FDCPA lawyers help stop abusive debt collectors from harassing you -- the best way to do this is to sue the lawbreaking collectors and make them pay you money damages.
"So what is the FDCPA?"
FDCPA stands for the Fair Debt Collection Practices Act. This is a federal law passed in the 1970s to stop abusive debt collectors.
The law was passed and continues to be on the books because so many collectors violate the law and this is unfair for two reasons.
First, it is unfair to consumers as people with access to our credit reports, credit information, personal financial information, etc. should not be allowed to harass us. We'll talk about some examples later in this article.
Second, it is unfair for abusive collectors to operate in the marketplace because it hurts the law abiding honorable debt collectors. The ones that follow the rules are at a competitive disadvantage to those collectors who break the law. Imagine a football game where one team often has 12 or 13 players on the field at one time. That's an advantage but it also is called cheating and there is a price to pay.
"Do collectors really break the law?"
The slightly longer answer is that because breaking the law gives a competitive advantage in the marketplace, many collectors give in to the temptation to cheat because it means higher profits and it hurts their competition.
So a for profit business naturally and rightfully wants to increase profits. Nothing wrong with this.
And if increasing profits causes your competitors to lose business or even go out of business, then that's considered a nice bonus.
Abusive debt collectors are not normally abusive just because they hate consumers. It usually is not "personal" -- it is just a business owner creating an environment where the business happily breaks the law to make more money.
It just so happens that in doing this, consumers are abused.
"What are some examples of debt collectors breaking the law?"
The two basic rules for debt collectors are:
First, don't lie to consumers.
Second, don't be unfair or harassing to consumers.
Examples of lying to consumers:
**Suing you for $7,000 when you owe nothing to the debt buyer (LVNV, Midland, Portfolio, etc).
**Telling you that you will be sued when the collector has no intention of suing you
**Telling you that you will be garnished when there is no basis to garnish you
**Telling you that you can't "dispute" a debt
**Lying to you by saying the collection account will never come off of your credit reports
**Lying about how you cannot file bankruptcy anymore
**Telling you that you owe a certain amount on your mortgage when you owe a lesser amount
Examples of unfair or harassing conduct:
**Suing you after the statute of limitations has expired
**Calling your neighbors or family members (other than your spouse)
**Calling your co-workers
**Using profanity or racial slurs against you
**Garnishing you when there is no right to garnish
**Suing you for an amount that you don't owe
As you can see, a lot of times conduct can be a lie and can also be unfair/harassing.
"What can I get by suing under the FDCPA?"
When you sue an abusive debt collector in federal court, you can get the following:
1. Statutory damages of up to $1,000
2. Actual damages to compensate you for any economic losses or emotional distress
3. Costs of filing and prosecuting the lawsuit
4. Attorney fees
"Should I do this on my own or hire a lawyer?"
Sometimes folks think it would be cheaper to not hire an attorney. But unlike a lot of other types of cases, you don't pay us any money to file your lawsuit.
And we only get paid if we win the case -- either a judgment or a settlement. Remember also that the debt collector can be forced to pay our attorney fee. Usually this is worked into the settlement as the collectors know that our hourly rate is $400 an hour as I'm writing this now.
This causes collectors to have to decide if they want to fight or if they want to settle. If they fight, and they know they will lose, the price of the case will go up every step of the way because of the attorney fees.
The other factor is that you will be in federal court -- most trial attorneys are not even comfortable in federal court due to the complexity of the rules. So if you, as a non lawyer, want to represent yourself then you must be prepared to know the rules.
"If I want to know more about my options, what should I do now?"
Give us a call at 205-879-2447 and we'll be happy to help you think through your options.
There is, of course, no obligation to hire us and no fee for us to speak.
Let's talk about your options and what is the best approach for you to take with the debt collector you are dealing with....
Normally it is suing them which puts money in your pocket, discourages bad behavior in general and certainly makes the collector leave you alone. Overall, very good things happen when we sue the bad guys.
I look forward to speaking to you -- call us at 205-879-2447.
No -- treat it very seriously as this normally means you have been sued in Alabama. I would NEVER hire this company but one thing they do a great job of is getting word to you that you have been sued. Normally they mail out their letter to you the next day after being sued.
How does Ferry & Nicholas get my name?
All lawsuits in Alabama, including debt collection lawsuits, are on what is known as "AlaCourt" which is the Alabama internet based court records. There are still physical files but this is where judges and lawyers work from -- Alacourt.
Every new lawsuit is listed along with your name and address.
So Ferry & Nicholas pull that data each day and then generate letters to you and everyone else sued that day.
Normally you will know about a lawsuit first from Ferry & Nicholas -- long before you are actually served with the lawsuit.
What does Ferry & Nicholas claim to do for me?
They claim to be mediators -- to be a go between for you and the company suing you. Now it may be an original creditor suing you (Capital One, Discover, etc.) or it may be a debt buyer (Asset Acceptance, LVNV Funding, Midland Funding, Portfolio Recovery, etc).
Regardless Ferry says they will work out an "out of court" settlement so you don't have to go to court.
Sound good? And they are very cheap -- under $200.
So any problems?
Why should I be skeptical about hiring them?
You have been sued. You are in a court proceeding.
And you get a letter from a non lawyer place claiming to help you with your lawsuit.
As you can imagine, this can and does often end in disaster.
Velocity Investments, LLC is a debt buyer (debt collector) who supposedly buys up old car loans, usually after a repossession which leaves a deficiency balance. They are filing more and more suits in Alabama now.
A typical example of a Velocity suit
You buy a car from a local dealership and the loan is immediately assigned to Citi or Capital One Auto. Then maybe a year or two later, it is supposedly sold to Santander.
The car is repossessed, and Santander claims you still owe $12,000.
Four years later, the loan is supposedly sold to Cascade Capital and then a few months later to Velocity Investments.
After Velocity has the debt (or so it claims to have the debt), it will have a collection lawyer out of Mobile contact you -- Barry Friedman.
He will tell you that he is collecting this debt and you owe it. He will not tell you that the ownership is questionable (at best) and he will not tell you that he is collecting on a debt that is outside the statute of limitation.
Instead, if you don't pay anything -- and they just want one payment to claim to restart the statute of limitation -- then you will be sued for the $12,000.
Danger to you
The biggest danger to you is that you do nothing. Because if you do nothing, then Velocity will ask for and receive a default judgment.
This means it will be able to garnish your wages, garnish your bank accounts, and even force the sale of your property.
The next biggest danger is to assume Velocity has the right to sue you and filed the suit within the statute of limitations and so you pay Velocity instead of looking at your other options.
1. File bankruptcy
2. Fight the lawsuit on your own
3. Settle the lawsuit on your own
4. Hire a lawyer to fight the lawsuit for you
5. Hire a lawyer to settle the lawsuit for you
Let's assume that you are going to fight this lawsuit -- what are some problems for Velocity?
Problem one for Velocity -- it must prove it owns the debt
This is a problem for all debt buyers.
See they claim to "buy" the debt. But it is one thing to claim and it is another to prove it.
You would think it would be easy to prove it if they really bought the debt. But that's the kicker -- these debt buyers struggle mightily to prove ownership.
So either they do buy the debt but can't prove it or they never owned the debt in the first place.
Not really important to us because when they sue us, they have to prove ownership of the debt or they lose. Obviously you never did business with Velocity so they better be able to show they bought the debt from Cascade who must show it bought it from Santander who must show it bought it from Citi or Capital One Auto who must show it bought it from the dealer.
Lots of steps, isn't it?
That's why Velocity can buy this debt for a penny or two on the dollar because what they are buying is often a vague promise that this might possibly be a debt. But usually the contract where they "buy" the debt says there is no promise that any of the records are remotely accurate....
Problem two for Velocity -- it files suit after the statute of limitation expires
There is a big debate in Alabama over the statute of limitations on a credit card debt -- is it three (my belief) or is it six (collectors believe this).
With the type of car loans that Velocity buys, to my knowledge only Velocity thinks the statute of limitations is six years. Everyone else seems to know immediately that this is a four year statute of limitation as this is a lawsuit arising out of a sale of a good.
This means the UCC (Uniform Commercial Code) applies and it says four (4) years is the time limit.
I have yet to see a Velocity case brought in less than 4 years from the date of the repossession. The starting point is actually before the repossession but the statute certainly starts running at the time of the repossession.
Problem three for Velocity -- it normally can be sued for violating the FDCPA
Velocity has a habit in my opinion of suing people who do not owe Velocity. And suing folks well after the statute of limitations has expired.
We also see Velocity suing after consumers have made a valid dispute under the FDCPA (Fair Debt Collection Practices Act) but instead of responding to the dispute, Velocity simply sues.
All of these issues normally violate the FDCPA (and Alabama state law).
So the key is to win your case and then sue Velocity in Federal Court for money damages.
What to do if you have been sued by Velocity -- call us to go through your options
Call us at 205-879-2447 and we can go through your options, including whether you can sue Velocity in Federal Court.
There are a lot of legal issues involved and we need to know the details of your unique circumstance. Once we understand your situation (which we do in a no cost consultation call), we can give you our advice as to your best option.
From the time you answer the Alabama small claims or district court collection case filed against you, usually you will go to trial in 4-8 weeks.
Here's an overview of the process:
First, the debt collector (debt buyer) will file suit against you. This happens all the time. Midland Funding and Portfolio Recovery each file about 100 lawsuits a week in Alabama against Alabama consumers.
Second, you will be served with the lawsuit.
This is where you are personally given the lawsuit. Or it is left with an adult who lives in your house. Or you will receive it by certified mail.
Being served is critically important as this starts the time limit for you to answer . . . .
Third, you have 14 days to answer the small claims or district court lawsuit.
Starting from the time you were served, you will have 14 days to answer.
It is critical that you answer -- if you don't, you can and almost certainly will get hit with a default judgment. This is a real judgment that will lead to garnishment of wages, bank accounts, and even the forced sale of your home and other assets.
You take the answer to the courthouse and file it with the clerk's office. Send a copy to the collection lawyer and then keep a copy for yourself that has been "stamped filed" so you can prove you actually did file your answer. If you have hired a lawyer, your lawyer will do this for you.
So avoid that default judgment by answering. Once you do, the next step is . . . .
Fourth, you will get a trial date.
Normally this will come in the mail in a week or two after your answer is filed. If you don't get it, call the court (if you are handling this on your own) to see when the trial date is so you don't miss it.
As soon as you know when it is, write it on your calendar and request time off from work, arrange for baby sitters, etc. Whatever you need to do to be available that day for court. Each court is different, but you may need to be available all day.
Fifth, you go to trial. This is normally about 4-8 weeks after you file your answer.
