Been Subjected to an Arbitration Claim?

Public Justice needs your help…help them, help you!

A message from Public Justice…

Have you had an award issued against you by the National Arbitration Forum, on a debt you never owed to begin with, after objecting to the arbitration to no avail? Or did you experience NAF favoritism toward credit card companies, against debtors? Your experience could play an important role in an ongoing investigation into the practices of the NAF.

This office is assisting the GIVE ME BACK MY RIGHTS Campaign in gathering research. In particular, we are interested in speaking to individuals who have personally experienced situations in which the NAF has allegedly:

entered an arbitration award against a person who was a victim of identity theft, or mistaken identity,
been dishonest to consumers, or
broken its own rules or twisted its rules in another outrageous way.

The Give Me Back My Rights Campaign is working with concerned legislators both in the U.S. Congress and in a number of states about abuses of consumers in mandatory arbitration, and we’ve received a number of questions about the behavior and practices of NAF. We have also received questions from a number of reporters around the country. Also, a number of consumers in different parts of the country are challenging various practices of the NAF, and some lawyers handling these cases are looking for consumers who have been mistreated by NAF to come forward and testify as witnesses in their cases.

If you have a story to tell, and might be willing to share your experience with the media or testify in court, please click here. Please give a BRIEF description of your experience. We will forward the information to the campaign, and you may or may not be contacted to follow up. This is NOT an offer of legal representation; your story will be used to help prove that the NAF is biased in favor of its corporate clients, and hopefully to help others avoid arbitration before the NAF. Your information will not be used without your consent.

pbland@publicjustice.net

Note: Trial Lawyers for Public Justice is now known as Public Justice

What Happens If You Ignore Debt?

I have more than $200,000 in credit card debts; I don’t think I will make it. What will happen if I don’t file for bankruptcy and just stop paying? I don’t have any assets, and my business went bad. What do you think? – In debt and desperateI’m sure a lot of readers are wondering what they would do in your situation: unable to pay the bills and not wanting to file for bankruptcy.

Though many people would disagree, filing for bankruptcy after trying to start your own business is perfectly reasonable. Many notable Americans have faced the same troubles. Walt Disney and P.T. Barnum, both entertainment pioneers, filed for bankruptcy. Milton Hershey, the owner of the Hershey’s chocolate empire, filed for bankruptcy four times! Before you decide to walk away or ignore the debt, you should consider whether you want to try again.

Even though you describe yourself as having no assets and a defunct business, I’m going to assume that you have some assets and that your business continues in some way. I hope you won’t take offense; my experience is that when people say that they have nothing, they usually have something. My purpose is to give you an answer that will be helpful in describing what is likely to happen whether you have assets or not.

First, each creditor will contact you by phone, letters, e-mail — any way they can. They will make demands and threaten you with lawsuits. If that doesn’t work, they will hire a collection attorney to sue you or sell your debt to a collection agency that will probably sue you immediately.

The creditors (or collection agencies) may possibly get a judgment against you. If you own a home, a lien could be filed against it. If your bank accounts can be located, a levy can be filed against any money in the account, and that money can be given to the judgment creditor. If your business continues to function in any way, a receiver will be sent into your business office. This person will look at all mail that comes to your office and open it, looking for checks. Any checks made out to you or your business may be taken by the receiver.

Receivers take a certain percentage of the money for their fees; the remaining balance will be paid to the creditor. The money ultimately paid to the judgment creditor will be credited against the total amount of the judgment against you. This type of action can continue until all amounts due under the judgment, and all costs incurred in collecting the amount due, are paid in full to the judgment creditor.

The judgment creditor could also have you served with a subpoena or order requiring you to come to court and be questioned under oath. You would be required to answer questions about all your assets and explain why you are refusing to pay the amount due under the judgment. By doing so, it is hoped that enough pressure would be put on you to pay something, at least a partial payment.

Involuntary bankruptcy

Failing that, a group of judgment creditors may try to force you into an involuntary bankruptcy. Usually, this is only done when the creditor knows you have valuable assets and wants to have them sold. For example, if you had a home with a large amount of equity and you personally guaranteed the credit card debt that the creditor or collection agency is attempting to enforce, it will want to have that property liquidated. The net proceeds — after the bankruptcy trustee takes a percentage — would be distributed to your creditors. This process would also enable the creditor to gain the tax benefit of writing off the debt you owed.

If you have a car, especially one that is paid in full, the creditor’s attorney might try to make you surrender the vehicle. I know of an attorney who was trying to collect a debt for his client. He called the debtor into court and asked him whether he had a car. The debtor said yes.

The attorney asked him to go to the car and get documentation to show he owned the car. While the debtor was going to the car, the attorney asked the judge to execute a “turnover order.” The judge granted the attorney’s request, and when the debtor came back to court, the judge demanded that he turn over the keys to his car. The car was then taken into possession by the sheriff, sold at auction, and the net proceeds were credited against the amount of the outstanding judgment. The debtor was left on the curb to find his own way home.

