Month: November 2021

Can my creditors sue me even if I’m working with a debt settlement firm?

in Bankruptcy, Credit and Credit Cards

debt settlement

The short answer…yes, absolutely.  Even if you’ve started working with a debt settlement agency.  

In Georgia, like most of the rest of the country, debt settlement agencies usually aren’t lawyers and they certainly don’t offer the protections that the automatic stay does in bankruptcy.  

They promise you the world. “We’ll fix your problems.” “We’ll make the debt disappear.” The problem is, they don’t do it quickly enough to stop lawsuits from being filed and creditors from getting court dates.  

Once that happens, guess who won’t show up in court on your behalf.  

Most of these companies operate all over the country, so honestly, they couldn’t care less if you’re getting sued in Georgia.  Most likely they’ve already got several hundred or even thousands of dollars from you. 

What is Debt Settlement?

Basically, you stop paying all of your debts and instead send money to a debt settlement company every month.  The debt settlement agency will then contact your creditors and try to work out a deal with them and see if they’ll take a one time, lump sum payment to settle the debt.  

Unlike bankruptcy, if at any point the creditor wishes to opt out of the agreement and sue you, they can.  Nothing is stopping them with a debt settlement agency, whereas in bankruptcy, they will get smacked down by the full weight of the United States Federal Court system.  

I’m in debt settlement, why would they sue me?

Long story short, it’s because they can.  Some get tired of waiting.  Some have bought the debt from your original creditor for pennies on the dollar and they want to flip a profit ASAP.  

Generally speaking, if they file suit against you they’ll get your attention.  Either you’ll pay them first or they’ll obtain a court order and start garnishing you.  In Georgia, they can take 25% of your pre tax earnings from each pay period.  

Additionally, it takes a while to build up enough money with the debt settlement agency for them to actually be able to settle your debts.  

If you owe MegaBank, N.A. $10,000 and you’re only paying $500 a month to the debt settlement agency, it’ll take nearly a year for the agency to be able to offer to settle the debt for 50% of the value.  Keep in mind, that’s just one debt.  If you owe MonsterBank, and HorseCarraigeBank and BASSBank 5-10 thousands dollars each, think how long that’s going to take to settle.  

Inevitably, someone’s going to get tired of waiting and just file a lawsuit, at least that way they’ll get something out of you.  

How do I stop a Lawsuit?

There’s three options, only one of them is easy. 

  1. Prove to the court that you don’t actually owe the debt.  This probably won’t work because the burden of proof is on you.  Plus, it’s 2021, it’s extremely easy to find people and make sure that you’re actually suing the right person.  
  2. Pay off the debt.  But then again, if you’d had the money you’d have already paid them.  They know this and that’s why they sue.  If they get a garnishment, they can take the money you need to put food on the table and a roof over your head, but hey, they got paid. 
  3. The best way to stop a lawsuit is to file bankruptcy.  A Chapter 7 or 13 bankruptcy stops a lawsuit dead in its tracks.  It’s like a bullet hitting armor plating.  If you bring everything we need to your appointment, we can file emergency cases in as little as 6 hours. 

In the end, bankruptcy is usually the cheapest and definitely the most effective way to stop lawsuits and eliminate debts.  Unlike settlement companies, creditors absolutely have NO CHOICE but to follow the orders of the bankruptcy court.  

If you’re ready to make a fresh start, give us a call.

The HAVEN act and Bankruptcy

in Bankruptcy, VA Disability

Do you ever wonder how bad rumors get started?  Bad headlines don’t help.

Congress is considering a new piece of legislation.  It’s called the HAVEN act.  The act will correct a problem that has existed since the 2005 overhaul of bankruptcy.  

If you are a veteran who receives disability income from the VA, that money is counted in your means test.  In other words, it counts against you in bankruptcy, whereas regular disability income does not. 

Frankly, that’s not fair. 

The HAVEN Act saves the day

That’s where the HAVEN act comes in.  

Chapter 7 bankruptcy is a liquidation bankruptcy (it’s what most people who are in big debt want) and it gets rid of all of your debts that are dischargeable.  The problem is, you have to qualify for a Chapter 7 via the means test.  

This military disability increases your total income, which in turn can cause your income to be so high that you are forced to do a Chapter 13 bankruptcy. 

The HAVEN act eliminates military disability income from the means test just like regular SSI disability and gives you a big boost.  

There is, unfortunately a lot of rumors going around about the current state of bankruptcy and military benefits.  

