US Households Owe Record Amount – More Than During Recession

The New York Times and the Associated Press have been reporting new statistics just released by the “New York Fed.” I’m sorry, but I talk Minnesotan and “New York Fed” is not something in my vocabulary.  So I looked that up and find that it’s the Federal Reserve Bank of New York.  If you can’t believe them, then who can you believe.

The New York Fed says that consumer debt in the US now exceeds the level it was at before the recession.  I will admit that I’ve been wondering a bit, because over the past couple months my phone has been ringing a lot more than it did in 2015 and 2016.  I think the ringing of my phone might be a better barometer of what’s going on than the financial reports in the media.  I remember in 2008 when it started ringing like never before, they were still saying on the financial news networks that there was no sign of a recession.   The media in general wants to downplay economic problems.  So I figure if they are actually reporting a story like this, things are probably worse than they are admitting.

The New York Fed goes on to say, however, not to worry.  The new debt is proportionately more auto loans and student loans than it was in 2008, and besides the people with the debt are more credit worthy now.  In addition, home ownership is down and a higher percentage of mortgage debt is held by people over 65, as if that somehow was good news.  They admit that the student loan debt is getting up there and could be a bit high.  Also it might be that defaults on those auto loans are on the rise.  But a lot of the language in these stories is very soothing, so not to worry.

My opinion, based more on what I see with my own eyes, is this.  I think it is time to worry.  People may be back to work, but their earnings are down.  They still need to drive and the old car can only go so far, so they are getting car loans that they can’t really afford.  If they are not back to work they are back to school, getting student loans that they can’t afford.  Getting credit might be a bit more work than it used to be, but with the help of Credit Karma and other similar sites the lenders can still be manipulated into granting credit to people who really can’t afford it.  Maybe on paper they look more credit worthy, but that could be as much a fiction now as it was in 2008.  In other words, I believe individuals in this country are getting overextended again.  For many, another bubble may be about to burst.

This post is for general information purposes only, is not legal advice and does not create and attorney-client relationship.

 

Nothing is More Expensive Than A Cheap Bankruptcy Lawyer

Recently I had a bankruptcy case where a seemingly small and innocent circumstance turned up after the case was filed. It seemed normal to my client at the time and certainly not dishonest in any way.  It wasn’t illegal, immoral or fattening.  It just happened, however, to be one of those things which can run afoul of some of the more nonsensical provisions of the bankruptcy code.

I could have just said well that’s too bad and let things land wherever.  Fixing the situation was probably beyond the scope of what I had signed on for in my retainer agreement.  Many of the larger law firms, particularly the mills that crank out large volumes of cases for cheap, would have just let it go.  Lawyers don’t promise that everything will be perfect; we don’t promise that nothing will go wrong.  Sometimes it’s just too bad, isn’t it?

But that kind of approach is just not how I do things.  I really care about the outcome of my work and I really care about my clients. I just could not let it go.  It would, and actually did, keep me awake at night. I started asking my client more questions, started asking for more documentation, more history.  I explained that there was a problem, but I was aware of two or three exceptions, loopholes if you like, and I was determined to find one that fit.

I found what I was looking for and put it together for presentation to the bankruptcy trustee.  When I was finished, the trustee agreed with me that the issue was settled in my client’s favor and the case should proceed in the usual boring way.

On a forum at AVVO.com, Las Vegas bankruptcy attorney Dorothy Bunce said it best in answer to a question about how to find a cheap bankruptcy lawyer:

“If you have $70,000 in debt, why do you care ‘how much does it cost?’ Talk about being penny wise and pound foolish. Whatever the bankruptcy attorney charges, if the attorney takes care of you and eliminates as many of your debts as legally possible, protects your assets, and answers your questions, price is immaterial. When “how much” is someone’s first question to me, I get rid of them as soon as I can because they are telling me they don’t value what I do and will have to learn the hard way that NOTHING IS MORE EXPENSIVE THAN A CHEAP LAWYER.” Quoted with Ms. Bunce’s permission.

That sure as heck says it all.

This response is for general purposes only, is not legal advice and does not create an attorney-client relationship.  I am a debt relief agency.  I help people file for relief under the federal bankruptcy code.

Losing Ground on Payday Loans? Perhaps Bankruptcy is the Answer

If you’ve been reading my stuff, you know I’ve said this before.  My clients are good people.  Prior to giving up and deciding to come see me, they have tried just about everything and anything to avoid bankruptcy.  Among the various desperate measures many have tried is the payday loan.  What is a payday loan?  It’s one of the worst, most despicable, predatory schemes ever devised by the greedy and clever.

How does a payday loan work?  Well, it’s aimed of course at people who are employed and who as a result have a regularly scheduled payday.  It can be done at a storefront or on a web site.  These days most of the payday loans I see have been done on line.  One starts by providing bank account information along with employment information.  This includes the amount of a  typical paycheck and when it is ordinarily received. One site I just looked at claims to be able to approve the loan within two minutes.  Typically the amount will be about $500, but sometimes it can be more.  The money will be deposited into the borrower’s checking account within a day or less.

The borrower doesn’t have to repay the loan until after his or her next paycheck is deposited into the checking account.  What can be the harm?  At about the time the pay check from the borrower’s job is deposited into his or her account, the whole loan is automatically repaid by an automatic withdrawal, with interest – lots of interest.  One site I just reviewed states that the annual interest rate will run somewhere between 261% and 1304%.  At first it doesn’t seem that bad.  For example, at an annual rate of 300% the interest on a $500 loan over two weeks is “only” about $58.

