May 2015 - Page 2 of 2 - FREE CONSULTATION

Bankruptcy Loophole Exploited by Trustees for Tuition Money

Posted on May 14, 2015by Admin

According to The Wall Street Journal, trustees handling the collection of monies owed to creditors have come across a stealthy way to regain funds owed, by demanding the academic institution return a part of tuition received. These aggressive tactics to take back tuition payments are being used by parents filing for bankruptcy. As more and more Americans are sinking deeper in student loans and filing for bankruptcy, court-appointed trustees are seeking to recover as much money as possible in order to repay creditors.

“In a growing number of personal bankruptcy cases, trustees responsible for collecting money for creditors have moved to claw back tuition payments that insolvent parents made for their children. The trustees argue the funds should be recovered to pay off the parents’ debts instead. In many cases, they’re succeeding,” the Journal reports.

Originally, these cases were few and far but with increased tuition costs and heavy student loan debts, bankruptcy experts foresee more of these lawsuits to come. The University of Bridgeport paid $4,000 in such a lawsuit, over the last year. New York University was sued to claim tuition money by Trustees for a Minnesota couple last October. A spokesman for NYU, John Beckman called it “deeply unfair to that institution which has provided real value to the family.”

The reason these lawsuits are able to proceed is because of a loophole in the bankruptcy code, permitting trustees to sue in order to collect money that a bankrupt person spent several years before filing for protection. It is contingent on if a trustee finds that the person didn’t receive ‘reasonably equivalent value’ for that expense. The Journal reported, “But in the case of a child’s tuition payment, the filer didn’t get the value for the expenditure — the child did.”

Marquette University fought a lawsuit against them in 2010, arguing that Carmen and William Leonard’s the son had received “reasonably equivalent value” for their tuition amount. The court sided with the Leonards, stating they “did not receive any ‘value’ for their tuition payments to Marquette,” and that the school “points to no economic benefit to the Debtors, other than to speculate that a college education for Debtors’ son may in the future enable him to be financially independent of his parents, and thereby relieve Debtors of any need to financially support their son.” According to the Journal, Marquette was eventually compelled to repay $21,527 to the trustees, who had filed suit after both of the Leonards had lost their jobs during the recession.

Not all cases are successful. A New York bankruptcy judge ruled in favor of St. Andrews University and they were not required to repay $35,055 in demanded tuition costs. Also, unsuccessful lawsuits can be very costly for the families as well. Additionally some parents were afraid that their child might be expelled, denied a transcript or asked to repay tuition money received, according to the Journal. Trustees are less likely to go after tuition for private elementary and secondary schools, because in most states this money is protected by laws that require a parent to care for their children until adulthood.

If you are in a financial crisis and are considering filing bankruptcy, contact an experienced Miami bankruptcy attorney who can advise you of all of your options. As an experienced CPA as well as a proven bankruptcy lawyer, Timothy Kingcade knows how to help clients take full advantage of the bankruptcy laws to protect their assets and get successful results. Since 1996 Kingcade & Garcia, P.A. has been helping people from all walks of life build a better tomorrow. Our attorneys’ help thousands of people every year take advantage of their rights under bankruptcy protection to restart, rebuild and recover. The day you hire our firm, we will contact your creditors to stop the harassment. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Sources: http://www.newsmax.com/US/college-tuition-parents-bankruptcy-trustees-creditors/2015/05/06/id/642927/

http://blogs.wsj.com/bankruptcy/2015/05/06/whats-behind-bankruptcy-lawsuits-over-college-tuition/

Have Zombie Debts Finally Met an End?

Posted on May 13, 2015by Admin

According to the New York Times, JPMorgan Chase and Bank of America will remove all Chapter 7 bankruptcy discharged credit card debts from consumer credit reports in the next 3 months. In a written statement coming close to finalization, Citigroup will be doing the same. The nation’s largest banks are ready to put an end to zombie debts.

Pending litigation accuses these banks of attempting to receive payment by leaving these discharged debts on credit reports. Synchrony Financial has also been accused of this as well. Financial institutions are required by federal law to cease reporting defaulted credit card accounts, once a bankruptcy has discharged them.