So the total time to complete the collection case varies greatly but once you have been served, we know you have 14 days to answer and then normally about 1-2 months later you will be trying your case.
What do you do now?
When you have been sued by a debt collector, it is a scary thing. Feel free to call us at 205-879-2447 and we can help you think through your options.
You actually have five options -- despite all the letters telling you bankruptcy is your only option.
1. File bankruptcy -- normally this is a terrible idea but occasionally it is the right option.
2. Fight the lawsuit on your own -- in small claims and district court this can be a good option.
3. Settle the lawsuit on your own -- normally not a good idea as you can hire a lawyer for the same amount and get better results.
4. Hire a lawyer to fight the lawsuit -- when you hire us to fight it, our goal is to win the lawsuit and sue the debt collector in federal court.
5. Hire a lawyer to settle the lawsuit -- we don't pay the debt collectors any money but we do agree not to sue them if they will get the account off of your credit report and get rid of the lawsuit.
Call us at 205-879-2447 and we'll be glad to help you go through these options or even look up on the online court system to see if you have a trial date listed. Just ask for Carolyn and she'll be glad to help you and if you want to chat with me, she'll set up a free call so we can go over your options.
Being sued by an original creditor (credit card company, car company, hospital, etc) is no fun and it is somewhat different than being sued by a debt collector or debt buyer.
Different rules can apply to debt buyers (Asset Acceptance, Midland, etc) than to original creditors (AMEX, Bank of America, Capital One, etc).
But you still have five options when sued:
1. Do you file bankruptcy(not likely but possibly appropriate) 2. Do you fight the lawsuit on your own(won't cost you any money on a lawyer but will cost you time figuring out what to do and doing it) 3. Do you settle the lawsuit on your own(again no lawyer money but make sure you get this right) 4. Do you pay money to a lawyer to fight the case(costs money that you trust will give you a better chance of victory) 5. Do you pay money to a lawyer to settle the case(make sure this is a better deal than on your own in terms of money or peace of mind).
Our video above covers these in about 13 minutes and then in the rest of the video we answer questions that are often asked:
**What if I (or my collection lawyer) talk to the collection lawyer about settling, does this mean I admit I owe the debt?
**What is a judgment?
**What is a “consent judgment” and why is this normally bad?
**Should I hire a mediation company like Ferry & Nicholas, Inc. that sends me an advertisement letter?
**If I file my own answer, where do I take it?
**What do I do if the collection lawyer brings a witness to the trial?
**The debt was charged off so I can’t be sued, right?
**Why should I pull my credit reports?
**How do I pull my credit reports?
**Isn’t it illegal for collection lawyers to sue me on an old debt in Alabama?
**How do I know the collection lawyers have truly bought the debt they are suing me on?
**What is discovery in a collection case?
**What is a summary judgment motion in circuit court?
**If I hire you and the case does not settle but goes to trial, do I need to be at the courthouse?
**What happens at the trial of my case?
**Explain what happens if I go to trial and win my case.
**What are the options on appeal if I lose my case or if I win my case?
**Why does the creditor who sued me have to delete its account on my credit report if I win the case?
**Have you ever had a client sued by a creditor and you won the case then sued the creditor?
**What should I do now?
If you want to go over your options, feel free to call us at 205-879-2447 and we will set up a phone consultation at no charge and you'll leave that consultation with a clear understanding of your rights and options.
I was speaking with an experienced real estate professional the other day and the comment was made to me that probate judges in Alabama decide whether a foreclosure will happen or not.
So I wanted to address this issue or question.
How does a foreclosure happen in Alabama?
Here are the steps:
1. You get a default letter telling you that you are in default (usually not making payments) and that you have 30 days to fix the default;
2. You get an acceleration letter telling you the whole loan is now due at once ("accelerated") and the foreclosure date is usually set;
3. The actual foreclosure occurs outside the front entrance to the courthouse.
What happens at the actual foreclosure sale?
The auctioneer actually reads the information about the foreclosure -- the property description, etc. Then the bidding begins. Almost always the high bidder is the mortgage company or the "investor" behind the scenes such as Fannie Mae, Freddie Mac, etc.
What role does the probate judge have in foreclosures in Alabama?
The mortgage company (or the foreclosure lawyer) will prepare and file a foreclosure deed which is where you sell the property to the high bidder. This gets recorded in the probate court records.
But the probate judge does not approve or disapprove of the foreclosure. Sometimes people go to the judge and demand the probate judge not allow a foreclosure -- this does nothing as that is not the judge's role.
(Probate judges are vitally important but this is outsider their "jurisdiction" or their power to act).
How do you stop a foreclosure?
So if you can't go to the probate judge to stop a foreclosure, how do you stop one?
1. Bankruptcy -- extreme option but sometimes this works.
2. Loan modification.
3. Loss mitigation.
4. Sue the mortgage company.
There are many options but you have to figure out the right one for you. We have a 5 part process to help you do this and we make this available at no charge.
You get a letter from a loan modification company or an out of state lawfirm saying they can "guarantee" you that your loan will be modified and the foreclosure will stop.
This is code for "I'm going to steal your money and you will lose your home."
"But they seem very nice on the phone and they tell me how many homes they have saved -- they seem very sincere."
Well, con artists by definition are charming and sincere and really good, right?
Here's the truth.
No one can guarantee that a foreclosure will be stopped and that you will get a loan modification. Now there are things that can be done to adjust the odds in the right circumstances. But no guarantees.
So how do you know if who you are dealing with is legit or bogus?
How to Know if Modification Company is Legitimate?
Here's a short list:
1. Do they explain how they get results?
2. Do they have an actual website?
3. Do they have an actual physical location -- and no, a UPS store mailbox doesn't count. Look it up on Google Maps/Satellite view to see if it is a real office.
4. Do they have books or videos for you to watch or read? Materials that has actual substance instead of just marketing hype?
5. If they are going to be doing legal work, are they actually lawyers? Or do they say "We have a relationship with a lawyer" which again is code for "We are going to steal you blind."
6. If they have law degrees, are they licensed in Alabama? Or is this the typical California or Florida licensed lawyers (perhaps) who have no right to practice in or advise any clients in Alabama.
7. Do you get a good feel from them or are they pressuring you to "buy right now!!" from them?
Use your own good judgment and make sure before you hire someone that you feel good about the decision.
What Do You Do Now?
If you are facing foreclosure, you need Action. And lots of it.
Doing nothing will get you foreclosed.
So definitely Action is needed.
But make sure the action you are taking is the right action and you have good advice.
Welcome to our webinar on debt collection issues. The video is above, and the full transcript is below.
John G. Watts
My name is John Watts, and I want to welcome you to our, a normal Friday Q & A webinar. We're going to answer some questions about debt collection suits and dealing with debt collectors. This particular area is one of the most common area of questions we get because there are just simply so many collection lawsuits out there.
We talk about this in other videos but take a company like Midland Funding. They file a hundred lawsuits in Alabama every week. It's an amazing how many lawsuits are filed. We've got five questions that we will cover in this segment.
I'll just start with the very first one. Can you be sued in a different county than where you currently live?
It's a great question because in this society, we might start off over here, and then we move over here, and then we move over there.
Where are you supposed to be sued?
If we're dealing with a consumer debt, that's something that's covered by the FDCPA - The Fair Debt Collection Practices Act. Then, you can only be sued in a county where you live or the county where you took out the credit card, the medical bill, or whatever it might be. Whatever that kind of underlying debt is that you've been sued on.
I'll give you a recent example.
A lady took out a debt in Madison County.
Then, she lived in Lauderdale County for a little bit and now, it's in Jefferson County. They sued her in Lauderdale County.
Is that proper or improper?
It's not where she lives.
Now, when she's been sued and it was not where she created this debt, so that would be an improper county.
What does that mean?
Under the FDCPA, talking about a debt collector here, that’s improper. If they sue you in the wrong county, then that's a violation of the FDCPA. It could be that they have a valid reason for doing that, but it is a violation and so we look at kind of the whole spectrum and say, "You know, if they've done everything else right but they sued us in the wrong county and it's a very understandable mistake, do we do anything about it?"
Typically not, but if they sued you on the debt you don't owe, and they come to court they have no proof, and they do false credit frauding, and they do this and they do that, and they sued you on the wrong county, absolutely, you just stack this on top of each other. they're just doing one violation after another.
It definitely is a violation.
They pursued in the wrong county and please keep in mind, Alabama courts have their own rules about where you can be sued, and where you cannot be sued. They don't always line up perfectly with the Federal Court. In Alabama Court, we might say we have more options on where to see.
Under this federal law, the FDCPA, a debt collector has to comply with that. If they want to ignore it, that's fine but then they can't whine about, "I can't believe we got sued and how terrible." You know, you knew you're violating the law so deal with it.
Our next question is, what is the difference between Circuit Court, District Court and Small Claims Court?
Circuit court is our big court. It's a court where you can be sued for a million dollars or billion dollars, and that's where we have jury trials.
Typically, we're seeing cases that are around $10,000 or above, get in Circuit Court. That's the High Court. Beneath that, is what's called District Court, and that goes up to $10,000. There's no jury trial in that. Then, beneath that we have something called Small Claims Court to it.
Circuit Court, District Court, Small Claims Court. It used to be, I think, $3,000 was the limit and now it's been raised up to I think $6,000. Typically, the judge in Small Claims and District Court, same judge, same courtroom.
There are some different rules. Small Claims rules are a little more relaxed. The District Court with the same rules as far as evidence as in Circuit Court.
Now, the big difference is, in Circuit Court you can do what's called discovery and the collector against you can do a discovery. Interrogatory or request for production or request for admissions, depositions.
We talked about those in other videos.
In District Court, it's pretty rare that that ever happens. In Small Claims, absolutely no discovery, and that's the difference.
If you are sued in Small Claims or District Court, and you're unhappy with the result, you can appeal it to Circuit Court and it just starts completely from scratch, as if what happened here in Small Claims or District Court never happened.
Hopefully that helps you to get a little bit of perspective about the courts. Again, we have lots of other videos that get into details about, if you handle this on your own, how do you handle it on your own? Actually, I have a whole video series on that.
Our third question is, what do I do if I find out my bank accounts have been wiped out by collection law firm?
This question came from somebody that this happened to over the holiday weekend.
They're having a great time. All of sudden on Monday, boom! Bank accounts are wiped out.
What in the world happened?
The very first step is, you look and say, "Okay. Do I have a judgement against me?" Maybe there's a judgement way back here in 2005, 2010, even earlier than that. Now, here we are in 2015 and boom! It pops up for the first time.