In other words, if you have any assets, any at all, they are at risk. If at any point in this process you have no assets, then your risk decreases. Basically, creditors can’t do anything to you if there’s nothing for them to take.

Here’s what you can do: You can make them wait. Most creditors will sue and get judgments that they can’t enforce at that moment because you have nothing to give them. However, these judgments last 10 years and can be renewed twice for a total of 30 years. Now, judgments can fade away over time — that is to say, collection agencies and creditors have higher-priority things than trying to collect from someone who doesn’t have anything. But if you do accumulate some assets or rehabilitate your business, you may find some very happy creditors knocking on your door with enforceable judgments.

So if you plan to re-establish your credit during the next 10 years for any reason, such as getting financing to start another business, you’re going to need to make arrangements with your creditors to pay the outstanding debts, or you may need to file for protection in bankruptcy. If you don’t need credit, then it’s not a necessity.

Red Flags Of Debt . . . .

How The Red Flags of Debt Can Save You

While many advocate getting and staying debt free, not everybody wants to follow the debt freedom path. Some would rather use debt to their advantage. It’s definitely possible to use the principle of leverage as a wealth creation vehicle. In fact, leverage is one of the most time-tested methods of creating real wealth. As many have found out however, that 18% Visa card is not the financial vehicle of choice when you’re trying to use leverage for wealth creation. Well, come on, just think about it for a second, please! If you’re paying 18% annual interest, you’d better have stellar returns in order to generate a profit from your investments.

Given that you may not be one of those successfully using debt to their advantage, what are the signs that you can look to as early warning markers? These will tell you in advance when debt is about to become a real financial problem for you. They are the “Red Flags of Debt”. Pay heed, so you can spot debt trouble before it’s too late.

1 – Debt accumulation rate – Are you adding to your debt every month or paying down your debt? If you’re adding to your debt, at what rate are your debts mounting? If you just took advantage of a 0% financing deal to festoon your wall with a new 42” plasma TV so you could enjoy watching Rex Grossman give up the ball (again and again), that may be okay. Watch those kind of deals though. Typically they’ll include a provision that will charge you a ridiculous amount of interest if you either make a late payment or miss the payoff date. Many have been stung by failing to pay off the balance in the alloted time and getting stuck with the entire interest amount. If buying that plasma TV was really just an aberration, you’re probably not in trouble, but look at weather you’re steadily accumulating debt on a consistent basis. If it’s a trend, that’s a red flag of debt.

2 – Minimum monthly payments are excessive. If the total of those payments exceed more than 10% of your net income, watch out. You’re setting yourself up for trouble. That’s another red flag of debt. As you may be aware, the minimum monthly payment is a wonderful little device used by creditors to keep you in financial indentured servitude for decades. Yeah, decades. It will take most people between 20 and 100 years to pay off their debts by using the minimum monthly payment method. Here’s a thought, sucker; put all your credit cards on autopay for the minimum monthly payment only. That way you’ll not be late or miss a payment. Oh, they love that! It’s a convenient excuse for the creditor to jack up your interest rate and charge profitable fees. After setting up autopay, pay whatever you can afford, but preferably at least an additional $100 on the card with the most offensive interest rate. That’s a little secret for automatically getting debt free.

3 – Negative Savings Rate – Look at your savings rate. Are your savings or retirement accounts growing? If so are the growing by more or less every month? If it’s less, and it’s consistently heading that way every month, you guessed it. No savings, or a consistently shrinking savings rate is another red flag of debt. If you are using more of your income every month to service debt, and saving or investing less, it’s a warning sign there’s a storm coming.

4 – Frivolous Spending – Just had to get the new dub dubs for that ‘95 Camry your drivin’? Come on! What the hell are you thinkin’? If you do things like get rims for your car that cost what the car’s worth, that’s a prime example of frivolous spending. Ditto for Carribean cruises or anything else where you’re spending money on nonessentials when you have substantial credit card debt. Buckle down, ace! The little things add up too. Try switching from Grey Goose to whatever’s on the gun. You’re friends won’t care, really.

Watch these debt warning signs. You can use them to spot and avoid a debt nightmare before you living it.

Telemarketing . . . Just as Bad as Debt Collecting

When André-Tascha Lammé was granted a judgment of $3,500 last month in a Sacramento, Calif., small claims court, he heard gasps.

“You could hear people in the courtroom saying, ‘You can sue telemarketers?’” he said. You can. In fact, you can make some decent cash for your trouble.