Ira Rheingold, executive director of the National Association of Consumer Advocates, said, “The bankruptcy then indicates that (it was) taken care of. The notion that it should stay on your credit report is inaccurate and it does damage to consumers.” If a bankruptcy and the eliminated credit card debt appear together on a consumer’s credit report, the consumer is penalized twice, making it harder to gain future financing. It can also harm potential future job opportunities as well, since certain employers will not consider prospects with delinquent accounts.

JPMorgan Chase would not report, comment or confirm to the Times why these discharged debts might have been reported. Synchrony Financial would not respond either, but they did agree to offer similar relief for consumers. According to an email statement, Bank of America feels that their reporting on sold credit card accounts is accurate. Spokeswoman Betty Riess said, “However, given the issues raised by the court, we have made the decision to delete credit reporting for the sold credit card accounts.”

According to the Times, if these agreements follow through, more than a million Americans will be helped by the banks’ decisions.

If in the event a discharged bankruptcy debt still shows up on your credit report, it is advised that you do not pay it since you no longer owe the debt. It is suggested that you file a dispute with the credit bureaus (Experian, Equifax and TransUnion) instead. By asking to have it removed from your reports, an inquiry will be launched. It is also helpful to provide the credit bureaus with as much information as possible to prove that the debt is gone—indeed dead. Also attach your bankruptcy discharge notice, which lists the debt on it. According to Rheingold, “If the bureaus don’t fix it, you have them on a fair credit reporting violation.”

Source: http://www.bankrate.com/financing/credit-cards/death-to-zombie-debts/

Bankruptcy Law, Timothy Kingcade Posts

Mortgage Relief for Borrowers from Bank of America is Questioned

Posted on May 12, 2015by Admin

The record setting $16.7 billion settlement between Bank of America and the Justice Department, was a big deal last August. Bank of America agreed to the settlement regarding questionable mortgage practices. The bank was required to provide $7 billion for consumer relief, including loan modifications.

Since the settlement, there have been questions as to whether the money will go to those deserving it, or if Bank of America will be allowed to claim credit for the relief well beyond the actual value. The bank has made a $3.4 billion profit, a vast improvement from the $276 million loss, one year before.

According to the settlement, the bank was expected to reduce or forgive first and second mortgage amounts owed, as well as make loans more affordable for borrowers. In return, the bank was to receive a specified dollar amount of credit for these reductions. Several borrowers were told that the bank intended to “forgive” certain loans discharged in their bankruptcies, but those debts were already forgiven.

Florida borrower, Patti Coleman received correspondence from Bank of America earlier this year, stating that Ms. Coleman had been approved for a “full principal forgiveness” of $54,732 for a home equity line of credit, and that she would “no longer owe” the amount. However, Ms. Coleman’s 2010 bankruptcy had already discharged this debt. In an interview, she stated, “In my Chapter 7 filing, the debt was extinguished. They can’t come back to me and try to collect.”

It did state in the letter that Ms. Coleman’s debt was discharged under bankruptcy law, and that she is not personally liable for it, but such a large amount may automatically counted unless she contacted Bank of America to opt out. This suggests that under the Justice Department deal, the bank will still claim credit for these loan forgiveness actions.

A Bank of America spokesman, Richard Simon, argued that Ms. Coleman’s offer from the bank was an opportunity for her to eliminate the lien the banks still holds and clear title to the property. “The vast majority of customers benefit when their second lien is extinguished,” he stated. Mr. Simon was unable to comment when questioned if Bank of America would be submitting the $54,732 that Ms. Coleman no longer owes on her home equity loan.

Under the settlement, Bank of America receives additional credit, over $1 for every dollar of forgiven loans, if it provides certain types of relief by Aug. 31.

According to Jacksonville, Fla. Attorney Chip Parker of Parker & DuFresne, over 100 attorneys said they had clients who have received these letters. “Releasing a debt that has already been discharged is not in the spirit of the settlement. My concern is that the bank will use these cases to avoid having to give true principal reductions to people who need it. ” Mr. Parker said.