You never knew about it because you're never served. You've got to know, is there a judgement? You look that up, you call the court. If your bank account's been garnished, typically your bank will have an indication of which court case that came from. You call the court.
Over in Alabama, you can contact us. We'll look it up for you. My phone number is 205-879-2447. You can ask to speak to Carolyn in my office and she'll be glad to look that up for you.
Is there a judgement? If there is, were you served? Did you, under the definitions of the rules, did you get a copy of the lawsuit and did you get it in the right way? That's normally, it's personally delivered to you, certified mailed to you or they give it to an adult who lives in your house where you live at the time that those papers were handed.
Typically, that means you've been served validly. If you were not served and particularly if you never knew about this, until you get garnished, well then, you attack that service. If you can make that service go away, well then, it's almost like here's the judgement, it rests on top of you being served. If you pulled the service out, and you show the court, "Hey. I wasn't served."
That judgement just falls apart. It doesn't make the lawsuit go away. Lawsuits still out there. You've got to deal with the lawsuit, but you're in a much stronger position. Now, you have the opportunity to defend yourself, you're not being garnished, your wages, your bank account.
That's the number one step. What if you say, "You know, I remember being served. I just ignored them." That's going to be very difficult, if not impossible to attack that service, so this judgement stands. What do you do now? You can look a file in bankruptcy. You can look at doing a lump sum settlement. You can do a monthly settlement with them, with the collection law firm.
Now, you can do that on your own or you can hire a lawyer. We're not going to get into all those details in this, sort of a contacts of this webinar. Let me just say this, a long times you do this on your own, you just need to have a plan.
You need to know how you're going to negotiate and make sure whatever deal you get is actually honored by the collector. We're talking about this in other contacts I used as example because it comes up nearly every week.
Say there's a $5,000 judgement, you talk with the lawyers, they say, "Hey. If you pay us three, we're done." You'll go, "Great." You pay them $3,000 and then six months, either they come after you garnishing $2,000. You got away, "I was done."
They go, "No, no, no, no. You just pay $3,000." There was 5, you pay 3, so now you're 2. You say, "No, no, no. It was a settlement." They got words to prove for that. You go, "Well. We've got a conversation."
Look, if that happens, you may still be able to sue the debt collector for lying to you if you've got sufficient proof, but the safe thing to do is have this in writing. Make sure, if you do that on your own, make sure you negotiate a good deal and then underneath that, you get it rock solid.
That is just rock solid. There's no question about what the deal is or is there any misunderstanding down the road. Of course, you can hire a lawyer.
If you're in Alabama or this is a judgement in Alabama, you can contact us. We'll be glad to give you options. Normally, what we do is, if we know we'd been served, then we will look at your situation, give you a quote as far as a fee and then usually, if we cannot get it settled, then you don't owe us that money. I'm not sure if I've ever done it differently actually, but the idea is you're going to pay us that money if you get settled.
Now, if it's an invalid service where we can attack that judgement or try to or that service to pull that service away so judgement falls. Now again, we'll give you a fee and that maybe you pay us out whether we're successful or not, because we're doing a certain amount of works.
We'll give you different options if you want to talk with us as far as having a lawyer will help you.
Our next question, this is our next to last question. What happens if I ignore the Nathan and Nathan lawsuit they filed for NCSLT?
Now, can we just define a couple of terms. Nathan and Nathan is a large Birmingham collection law firm and NCSLT is the National Collegiate Student Law Trust. To my knowledge, Nathan and Nathan is the only law firm in Alabama. As of September 25th, 2015, they're the only law firm in Alabama that actually files the National Collegiate Student Loan Trust cases.
The question is, what if I ignore it? What if I ignore the lawsuit? Am I even back up if I can? What if you ignore the collection letters from on National Collegiate Loan Trust. Typically, you're going to get sued.
Maybe this happens I don't know about, but I don't know if Nathan and Nathan just repeatedly sending our collection letters and you ignore them and they go, "Okay. Well, we'll just drop it."
They tend to sue.
They file a lot of lawsuits every month. These are not $3,000, $4,000 lawsuits. These are $20,000, $50,000, $150,000 lawsuits, private student loans.
If you ignore it, you'll get a judgement. I can't tell you the number of people come to my firm.
They go, "I saw something on the news. They said they couldn't sue on student loans, or this National Collegiate Student Loans is not a legitimate place or Nathan and Nathan's not a real law firm, and so I just ignored it because they can't touch me."
They can touch you.
And go and touch your bank account, garnish your wages. These big judgement just keeps growing and growing and growing every year with interest. Let's talk about, is Nathan and Nathan a legitimate collection law firm? Absolutely. They're licensed lawyers, they're real lawyers.
I'm going to let you read on the internet, but they are a legitimate law firm and they file lawsuits and they show up to court. What about National Collegiate? Somebody says, "Well, I heard that place is kind of you know, a little sketchy." You know, I agree. I agree.
I have some very serious concerns about the legitimacy of National Collegiate Student Loan Trust. They come in and they say, "We own your debt. We bought your student loan from charter 1 or charter bank or Marble Head. There's all these different entities that are involved in this.
It's kind of like the larger industry. The company, it makes you a loan, they don't hold on till, it usually starts here, you get sold to this company, it gets sold to this company, it gets put into this trust.
That's where National Collegiate Student Loan Trust says that, "We own it." You know, they actually have to prove that. If you fight them, they have to prove it.
Now, if you settle and sometimes that's the best move, to settle. They have to prove. If you fight them, they have to prove it. I do have some very serious questions about this company, but they do file lawsuits.
They are real lawsuits and you've better take them really seriously because if you don't, they will get a real judgement against you.
Maybe a default judgement, maybe a summary judgement, maybe a trial. If you ignore it, bad things will happen. What's the solution? Don't ignore it. We actually have a video that explains this in a little more detail.
We have like a maybe 1 hour and 20 minute video here on everything you want to know a lot more about being sued by National Collegiate Student Loan Trust. You can check that out if you'd like more information.
Last one, “is the collection law firm of Nadler legitimate?”
I get a lot of people that contact our firm and a lot of people from other state, even though we don't want that. We always say this is for Alabama folks only but you know, let's just limit it to Alabama people.
A lot of times, people are calling because they've been sued or they got a collection letter and they're saying, "Well, hey. Is this law firm legitimate? What about this? I'd just got this phone call saying, 'You're going to be arrested, thrown in prison. We're going to deport your family."
You know, what's going on? There's a lot of collectors out there that are absolute scam collectors. It's some guy in his basement with a prepaid cell phone and he's in Pakistan or somewhere out of the country. Then, there are legitimate companies.
Now, and lastly, they may still break the law.
We see a lot of legitimate companies because they're law companies but they really break the law. If they're illegitimate, if it's a scam company, there's not much you can do about it.
I mean, you can report it to the authorities but, how do you sue a guy in his basement that has a prepaid cellphone? He's going to flee the country or he's already out of the country.
It's wise to be skeptical.
If you get a letter from somebody saying they're a lawyer, if you get a phone call from somebody saying they're lawyers, say, "Look. Send me a letter."
If you're holding in your hand, say a letter, across the top it say's "Attorney at Law" then you need to take that very, very seriously. Check it out. Again, if you're in Alabama, give us a call, 205-879-2447.
The question is about Nadler.
Are they legitimate?
Absolutely, they're legitimate.
This is a real law firm. I forget how many lawyers they have, maybe 5 lawyers. They are real law firm and they really do sue. I can tell you with debt buyers , one of the main ones they represent, at least to my knowledge is Calvary, Calvary Portfolio.
It's called in different things but it's Calvary. They file a lot of lawsuits. They also file as I recall, a good bit of medical type collection.
I think they also file for Sterling which is like Kay Jeweler but I guess that's the name of the, official name of the company. They file lots of lawsuits. They show up in court. Now, do I always agree with them?
We've had our differences, but this is a real law firm. They're licensed in Alabama. They file lawsuits in Alabama.
If you ignore them and say, "They're not legitimate. I'm not going to pay attention to them."
Then you do that, it's your risk.
The consequences are typically going to be that you're holding a judgement in your hand, you're holding a garnishment in your hand of your wages or garnishment of your bank account or all the above. My point is, they get that judgement against you and then all these bad things start building on top of that.
Should you ignore them?
Are they legitimate?
Take it very, very seriously if you're sued by this law firm. I know what they're doing. They've been around, and they'll show up at court. You have to treat them very seriously.
I hope that these questions and answers have been helpful to you. If you will continue to submit questions to us, you can do it below on a comment.
You can put a comment on our website Alabama Consumer. You can call us 205-879-2447 also and we'll be happy to add your questions to the list.
Again, my name is John Watts. I may not have said that at the beginning. My name is John Watts, a lawyer here in Alabama and represent people all over the state of Alabama. We have an office in Birmingham.
We have an office in Madison, the Huntsville area and we also represent people in Moville , Montgomery. Really, anywhere in the state, we'll represent you.
We will be glad to help you. If you have questions or there's something we can do for you, Alabama Consumer or 205-879-2447.
Welcome to our Q&A on the VA Pension, or Aid and Attendance. The entire video is above, and the transcript is below. We apologize as we had some technical difficulties with the video quality but it seems the audio is fine. Hope this webinar is helpful to you.
I hope you enjoy!
Hello my name is John Watts I’m an elder law attorney in Alabama. I welcome you to our weekly webinar on elder law issues. Now this week we’re going to focus on the VA pension or Aid and attendance which is a remarkable benefit for veterans. It can pay up to $25,000 a year tax free to help pay for long term care.
One reason I want to just stick with that subject for this week’s webinar and I realize we’re couple weeks behind on the webinars we’re going to get back on schedule here. Yesterday I had a wonderful opportunity to go to an NHC place in Anniston. This is a very nice assisted living facility out in Anniston.
The administrator seems very nice out there and marketing director. What they did is they put together a community outreach program where I was there. I spoke about the VA pension. We had some folks there from Wells Fargo talking about financial planning as well as long term care insurance. Then we had a realtor very good presentation about if maybe you’re going to sell your house and move into an assisted living facility, what do you do or how do you do that.
I answered some questions out there and then we’ve also received some questions from you very recently here. I’ve got those typed up here. We’ve got about 5 questions.
The first one is, “on the VA pension can I get my check direct deposited?”
Then secondly, “where does VA pension money go to? Does it go to me or to the facility?”
Third, “I heard I have to be in an assisted living facility to get the VA pension, is that right?”
Then fourth, “why does it make sense to sometimes get an accredited attorney to help me get the VA pension?”
I think what they also were saying is sometimes why does it make sense to not hire an attorney just to do it on your own. Finally, this was one directly from, probably, the last question I answered at the presentation yesterday was I was active duty from 1953 to 56 but I went to Germany not Korea. I cannot get the VA pension, right? Because that’s what the family been told.