Lammé started getting pelted with calls from mortgage brokers last year, just as his adjustable rate mortgage was about to reset. Like many consumers, he quickly reached the boiling point over the frequent interruptions. But unlike many consumers, the computer programmer took the time to educate himself – perhaps owing to the spirit of his grandmother, a lawyer for several decades – and quickly discovered the Telephone Consumer Protection Act.

“It specifically deals with unwanted calls,” he said. “For each violation, there is a $500 penalty.” Who gets that money? The call recipient. Lammé read on and found he didn’t have to hire a high-priced attorney to pursue the penalty fees – he could file the case himself.

So far, Lammé has won $6,000 in judgments against telemarketers in three cases. He’s not a lawyer, but by filing in small claims court, he’s spent no more than $100 in court fees and scarcely more than an hour of his time on any case. Now he wants you to do it, too.

The Telephone Consumer Protection Act of 1991, signed into law by George Bush the elder, led to creation of the ragingly popular Do Not Call List. But tucked away in the bill was another important provision that entitles consumers to take what’s called a “private right of action.” For each violation of the act, consumers can sue for a $500 penalty. Violations include calling after a consumer has told a company to stop, or failing to provide the consumer with a copy of the firm’s Do Not Call policy.

In his most recent case, heard in January in Sacramento, Lammé was awarded $3,500 for seven violations allegedly committed by Country Club Mortgage Inc. of Visalia. David Mitchell, vice president of Country Club Mortgage, said he couldn’t comment on the litigation.

Suing a telemarketing firm might sound like a paperwork headache beyond the means of most people, but it’s not, said Lammé. Small claims court papers are easy to file, he said. In Sacramento County, he doesn’t even have to walk down to the courthouse. He can file online.

“It only took me five or 10 minutes to file,” he said. “No more than a half-hour total.”

In two prior cases, Lammé didn’t even have to go to court. Two other companies settled with him for about $2,500 after he filed his case.

Web-filing streamlines the process
Suing telemarketers is not new, but Web-based court forms have made it much easier. Electronic filing is slowly becoming standard at small claims courts across the country, said Emily Doskow, editor of “Everybody’s Guide to Small Claims Court.”

“It’s very consumer friendly,” she said. “It’s been growing in popularity for the last five years.”

Despite Lammé’s success, Davids don’t typically triumph over Goliaths in the venue, said Stuart Rossman, director of litigation at the National Consumer Law Center in Boston.

Consumers who pursue a small claims case after frustrating fights with their cable provider, cell phone company or a retail electronics store are in for a rude awakening, he said. In almost all those situations, they long ago waived their right to sue by agreeing to mandatory binding arbitration for disputes.

Don’t remember doing that? Well, you did, virtually any time you signed a contract with a service provider, used your credit card or even opened a shrink-wrapped piece of software you purchased at an electronics store. Binding arbitration agreements are everywhere, and they virtually eliminate a consumers’ ability to bring small claims court cases.

“Courts will say, ‘You have agreed to arbitration, we can’t get involved,’” said attorney Ed Rapacki, who is challenging arbitration clauses in several cases around the country. “At small claims, (the defendant) will file a motion to dismiss or to compel arbitration. They’ll say, ‘Here’s the contract, here’s the arbitration clause.’ And the judge will order you to proceed to arbitration.”

The legal basis for mandatory arbitration dates all he way back to the Federal Arbitration Act of 1925, which was designed to allow two parties to streamline court proceedings.

But Rossman said arbitration has turned into a one-sided arrangement that nearly always favors the corporation and forces consumers to unknowingly surrender their rights to use the traditional court system.

“There are a number of things that organizations like banks are doing to protect themselves in those (contracts),” he said. “Mandatory arbitration prevents individuals from bringing claims … and they are difficult to defeat.”

An organization named StopBMA (binding mandatatory arbitration) has been trying to call attention to the issue of arbitration agreements. More information is available at GiveMeBackMyRights.org.

Lammé is a lucky litigant for two reasons: Congress made it clear that penalties awarded under the Telephone Consumer Protection Act should go to consumers, and he is suing companies with which he has no contractual relationship, and therefore can’t have signed arbitration agreements.

How to file

If you are interested in pursuing a small claims case against a telemarketer, Lammé has set up a Web site with instructions at KillTheCalls.com. It includes a handy list of links to various small claims court instruction pages all around the Internet.

In most cases, your small claims court will be located at the county courthouse in the same building as your superior court.

The real trick to successful small claims cases is adequately serving the defendant with a summons indicating they’ve been sued and must appear in court. That means you’ll have to provide the court with a viable address and preferably the name of a corporate executive or officer. That’s sometimes easier said than done, but often you can find the information on the state Secretary of State’s Web site.

On court day, it’s important to bring supporting paperwork organized in an easy-to-read format. Lammé always brings a copy of the Telephone Consumer Protection Act to hand to the judge. The trials are informal, so you won’t need to learn any legal jargon to plead your case. You might feel nervous or intimidated, but acting as your own lawyer is not as hard as it seems, Lammé said. He recommends going to court a day or two before your case just to become familiar with the courtroom procedures.

