Zombie Debt – Dirty Tricks By Debt Collectors

Written by Peter Mullison, Colorado Bankruptcy Attorney

Zombie Debt

By Tara Gaschler Salinas

This week I received a panicked email from one of our clients. Her bankruptcy was discharged over 18 months ago. Since then, she has been working hard to rebuild her credit and manage her budget successfully. Her recovery from bankruptcy was well on track, so I was surprised to hear from her and even more surprised at the question she asked.

“Can they really do this?”

A debt collector was threatening to have her arrested unless she contacted them immediately to arrange payment. This was a debt listed in her bankruptcy which was discharged. Fortunately, the email was a complete fraud and I was able to reassure our client with a quick reply. Unfortunately, this is an increasingly common problem for people who have filed bankruptcy. Many end up paying debts that were covered in their bankruptcy discharge.

What is Zombie Debt?

“Zombie” or “Junk” debt is old or uncollectable debt that has been sold or assigned to a collection agency for pennies on the dollar. The collection agency can often score big if it is successful in convincing a consumer to pay the zombie debt. Because of this potentially big payoff, an agency dealing in zombie debt will often use underhanded and illegal tactics to convince you to pay. The threat of arrest is common, along with threats of garnishment, foreclosure, notifying your employer and family.

How Can You Protect Yourself?

  1. Don’t admit you owe the debt! Chances are, this isn’t a debt you owe. Don’t agree to a payment plan or make any statements acknowledging that this is your debt. Request the collector mail you validation of the debt, as required by the Federal Fair Debt Collection Practices Act.
  2. Be suspicious!   Listen carefully and read the fine print! A quick read of the email sent to our client revealed disjointed and nonsensical language that indicated the collectors were probably based overseas. Often the timeline for making a decision or a payment arrangement will be less than 24 hours. This should be a huge red flag. No one can pursue legal action in that short of time – the quick deadline is intended to make you commit before you have a chance to check out the collector and the debt.
  3. Contact your attorney! If you filed bankruptcy and believe the debt was included, check with your attorney before responding to any demand for payment. Many attorneys have form letters that they will either send for you or give you to send off to creditors. If a creditor doesn’t stop attempting to collect, a suit could be filed against the creditor for violation of the discharge injunction.

The best defense against zombie debt collection is being aware that it exists. Knowing that a creditor may try to collect a debt you are not obligated on will help to protect you and your finances going forward. Bankruptcy offers excellent relief, and we are here to help you protect it!

If you have questions about Chapter 7 and 13 bankruptcy, we hope you’ll come in for a free consultation with an experienced Colorado bankruptcy lawyer. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's unexpected events find their way to financial recovery.
3773 Cherry Creek North Drive, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

The Bankruptcy Advice You Don’t Want To Hear May Be The Bankruptcy Advice You Need

Written by Peter Mullison, Colorado Bankruptcy Attorney

The Bankruptcy Advice You Need

Not all of my consultations go well. In fact, I had one this week that ended with a potential client quickly scooping up the documents she had brought in off my desk and rushing for the door. She couldn’t seem to get out of there fast enough.

She didn’t like what I had to say. She had called me in the morning and asked if she could come in later that afternoon. She said she was ready to file. She said she had everything she needed. We scheduled an appointment for a few hours later. She was there on time, and she was ready to get down to business.

Of course, I knew nothing about her. I’m always pleased when someone wants to hire me, but I’m also wary of someone who wants to hire me without spending any time with me and learning about the bankruptcy process. I launched into consultation mode and began asking her the same questions I ask all potential clients.

That’s when the trouble started.

She had recently received a very large tax refund. I asked if any of the money was left, and how she had spent it. Yes, there was still quite a bit left. She had paid some bills with some of the money. But she had also given a large portion of it to her grandmother to repay a loan. She began getting flustered and didn’t understand why I needed to know anything about her tax refund.

I explained that if she still had a large portion of the refund when we filed her bankruptcy petition, there was a good chance that she would have to turn it over to the bankruptcy trustee, who would distribute it to her creditors. I could tell that she was not enjoying our conversation. I explained to her that the bankruptcy rules only allow certain assets to be protected, and that unprotected assets may have to be turned over. Tax refunds for the year in which the bankruptcy case is filed are unprotected in Colorado.

I also asked her if she was being garnished. In fact, she was. That was the big reason she was in such a rush to get filed as soon as possible. To stop the garnishment.

After I went through all of my questions, I let her know that there were some issues that she should be prepared for if she filed.