Let’s go ahead and answer those questions. The first one is on the VA pension. If I get awarded that pension, can I get that direct deposited to me?
I should back up and let’s make sure we’re on the same page about this pension. It’s a non-service related pension so not service related means it wasn’t because I was injured or I contracted the disease. While in the military it’s just, “I meet the requirements and now I need long term care.”
What are those requirements?
Military is war time veteran with an honorable discharge. Second, your health. Basically that means you need help. You need help dressing, bathing, going to the bathroom, medication management or just being safe at home. Then the third one is the financial, and this is where we look at the income and the assets and we either make sure we qualify or we do things so that we can legitimately qualify.
Going back to our question. If we meet all these requirements and we get the award, can we get that direct deposit? Answer is yes. Actually the VA, I won’t say that they’ll make you, but they really, really want you to have that direct deposit so that is no problem whatsoever and that comes directly to you.
This really flows into our second question which is, “where does the VA pension money go? Does that go to me as the veteran or does it go to the facility?”
Here’s why it’s such a good question. There’s a lot of confusion between the VA pension paid in attendance and Medicaid because in a way they do the same thing. Its money from the government to help you pay for long term care.
The difference is Medicaid over here has a practical matter we’re only talking about long term care in a nursing home not assisted living. Not having sitters come to your house but in a nursing home. That money does not go to you. That money goes directly to the facility.
It’s quite natural when we finally hear about this VA pension which not very much is known about it. People have a lot of misunderstandings about it. They don’t even know it exist. You call the VA half of the time you’ll be told “We don’t have any such program. You have to be injured or contract a disease in your military service.”
This benefit nothing to do with that. You think, “Oh well it I guess it goes to the facility.” but it doesn’t. It goes to you. We’re talking about in our last question normally it gets direct deposited into your account but if you don’t do it that way then you get a check but it goes directly to you then you decide what to do with it.
The whole point of it, the purpose of it is for long term care. That could be care at home. That’s great we can stay at home. Maybe we can't do that anymore so we move down the line to assisted living. It certainly can help you there.
If you are in an assisted living that’s $4,000 a month so you’re in a nice place and your income is $3,000 a month, you’re not going to make it. You got to dip into 1000 a month into your savings. There’s benefit if you qualify and you’re a married couple it’s $2000 a month that you get.
Remember you’re at 3 but you’re spending 4 so that’s a negative 1000 but if you can get an extra 2000 now you’re positive 1000. It’s incredible benefit. At home paying for caregivers in an assisted living even in a nursing home.
Now if you’re drawing Medicaid then you lose a lot of this benefit but you may be privately paying. You may have a penalty period to pay through. All sorts of reasons why it might be coming out of your pocket. Getting that VA check can be vitally important to you.
Our third one is, “I heard I have to be in an assisted living to get the VA pension, is that true?”
Let me say this. An assisted living facility is the ideal place, the classic place where you need this one. You might be at home and maybe you’re getting care for free. If it’s a child or a grandchild caring for you, we can arrange things so that you can legitimately pay them. The VA completely allows it. When you’re in assisted living, you’re definitely paying. Think about this with assisted living.
Go back to example in our last one. We said we have $3,000 of income but we’re spending $4,000 a month at assisted living. That $4,000 when you think about it part of that is room, part of that is board. You have a place to live. You’re paying for that and you get meals. You’re paying for that but that’s all inclusive in that $4000 or $5000 whatever it may be.
If you’re living at home, you’re paying rent or mortgage. You can't deduct that as a medical expense. We have other videos where we talk about what’s called IVAP, income for VA purposes. That’s your total household income but then you subtract out unreimbursed medical expenses to get to your IVAP, income from VA purposes.
If you’re living at home you can't deduct anything for your mortgage or your rent. You can't deduct anything for your groceries, for your eating out. What if you’re in an assisted living facility, part of that $4000 is room and board. You can deduct that.
I understand why the person that wrote this question they said I heard I have to be in an assisted living facility to get the VA. I get why they said that because it’s such a natural fit for this benefit but you don’t have to be.
You can still be at home you may have a child caring for you. You can enter in what’s called a caregiver agreement. You have to be careful when you do that. You always have to look at Medicaid over here.
They have certain rules but it’s possible to qualify at home and most of our clients qualify at home but a lot of folks are in assisted living. This is perfect. We even have people in nursing homes. They’re this whole spectrum. We always want to be at home then we want to be in assisted living and then ultimately nursing home if we have no choice. It can be very beneficial there as well.
Our fourth question. Why does it make sense to sometimes get an accredited attorney to help me get the VA pension?
Let me say this. If you get any attorney, they have to be accredited. I don’t care if they’re licensed in Alabama, not licensed in Alabama. They have to be accredited or they’re breaking federal law by advising you on the VA pension. Now they may be doing that without knowing it but let’s think about this.
If you can't even advise people about this benefit unless you’re accredited. If you don’t know that as an attorney, then why would we expect that you would know how the benefit works, what you can do to qualify, what you cannot do qualify, how it interacts with Medicaid.
If you don’t have that basic level of knowledge, I don’t know how they would have the advance level of knowledge. If you’re going to get an attorney make sure they’re accredited. You can check that out on the VA website who is accredited in Alabama.
Maybe the question ought to be, do I need a lawyer? Do I not need a lawyer? When I was doing that presentation yesterday in Anniston I mentioned to you the group of folks that I’m speaking to. We set up a little video training website and specifically for the folks I was giving that training to but I’ll go ahead and mention that because it’s on my mind and I think it’s very helpful.
You’re welcome to use it if you go to www.annistonva.com. There’s a welcome video. You put your information and then you get access to 4 videos where we walk you through this whole process. The final video is, what do you do now. Do you get an attorney? Do you do it on your own? Do you go to the VA? Do you have a financial adviser do this for you?
Generally the answer is if you need any help with your income maybe showing that the income meets the requirements and even more than that the assets, your net worth. If you have maybe too much in the way of assets or net worth, you really need to be meeting with the lawyer. We see financial advisers giving legal advice. Give this away or do this or do that. You just cringe when they do that because they just don’t have the knowledge. They may have the best of intentions or just a great heart but they’re telling it wrong and they also don’t understand Medicaid.
Just recently I heard somebody say “It’s illegal to give assets away. You can go to prison for giving assets away to qualify for Medicaid.” That’s absolutely false. You go to prison if you lie about giving stuff away. You can give stuff away.
You can apply for Medicaid and say to Medicaid “I gave away half a million dollars. That’s fun.” You don’t go to jail for that. You go to jail if you lie about it. There’s a lot of misunderstandings about these also. Any legal advice needs to be lawyer, needs to be a VA accredited lawyer.
Do you have time for a lawyer? No. There are people we meet with and we say “You got $3000 income and $4000 a month [to non 00:13:00] reimburse medical expenses and you had $20,000 assets, you don’t need us. You can go to a veteran service organization, American Legion VAW, whoever it may be go to your county VA officer they can help you.
My suggestion is don’t go to those folks if you have more than $80,000. If you’re needing to transfer assets, you give it to your kids, you put it in a trust, you buy a special type of annuity. What do you do? You need to come to a lawyer for that because we can look at the whole picture.
Let’s strike this one. If we have one eye on the VA, we can have another eye on Medicaid and nobody wants Medicaid. Nobody wakes up in the morning and says, “Yes I get to go to a nursing home today.” Nobody does that. The nursing homes are full of people in there who do not want to be there but they have to be there because you need skilled nursing.
We can't just say “There’s no way I’ll need Medicaid nursing home.” If we do anything for the VA, we have to look over here and say “How does this fit with Medicaid and what’s my plan to coordinate these 2 things if I have to?” That’s my suggestion for you. Again, you’re welcome to go to that annistonva.com and look at those videos. There’s also workbook that comes with it. A lot of materials we’ll send you on that.
Final question, "I was active duty in 1953 to 56 and went to Germany not Korea so I can't get the VA pension, right?"
There’s where a lot of misunderstanding. Go back to our 3 requirements; military, health, financial. What’s the military requirement? You have to be a war time veteran. What does that mean? It means you have an honorable discharge or a better than an dishonorable discharge. What does war time mean? It means active duty during a time of war.
To this person they said “I was in there from ‘53 to ’56.” That’s during the Korean war but they said “No I went to Germany so I wasn’t in combat. I wasn’t where the battles were being fought.” It doesn’t matter.
Active duty during a time of war. What’s a time of war? World War 2 we started off at the beginning of the war and we’ll go to the end of ‘46. Korea is about ‘50 to the first part of ‘55. What about Vietnam? ‘64 to ‘75. A little bit longer period if we were actually in country.
Here’s something that most people don’t know. We have been in a constant state of war for the longest period of time ever in our history. Twenty five years, 1990 to today the Gulf War, 25 years of being in a state of war. Anybody active duty. There’s a few requirements how long you have to be active duty. We get in those details later. Active duty World War 2, Korea, Vietnam, Gulf War doesn’t matter if your station.
Are you stationed in Anniston? Are you in Georgia? You in Arizona? Where are you? It doesn’t matter you be at the North Pole. Active duty during a time of war you qualify under that military requirement. If you ever question about your dates you can get something it’s a foreign piece of paper from the government, DD214.
If you don’t have that or maybe you’re watching this for a parent or an aunt, uncle if they don’t have it then we’ve set up a little link. It will take you directly to the page you need at the government website. It’s called getmydd214.com. Get, G-E-T my, M-Y DD so that’s D as in David, D as in David 214.com. It will just take you right to that link.
You can see phone numbers, little form you can fill out or pdf you can do. You can get that and I will tell you because once you get that form it’ll say here’s when you went into the service. Here’s when you left, here’s your type of discharge that you had some very valuable to have that if you’re even remotely thinking about this benefit.
Please understand you do not have to be in combat. So many people believe that and I think well meaning, well intentioned folks at the VA tell people that and they just don’t understand. This benefit you do not have to be in combat. It’s not a combat benefit. It’s a benefit for anyone active duty during a time of war.
Hope that this webinar has been helpful to you. We appreciate your questions and you can put them as a comment below this video. You can go to Alabama Elder Lawyer to contact us. You can call us 205-879-2447 and we can give you a lot of information if you are in Alabama or you’re calling about somebody in Alabama.
You’re also welcome to go to the little website. Again we set it up for the folks in Anniston but it applies to anywhere. Annistonva.com and get the workbook. Make sure you check your email to get the workbook and then go through those 4 videos.