“Small claims judges are … sympathetic,” to the legally uninitiated, he said. “The judges give the benefit of the plaintiffs.”

You only get one shot to make your case. By filing in small claims as a plaintiff, you waive your right to appeal the verdict or file in any other court.

One other bit of bad news: If you win a judgment, you will likely have a tough time collecting, particularly if your defendant resides in another state. You’ll no doubt have to pay additional court fees in an attempt to collect. But you will have time on your side — in New York and Massachusetts, for example, you have 20 years.

Because Lammé has sued firms that can’t disappear overnight, he has been able to collect on his lawsuits. But he’s not in it for the money, he said. He thinks consumers’ lawsuits are the best way to end unwanted phone calls.

“If you sue these people, they’re going to get the message,” he said.

Plastic or Plastic: U.S. Credit Cards . . .

Credit card use in the U.S. is growing, with 14% of Americans holding more than 10 cards, a survey by one of the giant credit-reporting agencies has found. That’s up from 2004, when 10% had more than 10 cards.

The study, released today by Experian, identified two groups of heavy card users: the 14% who own more than 10 cards and another, at times overlapping, 14% who use more than 50% of the credit available to them. This last group alone holds an average of nearly seven cards each, two more than in 2004.

The study was done by randomly selecting and analyzing 3.2 million of the roughly 215 million credit files in the company’s gigantic database, said Pete Bolin, Experian senior analyst.

Among the findings:

51% of Americans who have established credit own two credit cards, up from 49% in 2004.
The average American holds four credit cards, up from 3.2 in 2004.
The average credit score nationally dropped to 674, from 678 in 2004.
The average score for those who use at least 50% of their credit rose to 645 from 631 in 2004.
Fewer Americans — 14% — are using 50% or more of their available credit than in 2004, when 16% did. These high users have credit scores about 30 points below the national average.
(Story continues below chart)

  Credit card use by state        
State
 Avg. cards
 2 or more
 10 or more
 Using half of credit
 