Retired Boston University law professor, Eric D. Green, is overseeing Bank of America’s performance under the settlement. As an independent monitor, he validates the bank’s claims for credit under the consumer assistance portion of the agreement. He stated that the bank had not yet submitted claims for credit under the settlement.

“We are working out the definitions and methodology of checking the credits the bank seeks.” said Mr. Green. He also said that bankruptcy discharged loans will not be acceptable for credit. Regarding Ms. Coleman’s case, Mr. Green concluded it to be an honest mistake. Periodic reports on the bank’s progress will be filed by Mr. Green’s office. His office has already completed a report for February and another is expected at the end of July.

Source: http://www.nytimes.com/2015/05/10/business/bank-of-americas-relief-for-mortgage-borrowers-is-questioned.html?_r=0

Bankruptcy Law, Timothy Kingcade Posts

Bank of America and JPMorgan Finally Agree to Remove Debt from Credit Reports

Posted on May 11, 2015by Admin

Consumer debt previously eliminated during bankruptcy proceedings are finally being wiped clean from credit reports by America’s two largest banks: Bank of America and JPMorgan Chase. This movement finally puts these two banks in line with the federal law.

According to The New York Times, over the course of the next three months, the banks will update borrowers’ credit reports, to the great relief of millions of consumers. The bank is required to update a consumer’s credit reports, showing that the debt is no longer owed, once a debt has been erased by bankruptcy, under federal law. Because this rule was disregarded by America’s largest banks, consumers had to deal with unfair red marks and inaccurate credit reports.

Several lawsuits have shed light on how many larger banks are ignoring the discharges from bankruptcy, in an effort to sell off the debt and still collect money from debt collectors, the Times explains.

Neither Bank of America nor JPMorgan are admitting to any misconduct, but they do agree to correct credit reports. JPMorgan said they would correctly record all discharged debts from Chapter 7 bankruptcy by this upcoming August. Also, Bank of America will be making changes on how they report cleared debts that have been sold to financial firms. Credit card debt that has been sold since May 2007 is expected to be removed from consumers’ credit reports.

In addition to Bank of America and JPMorgan, Synchrony Financial and Citigroup have also allegedly deliberately ignored bankruptcy charges, and they face lawsuits as well. Like JPMorgan and Bank of America, Synchrony will be providing similar relief.

The Times reports that although the banks have tried to have these lawsuits thrown out, all attempts have failed. In response to the judge’s criticism in Citigroup’s case, Citigroup stated that they have made a proposal to plaintiffs much similar to what other banks have done.

Source: http://consumerist.com/2015/05/08/jpmorgan-chase-bank-of-america-agree-to-wipe-debt-cleared-by-bankruptcy-from-credit-reports/

Bankruptcy Law, Credit, Timothy Kingcade Posts

Congress Focuses on Lending Protections for U.S. Troops

Posted on May 8, 2015by Admin

The Consumer Financial Protection Bureau (CFPB) issued a report in December, asking for stronger protections for military families. Earlier this year, NBC News reported that military families are “especially vulnerable.”

Predatory lending practices affect a large number of Americans, and currently in the U.S. house there’s an important debate about just how far these protections will go. According to The Huffington Post, Congress passed legislation in 2006 that set a 36 percent cap on interest rates for auto title loans, tax refund loans, and payday loans for military families.

In response, Lenders aptly adjusted the loan terms to avoid these limits. These terms applied to payday loans that were for 91 days or less, and the amount of $2,000 or less. For payday loans exceeding 92 days or $2,001, credit companies were still able to avoid the new rules. Larger banks skirted around the issue by creatively issuing “deposit advance products,” which operated very much like payday loans, but annual interest rates of 300%. In 2012, Congress passed another law to close these loopholes. As of September 2014, these new rules have been finalized.

Unfortunately, the problem was not completely solved because a provision was added to the military spending bill to delay the adding of any new protections for another year. Josh Earnest, White House Press Secretary termed the proposal as “shameful” and Iraq War veteran, Rep. Tammy Duckworth (D-Ill.), has led the opposition against the Republican measure.