I want to say there maybe 30 minutes total. I think one maybe 10 or 12 minutes maybe even 20 minutes because that’s where we’re talking about the financial requirement. Remember that’s the third requirement because there’s so much information about that.
How do you calculate income, how do you calculate assets, what counts, what doesn’t count, can you transfer, is there a penalty period, what about this change in the law that’s coming from the VA or maybe it’s coming, who knows if it’s coming, when is it coming. We’re talking about all that in those videos.
I appreciate your questions. As long as you keep sending any questions, we’ll keep doing these webinars and we’ll be happy to continue to do these. Hope you have a great weekend and I will see you next week. Okay, have a good one. Bye.
Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
Hello and welcome to our question and answer webinar. My name is John Watts, consumer protection attorney in Alabama. We've been a couple weeks late doing this webinar so I apologize for that.
Thank you for those that have asked about it. We will focus this webinar really on the topic of mortgages, foreclosures, and things of that nature. I've mentioned this in other webinars but we certainly welcome your questions. You can submit your questions through our website, Alabama Consumer.
You can also put a comment beneath this video. You can even call us at 205-879-2447. What we do is we take all those questions and then one of my assistants puts them in written form for me so I read and answer them for you. We try to answer as many questions as we can. Now, we have more questions than we can possibly answer today but we certainly welcome your questions because it gives us a nice supply of questions to work through. We are also looking at maybe even doing this twice a week instead of just one time a week due to the volume of questions.
Let me read for you what the questions are then we'll go through these one at a time.
"Who is Freddie Mac or Fannie Mae?"
If you have been involved with mortgages or you've done any research you probably have run across those companies.
"Should I hire a loan modification company to help me stop a foreclosure?"
It's a big one. Many people we meet with have hired companies and they've paid i$3,000, $5,000, or even $10,00 and usually that has not been successful.
"I had a loan modification then the loan got transferred and the new company is refusing to honor the loan modification. What do I do?"
Again, very common situation. Here's one, it's a little bit different but if it applies to you it would be very helpful.
"I have a first and second mortgage. I'm thinking of letting the house foreclose or maybe doing a deed in lieu with the first. Is this a good strategy if I cannot afford my house?"
We'll talk about that. The key is that there's a second mortgage.
And last but not least,"I got sued for a ejectment after a wrongful foreclosure and I didn't answer so I just got the default judgment." That means you lose because you did not respond. "Will this hurt me suing my mortgage company?"
Let's start from the top number one, who or what is Freddie Mac or Fannie Mae?
You really have to go back in time. We start way back in the 30's and we've got the depression and Roosevelt, the new deal and we've got to try to stimulate housing growth here. Loans were not the same back then. You didn't have the 30 year fix rate.
These were more like five year loans, ten year loans, maybe it was interest only. Then as you get to the end of that there's this big balloon payment at stake. Freddie Mac, Fannie Mae, they are governmental companies, agencies. It was more of an implied promise that if these companies started falling, then the government would step in and prop them up. They may guarantee to mortgage companies. They're like, "If the borrower defaults we'll cover the land."
What if too many borrowers defaulted and Fannie Mae, Freddie Mac could not afford it? Well then the idea is that the government will step in. There was never an explicit promise of that but it was just understood that would happen. We're rolling through time, in the 70's, 80's, 90's, 2000's.
Now, Freddie Mac and Fannie Mae and doing more than just securing or promising about these loans. They are out there investing in the sub prime loans and part of the problem with the sub prime loans. We had loans being made $500,000 loan to somebody who's making $25,000 a year. Really, that's going to fail. Of course that's going to fail.
Many of the loans were really refinances so people are pulling money out of their house. It was the traditional, "I'm going to put down 10%, 20% down payment and then stay in my house."
They are doing all this investing and then in about seven or eight years when they start to crash, the housing market starts crashing. Dominoes start falling. Fannie Mae and Freddie Mac are sitting in there and now they are going to be wiped down. The government, remember it was always the implied promise, the government will come in and save them.
The government institute was called a conservatoire relationship over Fannie Mae, Freddie Mac. We're primarily talking about the treasury department. They come in, they take over, they get rid of most of the leadership of Fannie Mae, Freddie Mac.
There are a lot of issues, there's some accounting scandals. These companies, agencies sort of private, sort of government have become incredibly powerful politically very powerful. Whether right or wrong, government comes in, takes them over and that's still the case to this day.
If you are facing a foreclosure or you're trying to do a loan modification and you get something in the mail that goes, "Freddie Mac is the owner or the investor of Fannie Mae." Just understand that is a governmental agency particularly now.
I'm recording this September 18, 2015 so about seven or eight years it's been this situation. It's not necessarily good or bad it's just Fannie Mae, Freddie Mac is going to be calling the shots for this servicer. You may be dealing with Ocwen, Seterus, Nationstar, any of these.
Bank America, Chase, Wells Fargo and it maybe that behind them is Fannie Mae or Freddie Mac and they are the ones that will be dictating the terms. Just be aware of that and it's important to know who is behind the servicer.
Is it a trust? Private trust? Is it Fannie Mae, Freddie Mac? Who is it? Because that can make a difference. We don't have time to go in all that but hopefully that gives you a nice overview and I want to make a book recommendation.
If you're interested in Fannie Mae, Freddie Mac, the economic crash from the housing market, there's a book by I believe her name is Bethany McLean. It just came out maybe two weeks ago. It is called Shaky Ground, and it's all about Fannie Mae, Freddie Mac, how the government is running those two and whether that's good bad and what vulnerabilities that poses and really how that can affect you even if you don't have a mortgage. It still can affect you because there's so much money involved.
It's a fascinating look into the government and the housing crash and based on my experience it is fairly accurate. I think what she has in there is very, very correct. There are conclusions, implications drawn and you're to decide how accurate those are but I think the facts in there are very, very solid so I recommend that book to you.
Okay, our second question is, "Should I hire a loan modification company to help me stop a foreclosure?"
If the choice is hire a loan modification or do nothing, then yeah hire one because maybe it won't be a scam company and maybe it will help you. If you do nothing then you're behind on your mortgage then you're head to a foreclosure.
Here's my concern with the load modification company as I see, those who say, "Okay, pay us money. You don't talk to your mortgage company anymore. We will talk to them. We want to control everything. You get a letter in the mail from them, you get letters from foreclosure lawyers, you just ignore those. You let us do everything."
It's okay if they are legitimate and they know what they are doing and if they are giving you legal advice that their license in Alabama but that didn't really happen. What happens is you're paying all those money to them, you have no idea what's going on. Then, boom there's a foreclosure.
You get on the phone and you call this place, you say, "What happened?" They go, "Whoa, whoa, we can't help you. We don't deal with foreclosures." "What do you mean? I hired you to stop a foreclosure." They go, "No, no, no. We can't do that." That's if you're lucky and can get them on the phone.
Normally these places, the phone number becomes disconnected. The address is really just a little mail box in the UPS store and there's nobody there. It's a scam. They stole all your money. Particularly if it is a law firm out of state. That's almost absolute give away that it is a scam.
Some Florida law firm doesn't have a license with an Alabama attorney that's an employee of the firm, it's almost always a scam. If you're going to hire somebody to help you then hire a lawyer in Alabama that can actually help you. You need to go to court, they can go to court with you. Do you have to hire anybody? No.
As a matter of fact, we have a very comprehensive video training course and you can find it at foreclosuredvd.com and that should be in the notes here or the transcript of this after this webinar is over but you can go there.
There's no cost, you put your information in and you'll get access to four videos plus I think it's maybe a 17 page workbook. Now, if you're saying, "I want to stop a foreclosure. I want to get my loan modified and I'm not willing to do any work." Then it's not going to help you. I think we have probably two or three hours of videos in there.
It's a very detailed workbook that you follow along, print it out or watch us on your phone and type on your computer, whatever works for you. You have to do work to make this happen. If you're not willing to do work, if you're saying, "Where is that easy button that I hit and everything is fixed?" It's not going to help you. At the end of that, we make an invitation to use it. If you watched the videos, if you filled out the worksheet, we'll do a free consultation call with you.
Normally, my consultation calls are $500. Free consultation call and I'll help you understand, can you do it on your own, should you hire a lawyer if you hire a lawyer and if you want to hire us, what are the levels of service that we offer. Just did one of these calls today and I was very encouraging of the person by saying, "Look, you can do this on your own." If you're not willing to do it on your own or you just don't feel comfortable, sure you can hire me.
You can do this on your own.
You will know so much more about foreclosures that almost all lawyers in Alabama when you get through with this video training series. If you are saying, "I don't know if I should hire somebody to do it."
Then, spend the time if it's your house it is important. Spend the time foreclosuredvd.com. I think you will be very happy that you went through that.
Okay, our third question is: "I had a loan modification then the loan got transferred and then new company is refusing to honor the loan modification. What do I do?"
I think what's happened here is a person gets a loan modification so maybe it's with Chase and Chase says, "All right, we're going to lower your interest rate 4%. We're going to take all the missed payments and we're going to put those on the back end."
Whatever they said they are going to do and then you get a letter in the mail that say, "Hey, you've been transferred to Seterus," or to Nationstar, whoever it may be. They go, "Look, you had that with Chase but we're not going to honor that. You are behind, you're late and we're going to start foreclosing." That's wrong.
Now, I'm not saying that 100% of the time it is wrong but we'll say 99.99% of the time that's wrong, that's illegal, that violates RESPA, R-E-S-P-A. It violates the contract that you have and you need to be very, very aggressive about fixing that problem because if you let it linger then overtime the company will say, "See, you accepted it so now you can't complain about it."
Then, they'll foreclose on you and then you're trying to go back in time to say, "Yeah, but you should have honored that loan modification." It is something you really need to take care of, you can do that through RESPA letters.
Again, we cover that in our foreclosuredvd.com. You can also call the company, why are you doing this. I will say this, over the phone there's a lot of problems with it.
You really need it in writing.
I encourage you take immediate action with that. If you had a loan modification and now this company that has your loan is saying, "We're not going to honor it," you need to know why. They need to explain to you in writing why they are not going to honor it.
Maybe when you get the explanation you go, "Okay, that make sense." You need to know why. Why are they not honoring that because normally that's illegal and sometimes the way to solve this is we sue on the Federal Court.
Then they go, "Yeah, yeah, I'm sorry. It's just a mistake. We will honor that loan modification." They need to do that before you have to sue them, they need to do that before you wind up facing a foreclosure.
Okay, our fourth question is, "I have a first and a second mortgage. I'm thinking of letting the house foreclose or maybe doing a deed in lieu with the first mortgage company. Is this a good strategy if I can't afford my house?"
Let's talk about first of all what is a deed in lieu.