United States
 4.0
 51.3%
 14.1%
 14.3%
 
Alaska
 3.7
 50.7%
 12.3%
 17.4%
 
Alabama
 3.3
 47.3%
 10.3%
 13.9%
 
Arkansas
 3.5
 47.8%
 11.3%
 12.8%
 
Arizona
 3.5
 44.8%
 12.4%
 13.7%
 
California
 3.9
 48.5%
 13.7%
 14.4%
 
Colorado
 4.1
 49.7%
 15.0%
 14.5%
 
Connecticut
 4.8
 58.6%
 17.6%
 14.6%
 
Delaware
 4.1
 53.6%
 14.1%
 14.8%
 
District of Columbia
 3.0
 43.0%
 9.0%
 12.9%
 
Florida
 4.4
 52.7%
 16.2%
 15.5%
 
Georgia
 3.4
 47.1%
 11.2%
 14.7%
 
Hawaii
 4.3
 58.2%
 13.5%
 17.4%
 
Iowa
 4.0
 55.9%
 12.8%
 12.5%
 
Idaho
 4.2
 52.8%
 15.6%
 14.2%
 
Illinois
 4.2
 53.1%
 14.5%
 14.4%
 
Indiana
 3.8
 49.5%
 13.1%
 13.6%
 
Kansas
 3.9
 51.6%
 13.3%
 13.2%
 
Kentucky
 3.5
 49.9%
 11.1%
 13.2%
 
Louisiana
 3.2
 46.0%
 10.0%
 11.8%
 
Massachusetts
 5.1
 61.8%
 18.9%
 15.3%
 
Maryland
 4.4
 55.6%
 15.9%
 16.8%
 
Maine
 4.7
 60.6%
 15.9%
 15.6%
 
Michigan
 4.5
 55.0%
 16.6%
 15.1%
 
Minnesota
 4.9
 61.1%
 18.1%
 14.8%
 
Missouri
 4.0
 53.2%
 13.7%
 14.1%
 
Mississippi
 3.0
 45.0%
 8.3%
 12.6%
 
Montana
 4.4
 58.6%
 15.0%
 13.3%
 
North Carolina
 3.5
 46.3%
 12.0%
 13.3%
 
North Dakota
 4.6
 59.6%
 15.7%
 13.7%
 
Nebraska
 4.4
 56.8%
 15.2%
 13.7%
 
New Hampshire
 5.3
 63.4%
 20.3%
 15.5%
 
New Jersey
 5.2
 58.7%
 20.0%
 15.4%
 
New Mexico
 3.4
 46.3%
 10.9%
 13.8%
 
Nevada
 4.0
 49.0%
 14.8%
 16.2%
 
New York
 4.5
 54.3%
 16.4%
 14.8%
 
Ohio
 4.4
 55.4%
 15.8%
 15.1%
 
Oklahoma
 3.3
 46.1%
 10.3%
 12.7%
 
Oregon
 3.9
 50.9%
 13.7%
 13.7%
 
Pennsylvania
 4.5
 57.7%
 15.9%
 14.0%
 
Rhode Island
 5.0
 60.7%
 18.7%
 16.1%
 
South Carolina
 3.5
 47.5%
 11.2%
 13.8%
 
South Dakota
 4.5
 58.7%
 15.5%
 13.9%
 
Tennessee
 3.5
 48.6%
 11.0%
 13.2%
 
Texas
 3.3
 44.1%
 10.9%
 12.9%
 
Utah
 4.1
 53.6%
 14.5%
 15.6%
 
Virginia
 4.3
 54.5%
 14.9%
 15.7%
 
Vermont
 4.4
 59.9%
 14.7%
 14.0%
 
Washington
 4.0
 52.4%
 13.7%
 14.7%
 
Wisconsin
 4.1
 54.7%
 13.8%
 13.3%
 
West Virginia
 3.6
 50.8%
 11.1%
 13.3%
 
Wyoming
 4.2
 54.6%
 14.5%
 13.6%
 
Experian used its own credit score calculations, producing what it calls a PLUS score, in reporting results. It is one of numerous scoring systems developed by banks, lenders, credit-tracking companies and Fair Isaac, which created FICO, the most widely used score. All gather data on borrower behavior from credit reports to produce scores that lenders use in granting loans and setting interest rates. (You’re entitled to a free copy of each credit bureau’s report on you each year; visit www.annualcreditreport.com. Typically you will have to pay to see a credit score, though.).

In New England, credit card use is heaviest, yet credit scores are highest. The typical New Englander holds five credit cards, compared with lows of 3.3 in the Southwest and 3.9 in the Pacific and Mountain regions. Yet, New Englanders who use more than half of their available credit maintain an average credit score of 651, higher than any other region. Nationally, the average score for such big consumers of credit is 674.

The Real ID . . .

Apex Credit Services: No Part of the Below Reflects On Our Posture

Editor’s Note: Being undocumented can be a huge challenge but the American Dream is still possible, if you have a good credit line. Credit cards are the real ID cards, says NAM contributor Diego Ramirez (not his real name). Ramirez, 22, is a writer for Silicon Valley Debug.

SAN JOSE, Calif. – As an undocumented immigrant in this country, I am denied a lot of the things that come easily to other people. A driver’s license, or the opportunity to obtain a proper job, is out of my reach. But the one thing that I am allowed might be the most powerful, and it’s made of plastic.

Being undocumented has put many limitations on people in my situation, but having good credit can magically lift that “undocumented” label from you. For instance, when I go to open a new wireless phone service, the person helping me usually overlooks the fact that I handed them a “Matrícula Consular” ID card. This ID card, issued by the Mexican Consulate located in the United Sates, is almost like handing them a card stating that I am not a legal resident of this country.

But the reason they overlook this is because of my strong credit. I was approved to open up four lines of credit without a deposit, which, considering my situation, is a good thing. I am 22. A lot of young people around my age, citizens included, would not have the same privilege. In America, the statement “money talks” applies to us all. And plastic money can speak louder than even a proper ID card.

I knew that, being undocumented, I would need to find a way to get myself out of that economic handicap. At the age of 13 my uncle taught me the importance of maintaining a good credit record. He would lend me books that would give tips and a breakdown of how credit works. He told me that we might not have voting power, but the one thing that we as immigrants have is a drive to work hard. That drive, my uncle said, can lead to money, and, “money in this country can move mountains.”

The way that I started building up my credit was by opening up a bank account at sixteen and saving. Even though I’ve worked mainly entry-level jobs, I always made it a point to keep good credit. I had built up trust with my bank and so I was able to get my first credit card at 18. I used my Matrícula Consular ID card, and since I had been with my bank for a few years, it was not difficult to get my credit card.

I even got a good interest rate on it. Since I am undocumented, good credit is like a golden key that can open up many doors. I was able to buy a computer, pay my college tuition and keep up with the new technological trends. It’s all part of keeping up with people around me who are citizens or “legal” residents. I’ve done all this through the use of credit.

And it’s not just me. I have met many undocumented families who have been able to send their children to college, and own homes, all thanks to good credit. The golden rule of credit is: use it wisely and only as much as you can pay back. Simple enough, but it’s extremely hard to grasp for some people. Having financial power can be like no other power, and with the potential $40.8 billion that the total immigrant community (including the undocumented) can bring to the consumer market, it is safe to say that the economic voice of immigrants is going to be heard loud and clear, regardless of their status.