According to the Military Times, the delay was successfully stopped by Democrats. A narrow vote among House lawmakers removed the contentious language delaying the new rules, a great relief to advocates who viewed the clause as an attempt to take away military family financial protections.

Members of the House Armed Services Committee voted 32 to 30 to strip provisions from the legislation that would have setback Defense Department plans for expanding the 2006 Military Lending Act.

Those opposing of the clause accused supporters of providing predatory lenders with more chances to oppress troops. They also feel these rules are long overdue. Banks will be displeased but Democrats, consumer advocates, and other military advocacy groups see the vote as positive news.

“Service members who are drowning in debt are a burden to the military. They are costly to manage because they need special attention. Beyond that, thousands of service men and women have already been barred from duty abroad because the debt they carried made them security risks. In other words, blocking better debt protections is a terrible idea,” said journalist and author, Brent Staples.

For now, the current crisis has been averted.

Choosing the right attorney can make the difference between whether or not you can keep your home. A well-qualified Miami foreclosure defense attorney will not only help you keep your home, but they will be able to negotiate a loan that has payments you can afford. Miami foreclosure defense attorney Timothy Kingcade has helped many facing foreclosure alleviate their stress by letting them stay in their homes for at least another year, allowing them to re-organize their lives. If you have any questions on the topic of foreclosure please feel free to contact me at (305) 285-9100. You can also find useful consumer information on the Kingcade & Garcia website at www.miamibankruptcy.com.

Source: http://www.msnbc.com/rachel-maddow-show/house-targets-predatory-lending-protections-us-troops

Bankruptcy Law, Credit, Timothy Kingcade Posts

Wells Fargo to Provide Assistance to Homeowners

Posted on May 7, 2015by Admin

A federal judge’s ruling this week will finally allow homeowners who were denied mortgage assistance from Wells Fargo to soon get the help they needed years ago. The bank’s denial of modifications to homeowners was considered a breach of the 2010 Mortgage Settlement, involving adjustable-payment mortgages.

According to Reuters, the dispute over the 2010 deal has been long-running and this breach was only the most recent development, regarding the “pick-a-payment” loans Wells Fargo inherited when they acquired Wachovia. Initially, borrowers had the choice of paying a lesser amount than the interest due on their mortgage, but payment escalation caused mortgages to grow. This contributed to the foreclosure crisis of the late 2000s.

For homeowners who had taken out the pick-a-payment loans, Wells Fargo did not grant loan modifications. Plaintiffs in the case argued that Wells Fargo had not complied with the 2010 agreement. Reuters also reported lawyers contended that thousands of borrowers were denied mortgage assistance because Wells Fargo failed to use proper methods to determine if homeowners were at imminent risk of default, effectively qualifying them for assistance.

The judge found Wells Fargo’s breach to have been done using “evolving and perhaps ill-defined standards” when deciding assistance needs. The judge’s ruling ordered Wells Fargo to find a way to correct the violations and also make preparations to allow some homeowners the chance to reapply for assistance. In two weeks time, both Wells Fargo and the plaintiffs are required to provide the court with proposals for correcting the breach.

Source: http://consumerist.com/2015/04/17/wells-fargo-breached-2010-mortgage-settlement-must-work-to-provide-homeowner-assistance/

Bankruptcy Law, Credit, Timothy Kingcade Posts

The High Cost of Bankruptcy: Research Reveals Many Consumers Can’t Afford to File

Posted on May 6, 2015by Admin

Researchers have found that congressional changes to the U.S. bankruptcy law has kept financially struggling people out of bankruptcy court, but not from going bankrupt. Because of a new study, written by economists Jaromir Nosal of Columbia University and Stefania Albanesi of the New York Fed, the Federal Reserve Bank of New York has shed some light on why some individuals are simply too poor to file for bankruptcy.

In 2005, lawmakers made changes to the law and the cost for filing for bankruptcy became more expensive. According to the study, The Bankruptcy Abuse Prevention and Consumer Protection Act from 2005 may have eliminated the chance to start over for many who needed it.

