I’d be interested in hearing people’s thoughts about whether we are going over the “fiscal cliff.” Are they going to put some pillows down in the canyon for us to land on, or are we just going to go SPLAT?
Minnesota Bill Collectors Going Out of Business?
Is the economy getting so bad that the bill collectors are going out of business? From where I sit it appears that at least two of the old tried and true bill collectors have moved out of Minnesota. When a bankruptcy case is filed, it is very important to be sure that all the creditors are being notified. The notices are sent out to the creditors by US Mail by a central noticing center which is operated by the court. When an address is bad or when a notice comes back in the mail in connection with one of my cases, I get notified of that right away by email from the clerk of court’s office. In cases where a collection agency has taken over an account, I always try to list both the original creditor and the agency in the bankruptcy papers. If the debt has also been referred to a lawyer, I list the law firm on the list of creditors too.
For as long as I can remember, Allied Interstate has been one of the big collection agencies in these parts. In recent times their office was within a few blocks of mine. They were located in that big, white office building on the northwest corner of the intersection of I-394 and Highway 169 known as the Interchange Tower. There was more than one occasion when I was about ready to go over there in person and yell at them. To me they were an institution, kind of like the federal government. It never occurred to me that they would not always just be there. In bad economic times, I would have assumed that their business would have just gotten all the better.
You might imagine how shocked I was to receive a notice, and then another notice, telling me that the address I was using for Allied Interstate was bad. Well, they had apparently been assigned a number of debts of a couple of my clients – so I had to find a new address for them. At first I assumed that they had just moved to a new location in their old neighborhood. As I almost always do when I have such a problem, I went to Google looking for a new address. There were no results for Minnesota except what I already had. I went to Bing. Same result. Next I tried to call all the phone numbers I could find for Minnesota locations of Allied Interstate. More shock – they were disconnected. Finally I stared trying locations outside of Minnesota. They had been a nation-wide operation. The first few numbers I tried were not being answered. Finally someone answered at an Allied Interstate office in Ohio. He said to use the following address:
Allied Interstate, PO Box 4000, Warrenton, VA 60197-6123
So I added that address to the list of creditors at the court web site for both of my cases, and it seems so far to have been a good address. Meanwhile a notice that I had sent to an Illinois office of Allied Interstate came back in the mail as well. One has the impression that this outfit is not doing so well.
Not long after this business with Allied Interstate, I received notice that an address I had been using for one of the bill collecting law firms was bad. They were it seemed to me a lot like Allied Interstate in that they had been around forever. To me they seemed to be one of the top law firms that over the years had driven many of my clients to my door. Their office had always been in St. Paul, but they sued people from all over the Twin Cities. Again I went to Google and several other sources. What I found or seem to have found is that they closed their St. Paul office and are now doing business from their home office in another state.
From day to day I see little indicators – including the above – that the economy is worse than anybody in the media outlets wants to admit.
This is for general information purposes only, is not legal advice, and does not create an attorney-client relationship. I am a debt relief agency, helping people file for relief under the federal bankruptcy code.
How Much it Costs to NOT File Bankruptcy
By Dave Kelly, Minnesota Bankruptcy Lawyer
Nearly every day I am asked how much it costs to file bankruptcy. Here I turn the question around and ask – assuming that you already know that you qualify for bankruptcy – how much is it costing you to not file.
So often when someone comes to my office, the story I hear involves the loss of things we could have saved if the bankruptcy had been done sooner. In the past few months I have seen all the situations I am about to list here:Large tax refund used to try and get caught up on debts, but it wasn’t enough.
Use of home equity line of credit to pay unsecured debts. What this does is take perfectly good equity in the home, which in bankruptcy would have been exempt, and squander it on unsecured credit card debt. Even after maxing out the home equity line of credit, the credit card debt is still to high to manage. Had a bankruptcy been filed sooner, the debts could have been eliminated and the equity in the house saved.
Mortgage payments stopped so credit card payments, or medical bill payments, can be made. The bill collectors for the credit cards – and lately those for the medical providers too – will often be a lot more agressive than those for the mortgage company. In this scenario, people allow themselves to be pressured into paying credit card or medical bill payments before they make their mortgage payment. The mortgage falls so far behind that foreclosure is started. The mortgage is now too far behind to ever be brought up to date, and the house will be lost. A bankruptcy before things got this far would have eliminated the medical bills and credit card debt and saved the house.