But as undocumented immigrants, we do face risks others do not have to face. My mother’s friend, Rosa, who lives in the apartment complex next to us, had to take over her cousin’s house and car payments when her cousin was deported back to Mexico four months ago. Her cousin risked losing everything that she worked so hard for. Rosa had no other choice than to sell most of the belongings in her cousin’s home, and money is running out.

It will be interesting to see if our buying power can influence and help us out politically. I sincerely hope that politicians will find a way to “legalize” us, but until then, the credit card is our ticket into the America we’ve all dreamed about.

When Credit Repair Fails: Need An Attorney For Bankruptcy?

Apex Credit Services Advises on Pro Se Bankruptcy

Fill out some forms, sign them and send them to court.  Why the heck do you need a lawyer for your bankruptcy case?

In other words - “How do I file for bankruptcy without a lawyer?”

That’s the attitude that a lot of people have.  I know because I see these people in bankruptcy court all the time, sweating as the trustee asks them questions that they don’t understand.  They’re usually honest people who have an honest problem and are looking for a proper solution.  But they’ve bought into the notion that bankruptcy is nothing more than a few basic forms.

Huge mistake.  Bankruptcy isn’t about forms, it’s about protection.  Protection from your creditors, protection for your belongings, and protection from blunders that could cause headaches.

For example, let’s say your brother bought a house a few years ago but his credit was terrible.  He asked you to put the house in your name because your credit was pretty good at the time, and you agreed.  You never put any money into the house, never lived there, and had nothing to do with it.  Last year your brother told you he could qualify for a mortgage, so you turned the house back over to him.

You run into some financial troubles, file for bankruptcy on your own.  The house was never yours so you don’t put it down on the schedules or the Statement of Financial Affairs.

Huge mistake.  Next thing you know, your brother’s getting sued by the bankruptcy trustee and you’re looking at a possible criminal action for failing to disclose your financial transactions properly.

Sure, this may be one of those situations that you’d know better than to handle without a lawyer.  But what about an inheritance from three months ago?  Is it income that needs to be used in calculating your “current monthly income”?  If you have a car that’s ten years old what sort of deductions can you take from your “current monthly income”?

What about a bank account that you have for your elderly parent?  It has your name on it, but it isn’t your money - do you list it?  And if so, where do you list it?

Above all, which type of bankruptcy is right for you?  Chapter 7?  Chapter 13?  Chapter 11?

These situations serve to underscore only some of the many reasons for hiring a lawyer when you file for bankruptcy.  Remember, the cost of a lawyer is undoubtedly far less than the amount of debt at stake.

New Congress Needs To Make Change . . .

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was arguably the most odious piece of domestic legislation the previous congress passed. President Bush and his party typically cited it as among their “accomplishments” and the media seldom questioned whether it was a good idea.

This “accomplishment” amounted to nothing less than class warfare waged on behalf of the super rich against the little guy. Indeed, it illustrated the sheer indecency of the Republican Party machine and pervasive influence of banks, credit card companies and the financial services industry as a whole.

Sadly, the Republicans were aided and abetted by the support of eighteen Democrats in the Senate – including Minority Leader Harry Reid. For the record, New York Senator Hillary Clinton did not vote at all. Over seventy House Democrats supported the measure as well. Others who did not vote for it supported the Republicans in their parliamentary tactics and maneuvers to get it through. Senator Joe Lieberman of Connecticut was especially guilty of two-faced behavior – denouncing the legislation while supporting Senator Bill Frist’s efforts to shut off cloture.

A few such as Senator Charles Schumer of New York valiantly put up a fight. Schumer actually tried to attach “poison amendments” to the new law and make it more difficult for people who blow up abortion clinics to declare bankruptcy in paying for their legal defense. That tactic worked for a couple years but without the support of the Democratic leadership the bill’s final passage could not be prevented.

Well now the political landscape has changed with newly elected populists poised to take control in January. Senator-Elect Jon Tester for example doesn’t appear to be the type to sell out his constituents for heavy contributions from Bank of America. While Democrats are culturally diverse, repealing the 2005 law is a meat and potatoes issue the entire party can rally behind.

More importantly, Democrats have a moral obligation to make a stand and repeal the legislation after their fecklessness in the previous congress. They also have an opportunity to demonstrate they are on the side of working people and small business entrepreneurs.

Here is some background and context for those not familiar with the issue. During the economic boom of the 1990’s (remember that?) banks went on an irresponsible lending spree. They issued credit cards to people with either poor credit history or none at all. It was not uncommon for someone of questionable income or even no income to receive a platinum credit card from Citibank, Chase or Capitol One with a generous credit line.