The report clearly reveals that a “sizable group of individuals exists that does not file for bankruptcy, but seems unable to pay off their debts.” Researchers said, “These individuals are concentrated at the bottom of the income distribution, and therefore they are the ones who would be expected to benefit most from the relief offered by personal bankruptcy.” Individuals with financial troubles are less likely to have much access to new lines of credit and they also tend to have lower credit scores than those who file for bankruptcy, the study showed.

Professor Lois R. Lupica from the University of Maine’s law school conducted an earlier study and found that the cost of a Chapter 7 filing grew from $600 to $2,500. According to the numbers from the study, more paperwork, mandatory credit counseling classes and attorney fees made up most of the cost. The average rose from $663 to $986.

In an interview with The Wall Street Journal on Tuesday, Prof. Lupica agreed that the study reveals that the increase in cost has stopped people from filing. Approximately 601,000 people and couples filed Chapter 7 in 2014, far less than the 1.1 million filings recorded in 2010 from the recession-era peak, according to the U.S. Administrative Office of the U.S. Courts.

Consumer advocates who opposed financial industry lobbyists, voiced that the bankruptcy process was being abused by people who filed for Chapter 7 protection to cancel their debt, when they were able to still repay a portion of the debt over time. After an 8 year battle to reform the U.S. consumer bankruptcy laws, former President George W. Bush signed the law on April 20, 2005.

The New York Fed study stated that they are the first to focus on the individuals “who no longer file for bankruptcy post-reform.” Researchers used Consumer Credit Panel/Equifax Data from 1999 to 2013 to study and track anonymous individuals, in order to draw their conclusions. Unlike the Consumer Bankruptcy Project which houses volumes of data on people who did file for bankruptcy, this study includes those who did not file, which the academic community may find to be particularly useful.

Source: http://blogs.wsj.com/economics/2015/04/14/too-poor-to-file-for-bankruptcy/

Credit, Foreclosures, Timothy Kingcade Posts

FTC Puts a Stop to Foreclosure Rescue Scam

Posted on May 5, 2015by Admin

Homeowners facing foreclosure across the nation were fooled into paying money out, all while getting nothing back in a recent Foreclosure Scam. After winning a court order, the Federal Trade Commission stepped in and shut down the entire operation, calling it a “massive fraud.”

The foreclosure rescue group was known as both HOPE Services and HAMP Services, targeting financially distressed homeowners. Jessica Rich, Director of the FTC’s Bureau of Consumer Protection defined the scheme as “shameful mortgage frauds.”

“These defendants stole mortgage payments from struggling homeowners, and they pretended to be a nonprofit working with the government,” Ms. Rich further stated. Nearly $2 million was lost by homeowners, according to the FTC lawsuit. In certain cases, victims paid the equivalent to several mortgage payments to the false mortgage relief enterprise.

Homeowners were lured in with a letter sent to them, explaining how they might qualify for help from the “New 2014 Home Affordable Modification Program” (HAMP 2). The letter even displayed what appeared to be an official government seal. FTC described HAMP 2 as “an aggressive update to Obama’s original modification program,” stating that the banks had received incentive from the government to lower interest rates. The operation then collected financial information from the victims, boasting about their high success rates for getting loan terms modified, according to the FTC complaint.

FTC also said that they advised victims that their application would be submitted to the “Making Home Affordable” (MHA) program, Neighborhood Assistance Corporation of America, and the U.S. Department of Housing & Urban Development. An actual MHA application was used in the operation, but it failed to include the warning page, addressing foreclosure rescue scams.

Following the application process, victims were advised they had been approved for a lower interest rate with lower payments. Safety from foreclosure was promised by the alleged Advocacy Department, after three “trial payments” were made as well as other possible fees. Victims were even advised not to speak to their lender or lawyer.

The monies received were never sent to the lenders and the modification never took place. As a result, people were falling further behind on their mortgage, incurring additional penalties and interest. According to the FTC, some even lost their homes.