First, filers are required to disclose certain financial transactions. One of those transactions is the repayment of any debts to family members within the twelve months of filing. I let her know that she was going to have to disclose the payment to her grandmother and that there was a chance that the trustee would want to recover that money, either from her grandmother or from her.

Next, I let her know that the trustee would ask whoever had been garnishing her paycheck to return the money to him so it could be distributed to all her creditors. And since he was going to do that, the trustee would also ask her to turn over 25% of any wages she was due on the day the case was filed.

Altogether, I told her that she may have to turnover a portion of whatever wages her employer owed her on the day we filed, the money she paid to her grandmother, and any remainder of her tax refund if she hadn’t spent it before we filed.

This was too much for her. She was not prepared for the idea that she may have to pay any money to her debts in bankruptcy. She also had no idea that she was going to have to meet with the trustee. She thought that she would drop off the account statements from her debts and that I would take care of the rest. She didn’t realize that she would have to answer any questions at all.

Suddenly, she wanted nothing to do with me or the bankruptcy process. She grabbed her things and rushed for the door. I barely had time to get out of my seat. But to be honest, I didn’t try too hard. My job is to help people through the bankruptcy process, but it requires their cooperation. They have to be willing to give me answers to the questions I ask. They have to be willing to tell the truth. In return for full disclosure, they’ll be relieved of most, if not all, of their debts and get a fresh financial start. She wasn’t prepared to do that.

If someone who files bankruptcy decides not to tell the truth, they can’t expect any assurances. They can’t expect that when the truth inevitably comes out that there won’t be any consequences.

So, while I was sorry to see her so unhappy about the information I was giving her, it was probably best for the both of us that she left without hiring me.

If you’d like to learn more about the Chapter 7 and Chapter 13 bankruptcy process, we hope you’ll come in for a consultation with an experienced Colorado bankruptcy attorney. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's unexpected events find their way to financial recovery.
3773 Cherry Creek North Drive, Suite 575
Denver, CO
80209
Phone: 303.331.3403
Fax: 303.261.8290

What Happens If Someone Objects To My Chapter 13 Bankruptcy Plan?

Written by Peter Mullison, Colorado Bankruptcy Attorney

What Happens If Someone Objects To My Chapter 13 Plan?

When you file Chapter 13 bankruptcy, you have to propose a plan that shows the court, trustee, and your creditors who will get paid during the course of your plan. The court will mail out the plan, along with the notice of your bankruptcy, to all of the creditors that you list on your petition.

As a bankruptcy attorney, my job is to reduce my client’s payment to unsecured creditors to as little as possible. The trustee’s job is to get the payment as high as possible. Secured creditors want to make sure that their collateral is protected.

Given the varying interests involved, it’s normal for Chapter 13 plans to receive at least one objection, usually from the trustee. The trustee may object to the amount of a monthly expense the filer has taken or that priority debts, like taxes or child support, haven’t been fully taken care of.

Objections to the plan are due about a month after the case is filed. It’s my job to address all of the objections. Resolving an objection may take as little work as providing documentation that supports a monthly expense or it may involve arguing to the court that such an expense is allowable, or that the objection is not supported by the facts.

From time to time, an evidentiary hearing may be required to resolve an objection. That can sometimes require a filer to testify in court. While rare, I would expect that only an experienced attorney can tell you whether or not you can expect that in your case.

Once all objections are resolved, another plan must be sent to creditors who then have another chance to object to the amended plan. Hopefully, all objections have been resolved, but it can sometimes take two, even three, amendments to fully address all of the objections. This is a normal part of the Chapter 13 process, and you shouldn’t be too concerned when the court issues an order denying the confirmation of your original plan. Again, an experienced attorney should be able to prepare you for any bumps in the road she expects.

If you have questions about the Chapter 13 bankruptcy process and whether it might be a good option for you, we hope you’ll come in for a free, confidential consultation with an experienced Colorado bankruptcy lawyer. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's unexpected events and help them get on the road to financial recovery.
3773 Cherry Creek North Drive, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

How To Avoid Bankruptcy: Get Rid Of Your Toys

Written by Peter Mullison, Colorado Bankruptcy Attorney

How To Avoid Bankruptcy - Sell Your Toys

I recently met with a couple who came in because they were finding it harder and harder to make ends meet, even though, together, they make almost $100,000 a year. They have three children. They began their story by explaining that a recent hail storm had caused them to rack up a significant amount of credit card debt to make repairs. Their high insurance deductible meant that they would have to pay for a large portion of a replacement roof and windows out of pocket, and they didn’t have any savings to pay for the repairs.