While attending graduate school I interned at the corporate library of American Express in 2001. I maintained a journal of my experience and memorialized a conversation with a Vice President I occasionally performed research for and was on good terms with. I asked this gentleman why American Express was targeting less affluent people and wondered if they were assuming an unreasonable risk in doing so. He told me,

“They’re all going to have to pay eventually. The lawmakers are on our side because of heavy campaign contributions from our industry. First we have to get Joe and Jane Smith hooked on the great American drug: credit.”

I followed up and asked if that might cause undue hardship for the middle and working class who were strapped for cash in the short term and didn’t understand the long-term consequences of burning a hole through their credit cards. His response to that was,

“Not my problem.”

Predictably, people in the middle and lower income brackets hit a wall when the economy went bust and jobs were lost. Many were confronted with medical calamities in their families, had no health insurance and no means of meeting their financial obligations. In the past such people had the option of declaring Chapter 7 Bankruptcy and getting a “fresh start.” Conservative critics typically excoriated the concept of a fresh start as an unjustified reward for profligate spending. In fact declaring bankruptcy is a lifeline for people in legitimate need.

A “fresh start” used to be the objective of American bankruptcy law. The law passed in 2005 requires people who earn more than the median income in their state to pay off their debts on a five-year repayment plan. In theory, lower income earners may still avail themselves of Chapter 7’s debt-erasing provisions, but they’re confronted with all sorts of additional hurdles, including mandatory credit counseling, greater paperwork requirements and rising lawyers’ fees. These obstacles make it virtually impossible for lower income people to declare bankruptcy.

Contrary to conservative propaganda most do not declare bankruptcy because of profligate spending. Typically, lower and middle-income workers are forced to declare bankruptcy because of a medical calamity in their family. If a lower income individual with limited or no health insurance can’t declare bankruptcy when a child suffers from a medical calamity, they’re in danger of complete financial destitution – even homelessness. Indeed, many of these people are among the over 40 million not currently benefiting from health insurance or their coverage is simply inadequate to meet their needs.

Another important impact of the new bankruptcy law is that an indispensable safety net for small risk taking entrepreneurs is gone. Bankruptcy regulations that apply to large corporations are essentially unchanged. For example, an airline can declare bankruptcy and avoid financial obligations regarding their employees’ pension funds. However, the current law does facilitate economic distress on those small businesses that our economy is so dependent on for job creation.

Unlike large corporations, individual owners usually finance small businesses with money from their own bank accounts. Previously an owner of a failing small enterprise had the option of declaring bankruptcy so they could obtain a fresh start and still take care of their family. With that safety net removed it is far more difficult for the little guy to be an innovative risk taker.

In September I interviewed talk radio’s Thom Hartmann and he noted to me that Henry Ford declared bankruptcy seven times. So if it was good enough for Henry Ford why not for today’s small businessperson?

Relaxing the bankruptcy laws would have a far greater impact on job creation than tax breaks for the super rich. Indeed if small business were relieved of the burdens of healthcare costs through a single payer system coupled with a relaxation of bankruptcy laws it could be a job stimulus for our economy.

The financial services industry will move hard and fast to seduce the new Democratic majority. It would not surprise me if the financial services industry lobbies the new congress for even more stringent bankruptcy laws while Bush is still in the White House. Every time new bankruptcy legislation has become law in recent years it was to benefit the financial services sector. How sickening if in coming weeks we read press clippings that lobbyists from credit card companies find the Democrats “pragmatic” and “accessible.” It’s time to reverse that trend starting with this new congress.

Replacing the 2005 law with more consumer and small business friendly legislation makes political sense and is good policy. It would put Republicans on the defensive and enable Democrats to further shift the center of political gravity in a populist direction. The corporatist media and K-Street lobbyists are eager to portray the election as having little to do with a repudiation of conservatism. Flexing political muscle on this issue will help transform the national conversation on domestic issues and keep Republicans back on their heels.

In all likelihood President Bush would veto such an initiative. If he does then it helps the party educate small business entrepreneurs and working people why it is in their interest to put a Democrat in the White House in 2008. Perhaps some Republicans could be persuaded to join Democrats out of political expediency.

The key of course will be to maintain unity in the Democratic caucus. That’s where the netroots can make an important contribution. We have to make it clear that we consider the bankruptcy law class warfare from the top and expect Democrats to make a stand about it.

It’s one thing for Delaware Senator Joe Biden to support the legislation because his state is a bastion for the financial services industry. But if he’s serious about competing to become my party’s standard-bearer in 2008 then he has to change his position. Another example is Senator Evan Bayh of Indiana. Senator Bayh it’s wonderful that you’re from a red state and have gubernatorial experience too. However, you’re among the Senators that supported Bush’s bankruptcy law and until you change your tune I’m not going to waste my time with you.