Large loans from relatives for payment of credit card debt. When a job is lost or a medical problem arises, many of us have wonderful relatives who are willing to help – financially. Often this kind of help will come from a parent. It’s not unusual for loans from relatives to exceed $20,000 – accumulated a little at at time. This will sometimes continue until the relative is tapped out and can’t lend anymore. The money from the relative was not enough to bring the debts under control. A bankruptcy filed sooner could have saved Mom’s or another relative’s savings account.
Bankruptcy not considered until wage garnishment actually begins. Filing bankruptcy is not like buying a can of beans at the grocery store. It’s not even like going to your accountant or to H&R Block to file your taxes. It’s not just a matter of one session in the lawyer’s office. Typically it takes me six to eight weeks to have a case prepared for filing. If I rush it, maybe I can shorten that to three or four weeks – or not. Until the case is filed, the wage garnishment continues. There goes one or two months of take home pay.
My office is the right place to deal with these and similar problems, but there are many, many times I wish my client would have come in sooner.
This is for general information purposes only, is not legal advice, and does not create and attoney-client relationship. My office is a debt relief agency, helping people file for relief under the federal bankruptcy code.
The Most Common Reasons People File for Bankruptcy
With the recent downturn in the economy, bankruptcy has become an increasingly popular way for people to relieve their debts. There are hundreds of reasons why a person may choose to file bankruptcy, but some reasons are more prominent than others. Here are the four most common reasons people file for bankruptcy in America:
- Medical Bills: With the number of uninsured citizens in the United States rising by the day, many families have high medical debt for accidents they could not pay for on their own. Medical bills can be upwards of $100,000 for one person, and that debt is typically more than one person can pay off. Bankruptcy provides patients with the opportunity to relieve their medical debts and start fresh in the future.
- Unemployment: Loss of work is another common cause of bankruptcy in the modern world. As people lose the ability to work, they lose the ability to pay their bills. Thus their debt piles up, and bankruptcy becomes the only solution they have to get back on their feet.
- Excessive Debt: Some people just make poor financial decisions, and they end up in debt because they over-exceeded their financial limitations. This is often the case with young adults who are not used to living on their own. Credit card debts and high car loans are some of the biggest financial problems in America, and they are among the most significant causes for bankruptcy.
- Divorce: Divorcees often encounter debt that was once part of a marriage. This, combined with the cost of divorce as a whole, may cause someone to build up enough debt to qualify for bankruptcy.
There are plenty of other reasons why you may feel pressed to file bankruptcy, but those are the most common ones at this time. If you happen to fit into one of those categories, you might want to speak with a debt relief attorney to assess your options.
Two pro se cases not heard last Thursday
I was at the Federal Courthouse in Minneapolis last Thursday for a meeting of creditors. The room was full and I was planning for a long wait with my client.
To my surprise the trustee – who is the person who runs such proceedings – stood up and asked two apparently married couples to leave. These individuals were there without a lawyer and were obviously pro se – or in other words representing themselves. From the words that were exchanged it sounded as if they had gone to some sort of a non-lawyer document preparation service.
Apparently whoever they had gone to had neglected to tell them that they were supposed to provide a copy of their most recent tax return to the trustee well in advance of the date of the meeting of creditors.
I expect that those parties will be allowed to provide their tax returns to the trustee and reschedule their meeting of creditors – which those who know me know I often call the “hearing,” because that word is a good one to describe what happens. I can’t help but wonder what else might be wrong with those bankruptcy filings.
I’ve been concerned for some time that some of these document preparation outfits are dangerous. If you search this blog I believe you’ll find something from a while back where I was carrying on about such a service located in India which had contacted me and wanted to essentially use my name.
Real Clients and Fake Clients, Real Friends and Fake Friends
Earlier this week I was meeting with a client who was in the process of hiring me to represent her in the Chapter 7 bankruptcy process. As we were both signing the retainer agreement, I explained as I usually do at that point that now I was her lawyer. This means she has my permission to use my name if she needs to in the event that creditors manage to reach her by telephone.
These days most of my clients are pretty good at avoiding the calls from creditors by just watching their caller ID. It’s not unusual to be receiving between twenty to fifty calls a day from bill collectors by the time someone finally decides to come see me. I’ve carried on before about how people tend to wait too long and most should have come in sooner. Some of the creditor calls are hard to avoid, however, because they are tricky and disguise their caller ID. One who called me recently had a caller ID that said “Swiss Miss.”
So I tell my clients when they hire me that when one of those creditors gets though on the phone for whatever reason, my advice is to say something like this: “I’ve hired a lawyer to represent me in Chapter 7 bankruptcy. He’s instructed me to not speak with you, to not say anything, except that his name is David Kelly and his number is 952-544-6356. If you have questions you should call him. Goodbye.”