A deed in lieu is where it's like you have your deed and you hand that to the mortgage company and you say, "I'm giving you the deed in lieu of," instead of you foreclosing. There's no foreclosure. It's like you're swapping the deed and now they get the house.
What's the downside of that?
You may get stuck with the deficiency. It may count on your credit report. Maybe report as a foreclosure. We'll talk about later on whether that's good or bad, right or wrong but here's the problem in this situation. This person has a second mortgage.
They give a deed in lieu to the first mortgage company and second mortgage company is going, "Okay, we just lost our security interest in the property. We want our money." What if you have a $100,000 second mortgage?
They are coming to you saying, "We want our 100,000." Generally this idea, I'm just going to give them the deed in lieu or I'm just going to walk away and let them foreclose. Not really a good idea if you're at all concerned about owing that $50,000, $100,000, whatever it is on that second mortgage.
Usually the better option is to go to the first mortgage company, go to the second mortgage company and say, "Guys, I need help. I cannot afford this house. I need loss mitigation, loan modification, principal reduction, forbearance, deferment. Let me do a short sale. Let me do a deed in lieu but I need it for both of you guys."
It's a tough situation when you get two mortgages because you can really get caught in a bind but at least you have a chance if you're reaching out to them saying, "Give me some loss mitigation."
Again, go to that foreclosuredvd.com, we walk you through about loss mitigation, about RESPA letters, things called request for information, notice of error, all these things we walk you through because those are vitally important if you want to save your house.
Look, if you can get your loans modified enough, the interest rate comes down, the payment comes down, maybe you can afford your house. Even if you can't at least you have a shot at being able to do something to protect yourself from getting hit with that second mortgage company coming after you.
Okay, our final question on this foreclosure webinar is, "I've been sued for ejectment after a wrongful foreclosure and I did not answer. I just got default judgment. Will this hurt me suing my mortgage company?"
I think what they are talking about here is they are saying, "Look, it was illegal to foreclosure against me. Then I got sued for ejectment." That's where they are trying to kick you out of your house and I lost because I didn't do anything but I still want to sue my mortgage company for a wrongful foreclosure. Can I do that? Maybe. Maybe not.
It depends who sued you for ejectment, was that your mortgage company? Was that Fannie Mae, Freddie Mac, some trust out of New York, who was it? If it is Fannie Mae or Freddie Mac, you may still have the right to sue your mortgage company.
It's questionable. It depends on exactly what happened. You see, when you get default judgment against you, you lose so you're kicked out of your house. People will say, "That's not fair. I want my day in court." That was your day in court, you have to answer the ejectment lawsuit.
What if you didn't do that you got a default judgment and it was your mortgage company suing you for ejectment? Generally speaking, you lost your right to counter-suit. You have to check that out. You can contact us, you can contact another lawyer.
Get specific advice. This video this whole webinar we're just giving you general information. I can't give you advice because I don't know your specific situation, I don't represent you.
I'm just telling you it's a really, really bad position to be in to have a default judgment against you in the ejectment case because that may have taken away your right even if you're absolutely wrongfully foreclosed. If you did nothing, that default judgment came against you that's going to be a real problem.
I hope that these videos, these webinar questions, answers have been helpful to you. We try to do these every Friday and again we may start doing on maybe on Fridays but also I don't know Wednesdays or Tuesdays, Mondays.
Someday we'll do and we'll go through these questions. Feel free to give us your questions, you can call us 205-879-2447. You can go to Alabama Consumer and contact us there or you can put a comment below this. I will look forward to finding out your questions and then seeing you next week. Okay, have a good one. Bye-bye.
Welcome to our Q&A on consumer protection issues. The entire video is above, and the transcript is below.
I hope you enjoy!
My name is John Watts. I'm a consumer protection attorney in Alabama, and we're going to do our normal consumer protection question and answer webinar. We will be answering some questions that have been asked over the past week. If you would like to have us answer a question you can contact us through our website, Alabama Consumer, or you can comment below this video, or you can even call us. 205-879-2447. Just let us know what your question is and we'll be happy to put that in the list.
We have about, let's see, about 6 questions today. Most of these are about collection matters. Then we do have one related to foreclosure. We'll go ahead and get started.
"If my bank account is garnished are my funds protected if I receive disability income?"
Now, I think a couple things here. Make sure we're on the same page. The way you get garnished is you have a judgment against you. It means that you lost a case and you were served with the lawsuit before you lost the case.
If we're dealing with a situation, and I have a lot of these, where we were never actually served, then that's a whole different matter. Assuming we were served, assuming we legitimately lost the case, either a default judgement, or we lost at trial, or summary judgment, now can they garnish our bank account if we receive disability income?
I presume the person means, when they say disability income, Social Security Disability Income, or SSDI, which is Social Security Disability Insurance. The short answer is no.
You cannot have your Social Security Disability check garnished, and your bank account cannot be garnished if all the funds in there are protected, or exempt, funds such as Social Security Disability. Now, if you are putting that money in, and you're putting in money that your spouse makes, and putting in birthday money, and an inheritance that you received, it's all mixed up, now that's going to be difficult to say when that collector reaches in to grab that money after a judgement that what they're really grabbing is the exempt money.
You want to keep things very clean and separated there so that it's clear, but if you believe that what the company is trying to garnish is actually exempt funds, then what you need to do is either get with a lawyer or let the court know. There's various procedures that you go through with that. Hopefully that answers that question.
Our next question is, "If my bank account is garnished and I have CD's at that bank, would they be affected by the garnishment?"
The short answer to that is yes. If you're being garnished and your bank account's being garnished then the fact that you have CD's there, well they're going to be garnished as well. Now, we go back to, are these funds being garnished any type of exempt funds such as Social Security? If that's the case, then those CD's should be protected.
In other words, if we look at the CD, imagine we kind of break it open and say "What went into the CD?" You go "Oh, that was when I got my lump sum. My back pay for Social Security. All that money came it went into the CD."
You can show that that's the case then it should be protected. Again, you get with a lawyer or you let the judge know, either through your lawyer or on your own if you're handling
it yourself that, "Hey, these are exempt funds." You let the bank know, let the court know, let the other side, the collection lawyer know. "Hey wait a minute. Don't touch my CD number 12345 because those are exempt funds. Here's the proof of what went into those."
Our next question is, "If you respond to a collection letter and acknowledge the debt, does that extend the statute of limitations?"
We'll again make sure we're using these words in the same way. Statue of limitation is the time period to sue you. That may be 3 years, 4 years, 6 years, whatever it may be. The question is, "If I get a collection letter and then I respond to it, maybe I call, maybe I write a letter back to that debt collector, and let's assume the time limit, statute of limitation is over, just by responding to them, does that just restart the statute of limitation?" The answer is no, unless you say in there something that might trigger it.
I'll tell you this. We're not in this answer going to cover everything you do when you talk to a debt collector, when you write a debt collector. We have other videos on that. I think we have an upcoming webinar all about how do you talk to these guys? You get a letter from them, or you get a phone call from them.
How do you speak to them? Here's a very short version. When somebody sends you a letter through the mail, or they call you on the phone, it would be very unusual for you to know, when dealing with a debt collector, that "Oh, this debt collector is legitimate. This debt collector has the right to collect this debt. This is who I should pay."
I just, about 2 days ago, met with somebody. They are paying a collection law firm for a particular debt. Now they have another collection law firm from out of state trying to collect that same debt, saying "You have to pay us." Well, they were already sued for that debt. They're already paying on that debt as part of a settlement. Now this other debt collector's trying to collect it.
My point in bringing that up, first of all it's illegal for that other debt collector to do that, and we'll take care of that in Federal court, but when you get a letter, you get a phone call, I'm not sure why you would ever say "Oh yeah. I admit it. I owe you the money." How do you know you're dealing with the right person?
When you're talking to them on the phone, you say "Send me proof." They send you a letter. You should send them a letter back. We have a sample letter on our website. I think the name of the article's like "A simple dispute letter sent to collectors."
Let me just tell it to you. You send them a letter, certified mail, otherwise they throw it in the garbage. Certified mail so you can prove they got it. You say "I dispute owing any debt to you." That way you don't have to worry about getting the right account number. What if you transpose the number and they go "Oh, well we didn't know you were talking about this debt, because you wrote the wrong number."
Just avoid all that.
Say "I dispute owing any debt to you. If you think I owe you a debt, send me proof in writing." That would be more than just a letter. It'd be some proof. We'll get into that in another webinar, what that means. Then you say "I dispute owing any debt to you. If you think I owe you any debt send me proof in writing.
By the way, do not ever call my cell phone number." Then you write down your cell phone number. "If you think I every gave you or anybody you're acting on behalf of permission, I revoke that. I take back that permission." You put your name, your address, last 4 of Social, date of birth, so that they know who you are.
By doing that you are not extending the statute of limitations. Now, if you write them a letter and say "I know the statute of limitations is expired and I'm voluntarily paying you $10, so that you can restart the statute of limitations." Now you may have restarted it.
But if you are not doing something kind of crazy like that then you're not going to restart it. It's fine to ask them for proof. The FDCPA, their Debt Collection Practices Act even gives you that right to say "You've got the right to dispute it, to ask for validation of this debt." You need to do that.
Okay. Our next question is, "Is the collection department for a medical facility considered a debt collector?"
It's a great question.
Here's the thing.
It depends on what we mean by the collection department. If you go to, let's just say St. Vincent's Hospital, and then you get a bill from St. Vincent's Hospital and it says on the bill "St. Vincent's Collection Department", then no. They're not going to be a debt collector unless there's something really unusual going on. I'll use Brookwood as an example, Brookwood Hospital in Birmingham. They send you a letter and it says "From Brookwood". Well, then they're not a debt collector. But if they send you from, at least at one time they had a company called "Syndicated Office Solutions", or "Systems", or something like that. It's SOS.
There's no statement on there. "Hey, we are a part of Brookwood Hospital." Well, even though it really is part of Brookwood Hospital, or at least the parent company, then I've sued them for being a debt collector because they're using a name that's not the name of the creditor. The creditor in this case being the hospital.
I forget the other one. Something Central Office or something. I've sued Chase for example, because they've used a name that is not Chase. It sounds like a debt collector. We even got a judgment against Chase for doing that. If they are using a name that makes it sound like a debt collector, then even though it's not technically a different debt collector, if they tell you that they are then they are.
It kind of makes sense. The law says "Look, if you're going to pretend to be a debt collector so it's more intimidating, then you are a debt collector." The hospitals go "But, it's really us. We were just lying. We were just making it up." Well, too bad. You just made it up that you're a debt collector now.