This needs to be a litmus issue for Democratic candidates in 2008. Hillary Clinton is constantly calculating and recalibrating her positions. She’ll embrace flag burning amendments to appear “moderate” and supported Bush’s national security policies in Iraq until recently. Well I’d like to see Senator Clinton put her prestige on the line and help lead a fight to repeal this horrific law. Hell it could be an opportunity for her to establish some populist credentials of her own heading into the Democratic primary season. Let her calculate in a progressive direction for a change and promise that if elected president she’ll sign legislation overturning the 2005 law.

As for Senator Barack Obama let him take an unequivocal stand that isn’t mealy mouthed and state outright the 2005 bankruptcy law is reprehensible. Why not lead the fight to change it Senator Obama? Perhaps that might enable the freshman senator to accomplish something tangible in his term before hanging out in Iowa and New Hampshire.

John Edwards this is right up your alley. Demonstrate that you’re the true champion of the little guy and push your party to do the right thing. You have populist stature already and can distinguish yourself even further from Clinton and Obama by making this one of your issues.

Governor Vilsak you can get some traction as the Washington outsider not infected by K-Street disease. Prod your party from the heartland. Forcefully deliver the message this law is a travesty of governance in Washington, and you pledge to repeal it if elected president. It’s a stand worth taking and perhaps might propel you in an otherwise bloated field of big names and big money.

Let’s face it Governor Vilsak there is no way you’ll ever raise more cash than Clinton, Obama, Edwards or even the hapless John Kerry. So why not be the people’s champion and use this issue to differentiate yourself from the pack? With Feingold out of the picture progressives are hungering for a candidate to rally behind so why not you? Everyone, including Hillary will be rhetorically against the war in 2008 so why not add some old fashioned domestic populism to your pedigree?

I didn’t phone bank after hours and weekends prior to Election Day because it was fun. I did it because I want change. The bankruptcy law of 2005 is a prime example of what Democrats need to change forthwith.

Another Junk Debt Purchaser Bites The Dust . . .

Arrow Financial Services, LLC of Niles, Illinois was named in a lawsuit alleging deceptive debt collection practices.  Illinois Attorney General Lisa Madigan filed the lawsuit claiming the debt buyer violated the Illinois Consumer Fraud and Deceptive Business Practices Act.Arrow is specifically charged with attempting to collect debts already discharged in bankruptcy and older debts barred by the statute of limitations.  The company allegedly used abusive collection tactics and tried to obtain payment without providing consumers with proof of the debt.

The Illinois Consumer Fraud Bureau received 669 consumer complaints against Arrow since 1999.  Some of the complaints were made by consumers who had emerged from bankruptcy only to have this debt collector attempt to collect debts that were already discharged in the consumer’s bankruptcy case.

Any Illinois Consumer who feels they have been deceived or abused by a debt collector can call one of the following numbers:

Chicago: 1-800-386-5438; TTY: 1-800-964-3013
Springfield: 1-800-243-0618; TTY: 1-877-844-5461
Carbondale: 1-800-243-0607; TTY: 1-877-675-9339
Spanish Language Hotline: 1-866-310-8398

If it wasn’t for Texas . . .

Texas Attorney General Greg Abbott today settled with Cross Country Bank Inc., now known as Applied Card Bank, and its affiliate, Applied Card Systems, ending a scheme aimed at consumers with low incomes or tarnished credit scores. In addition to paying $1.3 million in penalties and attorneys’ fees to the state, the defendants must provide refunds and/or credits to eligible consumers.

Attorney General Abbott filed suit against the defendants in June 2004, alleging the companies preyed on consumers with no credit or bad credit ratings, urging them to apply for credit cards to improve their credit history. Through direct mail solicitations, Cross Country Bank told consumers that the cards had credit limits of up to $2,500. When cardholders received their first billing statement, however, they discovered that the company set their actual credit limit at approximately $350, a limit that many cardholders unwittingly exceeded. Consumers also found that they were assessed a $150 start-up fee, hidden charges, as well as interest rates in excess of 20 percent.

Unable to gain control of their accounts as finance charges, over-the-credit-limit fees and other charges accrued, many of the defendants’ cardholders fell into a downward spiral. An affiliated company, Applied Card Systems, would thereafter begin an unlawful collection effort, harassing the cardholders with repeated and sometimes threatening or obscene telephone calls.

Texans who received unsecured credit cards from Cross Country Bank between Jan. 1, 2002, and July 30, 2004, exceeded their credit limit within 17 days of the first billing date, but who did not use their credit card more than 17 days after the first billing date are eligible for a credit of all charges, fees and other amounts the company charged cardholders, excluding actual goods and services purchased with defendants’ credit cards. Cross Country Bank must also contact credit reporting agencies to provide updated and corrected information for each eligible consumer. In addition, eligible consumers who made payments that exceeded their actual purchases may file a complaint with the Attorney General or Cross Country Bank within 75 days of today’s court filing to receive a refund of the difference.