Once they hear this and confirm that it’s true – by calling me – many of the creditors will stop calling. As far as I know there is no legal requirement that they do so until we actually file the case, but as a practical matter they know that they might as well focus their energy elsewhere.
When I went over this with the client who I referred to above, she made a remark to the effect that she wasn’t necessarily very happy about being able to say I was her lawyer. She wished she had not needed to hire me. I replied that, if this was any comfort, there seemed to be quite a few people out there who were happy to claim I was their lawyer even though they had never met me.
Yes that’s right, I have real clients like the woman who just hired me, and I also have fake clients. Besides the calls from creditors to confirm that I’ve been hired by my real clients, I am also receiving calls from creditors who have been given my name by people I have never heard of. There tend to be about two calls a week like that. I guess they must think I’m good if they want to take my name in vain like that.
So I said to my new client that I had real clients and fake clients, and at least she was a real client. To that she replied, “well I have real friends and fake friends.”
I thought my new client’s remark was quite profound. At least it seemed profound to me. I asked her permission to quote her here, anonymously of course.
What to Bring to a Bankruptcy Hearing
At the outset let me say that this post is about the practices that I encounter here in Minnesota, mostly for cases right here in the Twin Cities. If you are from somewhere else, please consult an attorney in your own jurisdiction. Even though bankruptcy is based on federal law and should be about the same everywhere in the country, there are in fact tremendous variations from one locale to another.
Usually the only hearing there is in a Chapter 7 or Chapter 13 bankruptcy is a little proceeding they call the “Meeting of Creditors.” Sometimes it’s also called the “341” or “341 Meeting,” after the section of the bankruptcy code that sets up the hearing process. In this post when I say “hearing,” I mean this meeting of creditors.
This week I have had a hearing nearly every day, except for Friday when I had two. It is usually simple and short, possibly just five minutes, if the lawyer and the clients are properly prepared. But there’s nothing that can delay it worse or mess it up more than not coming to the hearing with all the required documents.
For most of these the required doucments fall into four categories, sometimes five. Here they are:
1. Driver’s license or goverment photo ID for each debtor.
2. Social security card. It’s surprising how many people can’t find this or have lost it a long time ago. If you absolutely can’t find your card, there are some substitutes that are acceptable. In general you can use anything that you have that has your social security number on it, AS LONG AS IT WAS CREATED BY A THIRD PARTY.
So a pay stub would work, since that is created by your employer. So would a W-2. Trouble is that most pay stubs don’t have the social security number on them anymore. It’s getting harder and harder to find a document that has it. Health insurance cards used to have them, but now most don’t. In this day of identity theft, the items that have a social security number on them are disappearing. About the only thing that I can use reliably is a W-2 or 1099. I usully can’t use a tax return, because that’s considered a self generated document – it’s not from a third party.
3. Most recent paystub from employment for each debtor. That is the pay stub that is most recent as of the date of the hearing, not the most recent stub from before the date of filing. The handout from the court which I have posted on my site says to bring “evidence of current income,” but I’ve never seen a trustee ask for anything other than a pay stub. I’ve never seen a person who gets a pension or unemployment be asked to produce evidence of that at the hearing. My experience also is that self-employed people don’t have to produce anything in this category – not at the hearing at least.
4. Bank statements for all open accounts which show what the balance was on the day the case was filed. If the account is open, you have to produce a statement for it. However, unlike the pay stub, this is not necessarily the most recent statement as of the date of the hearing. Usually the statement that comes in the mail at the beginning of the month following the filing of the case will do the trick. You have to be sure, however, that the date of filing is covered in the period included in the statement. In cases where my clients are unable to get a statment that came in the mail, I tell them to go on line or actually go to the bank and get a statement that includes about two weeks before the date of filing and two weeks after that date. Some of the trustees like to snoop through these statements, and I’m concerned that they would be disappointed if we just came in with one page that gave the balance on date of filing.
5. Additional information if the trustee requests it. The above four items or categories of items are all that’s required for more than 90% of the cases I handle. However, every now and then there will be a case where the trustee sends us a letter asking for more information. This could be almost anything, but the rule I follow is that if the trustee wants it, I tell my clients that we better provide it. Often these letters ask that the material be emailed to the trustee several days before the hearing.
Going to Jail for Being in Debt
Everyone I have spoken with all this week has brought up the front page story in last Sunday’s Star Tribune about going to jail for debt. I’m glad that the newspaper is making people aware that this can happen. What you need to know about it, however, is that the procedure is rare and easy to avoid.