To answer this question "Is the collection department for a medical facility considered a debt collector?" It depends. Is it clearly the hospital? Well then they're not. Is it clearly appearing to be a debt collector? Then they are regardless of whether they truly are a separate entity or not.
Our next question. "Can you sue an original creditor for suing you if you win your case against them?"
Let's take, for example, Discover Bank, because I've had a number of these cases. Discover Bank sues us. We win at trial. Now, what can we do about that? If it was a bogus lawsuit, what's called malicious prosecution, then yes you can sue.
Maybe you never had a Discover Card. Discover Card, through their lawyer, they write you a letter saying "You better pay or we're suing you." You go "I've never had a Discover Card." They go "We think that you have. We got your letter disputing it, saying you never had a Discover Card. We think you're lying. We're going to take our chances." They sue you and they got nothing.
They come to court and the documents don't have your name, or maybe they do and you had filed an identity theft dispute with them. The judge says "Are you kidding me? This is terrible." And throws the case out. Well, then you may can sue them for malicious prosecution.
More commonly what you sue Discover Card, Capital One, Citibank, and all these places that we've sued, is you win at trial. They sue you and say "You owe $5,000." You get this lawsuit. You write your answer down. Say "I don't owe you this money." You go to trial. The judge enters an order. It says "No. Plaintiff loses. Defense verdict." That means you do not owe that creditor that money. There's the proof right there in word.
Then you go to Equifax. You go to Experian. You go to TransUnion. Any credit bureau that's reporting Discover, Capital 1, Citibank, whoever it may be. Regent's Bank, Wells Fargo. I don't care who it is. Whoever's reporting on you. You go to that credit bureau and you write them a letter. Send it certified mail.
You pull the green card back so you can prove they got it, otherwise they'll lie and say they never got it. You say "Look, I got sued by Discover Card. I don't owe Discover Card. The proof, right here. This order. The proof is I don't owe them this debt. Get it off my credit."
If you're sending that, particularly to Experian because they're infamous for having this just completely bogus process where they'll reject your dispute and say "Well, we don't know it's really you. You have to send us your driver's license, a utility bill, bank statement, something like that." So go ahead and send that to them. "Here's my driver's license. Here's a utility bill or a bank statement." They'll probably still reject it because that's what Experian does. Then you probably want to just sue them for refusing to investigate.
The other guys, TransUnion, Equifax, they'll actually investigate. There may be a terrible investigation, but they'll investigate it. They should delete, but sometimes they don't. Even though you send them an order from a judge, they'll call Discover.
They don't literally call them. It goes electronically. Somebody at Discover will go, "Oh yeah. Keep that." The credit bureaus will go "Okay. You tell us to keep it we'll keep it." With Experian, we had, actually it was a Discover Card case. Pretty sure it was Experian this happened, too.
Our guy called Experian because he got the results back. They said "We're keeping it." He goes "I sent you an order. Are you going to believe Discover Card over an order from a judge in Alabama?" You know what they said? You got to appreciate the honesty.
They go, "Yes. We will believe our client, our customer, over a judge. We don't care what the judge says. If Discover says keep it then we keep it." Just understand even though you're sending them the proof, they may do that. Now, if they delete it great. If they don't delete it, then you look at suing Discover, Capital 1, Citibank, whoever and you sue the credit bureaus for doing that.
To answer your question "Can you sue an original creditor for suing you if you win your case against them?" Yes, you can. Usually though, this is different than under the FDCPA when you're dealing with a debt collector, usually though you need to do a dispute through the credit bureaus so that you have the Fair Credit Reporting Act so that you can then sue under that law, the FCRA. That's the typical way that we sue the creditors after they lose a collection lawsuit against us.
The final one is, "What happens if you walk away from your house when facing foreclosure? Are you responsible for that debt?"
This is sometimes called a deficiency issue. You owe $200,000 but your house is fallen down in value to $120,000. That's what it gets sold for. What about that $80,000? It sold at foreclosure sale for $120. What about that $80,000 gap? Well, in some states, I think California is one, they say "Nope. Can't touch a California resident", or whoever it is, "For this deficiency." Certain rules that require, it doesn't matter if you want to live in California.
In Alabama we don't have that rule. They can come after you for that deficiency. I've had clients that have been sued for let's say the most was about $500,000 deficiency. It might be 50,000, 150,000, 20,000. Whatever it may be. To answer your question are you responsible for that debt? You may be. We need to look at "What did we owe? What was the amount at the foreclosure sell?" Not talking about what happened afterwards. Sometimes people say "Well, my house was 200. They sold it at the foreclosure for 200, but then that person sold the house for 350. I want the difference." No, you don't get the difference.
You owe 200, it gets sold for 300. Yeah, you're going to get some of that difference. But if it sold for less you may owe the difference. It just depends on what happened at that foreclosure sale. Sometimes there's been a foreclosure and there's a bankruptcy before it. You did not reaffirm the debt, you discharged the debt. Well, you don't owe it. I don't care what it was sold for. You don't owe it. You just really need to look and say "Did I have a bankruptcy? Did I owe the debt? Then, if I owed the debt, how much did the whoever bought it, how much did they pay for it?"
Usually it's the mortgage company. Whether it's the mortgage company writing a check to themselves, "How much did they buyer pay my mortgage company? Then was that above what I owed? Well then maybe I'm getting some back. Was it equal?" A lot of times it is. "Then I owe nothing. Was it below it? Then I may owe that deficiency."
You need to check that out. Usually you'll have a letter from the mortgage company called an acceleration letter. It says "You owe the whole amount, all day, right now. That is $200,000." Then the foreclose 2 weeks later, 4 weeks later. Then you pull the foreclosure deed. Go down to the probate court.
You can call the foreclosure lawyer. Maybe they'll send it to you. You look at that foreclosure deed. Read on there on, today's August 28th I think. Yeah, August 28th. Say it happened today. Foreclosure deed would say "Today on August 28th, 2015, the property was sold to the high bidder for $135,000." If I got a letter saying I owed 200 and then I get the foreclosure deed saying it was sold for 135, now I'm going to owe that difference, potentially.
Hope that that answers that question. Just want to remind you. We try to do these every Friday. We start at 11:30 Central time for the consumer question and answer. Then as soon as we're done with this we start a new webinar on elder law and estate planning issues in Alabama. There's a lot of overlap between those because what we're ultimately talking about are threats to your financial security. It may be a debt collector, foreclosure, bankruptcy, nursing home, whatever it may be. That's why we do these webinars.
You can call us at 205-879-2447, or go to Alabama Consumer. Contact us there. Or you can comment below this video on YouTube and we'll be happy to answer your question next week. Thanks and have a great day. Bye bye.
Welcome to our Q&A on elder law and estate planning issues. The entire video is above, and the transcript is below.
I hope you enjoy!
Hello. My name is John Watts. I'm a lawyer in Alabama, and we're going to do our regular elder law and sometimes estate planning ... today, it will just be elder law question-and-answer webinar. We'll try to do this around 12:00 Central Time every Friday. If you'd like to get your question answered, you can leave us a comment below this video. You can go to Alabama Elder Lawyer and contact us there, or you can call us at 205-879-2447 and just let us know what your question is. We'll be happy to put that in our list.
Today, we have one, two, three, four, five, six questions. Several of these are on the VA pension. Then we have a couple on long-term care insurance and then one about independent living and some VA benefits. We'll go ahead and get started.
The very first question is: can I get both the VA pension and the VA disability benefits?
It's a great question. A lot of confusion on this. We have the VA, which is this massive structure, and there's really several parts to it. For our purposes, there's a compensation part and a pension part.
Another way to say it is the compensation or the disability over here is service-related. Excuse me. Service-related. That means I was injured during service or I contracted a disease. I had an accident, I got shot, whatever it is, while I was on active duty. You might think of this almost like ... kind of like a worker's compensation type benefit. That is one benefit. That's the dominant benefit in the VA.
Now over here, we have, on the other hand, the non-service related or what's called VA pension or VA Aid and Attendance. What that does for us is it says, look, it has nothing to do with being injured in the service. We can have a guy that was in the Korean War, and he gets out in, say, '54 and never goes back in the service, never hurt, never injured, no disease.
Then what are we now?
Sixty-one years later, a drunk driver hits him, and he's paralyzed. Now he can't dress himself, can't bathe himself. He needs help. Well, that's when the VA pension or VA Aid and Attendance comes into play. It wouldn't be service-related because it had nothing to do with his service. That was 60 years ago.
The question is: can we get the service-related and the non-service-related? The answer is no. You get the higher one. At the maximum levels, the service-related, the VA disability, that's the higher one. The non-service-related VA Aid and Attendance for a married couple, you're generally looking at about $25,000 a year, whereas on the service-related, it could be higher than that. So you just decide which one is the highest.
Now, typically, the service-related takes a long time to get, but the non-service-related, at least when we do the applications for folks, we're typically getting those approved in four weeks, six weeks, eight weeks, whereas the service-related, you may be looking ultimately at two, three, four, five years to get those. Even if we know we have both, we might apply over here for the service-related but then go ahead and get the VA pension, the non-service-related, just to get some money coming in. Hopefully, that
answers that question. You just get the higher of the two, but you cannot get both.
All right, our next question is: why can't my mother get the VA pension, that's that Aid and Attendance, when she was married for 40 years to a veteran who died and then she remarried but then got divorced?
Let me make sure we're clear on this. She's married to a veteran, a wartime veteran, who qualifies under this benefit. We go along for 40 years, and then he dies, okay? She's considered a surviving spouse of that wartime veteran. If she applied then and if she qualified, she would get the benefit.
But she then remarries. When she remarries, she is now the spouse of that second husband. She's no longer the surviving spouse of the husband that died because she's now somebody else's spouse, so this goes away for the VA pension purposes. Now she's married here, and let's say he's a veteran. Okay, everything's good, but then time goes along and now she gets divorced, and then he dies. Well, see, when she divorced, she's no longer the spouse of that second husband. She's the ex-spouse, so when he dies, she is not the surviving spouse, which is the test.
You go back to the question: why can't she get benefits, because for all these years, 40 years, she was married to a veteran? Well, the problem is she got remarried. Now, there's nothing wrong with getting remarried, but under this benefit, you say, "If I'm trying to get benefits and I'm not personally a veteran, then the only way I'm getting the VA pension is if my spouse who's died, if that spouse qualified and if I'm the surviving spouse of that wartime veteran, but if I divorce, then I'm not the surviving spouse."
I'm not saying this is fair, this is right. This is just what the law is. There are a few little exceptions, very obscure exceptions, so if you're in this situation, it's worth looking into and checking out, but just as a general rule, if you're not the veteran, then you have to be the surviving spouse of a veteran who would have qualified.
Okay, our next question: will a VA pension pay for independent living for my Dad?