Several federal laws were violated by the defendants, including the FTC Act, FTC’s Telemarketing Sales Rule, and FTC’s Mortgage Assistance Relief Services Rule. Listed defendants include Chad Caldaronello (aka Chad Johnson and Chad Carlson); C.C. Enterprises, doing business as HOPE Services, Justin Moreira (aka Justin Smith, Justin King, and Justin Mason); Derek Nelson (aka Dereck Wilson); D.N. Marketing doing business as HAMP Services; and Brian Pacios (aka Brian Kelly and Brian Berry).

Source(s): http://www.cbsnews.com/news/foreclosure-rescue-sham-shut-down-by-ftc/ and
http://consumerist.com/2015/04/30/ftc-halts-mortgage-relief-operation-targeting-consumers-in-foreclosure/

Bankruptcy Law, Credit, Timothy Kingcade Posts

Upward Climb Continues for Household Debt

Posted on May 4, 2015by Admin

The amount of money owed to financial institutions is considered household debt. This can include various forms of consumer debt such as student loans, auto loans and credit card debt, as well as mortgage loans. According to the latest household debt report, released by Federal Reserve Bank of New York, balances from mortgages have increased in the fourth quarter of 2014.

The Federal Reserve Bank of New York’s report clearly shows the growing trend in borrowing and indebtedness. Also according to the report, outstanding household debt increased by $117 billion, from the third quarter of 2014. This one percent increase has placed total household indebtedness at a staggering $11.83 trillion as of Dec. 31, 2014.

Compared to the fourth quarter of 2013, total debt has gone up $326 billion. The Federal Reserve Bank of New York’s report has been based on data collected from New York Fed’s Consumer Credit Panel, with a nationally representative sample drawn from anonymized Equifax credit data. Mortgage debt appeared to have the highest increase by $39 billion, while student loans followed closely behind with an increase by $31 billion.

Additionally, we saw an increase in auto loan debt by $21 billion and credit card debt by $20 billion. Outstanding student loan debt reached $1.16 trillion. Overall, delinquency rates for 2014’s fourth quarter remained unchanged at 4.3 percent. However, auto loans and student loan rates grew worse.

Donghoon Lee, research officer at the Federal Reserve Bank of New York stated, “Although we’ve seen an overall improvement in delinquency rates since the Great Recession, the increasing trend in student loan balances and delinquencies is concerning. Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.”

Source: http://www.acainternational.org/creditors-household-debt-continues-upward-climb-35086.aspx

Bankruptcy Law, Credit, Timothy Kingcade Posts

Hidden Rolex Unravels Bankruptcy Case in South Florida

Posted on May 1, 2015by Admin

Bankruptcy officials in South Florida discovered a couple was hiding assets from the courts while filing for Chapter 7 bankruptcy protection. When bankruptcy trustees paid a surprise visit to the couple’s home, they discovered a Presidential Rolex watch suddenly disappeared from the wife’s wrist. The discovery led to investigators uncovering $120,000 worth of hidden assets in the form of jewelry and artwork, all of which the couple claimed to have pawned.

The judge decided to reject the couple’s request to discharge their debts totaling $2.9 million as a result of the lies and concealing assets. Seven years after their failed attempt at filing for bankruptcy protection, the couple was charged with one count of bankruptcy fraud and sentenced to one year and one day in federal prison.

The couple still owes all of the original debts plus an additional $27,295 in restitution owed for the trustee’s services. The couple’s behavior caused them to lose their homes and their personal belongings, including family heirlooms, jewelry and clothing, much of which was auctioned off at “fire sale prices.”

This case comes as a warning to anyone considering hiding assets when filing for bankruptcy. This can include: lying about owning assets, transferring assets into someone else’s name or creating fake liens or mortgages to make assets look as if they have no value. When you file for bankruptcy, you must disclose everything you own and all your debts, in exchange for having your debts “discharged.” If you do not fully disclose your assets, you will not be granted a discharge. However, this is just one of the consequences you will face. You will also be subject to criminal penalties and will not be able to discharge those debts in subsequent bankruptcies.

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