As our consultation progressed, I asked them about their vehicles. Both of them were driving relatively new vehicles, but they had had to roll a previous loan into one of the car loans, which meant they were paying significantly more on a vehicle than what it was worth. Their monthly car payments were already a stretch for their budget.

I asked if there were any more vehicles. There were. They also had a boat and a motorcycle, both of which had loans on them and, again, were straining their budget. Although they were prepared to surrender the boat, the motorcycle was almost paid off, and they were hoping to keep it.

This couple had pushed their household to the limit with these luxury purchases, and when the hail storm hit, they found themselves overextended. Unfortunately, at this point, they may have no other option than to file bankruptcy to handle their debt. Even if they surrender the boat, the lender will likely want them to pay any deficiency left on the loan after it auctions the boat for sale. And, of course, the credit cards have already been maxed out.

Sometimes I wish I would have been able to meet with my clients a year or two before they actually come into my office. You’d be surprised by how much can change in that short of time. Had this couple come into my office a year earlier, we could have talked about other solutions besides bankruptcy. I would have told them to get rid of their toys. After all, that’s what the boat and the motorcycle are. They aren’t necessities and the debt was stretching their household budget thin, leaving no room for unforeseen events, like a hail storm.

Before you decide to make a purchase like a boat, motorcycle, timeshare or other luxury item, take into consideration whether or not you can manage that debt and an unexpected major expense, whether it’s a home repair or medical emergency. Taking that time may help you avoid bankruptcy.

If you have questions about whether bankruptcy is the right option for you, we hope you’ll come in for a free consultation with an experienced Colorado bankruptcy attorney. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's unexpected events find their way to financial recovery.
3773 Cherry Creek Drive North, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

Do I Have To Tell My Ex-Spouse That I Filed Bankruptcy?

Written by Peter Mullison, Colorado Bankruptcy Attorney

Do I Have To Tell My Ex Spouse I Filed Bankruptcy

Do I Have To Tell My Ex Spouse I Filed Bankruptcy?

One of the most common questions I get from people who are divorced when they file bankruptcy is whether or not they have to tell their ex-spouse. They are reluctant to notify their spouse of their having to file bankruptcy, usually out of embarrassment.

As is the case to so many legal questions, the answer of whether the ex-spouse has to get notice of a bankruptcy is often, “it depends”.

There are three circumstances that require you to give notice to an ex-spouse. The first is if you owe him or her child support or alimony. Second, if your ex-spouse is a co-signer/co-debtor on any of your debts, you’ll have to send them notice. The most common such debts are mortgages or auto loans. Third, if you owe your ex-spouse a debt, you must notify him or her of your bankruptcy. These kinds of obligations can arise from a division of property in a divorce.

Remember that your overarching obligation in bankruptcy is to disclose all of your income, assets, debts, and expenses. If you refuse to fully disclose that information, you could find yourself facing a dismissal action, which would leave you without the protection of the bankruptcy court.

If you are filing bankruptcy and don’t want your ex-spouse to know, the better course is to be up front with him or her. Consider telling them before you file instead of having them get notice from the bankruptcy court without any word from you.

If you have questions about who will find out about your bankruptcy, we hope you’ll come in for a free consultation with an experienced Colorado bankruptcy attorney. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's events get back on their feet and on the path to financial recovery.
3773 Cherry Creek Drive North, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

Some Private Student Lenders To Offer Loan Modifications

Written by Peter Mullison, Colorado Bankruptcy Attorney

Private Student Loan Modifications(Photo from Flickr user thisisbossi used under Creative Commons license)

If you have been researching your repayment options for student loans, you probably know that only federal loans offer modification options, such as income based repayment. Historically, most private lenders have not offered any sort of modification and have a reputation for not working with customers who are having difficulty repaying their loans.

That may soon be changing. Two private lenders, Wells Fargo and Discover Financial Services, have announced that may soon be offering modification options to customers who are dealing with financial hardship.

Wells Fargo has said they will consider lowering the interest rate for someone who is having financial trouble. They have also said that the loan doesn’t need to be in default to qualify for a modification. The reduction of interest may be temporary or permanent.

Other lenders have also stated that they will start offering modifications. You can read more here.