We have a spectrum here. At one end, we have I'm living at home. At this end, we have I'm in a nursing home. Well, the next step from my home might be independent living, so nobody's helping me get dressed or take a shower or anything like that. It's just I'm in, maybe it's an apartment; maybe it's a free-standing place, but it's designed for folks of a certain age, but nobody's coming in to help me.
That normally does not count when we're looking at what's called the IVAP, Income for VA Purposes. That's where we total up the household income, and we've talked about this in other videos. We total up all the household income, and then we subtract out the un-reimbursed medical expenses. Well, we do not subtract out our mortgage payment, our homeowner's insurance. If we're not at home, but we're in independent living, we don't subtract that out either.
Now, if we go to assisted living and we need it, or we go to a nursing home and we need it, then we can take that money that we're writing out every month and lower our income. This is how somebody that ... I'll give you a quick example. Let's say they've
got $3,000 a month in income and $3,000 a month for assisted living. Well, we take the $3,000 income, subtract out the $3,000 for assisted living. That leaves us with zero, so now if we otherwise qualify, we get the full VA pension benefit.
But if, let's take that same example, we have $3,000 in income, and independent living is $4,000, well, what do we do? We start off with $3,000 and we subtract, well, nothing. See, it doesn't matter, $4,000, $5,000, $25,000. We don't deduct that if it's independent living. We don't deduct assisted living unless we actually need the assisted living. To answer your question about, "Will a VA pension pay for independent living for my Dad?" no, it generally will not.
Okay, our next question is: what are the different types of long-term care insurance?
Okay, so it's really important that we all look at long-term care insurance. What does that mean? There's the traditional type, and you might think of this, it's like your car insurance, your homeowner's, your Blue Cross. You pay money every month, and if you need it, then great. You get the benefit. If you don't need it, that money's gone forever. Okay?
Now, another type is you take usually a lump sum. Maybe it's $50,000 or $100,000. You pay that to the insurance company, and if you ever need long-term care, then those benefits are there, and it's usually going to be significantly above what you paid in. Maybe you pay $100,000, and they say you get, I don't know, $200,000, $250,000 worth of benefits. It all depends on what kind of plan, your age, health, all that type of stuff. That's what happens if you need the benefit.
What if you die at home?
You never leave your home. You're in perfect health. You die while doing an Iron Man competition in Hawaii. Well, if you were doing that normal long-term-care policy, you're just making payments every month, you lose that. But this, what some people call a hybrid policy, it's really a life insurance policy also, so it has a death benefit. It says, okay, well, if you die and you never touch the benefits, here's how much your heirs get or whoever. I should say your beneficiaries get. It might be exactly the amount that you put in. It might be more than that, less than that.
Which one is better? Is it the traditional one or this kind of hybrid approach? Well, there's no right or wrong answer. Some objections people have to the one where they pay every month is they say, "Well, what if I never use it? I've wasted it." I get that. That makes a lot of sense. I will point out, though, every month you pay your homeowner's insurance and you don't have your house burn down, you wasted that money, but nobody goes, "Well, what if I've been paying for 20 years and my house never burns down?" Nobody complains about that. We go, "Oh, I'm so thankful my house didn't burn down."
What about your health insurance? Nobody goes, "I am so mad. I got to the end of the month, and I still don't have cancer today." Nobody says that. It is kind of interesting, with long-term care, we do get sort of bent out of shape if we don't use the benefit, but that's why that lump sum is there.
Now, should you do the lump sum? Well, look, you've got to get with your financial advisor and run the numbers. Obviously, by paying out $100,000, you don't have access to that $100,000, or you only have the ability to get it however your policy says.
Now, sometimes the policy says you can reach in there and grab that money back. You've just got to check out your own particular policy. All different types of options and varieties. That one, if you never use it for long-term care, well, your children or whoever will get the life-insurance benefits, but if you do use it, you've got all these benefits there. There's no right or wrong answer. You just have to check it out.
A lot of times, it makes sense to meet with somebody like me, an elder-law attorney, to say, "Okay, well, how does this fit in with the overall plan?" because long-term-care insurance can be a critical part of your plan. Sometimes, having that plan allows us to not have to do certain elder-law planning techniques, because we know we've got that policy.
Sometimes, it allows us to do a whole bunch of elder-law planning strategies because we know we've got that policy. All different possibilities. Definitely something to check out, even if you don't do it, just to find out what are your options. Do you even qualify for it? If you do, how much money are we talking about every month or in a lump-sum payment?
Okay, our next question is: how does long-term-care insurance fit in with Alabama Medicaid?
If you're listening to this whole webinar, I started to touch on that in the last question, but let me just kind of walk you through this. With Medicaid, and that's what the question is: how does long-term-care insurance fit in with Alabama Medicaid? Medicaid, if you've seen my other videos, this will be very familiar with you, but if not, you can find some in more detail.
Imagine a timeline, and here's where you are right now, 2015, August 28, 2015. You apply for Medicaid, and you qualify. They look back in time five years and say, "During this time period, this five years, 60 months, did you give anything away?" If no, then you're fine, because to apply, you've got to be qualified, and then going forward, you'll be qualified... (During our live session we experienced a couple of technical difficulties. Sorry for the inconvenience.)
... $150 a day. Well, what's $150 a day? That's $4,500 a month. Let's say you have $1,500 a month in Social Security. Well, that's going to be, what, $6,000 a month. That's the typical cost of a nursing home. I'm ignoring inflation right now. There's all different parts of policies, but just go with that $6,000 a month total income and benefits, and your cost is $6,000 a month.
If you come to me today, August 28, 2015, and say, "Hey, I'm going in a nursing home. This is permanent. I do have this long-term-care policy. I also have $500,000 in assets. I really want that to go to my kids. I don't want that to be burned up in the nursing home." You say, "Okay." Look, I'm not getting into every exception. Let's just give you a general idea. We say, "Okay. We can transfer that money, put it into a trust or give it to our kids." I'm not a big fan of that. Usually, we put it into a trust.
I think here's my handy little trust here. A trust is a box that we created. We put that money in it. We shut the lid, what's called an irrevocable trust, so you can't get to it anymore because it's not yours. Now, is that a gift? Yeah, that's a gift, but see, even though you would be qualified right now to apply for Medicaid, we don't do that. We just go along through time, and then we get, let's say, 61 months out. Now we apply for Medicaid.
Well, how have we been paying for it? Remember, we've got the long-term-care policy and our Social Security. It's $6,000, so all this time, we've been paying for it. Well, then we apply here. Medicaid is going to look back five years to August, 2015. Do they see any gift? Well, no. Actually, if we go 61 months, we're really looking at September, 2015. Are they going to see this gift we made back here in August? No, they're not going to see it because they only look back five years. That's the law. So long-term-care insurance can allow us to even make a gift at the moment of the crisis.
Now, it's better to not wait till the last minute because there are all sorts of things that can come up, but it does give us that power. Sometimes, we do that intentionally. We say, "You know what? We're not going to create the trust now. We're going to get this long-term-care insurance, and then if we need it, then we'll create the trust."
Other times, we'll say, "No, we're going to go ahead and create the trust." Then, as we go through time, maybe we don't need that long-term-care policy because now we're more than five years from when we gave away all that money, and so we can say, "You know what? I'm going to cancel my long-term-care policy. I'm not going to pay $500 or $600 or $700 for it."
So all different ways that these things work together. It's not that either you do a trust or you do elder-law planning. Elder-law planning is all of that. It may be a trust. It may be annuities, special types of annuities. It may be long-term-care insurance. All these different options that we have.
When we sit down with families, we want to see the whole picture. Then we say, "Okay. Now that we see this, you know what, let's go check out long-term-care insurance. Go to your financial advisor. If you don't have somebody, we'll recommend somebody to you, but go to your advisor, to your insurance agent. Find out what your options are. Come back and tell us. Let's see how that, this little long-term-care policy, how does that fit in with the picture? It may be the only thing you need to do, or it may just be one part of an overall plan." Hopefully, that answers the question of: how does long-term-care insurance fit in with Medicaid?
Now, what I think is ... Let me check the time here. I think we've got time for one more. Will a VA pension ...? Okay, actually, that was a duplicate question, so I think that is our final question that we have.
I'll tell you what. I'll mention one that was not asked this last week, but a couple weeks ago, and I've addressed this in other times, but somebody will say, "Well, when you start talking about this five-year look-back period and penalty period and are arranging things with long-term-care insurance or with a trust, isn't that illegal?"
No, it's not illegal if we follow the law. It's kind of an interesting statement. If we follow the law, it is not illegal. It is lawful. It is not unlawful. Here's what you have to keep in mind, particularly with this Medicaid. They've got this five-year look-back. Well, what if when you apply they look back 60 months and they see a gift? Do they say, "Well, if you had just waited one more month, we wouldn't see that, so we're not going to penalize you"? No, they don't say that. They say, "Aha, 60 months. You're being penalized."
Well, is that fair?
It's the law.
You know the law, or you should know the law when you're applying for Medicaid. Don't ever apply for Medicaid without having a real good plan. You know what the rule is. It's 60 months, so if they get you on 60 months, that's fair. If, on my credit card, it says it's due on the 5th and I pay it on the 15th, they hit me with a late fee. I go, "Yeah, but it's not that late," or maybe they give me a grace period till the 15th, and I pay it on the 16th. You know what? I'm late. I get hit with a late fee.
By the same token, if when Medicaid looks back 60 months, they don't see the gift because you did it 61, 62 months ago and we control when we apply for Medicaid, that's not being illegal. That's just being smart. It's being a good steward of what we've been blessed with. We're just following the rules.
If you're going down the interstate and it's 70 miles an hour and you're going 69 miles an hour, are you breaking the law? No. What if you're going 71? Well, technically, you're breaking the law. Somebody goes, "But that's just two miles an hour difference." What if you're going 70 miles an hour? That's lawful. 71 breaking the law. You know, that's what the law is. We can argue about should it be 70 miles an hour, 60 miles an hour? We can argue should it be 60 months? Should it be 600 months? Should it be six months or no months? That's not our job to make the law. Our job is to say, "You know what? The government's made this law. We're going to follow the law."
Well, I hope that these have been helpful to you. If you will let us know any comments you have, you can put those below this video. You can call us, 205-879-2447 or go to Alabama Elder Lawyer. We'll be glad to put your question in line, and hopefully, unlike this week, I won't put the same question down twice.
We'll get those questions answered, and we will see you about noon next week. What will that be? September, I don't know, the 5th or something, the 4th, but whatever it is, on Friday a week from today, we'll see you. Thanks a lot, and I appreciate you watching. Bye-bye.
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