In Minnesota nobody is sent to jail for not paying a debt. You can wind up in jail, however, for not obeying a court order. A person who ignores a court order can be found in contempt of court, and the most common penalty for that is a little time – often just a few hours – behind bars. The kind of court order that’s usually involved is one that requires the debtor to respond to a request for information about his or her assets.
When you get sued for a debt in Minnesota, typically a judgment is entered. A judgment is a fancy piece of paper that says you owe the money. After getting a judgment, a creditor has a right to inquire into what assets the debtor has out of which the debt can be paid. Usually this inquiry takes place in the form of written questions or a demand for documents. Typically the debtor will ignore this – for one thing you probably need a lawyer to even figure out what it is. So when there’s no response, the creditor will bring a motion requiring a response. The creditor has a right to a response, so the judge will always order the debtor to respond.
Then the creditor serves the debtor with the court order. By now the debtor has received a large number of legal documents, and this one tends to look the same and just as incomprehensible as the others. The order should be served in person, and a good process server will make a point of showing the debtor that there is a judge’s signature on the document. Of course, a lot of the process servers aren’t so good.
When the debtor ignores the court order, the creditor is in a position to make a motion that the debtor be found in contempt. Another order is served, this one requiring the debtor to show up for the contempt motion hearing. If the debtor fails to show up for that, an arrest order can be issued.
Usually the judge will just have you held for a few hours. Sometimes in an extreme case that can become a few days, perhaps even a few weeks. One way to get a person in such circumstances released is to file a bankruptcy. The automatic stay from the bankruptcy court is usually all it takes to invalidate the legal process that is holding the person in jail. If one brings the receipt for the bankruptcy court filing fee to the judge who has ordered a person to jail, most judges will immediately order that the person be released. Since child support and spousal maintenance are not discharged in bankruptcy, I’m not sure this would work if the contempt of court involved nonpayment of child support or maintenance.
All week I have been trying to reassure people that it’s actually pretty difficult to have this happen and not see it coming in advance, so that we have plenty of time to get their bankruptcy filed before it would ever become a real danger. One moral of the story is that one should never let legal documents pile up without at least consulting somebody about what they mean.
Call to cancel your appointment. Help someone else stop the nasty bill collectors!
People are literally lining up to see me. In 2008 anybody could get in to see me within a week, but now it’s about twice that long.
This is, however, the second morning in a row where I have had a no-show appointment. I noticed not long ago that the Veteran’s Administration – when notifying someone of an appointment at one of their medical facilities – includes a few words about how they would appreciate it if those unable to show up would call in and either cancel or reschedule. They make a point that those who don’t call to cancel or reschedule are denying a fellow veteran of the opportunity to use that time for their appointment. The saying goes something like this: Help your fellow veteran – cancel or reschedule if you can’t get here.
I doubt that the person who failed to show up this morning has thought this through. He is not only messing up my schedule, but also denying an opportunity to the person I could have scheduled in this time slot. I have people begging to get in to see me. If I knew that the person scheduled for this morning wasn’t coming, I’d be meeting with someone else right now. At least two callers yesterday wanted to meet with me this morning. Best I could do was set up appointments for week after next.
"Avoid Bankruptcy" add on the radio this morning
The radio add starts out with a dramatization of a phone call where a job applicant is being asked about a bankruptcy by a prospective employer. Then the announcer cuts in and starts talking about avoiding bankruptcy by going to whoever was sponsoring the add. This angered me because I have never had a client complain to me about receiving such a call; and I hear lots of complaints about lots of things.
The bankruptcy statute has provisions prohibiting discrimination by employers because a person has filed a bankruptcy. My understanding of those provisions is that they prevent a current employer from changing employment status because of a bankruptcy filing. It is also my understanding, however, that they do not prevent a future employer from taking the filing into account. So at least in theory, a call like the one in the add is possible. I just don’t know anyone who it has ever happened to.
I do know people who have spent great amounts of cash on various debt management or debt consolidation schemes, only to ultimately wind up in my office doing a bankruptcy. When I am asked about where to go for credit or debt management counseling, I always say to avoid any outfit that you hear advertising on the radio, TV or other media. The best places to go are the nonprofit organizations such as Lutheran Social Services or Family Means. There are lots of crooked or questionable debt counseling operations. It is possible that they could do a lot of good, but great care should be taken in selecting such a service. If I were you I would avoid any service which does not have an office in Minnesota.
Just ventilating here. I think the add is way inappropriate.