The trouble is that once a person starts doing this, it can become very addictive.  As soon as it’s been done it once, when payday comes there’s a big hole missing from the paycheck as soon as the automatic payment of the loan is made.  So what’s the obvious temptation?  Do another one, of course, to make up for the missing money.  Pretty soon it’s not hard to start taking multiple payday loans from the multiple web sites that are available for this purpose.  Then the extremely high interest, rate which didn’t look so bad at first, can really becoming quite a burden.  It can become a treadmill of dependency on these loans.  It can interfere with one’s ability to eat, pay rent or buy gasoline.  Much like the psychology involved in the slot machines at a casino, somebody has figured out just exactly what is required to keep people coming back and paying in. Usually if I see one payday loan it means my client has been at it for a long time.  It may only be one loan, one loan at a time that is.  Sometimes it’s two or three or four at a time, enough to entirely consume each paycheck.

Even after my client has hired me to do a bankruptcy, and after I have advised the client that this is the point at which they should stop paying many of their debts, there is a tendency to assume that this advice somehow does not apply to the payday loan.  It can be a surprise when I say, “it’s your account and it’s your bank and you can stop that automatic withdrawal any time you want”  I have had a few clients leave my office in a rush to try to make it to the bank in time to stop the next withdrawal.

The StarTribune recently published a feature article about payday loans and one of the big businesses in Minnesota that makes them.  According to the article the average interest rate customers in Minnesota pay for a payday loan is 277%.  Sounds like theft to me, but Minnesota is among 36 states which allow it.  If you find yourself going nowhere and losing ground on this payday loan treadmill, it’s probably time to call me for a free over the phone screening as to whether you qualify for a Chapter 7 or Chapter 13 bankruptcy.

This post is for general information purposes only, is not legal advice, and does not create an attorney-client relationship.  Nothing on this site is intended to be a substitute for retaining a competent attorney.  I am a debt relief agency.  I help people file for relief under the federal bankruptcy code.

 

Don’t be Tricked by Misleading Bankruptcy Attorney Fee Advertising

A lot of the advertising about attorney fees for bankruptcy is misleading – even tricky. Today I checked on a Google ad and the web page it leads to which says a certain law firm will file a bankruptcy after a payment toward the attorney fee of only $99.  I found this to be not exactly accurate.

The web page says that $99 toward the attorney fee, along with the court filing fee and counseling program fees, would be all one would have to pay prior to filing.  It was a slick web page, obviously done at considerable expense, where I found the following statement:

“You only have to pay the court filing fee of $335 and the credit report / credit course fees of $65 and an attorney fee of $99 to file.”  It also said:  “Only $99 Down, No Co-Signer Needed, File Now/Pay over Time, Affordable Payment Plans” in big blue letters.

I wondered how can these people can be doing this. I could never cover my office rent, malpractice insurance, phone and internet bills and office supplies if I didn’t charge a lot more than that.   So I went to the bankruptcy court web site and ran a search for actual cases they had filed.  This is not free, so I didn’t look very far.  All I did was check the last two cases this law firm filed to see what the attorney fee had been.  Attorney fees have to be disclosed on the bankruptcy petition.  What I found was that for the last two cases they filed, both Chapter 7s, their fee was $990. And the court filings also said they had received all of the $990 before filing the case.   That’s lower than what I would usually charge, but it’s a lot more than $99.

Now one thing you should understand about attorney fees in a Chapter 7 bankruptcy is this. If the attorney does not collect his or her fee prior to filing, any part of the fee that is still owing is just another debt in the bankruptcy case. The attorney is just another creditor.  The attorney, like all the other creditors, is under an immediate court order requiring that he or she do nothing to try to collect.  It is illegal and unethical for the attorney to collect anything from the client once the case is filed.  That’s why you may see references to a co-signer in some advertising.  The lawyer can still try to collect the fee from a co-signer as long as the co-signer is not his bankruptcy client.  This of course puts the bankruptcy lawyer in the position of being a bill collector. I don’t EVER want to be a bill collector.

I went back to the web page thinking it must be referring to Chapter 13 bankruptcy only. When it comes to paying attorney fees after the case is filed, a Chapter 13 bankruptcy is a very different animal from a Chapter 7. If you file a Chapter 13 bankruptcy it is possible to pay part of the attorney fee through the Chapter 13 payment plan.  I hit Control F to search the page and typed “13” into the search box.  No mention of “13” or “Chapter 13” appears anywhere on the page.  The page seems to be talking about Chapter 7.  The only filing fee the page mentions is $335, which is the Chapter 7  court filing fee. The court filing fee for a Chapter 13 is slightly lower.

When I look at their web page I can see that it is very slick, and at the bottom is the name of a web development company that designed the page.  I can remember a few years back when I hired a person to redesign my page.  The person I hired started adding all sorts of new key words and content, which was submitted to me for review.  There was a whole lot of it, and it was hard to keep up with what the designer was doing.  Is it possible that the web designer wrote up this stuff while the law firm was not paying attention?  It could happen.  I’m now back to doing all my own web design work. I found that having my web page in the hands of a professional design and marketing person was scary.

So maybe they just have a busy marketing person who they can’t keep up with.   Maybe it’s not entirely the law firm’s fault.  But I do want to suggest to you that you should be very wary when you see something like this and don’t be taken in by it. If it seems to good to be true, it probably is.

This posting is for general information purposes only and is not legal advice. It does not create an attorney-client relationship.  I am a debt relief agency. I help people file for relief under the federal bankruptcy code.

Dave Kelly, Kelly Law Office, Minnetonka, MN 952-544-6356

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