If you have questions about how to deal with student loan debt, including how bankruptcy may be able to help, we hope you’ll come in for a free, no-obligation consultation with an experienced Colorado bankruptcy attorney. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

 

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's unexpected events find their way to financial recovery.
3773 Cherry Creek Drive North, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

 

 

Do I Have To Tell The Bankruptcy Court About Debts I Owe To Family Members Or Friends?

Written by Peter Mullison, Colorado Bankruptcy Attorney

Do I Have To List All Of My Debts

It’s not unusual for a client or potential client to ask me if they have to list all of the people they owe money to. The question will come up either in the initial consultation or at the time we’re reviewing their petition and going over the schedules that list their creditors. Oftentimes, they want to avoid listing their landlord. They’re embarrassed about having to file bankruptcy and want to avoid other people finding out. Other times, they owe money to friends or family members and, again, they want to avoid them finding out.

My answer is always the same: when you file bankruptcy, the Bankruptcy Code requires you to list all of your debts. It doesn’t matter who they money is owed to or if you “plan on paying it back.”

A recent 7th Circuit Court of Appeals case highlights the dangers of not listing all debts on a bankruptcy petition. In In re Katsman, Ms. Katsman had filed a Chapter 7 bankruptcy. Katsman’s ex-husband’s son brought a lawsuit in bankruptcy court arguing that she should not receive a discharge because she “made a false oath or account” on her bankruptcy petition when she failed to disclose several creditors, including him. At trial Katsman admitted that she had left four creditors off her petition, but the bankruptcy court had found that her doing so was not fraudulent. The son appealed.

The Court of Appeals found that she had made other omissions in her petition, including real estate that she owned with her ex-husband and alimony payments she received. The appeals court found that “her many false statements bespeak a pattern of reckless indifference to the truth, implying fraudulent intent.” The court held that Katsman was not entitled to a discharge order. Now, not only will she have to repay the debts she owed to the creditors she didn’t list, she has lost any protection from the bankruptcy court for the debts she owes to her other creditors.

It’s important to contrast this result with In re Padilla, a Colorado bankruptcy court case which held that where there is a no asset case, even debts which are not listed are still discharged. The main difference between these two cases, is that the creditor in Padilla did not argue that the Padillas had fraudulently made omissions on their bankruptcy petition.

What I suggest for people who are concerned about friends or family members finding out is that they get in touch with those people before we file and let them know they can expect a notice in the mail from the bankruptcy court about the bankruptcy. They can still repay those debts, and they have fulfilled their obligation to list all of their debts.

If you have questions about how to deal with your creditors when you file bankruptcy, we hope you’ll come in for a free, no-obligation consultation with an experienced Colorado bankruptcy attorney. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's unexpected events find their way to financial recovery by expertly guiding them through the bankruptcy process.
3773 Cherry Creek Drive North, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

How Do I Know If I Qualify For Chapter 7 Bankruptcy?

Written by Peter Mullison, Colorado Bankruptcy Attorney

How Do I Know If I Qualify For Chapter 7 Bankruptcy

I love the Internet. It is a seemingly bottomless source of information and Google is the first place I stop if I am researching something. That said, I am also one of the most skeptical people my wife has ever met. So I always bounce anything I find on the Internet off of several sources to make sure that what I find is accurate.

Many people who come in to see us for an initial consultation have done some online research about bankruptcy. Some have done just enough to know they need to talk to an attorney to get more information. Others have done more digging and come to the consultation with their own conclusions about what their best course is. Most often it is whether they qualify for Chapter 7 or Chapter 13 bankruptcy.

While determining whether someone qualifies for Chapter 7 is not particularly difficult, it does require a thorough knowledge of the bankruptcy code and will generally not come from skimming a few blog posts or online forums about the subject.

The first step in determining whether someone qualifies for Chapter 7 bankruptcy is to determine their annual household income. This requires looking at all income sources, including that of household members who may not be filing bankruptcy. Also important is that we will be using before tax income, not what someone takes home in their paycheck.

Next, we compare that number to the median income for their household size. Current median income numbers can be found here.

If their household income is below the current median income, then that is usually the end of the calculation. However, if their household income is over the median income, we are going to have to go further. It’s possible for someone whose household income is over the median income to qualify for Chapter 7, but we have to have more information about their household expenses and even their debts.

That’s where the knowledge of an experienced bankruptcy lawyer is needed. An experienced lawyer will scrutinize those expenses and debts to see if there is a way to qualify someone for Chapter 7. Someone with less experience may not know, for example, that if more than 50% of someone’s debts came from a failed business, it doesn’t matter what their household income is and that Chapter 7 is an option for them.