Misconceptions about the current system

 A reporter for the military times has stated that veterans who file bankruptcy under our current system risk having the benefits taken away.  He states “Bankrupt vets can lose their disability benefits.”

This is patently false.  

The current system allows the military disability benefits to be counted in the means test, but it by no means eliminates your disability benefits.  

All this means is that IF your income is high enough, it could cause you to have to do a Chapter 13 bankruptcy instead of a Chapter 7.  

But, I repeat, you do not LOSE your benefits.  You still get a check from the VA every month just like you always did and will continue to do for the rest of your life.  

If you file a Chapter 7 bankruptcy, the trustee can’t take your check from YOUR bank account. 

Additionally, the Chapter 13 trustee does not take them from you either.  They still go into YOUR bank account and you may have to use some of your disability money to make your Chapter 13 payment.  

While all of this may seem confusing, rest assured, as a bankruptcy lawyer, it’s my job to understand the nuances of the law and make sure you get the best outcome possible.  Trust me, I do and you will. 

If you’re a veteran who is concerned about your VA benefits and the bankruptcy process, call me.  I understand it a lot better than you may think (I actually work with veterans to get VA disability for them as well). 

We’re here to help, especially those who have worked so hard and sacrificed so much already.

The Secret Risks of Debt Settlement

in Bankruptcy

If you’re maxing out credit cards every month and just making the bare minimum payment, you’re going about all this the wrong way.  You’re financing a lifestyle at a very high rate of interest and creating a lot of financial risks for yourself.  

I know you hear the ads all the time.  “USA FREEDOM CREDIT CARD DEBT RELIEF WILL SAVE YOU THOUSANDS!” Shouts some announcer on the radio, or maybe you’re scrolling social media and see smiling happy people with a prompt to contact someone to settle your debt for pennies on the dollar.  

It sounds too good to be true and it often is.   The FTC gives warnings about these types of schemes and I’m linking to it here.

The problem is, most of the companies don’t disclose how this actually works and that opens you up to tons of risks.  You’re not getting something for nothing.  

In fact, you could actually end up in more debt and with worse credit than you had when you started. 

So, how does it actually work?

In a debt settlement arrangement, a borrower (you) or someone representing the borrower contacts a credit card company and asks for a settlement.  Mind you, this only works if you can pay off the full balance at one time. 

The guy at Monster Mega Bank, N.A. hears this and thinks, “OMG, these people are going to file bankruptcy and we’re going to get nothing, let’s see if they’ll settle for half.”

Now, here’s the problem.  You don’t have thousands to pay them, even if they will settle for a significantly reduced amount. 

So, what do we do? Well, the debt settlement company opens up a shiny new line of credit in your name and uses that money to pay off the credit card company.  

Now, that may not sound too bad…but here’s the catch.  1. The debt settlement company is going to make tons of money off of you.  2. Monster Mega Bank, N.A. is going to report a “settlement” on your credit, and that’s going to hurt your score. 3. You’re still making payments to the debt settlement company and guess what? Now you don’t have revolving credit to help make ends meet. These are the biggest risks of the debt settlement process.  

Why Bankruptcy Eliminates the Risks

Debt settlement services rely on credit card companies writing off a portion of your debt.  Not only does that hurt your credit score, it can also have serious tax implications.  

The IRS treats forgiven debt like income but debts discharged in bankruptcy are completely tax free. 

If Monster Mega Bank, N.A. forgives $25,000 worth of debt, you’re going to get a 1099 that will treat that forgiven debt as income.  Then you’re going to owe taxes on  $25,000 in extra income. 

That’s a risk they didn’t tell you about.

Additionally, there’s no guarantee that Monster Mega Bank, N.A. is going to work with USA Freedom Debt Relief Company anyways. 

Then you’re right back at square one. 

That’s where bankruptcy comes in.  

In bankruptcy, Monster Mega Bank, N.A., has no choice but to work with you. It’s federal law. 

In bankruptcy you may be entitled to a full discharge of your unsecured debts or you may be able to pay back only a small portion of them with a very manageable interest rate.  

Another good thing is, bankruptcy increases your credit score starting the day you file.  

Is that too good to be true? Actually, no.  A government study confirmed it. 

Bankruptcy actually gets rid of the derogatory marks on your credit report and allows most people to obtain new credit within months of your discharge.  

If you’re concerned about the risks of debt settlement or you’ve already been the victim of a debt settlement gone wrong, give us a call.  Bankruptcy is a powerful tool that can help clean up a lot of the messes that debt settlement causes.