.
● Lower monthly payments on some debts, including some secured debts such as mortgages or car loans.
Bankruptcy, however, cannot cure every financial problem. In bankruptcy, it usually is not possible to:
● Modify certain rights of secured creditors. Although you can force secured creditors to take payments over time in the bankruptcy process to cure a default, some secured creditors are afforded protection from other modifications of the loan terms.
● Discharge certain types of debts singled out by the Bankruptcy Code for special treatment, such as child support, alimony, most student loans, court restitution orders, criminal fines and most taxes.
● Protect all co-signers on their debts. When a relative or friend has co-signed a loan and the debtor discharges the loan in bankruptcy, the co-signor may still have an obligation to repay all or part of the loan.
● Discharge debts that are incurred after bankruptcy has been filed.
Types of bankruptcy . . .There are six basic types of bankruptcy cases provided under the Bankruptcy Code. The cases are traditionally given the names of the chapters that describe them. Determining which type of bankruptcy to file is based upon analysis of numerous factors, including income, assets, debt, type of debt and the consumer’s goal in filing bankruptcy, among other factors. Most consumers, however, will file bankruptcy under either Chapter 7 or Chapter 13. Because our practice deals with a lot of real estate investors and real estate financiers, we do deal with consumers whose debt exceeded the thresholds for Chapter 13 and must file Chapter 11, which is predominately for mid to large corporations. (Chapter 13 bankruptcy thresholds are no more than about $394,725 in unsecured debt, or no more than about $1,184,200 in secured debts). Chapter 12 is like a Chapter 13, but for farmers. Chapter 9 is for Municipalities. Chapter 15 is for filing foreign debtors.
Discharging student loans and other debt due to mental health issues . . .As a country, our intelligence is just beginning to sharpen and we are better learning how to provide reasonable accommodations to people with physical health challenges. Additionally, we are beginning to evolve and provide enlightened support for the mental health needs for our country. As such, the bankruptcy code and bankruptcy courts provide framework for discharge of student loans, where repayment of the debt would provide and "undue hardship" for the consumer. Undue hardship traditionally was granted to persons who suffered from a debilitating illness or physical trauma. However, certain persons with bipolar and mental health challenges, have also demonstrated "undue hardship" and granted discharge of student loans in bankruptcy courts across the country. If you would like more information, shoot us an email and give us a call. Every conversation had with us, even before you hire us, is legal protected by attorney-client privilege. We have worked with many people with mental health challenges become debt free, and also help rebuild their lives and their credit.
Fresh start is the starting line, not the finish line . . .Bankruptcy is more than getting rid of debt. It is an asset protection, credit restoring and a family wealth generation vehicle as well. That is why every year that you hear all of the stories of famous celebrities, Fortune 500 companies and of course presidents, hiring bankruptcy attorneys. Within 3 years of filing bankruptcy you can have your credit score above 700, yes above 700, especially the sooner that you file instead of letting more negative history build up on your credit report. It is important to do a full credit report analysis, followed by an assets and liabilities analysis because in many cases we give clients a list of things to do first on their own, and to then come back to us. This includes writing letters to challenge items on their credit reports, waiting for a few months after taking out a loan on a 401k, or advising to trade in their current car for a new car before filing. Things like this can help you qualify for Chapter 7 instead of 13; help you increase your credit score before you file; and/or negate that impact that the filing bankruptcy has on your credit score.
Thank you for reading . . . and for more information . . .For specific information on each of the Chapters, see our other legal guides. Or just pick up the phone and give us call or shoot us an email. Every client that for whom we filed their bankruptcy petition, has been glad that they filed. However, at least 50% of them could have protected more of their family's money by coming to days, weeks, months and years sooner. Often, as you will see from a few our AVVO client reviews, we tell clients not to hire us. Also, every bankruptcy court that I have seen has terrific information for debtors. We actually send the info from the courts to our clients, so call us and we will be glad to save you sometime looking. Also, if you go to the website for the Chapter 13 trustee for your area, they have lots of good information too. What about the library? Sadly, as the son of a former school teacher, I was mandated to check out books from the library, and today have library cards in Denver, Miami and Chicago. Unfortunately, I would not recommend a single book on bankruptcy or debt relief that I have seen at any library. Don't waste your time. Stick with the bankruptcy courts and the Chapter 13 trustees, and of course consumer protection lawyers like us. If you want information on DIY credit repair and credit restoration, I have seen lots of good books on that. However, be aware that credit repair and credit restoration by consumer protection lawyers will be better. This is because we are assume the worst of the the credit bureaus and write the letters both seeking deletions by following all of the statutory provisions, but also write thinking about how to win the lawsuit we might have to slap on the credit bureau to get our clients the justice they deserve.