Even if someone does qualify for Chapter 7 bankruptcy, that doesn’t mean that is the best course for them. There are several reasons why someone should file Chapter 13 instead. Again, that is where the advice of an experienced bankruptcy lawyer helps.

If you have questions about whether you qualify to file Chapter 7 bankruptcy, we hope you’ll come in for a free, no-obligation consultation with an experienced Colorado bankruptcy attorney. You can call 303.331.3403 to schedule an appointment or use our online scheduling system.

We are Denver, Colorado bankruptcy attorneys. We help people who have been blindsided by life's unexpected events find their way to financial recovery.
3773 Cherry Creek Drive North, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

How Bankruptcy Can Improve Your Credit Score

Written by Peter Mullison, Colorado Bankruptcy Attorney

How Bankruptcy Can Improve Your Credit Score

Yesterday I got an email from a former client. She was concerned. She had received her discharge several months ago and decided to check her credit score. It was 674. She didn’t expect it to be that high so soon after filing. She was writing to ask if that was even possible.

I wasn’t surprised. One of the “secrets” of bankruptcy, is how quickly your credit score can improve after you file bankruptcy. Of course, everyone’s experience will vary, but this recovery is common for many people who file.

The reason is fairly simple. Factors that will lower a credit score are delinquent accounts and an upside down debt-to-credit ratio where you have maxed out your available credit. Most people who file bankruptcy have fallen behind on payments to their creditors and have maxed out their credit limits.

Once a person files bankruptcy, their debt-to-credit ratio obviously drops since they no longer have any debt. All of those delinquent accounts will also now reflect that they have been discharged. In effect, your credit report is wiped clean.

Once someone has gotten their discharge order from the bankruptcy court, they can start to rebuild their credit score. I encourage my clients to find a secured credit card. The card should be used for common purchases, such as groceries and gas, that would normally be paid for out of a checking account. The card should be paid off, every month, on time. This activity will be reported positively to the credit bureaus.

I recently had a conversation with a mortgage broker who encourages people who have recently filed bankruptcy, and are hoping to one day buy a home, to acquire at least three lines of credit. Again, though, these don’t need to be for large amounts to help build your credit score. While you want to build that score, you also want to use solid budgeting and money management strategies to take full advantage of the fresh start that bankruptcy provides.

If you have questions about how bankruptcy can improve your credit score, we hope you’ll come in for a free, no-obligation consultation with an experienced Colorado bankruptcy lawyer. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

We are Denver, Colorado bankruptcy lawyers. We help people who have been blindsided by life's unexpected events find their way back to financial recovery.
3773 Cherry Creek Drive North, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290

November 1, 2014 Colorado Median Income Amounts For Bankruptcy Means Test

Written by Peter Mullison, Colorado Bankruptcy Attorney

Median Income For Colorado November 1 2014

Twice a year the United States Census Bureau updates the median income. Those amounts were once again updated for Colorado on November 1, 2014.

They are as follows:

-Household Size of 1: $51,552

-Household Size of 2: $67,129

-Household Size of 3: $70,827

-Household Size of 4: $84,998

Add $8,100 for each household member in excess of 4.

For bankruptcy purposes, the median income amount is crucial in determining whether someone is either eligible for Chapter 7 bankruptcy. If their income exceeds the median income, and they have to file Chapter 13 bankruptcy, the median income amount will determine how much they’ll have to repay their creditors over the course of their Chapter 13 plan.

It’s important to keep in mind, however, that even if someone is over the median income, they may still be eligible for Chapter 7. An experienced bankruptcy attorney’s knowledge of the means test (used to determine Chapter 7 eligibility) can make the difference between getting your fresh start from bankruptcy in four months or having to repay a portion of your debt in a Chapter 13 bankruptcy over the course of three to five years.

If you have questions about bankruptcy, including whether your income qualifies you for Chapter 7 or Chapter 13 bankruptcy, we hope you’ll come in for a free, no obligation consultation with an experienced Colorado bankruptcy lawyer. You can schedule an appointment by calling 303.331.3403 or by using our online scheduling system.

Photo credit: Lending Memo

We are Denver, Colorado bankruptcy lawyers. We help people who have been blindsided by life's events find their way back to financial recovery.
3773 Cherry Creek Drive North, Suite 575
Denver, CO
80209
US
Phone: 303.331.3403
Fax: 303.261.8290